CEO Bianco repays loan from Cell Therapeutics
[The local press reports on Bianco's debt repayment]
By Luke Timmerman
Seattle Times business reporter
James Bianco, the chief executive of Seattle-based Cell Therapeutics, has paid back the full $3.5 million loaned him by the company, six months after missing the original deadline.
The company said the low-interest loan was repaid, with interest, in a filing with the Securities and Exchange Commission. The developer of cancer drugs made the two-year loan in April 2002.
Bianco was traveling to an investor conference yesterday, and unavailable for comment. Richard Leigh Jr., the company's executive vice president and general counsel, said he could not say how Bianco obtained the money to make the payment. "The loan was extended by the company, he agreed to repay it, and he has," Leigh said.
The insider loan was granted at a time when such transactions were common in corporate America, a few months before they were banned by the Sarbanes-Oxley Act.
The company's board of directors came under pressure from shareholders to collect the money in April, when the loan default was disclosed.
John Fluke Jr., chairman of the board's audit committee, said at the shareholders meeting a few weeks later that the loan would be resolved by year-end, and it could not be extended or forgiven under the Sarbanes-Oxley Act.
Bianco, 48, found himself in a financial bind when the loan came due because his wealth had declined. His stock in the company, a large chunk of his net worth, had fallen in value from $22 a share when the loan was granted, to $9 when it was due. His personal holdings in the company, 1.4 million shares and options, were worth about $8.5 million at yesterday's closing price of $5.97.
At the shareholders meeting, Bianco said he could have sold some of his stock instead of taking the loan in the first place, but it would have sent a bad signal to Wall Street.
He added that he was prohibited for months from selling his company stock during an acquisition, a restriction most other shareholders don't face.
The money is meaningful to a company in Cell Therapeutics' position — it has never made an annual profit in its 13-year history, and expects to lose $118 million to $127 million this year while it awaits clinical-trial results of its potential hit drug, Xyotax.
To keep from running too low on cash while it waits for the Xyotax results, the company cut $15 million in expenses in July, then sold 10 million shares to raise $49 million.
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