Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

What Kind of Phase 2 Drug Can You Get for $5 Million?

By Brian Orelli, PhD - Updated Apr 6, 2017 at 9:34PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Cell Therapeutics goes trash diving.

I just don't get Cell Therapeutics (Nasdaq: CTICD). The company is trying to gain Food and Drug Administration approval of its cancer drug pixantrone. The agency turned down the drug, but the company appealed and earned itself another review. It still seems like a long shot to me, but I can't blame them for trying. Gaining FDA approval by running another trial is a long and tedious process.

But then Cell Therapeutics issues a press release yesterday saying the company has "identified a potential acquisition opportunity that is a phase II drug candidate." Really? Does the company need a backup for pixantrone that badly?

And what's the point of spouting off that you've identified a potential acquisition target. Cell Therapeutics mentions that the target is in the field of cancer immunotherapy, seemingly trying to play off the success of Dendreon (Nasdaq: DNDN). Don't buy the hype, Fools.

How the heck is Cell Therapeutics going to pay for this drug? It's not as if the company is flush with cash. By my calculations, Cell Therapeutics has less than $50 million in its coffers right now. The company had $43.8 million at the end of last quarter, raised $16 million by selling stocks and warrants, and paid off $10.6 million of debt since then.

Elan (NYSE: ELN) had to pony up $20 million upfront plus another $30 million in research support to gain access to Proteostasis Therapeutics' drug discovery pipeline. Pfizer (NYSE: PFE) paid $14 million upfront for access to LPath's eye drug that hadn't even entered phase 2 development. Anything that Cell Therapeutics could license in the $5 million to $10 million range, which is all the company could really afford at the moment, likely isn't worth the effort.

There's a possibility Cell Therapeutics might try to raise additional cash to pay for a drug, but I certainly hope not. The company recently performed a reverse stock split in order to get the share price above $1 -- thus the temporary ticker change from CTIC to CTICD -- but shares aren't that far from hitting that level again. Further dilution isn't advisable.

Cell Therapeutics could be the next Human Genome Sciences (Nasdaq: HGSI) miracle story, but just keep in mind that for every HGS, there are multiple biotechs like La Jolla Pharmaceutical and Genta trading for pennies on the OTC boards.

Interested in small caps? Grab this free report from Motley Fool analysts: "Too Small to Fail: 2 Small Caps the Government Won't Let Go Broke."

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
$53.04 (-3.00%) $-1.64
Elan Corporation Limited Stock Quote
Elan Corporation Limited

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/03/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.