A Disaster for Shareholders

Editor's note: This article has been updated. As of the date of Cell Therapeutics' last balance sheet, the company had a net debt position of $20.8 million. Since then, as indicated in an 8-K filed with the SEC on June 30, 2010, that appears to have swung to a net cash position of $6.7 million as of the end of May, mostly through proceeds received from a preferred stock and warrants offering.

Motley Fool analyst Jordan DiPietro asked what might be around the corner for Cell Therapeutics (Nasdaq: CTIC  ) . Here's my answer: nothing good.

When we look for stocks in our market-beating newsletter Motley Fool Stock Advisor, we don't look for biotechnology companies that are losing money and have more debt than cash on their balance sheets. Cell Therapeutics, already priced under 50 cents a share, could be going to $0. I believe it will eventually be followed by other biotech companies like NPS Pharmaceuticals (Nasdaq: NPSP  ) . I hope that I'm wrong.

Both of these companies share the following traits:

  • They have more debt than cash as of the last balance sheet.
  • They are not generating positive cash flow.
  • And in the past decade, these companies have lost their shareholders anywhere from 80% to 99%.

There are more than 10,000 public companies in America, and many of them should never have gone public. These two share that distinction.

Fool co-founder Tom Gardner does not own shares of any companies mentioned. The Motley Fool has a disclosure policy.


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  • Report this Comment On July 26, 2010, at 1:08 PM, oracleatdelphi66 wrote:

    This column is incorrect and misleading when it claims CTI has more debt than cash. At the end of May of this year, CTI reported nearly $70 M in cash reserves. The company's remaining debt due in 2011 is about $21 M. It already paid off its 2010 debt.--- Dan Eramian, CTI

  • Report this Comment On July 26, 2010, at 4:07 PM, emptygestures wrote:

    Are you talking about CTI or CTIC? Because CTIC is a dead company no question about it. How they have avoided delisting this long is an anomaly.

  • Report this Comment On July 26, 2010, at 8:14 PM, esymoni wrote:

    Tom Gardner drops more lies from lack of research. Does he not read the balance sheet and 10k before posting on companies. If he did he would realize that most of NPSP dept is non recourse and backed by current roylaty streatms. NPSP has cash and available cash reserves of $130 million, more than enough for a two year run for the two drugs in the final stages of testing. Or does he know that they have a very nice royalty stream. Or that there is a potential blockbuster in the final stages of testing with FDA approval on the horizon in early 2011.

    Unlike Tom Gardner, do you research before you print lies and info about companies he knows nothing about.

    Do a little research and NPSP may be the best deal in the phara arena.

  • Report this Comment On July 27, 2010, at 5:39 PM, oracleatdelphi66 wrote:

    This column continues to mislead investors. CTI reported nearly $70 M in cash in the 8k the column points to. The company paid all of its 2010 debt and the remaining debt is not due until 2011. Dan Eramian, CTI

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