From 'The Street.com'
Top Stories: All Eyes on Cell
Therapeutics' Cancer Drug
By Jesse Eisinger
Staff Reporter
3/16/98 11:19 AM ET
The scramble is on to figure out whether Cell Therapeutics'
(CTIC:Nasdaq) Phase III trial will work.
Investors will know by the end of this month whether CTIC's
Lisofylline keeps patients who undergo bone-marrow
transplants alive in the first hundred days. If the drug doesn't
do that, it could still be a success if it's proven to cure
serious infections. Lisofylline is being tested in 132 cancer
patients who are taking their normal course of therapy.
There are a several reasons to worry about the trial results,
and that's been reflected in CTIC's volatile stock activity
during the last month. It's down 20% so far in March.
But cautious optimism seems to be the conclusion of most
investors and analysts who have been taking a look at the
drug closely in the last couple of weeks.
"It's a tough call. If I had to handicap it, I'd say it's a 70% to
80% chance they hit one of the endpoints," says Mike
Yellen, a portfolio manager for GT Global, which manages
money for Chancellor LGT Asset Management, which
owned 1.88 million CTIC shares at year-end, according to
data tracker Technimetrics. And some hedge fund
managers who frequently short biotechs have decided not to
play CTIC in front of the data.
It's the same old story: If the drug hits, the stock blows up in
the hip-hop sense of the word. If not, it blows up in the
Hindenburg sense. And then there are the nuances if the
data are marginally effective. If Lisofylline scores on all its
main goals, including survival, the stock will head higher and
be in a strong position for approval. If the drug reduces
serious, life-threatening infections with statistical
significance but doesn't improve survival, the stock will also
go up strongly, but there will be an ensuing debate about
whether the Food and Drug Administration will approve it.
The company plans to submit its filing to the FDA in the
third quarter if the results are strong.
The data so far haven't been uniformly strong, but they have
been promising. "We've always had a statistically significant
effect in one of the endpoints," of all the Lisofylline trials,
says Dr. James Bianco, the president and CEO of CTIC. "I
feel good. People are excited. The folks at [partner] J&J are
serious about the product." Johnson & Johnson
(JNJ:NYSE) will co-market the product and split the profits
50/50.
Most analysts think it's a long shot that the drug improves
mortality. For one, bone-marrow transplant patients' deaths
have fallen in recent years, as doctors have learned to use
transplants more effectively. Still, there are a lot of deaths:
45% of BMT transplant patients die after 100 days, with 70%
of those caused by infections, according to CTIC. The Phase
III trial, with its 132 patients, is probably not enough to show
a difference, some analysts expect. In the Phase II trial,
however, the company did show a survival benefit. In the
high-dose Lisofylline arm, 89% survived after 100 days,
compared with 59% in the placebo group, a statistically
significant difference.
The major reason some investors don't expect a benefit in
saving lives is that in a more recent Phase II study in
leukemia patients, the drug didn't show a survival benefit.
There isn't a very good explanation for that, analysts say.
For investors, reducing serious infections is probably
sufficient. "It's a pretty good shot that they hit serious
infections. They hit it twice [in the Phase II trials]. If so, it's
probably a $16 to $17 stock," says Yellen. Late Monday
morning, CTIC is trading at 12 1/8.
Still, even with many ways to win, investors have concerns.
One is that CTIC's sponsors on the sell-side don't have
stellar biotech records. "Montgomery and UBS don't have
the best records so it's making some people nervous.
Liposome [LIPO:Nasdaq], AutoImmune [AIMM:Nasdaq],
Amylin [AMLN:Nasdaq] -- there have been so many that
have just collapsed," says Yellen.
Worse, Eric Hecht, a respected analyst from Merrill Lynch,
put forward a report in early March, detailing reasons to be
cautious about the drug's chances of success. Hecht
doesn't officially follow the company and Merrill isn't a CTIC
banker.
Chief among Hecht's reasons is that there is an older related
drug called Pentoxifylline that failed in improving survival
and reducing infections in its trials. But Lisofylline, while
related to the older drug, has different properties and may be
more effective, the company thinks.
Another problem is that with nausea being one of the main
side effects of Lisofylline, it's possible that doctors could tell
which patients got the drug and which got placebo. In other
words, the trial may have been "unblinded." That means
doctors may have treated those getting the drug differently
than those who didn't. CTIC says that didn't happen.
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