Cell Therapeutics CEO still in place after board vote.
Bianco dissidents questioned leadership, Novuspharma unit's role
By BRAD WONG
SEATTLE POST-INTELLIGENCER REPORTER
James Bianco, chief executive and principal founder of Cell Therapeutics Inc., has survived an attempt by dissident board members to oust him from his position at the Seattle biotechnology company.
As a result, three dissident board members have resigned, and its chairman will leave on Sept. 30 as CTI continues pushing to get what some call a questionable anti-tumor drug, Xyotax, approved by the federal government.
At a Friday board meeting in New York City, members Silvano Spinelli, Erich Platzer, John Fluke and Max Link, the chairman, voted to remove Bianco, who also holds the title of president. Spokeswoman Leah Grant said the vote failed because four other members of the nine-person board supported Bianco.
Bianco serves on the body but abstained from voting.
In an interview, Bianco, 49, said the disagreement centered around who should lead the 225-person company and the role of Novuspharma, an Italian company that CTI acquired.
Bianco said the Novuspharma infrastructure cannot be maintained and said staff cuts among the 109 employees in Italy, many of whom are involved in research and development, could occur by the end of the year.
"We don't think the company needs to be 225 people," he said. "We have downsized the U.S. outfit considerably."
He noted the board, before members resigned, had approved the company's current goals. Those call for focusing on Xyotax and Pixantrone, a drug for non-Hodgkin's lymphoma, and placing less emphasis on research and development.
"...The overall strategy of what we should be focusing on was adopted by the entire board," he said. "The issue that needed resolution was (whether) this was the right leadership for the company. I think that was answered."
Other board members could not be reached Monday for comment.
But in a letter that was filed with the Securities and Exchange Commission, Spinelli said he wants a "more credible and reliable CEO in the interest of shareholders and the company."
Bianco said he has no plans to step down. "Smart and intelligent people can disagree, and I respect that. He's entitled to his opinion," he said.
The news failed to move the company's stock, which closed at $2.73, unchanged during regular trading on the Nasdaq on Monday. In the last year, the stock has risen to $10.85 per share before falling off between January and Monday, about 65 percent.
"Anybody who still owns these shares is such a true believer," said David Miller, a Seattle analyst and president of Biotech Stock Research.
As Miller and others pointed out, this year has been a tough one for the restructuring CTI.
In July, the company formally sold Trisenox, its only federally approved drug, for $68 million to raise money and pay off an investor. In June, it announced it was cutting 75 employees and selling its corporate jet to stem the quick pace at which it was burning up cash. The announcement followed news that Xyotax had failed to significantly extend the lives of patients in clinical trials.
CTI is now seeking approval of the Food and Drug Administration for Xyotax, which has demonstrated less severe side effects compared with other products.
Bianco's critics should note that he has beaten the odds of failure before.
Washington CEO magazine named him chief executive of 2000, pointing out how he helped turn around the company that was going through similar problems. Still, several biotechnology analysts had questions on Monday.
"What you're doing is you're betting the company on a drug that has clinical trials that cost a lot of money but don't tell you anything positive," Miller said. "If they can get Xyotax approved, it proves that Bianco is right."
Hamed Khorsand, an analyst with BWS Financial in the Los Angeles area, said CTI's problems are serious -- on a scale of one to 10, a nine.
"The resignation of the four members was a very large show of protest. It opens a can of worms," he said. "What's going to happen? Should Dr. Bianco step aside?"
He believes Bianco can allay any concern among analysts and shareholders by holding a conference call to talk about CTI's direction.
"I think what has happened is there might be disagreement that Cell Therapeutics is so dependent on Xyotax being approved," he said.
Khorsand, who holds no CTI stock, said he maintains a "buy" rating on shares. But that is now under review because of the news.
Quynh Pham, biotechnology analyst with Seattle-based Delafield Hambrecht, gives Xyotax a less than 50 percent chance of receiving conditional approval from the FDA. That means the FDA could approve the drug but require another clinical trial for more evidence.
"There is a lot of risk, and there is a lot of debt here, too," said Pham, who does not own CTI stock. "Their main concern is to keep the company going."
She added that her company has not had investment banking business with CTI in the past 12 months. It also does not buy or hold company stock.
Bianco agreed that the past year has been challenging for the company that he helped start in 1991.
So much so, that when asked for his age, he joked that he was getting older by the moment.
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