Will EMEA’s Validation of Cell Therapeutics’ PIP Pave the Way for its Lead Drug Candidate Pixantrone

Questions surrounding Cell Therapeutics Inc. (NASDAQ: CTIC) abound as investors continue to place their bets on whether the biopharmaceutical company has the ability to eliminate questions of effectiveness and safety concerning their lymphoma drug pixantrone and bring the drug to market.

Earlier this month Cell Therapeutics picked up some good news when the European Medicines Agency (EMEA) validated the expanded Pediatric Investigation Plan (PIP) for pixantrone. While the validation is certainly good news for CTIC there are plenty of hurdles that have to be cleared before the drug becomes a viable treatment. The PIP will now have to survive the scrutiny of the Pediatric Committee (PDCO) of the EMEA and assuming they earn the approval it will then have to submit a Marketing Authorization Application (MAA) which will then determine if pixantrone can finds its way into European Union market.

For those investors who have been following CTIC the recent validation has been a long time in the making as the company originally filed for validation in Sept. 2009 but was asked by the PDCO to expand their original PIP, better defining the outline they will follow to study pixantrone in children. That expansion was requested in part due to data suggesting the potential benefits of pixantrone in children suffering from hematological cancer.

While the drug is being developed to treat relapsed or refractory, aggressive non-Hodgkin’s lymphoma (NHL) for patients who have not responded to other treatment options there are a number of concerns that remain when it comes to the issue of pixantrone’s safety.

It’s been safety concerns that have tripped up CTIC in the U.S. as the FDA denied approval for pixantrone earlier this year based largely on a poor Phase 3 study that involved only 140 out of the planned 320 patients suffering from aggressive, non-Hodgkin’s lymphoma. As a result the FDA expressed doubt about “the level of evidence necessary to draw conclusions from this Phase 3 study and the reliability of these conclusions.”

The FDA also noted concern with pixantrone treatment generating “substantial hematologic and cardiac toxicity,” not a very promising outlook for CTIC. Cell Therapeutics has since submitted to the FDA a proposal for a new study in aggressive NHL and word on that could come at any time.

Perhaps most troubling about that Phase 3 study was CTIC’s decision to stop enrollment early so as to analyze the data they had gathered, essentially invalidating the Special Protocol Assessment (SPA) Cell Therapeutics had with the FDA for the study. That, in and of itself, should raise some red flags among shareholders who may be questioning the company’s ability to see pixantrone through.

Despite the uncertainty regarding FDA approval Jack Singer, Chief Medical Officer of Cell Therapeutics, has focused his enthusiasm on the more recent EMEA validation saying “We are very pleased that the EMEA has validated the expanded PIP for pixantrone, as there is a real need for a less toxic, more effective anthracycline-like treatment option not only in lymphoma, but also possibly in other tumors.”

In the company’s announcement regarding that validation Singer went on to say, “We look forward to completing the MAA submission, and continuing to pursue our goal of providing pixantrone as a treatment option to the patients who need it most.”

Singer’s enthusiasm hasn’t translated into a surge in CTIC’s stock price which took a significant hit back in March when it dropped to a 52-week low of .12 following the company’s announcement that the FDA had denied approval for pixantrone. Trading closed at .37 on Friday but that is significantly lower than the 52-week high of 1.70 it posted on Aug. 31, 2009. Lending further evidence to the importance of FDA approval for stock price, Cell Therapeutics saw little movement in its share price following April’s announcement that European regulatory authorities supported the MAA application submission to EMEA.

CTIC has said their products, including pixantrone, will be successful and generate revenue if the company is able to meet certain criteria which includes: product candidates are developed to a stage that will enable CTIC to commercialize, sell, or license related marketing rights to third parties; and product candidates, if developed, are approved.

That seems logical enough but with less-than-impressive results in their attempt to win FDA approval for pixantrone investors have to wonder whether CTIC is capable of meeting those requirements. Judging by the stock’s price drop when the FDA denied approval for pixantrone compared to a minimal price increase following EMEA’s validation should be a clear indicator as to how important the U.S. market is to investors. Betting that CTIC will successfully bring pixantrone to the U.S. market is betting that they’ll be able to clear the FDA hurdles and that has proven difficult up to this point.

Obviously getting into the European Union market would be a victory for CTIC so news of EMEA’s validation is certainly a positive sign but even an eventual approval of an MAA might not be enough to catapult the company’s stock price, that’s something FDA approval would do.

The 200 day moving average is 0.71 while the 50 day moving average is 0.40, which can be seen in the chart below.

Technical Chart for CTIC

CTIC is a penny stock trading on NASDAQ. Penny stocks are generally regarded as shares in a public company that trade below $5 per share.