Cell Therapeutics (CTIC) recently decided to exchange up to 60 million shares of its common stock for $30 million of notes. Liquidity crisis at the company continues to remain a major concern for us. Earlier, in April 2010, the company raised $18.5 million through preferred stock and warrants.
Although Cell Therapeutics has taken several steps to reduce the burn rate, its cash crunch will continue for the time being. During 2009, Cell Therapeutics reduced its debt burden considerably. However, the company’s policy to reduce debt level by converting into common stock dilutes shareholder value.
The liquidity crisis at Cell Therapeutics has become more prominent since its New Drug Application for lead candidate, Pixuvri was denied. The company has been seeking approval for the drug to treat relapsed or refractory aggressive non-Hodgkin’s lymphoma (NHL) in patients who have not responded to other treatment options.
In April 2010, the company received a complete response letter for Pixuvri from the US Food and Drug Administration. The company will be required to conduct additional trials, the roadmap for which will be decided in consultation with the FDA.
Following the setback for Pixuvri, Cell Therapeutics reduced its workforce by 36 employees. The reduction in staff strength along with the elimination of other planned expenses is likely to result in savings of about $16 million in 2010. The company expects operating expenses for 2010 to be approximately $60 million, a 21% reduction from its earlier projection.
Apart from Pixuvri, the company has other pipeline candidates as well. With the advancement of the pipeline, additional funds are required to support the various programs.
Current investor focus is primarily on the future course of action that Cell Therapeutics takes for Pixuvri. We are Neutral on the stock.
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