It’s been a while since we reported on Cell Therapeutics (CTIC), our favorite underdog which we feel has great potential, despite its history and not-so-clean capital structure.

Let’s take a look at what’s been going on since ASCO…

On June 1st, CTIC announced they were increasing the exchange rate of its current debt tender offer with the caveat that bondholders accept 85% of the exchange offer in common stock and only 15% in cash. The previous offer was 35% cash and 65% stock. Adam Feuerstein had his say and CTIC has not released any further updates on the offering.

On Monday, June 8th, CTIC announced a summary of 11 peer-reviewed publications on Pixantrone, including preclinical, Phase 1 and Phase 2 clinical studies. The report appears in the May 2009 edition of Future Oncology (Volume 5, Issue 4) and can be found here. The article is titled “Pixantrone: a promising drug in the treatment of non-Hodgkin lymphomas.” and is authored by Drs. Barry W. Hancock and Loaie M. El-Helw of the Weston Park Hospital, Sheffield UK.

CTIC also announced that Pixantrone data from the EXTEND trial was available at clinicaloptions.com. We signed up for the service, which is free. We never heard of the website, but it seems to offer some valuable information on various drugs, trials and statistics. Recommended.

Finally, on June 10th, CTIC filed an 8-K detailing bonus payouts to company management. Here’s who got paid and how much:

• James A. Bianco, CEO – $121,875

• Craig W. Philips, President – $16,750

• Louis A. Bianco, EVP Finance and Administration – $41,250

• Jack W. Singer, EVP, Chief Medical Officer – $38,250

• Daniel Eramian, EVP Corporate Communications – $35,448

Competitive Landscape

As a supplement to our Pixantrone evaluation, we’ve compiled a list of drugs currently in clinical trials for relapsed or refractory aggressive non-Hodgkin’s lymphoma (rrANHL). There is currently no approved therapy for rrANHL. Disregarding any potential regulatory obstacles or setbacks ahead (eg FDA complete response), Pixantrone has the potential to address a much needed market and save the lives of thousands of patients without any treatment options. In the table below (Table 1), we take a look at the competitive landscape for rrANHL, including development status and sponsors (right-click view image to see the large version).

As we note above, the table does not take into account Rituxan (Rituximab) or Treanda (bendamustine), both of which are enrolling in several ANHL trials with various regimens around the globe. Note: Rituxan is used to treat relapsed or refractory, low-grade or follicular, CD20-positive, B-cell NHL as a single agent, previously untreated follicular, CD20-positive, B-cell NHL in combination with CVP chemotherapy, non-progressing (including stable disease), low-grade, CD20-positive B-cell NHL, as a single agent, after first-line CVP chemotherapy and previously untreated diffuse large B-cell, CD20-positive NHL in combination with CHOP or other anthracycline-based chemotherapy regimens.

Treanda is indicated for indolent B-cell NHL and CLL.

In our view, either of these drugs, already blockbusters, could offer the most serious competitive threats should they offer evidence of efficacy in similar settings.

Commercial Analysis

In the table below (Table 2), we describe the sales potential of Pixantrone (if approved) in the 3rd, 2nd and 1st line settings. The figures are U.S. only and based off an overall NHL incidence of 65,000 cases per year with 50% of that aggressive (1st line). Our research shows that about 20% of ANHL patients do not respond to treatment and three of ten that do respond relapse after remission – or about 7,800 patients. Of these patients, 50% respond to 2nd line therapy with ifosfamide, vincristine, and etoposide (IVE), ifosfamide, carboplatin, etoposide (ICE), etoposide, cytarabine, cisplatin and methylprednisolone (ESHAP). Those that do not respond – roughly 4,000 – are considered 3rd line.

The next step in valuation here would be to apply a probability-adjusted NPV to value the Pixantrone contribution to CTIC share price. The problem, however, is the company’s capital structure. The analysis takes into account CTIC’s fully diluted shares and with close to 500M shares outstanding, the result is an NPV which significantly undervalues the company’s current stock price.

Our Pixantrone pricing is derived by averaging Pixantrone’s projected cost of $1,200/vial and a 6-month cycle of treatment with Treanda’s $44,000 cost of treatment. Penetration rate assumptions are based off historical and internal IguanaBio sources and models.

Once, or if, CTIC is able to get the capital structure (shares and debt) under control, we’ll be better able to value CTIC stock. Valuing CTIC is almost impossible right now due to its unique situation: the debt, near half-billion shares outstanding and NDA-stage of Pixantrone offers a paradox and we are only able to value CTIC based on the clinical fundamentals of Pixantrone.

Click here for our Pixantrone evaluation or here for our Novartis/Opaxio deal analysis.

Stay tuned for more CTIC…

No positions in CTIC, partners or competitors

Anonymous Tip? Comments? Contact us: hr AT iguanabio DOT com

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