Drug Approval! Oh, Wait, We Knew That Already.

Cell Therapeutics (Nasdaq: CTIC  ) recently jumped 15% on word that the European Commission signed off on the conditional marketing authorization for its non-Hodgkin B-cell lymphoma treatment, Pixuvri.

It seems some investors just don't seem to get the differences between the EU and U.S. approval process.

The European Medicines Agency's Committee for Medicinal Products for Human Use, or CHMP, is nothing like the Food and Drug Administration's advisory committee. About the only characteristic they have in common is that they both have "committee" in their name. CHMP makes "recommendations" to the EC the way advisory committees make recommendations to the FDA. But unlike advisory committee recommendations, which the FDA often disregards, the EC authorization is nothing more than a rubber stamp of the CHMP decision.

The EC's approval was therefore a non-event. It was expected right around this time, too, so I don't see how Cell Therapeutics is more valuable today than it was yesterday before the approval. The only drug I know of that didn't get an EC approval after a positive CHMP recommendation -- Johnson & Johnson's (NYSE: JNJ  ) antibiotic Zeftera -- happened because new information surfaced between the two events. I guess that was possible for Cell Therapeutics, but it certainly doesn't necessitate a 15% risk adjustment to the price.

It's not just Cell Therapeutics investors who seem to be discounting for no reason; InterMune (Nasdaq: ITMN  ) saw the same phenomenon happen when the EC signed off on Esbriet. If only it happened with every biotech, there would be an opportunity for nearly risk-free arbitrage.

If investors are going to risk-adjust Cell Therapeutics for something, I'd suggest it be for potential sales in the EU. Pixuvri is approved for "multiply relapsed or refractory aggressive non-Hodgkin B-cell lymphomas." In laymen's terms, that means it'll be used after patients have failed other drugs such as Rituxan, which is co-owned by Biogen Idec (Nasdaq: BIIB  ) and Roche, Sanofi's Campath, and Teva Pharmaceuticals' (Nasdaq: TEVA  ) Treanda. Add in the tough reimbursement and pricing pressures in the EU, and Cell Therapeutics looks like it has a tough uphill battle in front of it.

The Motley Fool Rule Breakers team has a better option in the health-care space with more potential. Find out the name of the company and why they like it so much in their new free report.

Fool contributor Brian Orelli holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson and Teva Pharmaceutical Industries and creating a diagonal call position in Johnson & Johnson. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (7) | Recommend This Article (5)

Comments from our Foolish Readers

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  • Report this Comment On May 12, 2012, at 1:16 PM, oracleatdelphi66 wrote:

    I read your recent post about the differences in the approval process between US and EU. You appear to say that investors don’t seem to get the differences between the US and EU drug approval process. The CHMP is the equivalent of the FDA with the exception that, unlike the FDA, where the decision for approval resides with a single Office Director, the CHMP involves a team of experts from each of the 27 member states and 5 consultant experts to review a sponsor’s application. An application only receives a recommendation for approval when either consensus is reached on the decision or a super majority vote is achieved on the application. The recommendation is forwarded to the EC, which is the legal administrative body overseeing the granting of marketing authorization. Hope this is valuable to your readership. –Dan Eramian, CTI ps On a more personal note I suspect that when a drug is approved for an unmet medical need, some people will find that a valuable event.

  • Report this Comment On May 12, 2012, at 4:37 PM, danico22 wrote:

    Mr.Orelli,

    looks like you hate CTIC despite the fact that they try to kill some cancer here.Hope you are not one patient in need of pixuvri then you will have other words about CTIC.The only negative factor in this stock is maybe the CEO who can be the worst in years(maybe he will ask more money again from investors like usually does when stock goes up a notch) other than that CTIC looks on a good path to get approved .They fight at least cancer what do you fight??

  • Report this Comment On May 14, 2012, at 9:44 AM, Bandit2237 wrote:

    My guess is that most of your articles are pessimistic, especially on companies that are succeeding at conducting business so you can drive their share price down in order to either buy or have your friends buy the stocks because you missed the boat. Well it's working I guess. LOL.

    I would love to see you and your friends portfolios changes in the upcoming days. Also if your argument really held water about the change in share price was due to no real business news and that the EU approval was expected, then explain why stocks in general raise and lower in value on a daily basis. I mean just because the Dow moves up and down, it doesn't mean business ideas change in every traded company. All it means is that one or more companies listed on the DOW has had an event occur or some political unrest is occurring in another part of the world. But I bet you are a "Finger Pointer" or "Excuse Maker" kind of guy, never wanting to be held accountable. Have a Great Day!!! :)

  • Report this Comment On May 14, 2012, at 3:24 PM, OBAMABB wrote:

    A Biased Basher Rag!

    Spewing Garbage!

    Longs in CTIC should file a class auction suit against your attempts at manipulating the stock price of CTIC.

    Bashing well over 60 times in the last 6 months just shows you are thieves nothing more nothing less!

  • Report this Comment On May 14, 2012, at 9:46 PM, mt48 wrote:

    Here we go again, talking about something you know nothing about. Do you know what NHL is? Have you any idea the detrimental effects it has? You know, it's not always about money. First and foremost, it's human beings! Don't ever forget it! If you are going to post something please have a good valid point to it. Please don't give your opinion, I didn't ask for it.

    By the way, if life should be that you were to get NHL, would you go to Europe for treatment or pounce on the FDA to approve the drug?

  • Report this Comment On May 15, 2012, at 2:08 AM, mrdupont2011 wrote:

    Motley Fool has simply turned into a churn and burn advice mill, no matter whether one hand states the opposite of the other, we are supposed to swallow it all.

  • Report this Comment On May 21, 2012, at 10:05 AM, dxt178 wrote:

    I have never seen such thinly veiled biased "reporting" in my life as this website and CTIC. I am an investor in this company because of their drugs and what they could potentially mean for people in need that have fairly limited options currently. Why the out and out bashing? This is disgraceful regardless of a particular view or business reason. I will never trust this website or its "news" again. Shameful.

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