Cell Therapeutics' deficit hits $1 billion
By Ángel González
Seattle Times business reporter
It's hard to burn through a billion dollars. Unless you're in the biotech drug business — and not selling any drugs.
Cell Therapeutics said Wednesday that its accumulated deficit had passed $1 billion, making it the first Seattle biotechnology company to hit that mark.
And the money hole is only getting deeper, even as the 16-year-old company strives to acquire an already commercial product so it can start producing some revenue.
The biotech firm reported a net second-quarter loss of $27.9 million, or 65 cents per share, up from $20.5 million last year, driven mainly by research and development expenses. The billion-dollar accumulated deficit was reported in the accompanying financial statements.
The target launch date for the company's two leading drug candidates is 2009 — but first they have to meet the U.S. Food and Drug Administration's tough standards.
Cell Therapeutics' surging bill underscores how expensive, risky and slow-moving the biotech industry is. The average cost of developing a new therapy runs at about $1.2 billion, according to the Tufts Center for the Study of Drug Development. It takes about eight years on average to get a drug to market, the center said.
In that context, Cell Therapeutics' deficit is not unusual, said Peter Winter, communications director for San Francisco-based Burrill and Co., a San Francisco investment bank that specializes in biotech.
Still, the $1 billion deficit is 6.6 times Cell Therapeutics' market capitalization. That means the market thinks the company is only worth a fraction of the capital it has consumed.
Other local firms have also run huge deficits, but success in getting their drugs approved eventually made their value skyrocket. In the third quarter of 2005, when Icos reached its peak accumulated deficit of $868 million, the company's market cap was $1.7 billion — twice the capital it had burned through. Icos was acquired by pharmaceutical giant Eli Lilly for $2.3 billion earlier this year.
ZymoGenetics, which expects to launch its first marketed product in October, has run up a deficit of $568 million, while the market values the company at $927 million.
"It's tough being a biotech company, that's for sure," Winter said. "Not everybody is going to win."
Cell Therapeutics hasn't brought in much revenue, since it sold its only commercial product, Trisenox, in 2005 for $71.9 million.
Its leading drug candidate, Xyotax, has failed at several major trials, but the company hopes it will be approved in 2009 after further testing. The firm also expects to launch Pixantrone, a therapy designed to treat immune-system cancer, that same year.
To prop its revenue in the meantime, Cell Therapeutics is looking at buying a commercial product that has $15 million to $18 million in annual sales. The company recently acquired Systems Medicine, based in Tucson, Ariz., for $20 million in stock to boost its research pipeline.
Spokesman Dan Eramian said big spending is part of the business. He also said that the company is ahead of the average cost of development because it has two drug candidates in late-stage trials.
"No drug company that's eventually successful doesn't run large deficits," Eramian said. "If we stop doing research because of deficits, you wouldn't have any drugs." |
