Cell Therapeutics said yesterday it has signed a deal that will bring in $25 million in upfront cash in exchange for a minimum of $53 million in future royalties from its arsenic-based...

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Cell Therapeutics said yesterday it has signed a deal that will bring in $25 million in upfront cash in exchange for a minimum of $53 million in future royalties from its arsenic-based cancer drug.


The deal, combined with an $18 million private stock sale a day earlier, provides a $43 million infusion for the Seattle biotech company at a point when it is running low on cash.


Under the agreement signed with Quintiles, a contract research firm, Cell Therapeutics will pay out a minimum of $53 million, spread from 2006 to 2010, in royalties from sales of Trisenox. If the royalty stream is higher because of strong sales, it could owe Quintiles a maximum of $69 million over those years, said spokeswoman Kate Whitman.


Quintiles also will do $5 million worth of clinical trial work for Cell Therapeutics, largely on Pixantrone, an experimental drug for non-Hodgkin’s lymphoma.


Cell Therapeutics has been losing $35 million per quarter, and finished September with $103 million in the bank. A company filing with the Securities and Exchange Commission this week reported it has enough money to operate through the first half of 2005, but biotechs don’t like to operate with only a six-month cushion.


The cash reserves have gotten relatively thin partly because the company has had to wait longer than expected for a possible make-or-break moment — the day clinical results arrive from a lung-cancer trial with its drug Xyotax.
















Cell Therapeutics


Founded: 1991




Headquarters:
Seattle




CEO:
Dr. James Bianco




Employees:
390, including 265 in the U.S.




Cash and investments:
$103 million at end of September




Quarterly net loss:
$35 million per quarter




What it does:
Markets an arsenic-based drug, Trisenox, for a rare form of leukemia; developing Xyotax, a new drug for lung and ovarian cancer.


The company says the results have been delayed for months because the trial is measuring patient survival time, and not enough patients have died yet to get a statistically valid measurement. Cell Therapeutics said earlier this month it expects the results by the end of March.


The company, which is still blinded to the results just as doctors and patients are, cannot know for certain if Xyotax is prolonging patients’ lives or if the patients in the comparative arm are also living longer for another reason. Xyotax, which combines a common chemotherapy drug with a polymer, is designed to reduce toxic side effects and enable patients to withstand more doses against their cancers.


If Xyotax shows a survival advantage, it would almost certainly drive Cell Therapeutics’ stock much higher, making it easier to raise more capital from investors and speed its path to the marketplace. If there’s no meaningful survival advantage, the company’s stock could plummet, and it may have to fall back on its other drugs in development.


Until the results come in, the company has to wait with the resources it has.


“This agreement will give us a strong year-end cash balance, and allow us to head into 2005 from a position of strength,” said Leah Grant, a company spokeswoman.


So far this year, Cell Therapeutics has made some cuts to slow down its spending rate. In a conference call last month, the company said it had cut $1.5 million in sales and administrative costs, and $8.3 million in research and development.


The company has not gotten rid of its corporate jet, which cost the company $2.4 million to lease last year, but Chief Executive James Bianco has repaid a $3.5 million loan he took from the company two years ago. Grant said the company did not scrap its holiday party, which was held at The Triple Door, a high-end jazz venue in downtown Seattle.


Paul Latta, an analyst with McAdams Wright Ragen, said he wonders why the company raised cash at this price — $8.30 per share at yesterday’s close — if it is confident better days are ahead.


“When the Xyotax data is out, if it’s positive, they’ll have another opportunity to raise capital,” Latta said. On the other hand, by raising cash now, “if [the results] are negative, they’ll have cash to move on to the next thing.”


Luke Timmerman: 206-515-5644 or ltimmerman@seattletimes.com