Avoid This Biotech Stock

Editor's note: This article is a stock pitch made by a member on CAPS, The Motley Fool's free investing community. The pitch is published UNEDITED and is the opinion of the CAPS member whose pitch it is, in this case: zzlangerhans.

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Company Cell Therapeutics (Nasdaq: CTIC  )
Submitted By zzlangerhans
Member Rating 99.02
Submitted On Feb. 20, 2011
Stock Price at Underperform Recommendation $1.45


Cell Therapeutics profile

CAPS Rating (out of 5) **
Headquarters Seattle
Industry Biotechnology
Market Cap $253.4 million

Sources: S&P Capital IQ, Yahoo! Finance, and Motley Fool CAPS.

This week's pitch:
I've followed Cell Therapeutics for years with amazement and amusement, but I've never found a good time to pitch them. When they were overvalued, it seemed kind of superfluous to add my tiny squeak to the chorus of opprobrium raining down from more authoritative voices such as Feuerstein. The few times when I thought they might actually resurge, the share price never quite broke through my lower threshold. So I've held my tongue these years.

Friday I finally got my chance to play, as a result of a 40% jump in the share price after the EU Advisory Committee CHMP recommended approval of Pixuvri for non-Hodgkin lymphoma. That was a surprising decision, given the widely reported problems and limitations of the single phase III study supporting the application and the unanimous FDA Advisory Panel vote against approval in 2010. But of course the Europeans have the right to make up their own minds. Unlike FDA Advisory Panels in the U.S., a positive CHMP recommendation confers a near certainty of full EU approval within a few months.

The reason I saw this as my opportunity to enter a red thumb that wasn't glaringly obvious is that I see EU approval as even less indicative of eventual commercial success than US approval. While FDA approval essentially forces public and private insurers to reimburse for on-label uses of the approved drug, several bureaucratic steps are required before the same applies in Europe. Individual countries apply their own standards to determine if the benefit of the drug justifies the expense. We've seen InterMune [ (Nasdaq: ITMN  ) ] run into this problem with a ruling by the IQWiG regulatory body in Germany classifying pirfenidone as having "no proven added benefit" over best supportive care. Probably the best parallel to pixantrone is Epicept's Ceplene, which received a shocking European approval in 2008 and has continued to be straight-armed by the FDA since then. To this point, Ceplene has garnered no material revenue from Ceplene in Europe.

Unless Cell Therapeutics can convince a skeptical market that they can translate approval into revenues, they'll have a hard time maintaining their price bump. They recently withdrew their pixantrone NDA resubmission to much derision and are unlikely to see a follow-up positive catalyst in the near future. Meanwhile their burn remains exorbitant and they have never shown hesitation to turn to secondaries for cash infusions. Three reverse splits in the last five years don't instill much confidence in management's respect for shareholder value.

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The Motley Fool is investors writing for investors. Dan Dzombak did not have a position in any of the companies mentioned in this article. Pitches must be compelling, made in the past 30 days, and be at least 400 words. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 22, 2012, at 11:53 AM, mt48 wrote:

    In fairness to all shareholders, you sir, do not know what you are talking about. You have no idea about NHL, Insurance much less EMEA! Over 30 thousand people will die from one form or another from NHL this year.

    Sorry forgot to mention, unmet medical need, benefit outweighs risk and just to add to this, PIX is used as a single agent.

    Interesting that someone could talk so much and no so little!

  • Report this Comment On February 22, 2012, at 9:57 PM, Hufington wrote:

    "... more authoritative voices such as Feuerstein."

    Do you really idolize the failed poly-sci major, who calls himself a journalist? The guy who falsely accused Oculus of skirting FDA rules by diluting Microcyn with common household bleach, resulting in calls from frightened and confused patients and angry doctors.

    Can Adam dispute this:

    The CHMP, on the basis of quality, safety and efficacy data submitted, considers there to be a favourable benefit-to-risk balance for Pixuvri and therefore recommends the granting of the marketing authorisation. The marketing authorisation is conditional.

  • Report this Comment On August 18, 2012, at 4:21 PM, zzlangerhans wrote:

    CTIC now at 41 cents, down from 1.45. Still holding?

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