Cell Therapeutics (CTIC) recently entered into a co-development and license agreement with UK based Chroma Therapeutics Ltd. for Chroma’s anti-cancer pipeline candidate, tosedostat, for an upfront payment of $5 million. Tosedostat is initially targeted to be developed for indications like acute myeloid leukemia (AML), myelodysplastic syndrome (MDS) and multiple myeloma (MM).
Cell Therapeutics will be responsible for the development and marketing of tosedostat in North, Central and South America while Chroma will take responsibilities for the rest of the world. Cell Therapeutics will bear 75% of the development costs and Chroma will fund the balance. Cell Therapeutics will fund a maximum of $50 million in the first three years.
Tosedostat has shown anti-tumor activity in blood related cancers and solid tumors in phase I-II trials. Cell Therapeutics is entitled to receive a milestone payment of $5 million on starting a phase III study in the US and Europe in elderly patients with relapsed or refractory AML in collaboration with Chroma. The trial is expected to start in the fourth quarter of 2011. Tosedostat has been granted orphan drug status, both in the US and EU, for AML.
Cell Therapeutics is also entitled to certain development based milestone payments related to indications like AML, MDS as well as royalties on future sales of the drug in its territories.
AML is a hematologic cancer that principally affects older people with the average patient age at onset of approximately 67 years. There are a large number of elderly patients who are unable to withstand intensive chemotherapy, which calls for a significant need of an easily tolerated treatment for such patients that would yield better survival results. Tosedostat was well tolerated in initial clinical studies. The once-a-day, oral dosage demonstrated encouraging response rates in difficult-to-treat AML patients.
We believe that the collaboration will expedite the development process of tosedostat.
Our Recommendation
We currently have a Neutral recommendation on Cell Therapeutics, which is supported by a Zacks #3 Rank tantamount to a short-term Neutral rating. We believe the uncertainty surrounding the approval of Cell Therapeutics’ lead pipeline candidate Pixuvri for aggressive non-Hodgkin’s lymphoma (NHL) in the US has slightly eased following the appeal against the FDA’s decision to deny approval of the drug. Moreover, the filing of a marketing application for the candidate with the European authorities is also encouraging. The latest deal with Chroma is also synergistic with Pixuvri as both are being developed for cancer indications. We prefer to remain on the sidelines until the FDA’s response to the company’s appeal becomes clear.
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