Cell Therapeutics: Buy, Sell or Hold?
Posted by BeaconEquity.com on Jan 21, 2011 | 2 comments
The small-cap biotech arena is a wild and woolly world. Driven by innovation and genius, but with success controlled by a sometimes capricious and arbitrary FDA, extreme volatility is an accepted fact of life in the price of these firm’s shares. In fact, volatility can be such a factor, that when I traded professionally, my firm had a list of biotechs that would result in immediately firing if traded — and that’s regardless if the trade was a money maker or not. Some of these companies simply subjected the firm to too much risk, win or lose.
Now with my risk speech out of the way, an interesting biotech company came up on the stock screener yesterday. Cell Therapeutics Inc. (Nasdaq: CTIC), a Seattle, Washington-based biopharmaceutical company that develops, acquires and commercializes oncology products for the treatment of cancer. It is developing pixantrone, a phase III single-agent clinical trial product for the treatment of non-Hodgkins lymphoma and various other hematologic malignancies, solid tumors and immunological disorders; OPAXIO, a phase III clinical trial product for the treatment of ovarian, esophageal, and non-small cell lung cancer; and brostallicin, a phase I/II clinical trials product for the treatment of sarcoma. The company also has licensing and collaboration agreements with the giant pharmaceutical company Novartis International (NYSE: NVS)
What makes this company any different than the scores of others in the same space? Last April, the FDA rejected the company’s Lymphoma drug Pixuvir. The company appealed the decision and is awaiting a ruling supposedly arriving within the first quarter of 2011. Not one to sit and hope, Cell Therapeutics has prepared a new drug trial to submit should the FDA not reverse its decision. This delay has resulted in the company having a high cash burn rate of about $70 million over the last 12 months, depleting its battle chest. Should the FDA reverse its decision, shares will rocket higher. If not, investors will be back in the waiting game. In order to enhance survival, the company just entered a security purchase agreement to sell $25 million worth of shares to a single institutional investor.
While the above is interesting and makes this firm a potential but risky bet for the upside, what really caught my eye is institutional interest. Institutions presently own 66,346,504 shares, up 16.73% from three months ago. This is a key factor, as it appears that smart money is accumulating the company.
