Cell Therapeutics (CTI) reported on February 27 that it will dismiss 62 employees from its preclinical segment. It hasn’t been able to reach an agreement for its divestiture, find a partner, or a company to form a joint venture with as was previously hoped.
CTI is keeping its eye firmly on the development of pixantrone, its Phase III candidate for non-Hodgkin’s lymphoma (NHL). It has been struggling to keep its head above water, financially speaking, and has lost almost all its value in the past year. The firm is thus doing everything it can to trim costs and raise capital to keep up with changing economic times and ensure a launch as early as the end of this year. Besides cutting off its preclinical research arm, the company is also getting rid of its only marketed product, Zevalin for lymphoma, which hasn’t done as well as was expected.
Taken together, CTI will save $32 million annually and the firm’s burn rate would drop to below $3 million a month by April, explained James Bianco, M.D., CEO. Additionally, CTI already earned $15 million through the Zevalin deal and will obtain another $18 million. Dr. Bianco wasn’t able to comment on how much cash it currently has in hand or how long it will be able to stay afloat. The company last reported that it had $11.7 million in cash as of September 30, 2008.
Dumping Preclinical Operations
Unloading its preclinical activities could save CTI about $1.2 million per month, Dr. Bianco noted. Situated in Milan, this segment is conducting IND-enabling studies on bisplatinates and is also researching dual inhibitors, antitubulin agents, as well as Rett inhibitors all for cancer treatment.
Dr. Bianco pointed out that while three years ago he would expect to receive between $20 million and $25 million for the Milan facility, today in keeping with the economic times, he’s willing to mark his price down to between $7.5 million to $10 million. The asset value of the facility is about $2.5 million, he reports.
Dr. Bianco goes so far as to say that really his main aim is to find an entity that will take over the preclinical arm as is, keeping the team intact, so that Cell Therapeutics can continue to use its services. Yet there have been no takers. Generic drug companies looking to grow their drug development activities had shown the most interest, according to Dr. Bianco at the “BIO CEO & Investor” conference on February 8. When the company said on February 27 that it would lay off employees from the Milan operations, it noted that its efforts were now directed at pharmaceutical firms and CROs.
CTI's Clinical Pipeline
CTI would be left with Phase II Brostallicin, Phase III Opaxio, and Phase III Pixantrone. Brostallicin is being evaluated in patients with advanced or metastatic soft tissue sarcoma. Opaxio is in trials for non-small-cell lung cancer (NSCLC), ovarian, and other cancers. The company plans on initially seeking FDA approval for maintenance of ovarian cancer following complete remission after first-line treatment. The drug is also currently under EMEA review in first-line NSCLC.
The breadwinner of course is expected to be pixantrone. Resources are going toward obtaining pixantrone approval in relapsed, aggressive NHL. The company believes that the drug could apply to patients with prior exposure to anthracyclines, those with nonanthracycline-induced cardiac disorders, and patients who might benefit from longer-term therapy along with other anthracyclines.
Disconnecting from Zevalin
Besides securing money to aid development, the company is also already beginning to use some financing to enhance its U.S. sales and marketing operations in anticipation of a pixantrone launch. Until recently, the company’s sales-related activities were focused on Zevalin, sanctioned for relapsed or refractory low-grade or follicular B-cell NHL.
Soon CTI will have completely divorced itself from Zevalin, which it thought would rake in the dollars but hasn’t. After forming a joint venture in November 2008 to develop and commercialize the drug as a first-line treatment, the firm has now decided to sell its 50% ownership in the JV. “It was a mix of factors that led to this decision with Zevalin,” commented Dr. Bianco. Increased cost of development, lower revenues earned thus far, new medications for NHL entering the market, and wanting to focus on pixantrone, which is considered to be a more commercially viable drug, are some of these factors.
CTI obtained Zevalin from Biogen Idec with a $10 million up-front payment in August 2007. At the time, Cell Therapeutics believed that it could expand the use of Zevalin, which brought in $16.4 million during 2006. The company spent about $32 million on developing the drug as a first-line treatment and expected to gain approval in the second quarter of 2008. Had this happened, “the hope was that Zevalin would generate about $34 million in sales, and we would break even by the end of 2008,” said Dr. Bianco.
Approval, however, is still pending and the first three quarters of last year brought in $8.8 million. Coupled with market competition from drugs like Cephalon’s Treanda, Cell Therapeutics was pushed to reevaluate its investment in Zevalin, Dr. Bianco continued. “It didn’t make sense to invest another $15 million in Zevalin, when we clearly have another very promising drug in pixantrone.”
The formation of the JV with Spectrum Pharmaceuticals in November 2008 to focus on Zevalin gave CTI $15 million. On February 20, Cell Therapeutics sold its 50% interest in the JV and will receive another $18 million. Dr. Bianco also expects to save $1 million a month from expenses related to Zevalin and about $0.5 million linked to employees who were involved with Zevalin who will transfer to Spectrum.
Cell Therapeutics finds itself where every biopharma company hopes to be but in more uncertain economic times and with less assurance of a smooth FDA approval. The transition from an R&D company to a commercial one is made tougher and more significant by the unique business model employed within the biopharma industry. The wait often is at least 10 years, and expenses incurred during that time runs into the billions.
This can also mean great fluctuations in market value with stock charts that look like the Alps and predictability similar to that of the weather. In fact, Cell Therapeutics has been trading below $1 since September 2008 and opened today at $0.06. Despite this negative Wall Street perception and the tight financial situation the company finds itself it, Dr. Bianco extolled confidence in pixantrone and anticipates breaking even by the fourth quarter.