Cell Therapeutics: A Company Making The Right Decisions

| About: CTI BioPharma (CTIC)

In early 2007 there was a groundbreaking cancer vaccine that created a substantial amount of buzz in the medical and investment communities. Everyone predicted that this drug would be approved, but in 2007, the FDA shockingly asked for more data despite the drug showing a clear statistical advantage. The drug was Provenge by Dendreon (NASDAQ:DNDN), and although it has since become somewhat of a disappointment, it was considered the first in a long line of cancer vaccines that would change the treatment of cancer, and was then later approved following this very controversial decision by the FDA.

I know that I am comparing apples to oranges, but one company that reminds me of this decision by the FDA, and the experience of Provenge is Cell Therapeutics (NASDAQ:CTIC). The company's drug Pixantrone has already been denied by the FDA despite recognizable benefits. The FDA said it needed additional data. Its previous Phase III trial only enrolled 140 patients of the 320 that it was required to enroll for its pivotal study. In the trial, the drug had a greater overall response (ORR) along with a greater overall cure rate (CR). It had a 48% increase in overall survival for the Pixantrone arm at 10.2 months compared to 6.9 months on the comparator arm. Yet despite such benefits (and I remember the FDA decision vividly), the data was seemingly ignored due to the trial being short patients, therefore requiring additional data, similar to Provenge.

To me, the situation with Pixantrone mirrors that of Provenge, and I believe the company has now been given an opportunity where it could see an approval from the FDA in the future, but first, for a little background information: Pixantrone is a novel aza-anthracenedione for the treatment of non-Hodgkin's lymphoma, along with other hematologic malignancies and solid tumors. There is a significant unmet demand for a drug such as Pixantrone in the treatment of a very violent disease with survival measured in months. Non-Hodgkin lymphoma is the fifth most common cancer in the United States. It is caused by the abnormal growth of lymphocytes, cells key to the functioning of the immune system. It usually originates in lymph nodes and then spreads throughout the lymphatic system. There are currently no effective therapies for patients with aggressive NHL who relapse after or are refractory to second-line treatment, which identifies an unmet demand for Pixantrone, or Pixuvri, in a similar way to Provenge.

The company itself has a number of critics, and investors have wondered if Pixantrone would ever be approved in any market, but in April of this year, Cell Therapeutics announced that is has received conditional marketing authorization from the European Commission for Pixuri, otherwise known as Pixantrone, for the treatment of adult patients with multiply relapsed or refractory aggressive non-Hodgkin B-cell lymphomas. This will now allow the company to market the drug in 27 member states of the EU as well in Iceland, Liechtenstein and Norway, therefore providing for a potentially large group of patients. The company announced that it intends to make Pixuri immediately available in the EU, and commercialize the drug with its own sales force in the second half of 2012.

The reason I believe the marketing approval is significant for CTIC moving forward is because it will create immediate sales allowing investors to get an idea of its potential success in the U.S. In addition to the EU approval providing immediate revenue, it will also provide data for the drug that could possibly be used once the company attempts to gain approval in the U.S. It's hard to say whether the FDA would consider this data from Europe, but nonetheless, the approval could provide U.S. regulators with a more diversified collection of information regarding the efficiency of Pixantrone, which could sway the upcoming decision once CTIC reapplies in the U.S.

The approval of Pixantrone is a major development for Cell Therapeutics but its stock has since fallen, which I don't understand. The stock actually jumped to $1.25 following the announcement of the approval but has since fallen to $0.91 over the last two weeks, near 52 week lows. There are a number of reasons why the stock may be trading lower, but in my opinion, it does appear as though CTIC is moving in the right direction, and investors are reacting to the news of the EU approval as if it were negative for the company.

Some have been particularly disappointed by the company's decision to withdraw its New Drug Application (NDA) for Pixuvi for approval in the U.S. after the agency allowed it to re-submit following review of the original decision. However, at this time, I think it is a smart move. The drug shows an obvious benefit in treating this disease. Therefore, it could perform very well in the EU, which would reflect positively in the U.S. for the FDA. The reason I think it was wise for the company to withdraw its application at this time is because, although we as investors seek immediate gratification and want to see immediate sales growth, it isn't practical considering the sales team that would have to be in place, along with the necessary marketing campaign on two different continents. The company has had its issues with the FDA and it probably looks at the EU approval as an opportunity to provide more data to the FDA, hence knowing that all potential questions could be answered by virtue of its EU approval.

An approval of a drug is all but one step in a long process - it is then very expensive to market and supply the drug, especially in two regions. Let's not forget, the company also has a large pipeline and just recently acquired a very promising JAK2 inhibitor, meaning it must keep costs in check. Overall, I am satisfied with the company's decision to withdraw the application. I think the EU approval will provide additional data and allow for the company to get its marketing platform in place without having to worry about pleasing investors with immediate success in the U.S.. I expect the company to be much more prepared when it does submit its application in the U.S., and I think sales in the EU will create investor confidence in a stock that should not have fallen following a very significant milestone for the future of this drug. I look for significant upside in shares of CTIC over the next year, as it should be a very eventful year.

Disclosure: I am long CTIC.