Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

2-3-10 FDA Approval and a Short Squeeze? Could we be so lucky?

|Includes: CTI BioPharma Corp. (CTIC)

8:29am  (originally posted on Kudrna's Stock Market Blog)

I’m playing some catch-up today and offering you two potentially bullish speculative stocks with tremendous upside but some definite risks.  Please perform your due diligence on these before you decide to invest to make sure you agree with me and not follow my beliefs blindly.  I’ve spent a significant amount of time studying these stocks to make sure I’m a believer in them before I posted so I hope you appreciate these lengthy articles. Here is stock 1 of 2.

Cell Therapeutics (NASDAQ:CTIC) has a cancer drug a few days away from an ODAC meeting that could recommend an FDA approval.  Lately, CTIC has been bashed significantly about their financial hardships (recent dilution) and reasons to think they won’t get FDA approval (which I’m not believing).

FDA approval can be tricky but I believe CTIC has the goods to obtain that approval upon further inspection.  However, I can never say with certainty what a governing body like the FDA is going to do….they live by their own rules, so to speak.  With that being said, I still think the ODAC meeting goes well and the stock jumps on the news.  What they offer is more than hope...they have legit results to receive approval.

However if the ODAC meeting is overly negative, I expect CTIC to tank and a good amount of shorts ARE banking on that to happen so make sure you are active in the market even a few days before as any bad news could send this stock tumbling.  Documents on the meeting should be available as soon as February 8th.

I’m also concerned with the current PPS already putting the market cap at over $600 million.  While that will be cheap if Pixantrone is FDA approved and in production…it’s high if Pixantrone is not approved.  Outstanding shares and the float are at about $600 million and $550 million, respectfully, therefore I don’t expect this stock to make you rich overnight.  I also see concerns over more dilution down the road even if they get approved so I’ll be sure to take some off the table on the ride up just in case.  Since they just diluted, it should be a while before they do it again, if they do.

The shorts are 10% of the float last I’ve seen so if the ODAC meeting is positive, they could aggressively cover and we will see a nice short squeeze pop that should last a few days.  I expect the stock to be close to its 52 week high of $2.23 within a short period of time (few months) but we could take a breather before going higher.   Having a potential FDA approval and a short squeeze is very tempting though.  So is this stock too risky?

While this stock poses some legit risks, I’m well diversified in my portfolio and able to take on that risk.  I’ll be looking to initiate a position shortly after this article is posted.  Do your due diligence as I said earlier and make sure you agree with me on this stock before you decide to invest but remember that we should have an understanding of which way the FDA should lean towards by February 10th and I expect it to be a positive one.  Now I have to get off here to go buy some shares for myself.  Good luck out there.


Disclosure: No Positions in Mentioned Stock