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 On||Feb. 20, 2011|
|Stock Price at Underperform Recommendation||$1.45|
Cell Therapeutics profile
|CAPS Rating (out of 5)||**|
|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.