Cell Therapeutics, Inc.

Transcription

1 ZACKS SMALL CAP RESEARCH May 18, 2009 Gargi B Banerjee Grant Zeng, CFA gzeng@zacks.com Cell Therapeutics, Inc. (CTIC-NSDQ) CTIC: Cash burn, a major concern Hold Current Recommendation Hold Prior Recommendation Buy Date of Last Change 03/17/2008 Current Price (05/15/09) $1.20 Six- Month Target Price $1.50 SUMMARY DATA 52-Week High $ Week Low $0.05 One-Year Return (%) Beta 6.84 Average Daily Volume (sh) 39,091,640 Shares Outstanding (mil) Market Capitalization ($mil) Short Interest Ratio (days) 0.24 Institutional Ownership (%) 21 Insider Ownership (%) 2 Annual Cash Dividend $0.00 Dividend Yield (%) Yr. Historical Growth Rates Sales (%) Earnings Per Share (%) Dividend (%) P/E using TTM EPS P/E using 2009 Estimate P/E using 2010 Estimate Zacks Rank 2 OUTLOOK Cell Therapeutics (CTIC), Inc. develops, acquires, and commercializes novel treatments for cancer. Recently, the company sold its entire 50% holding in the Zevalin joint venture to Spectrum Pharmaceuticals for $18 million in order to focus its resources towards two late-stage oncology products Pixantrone and Opaxio. The company is in the process of submitting an NDA for Pixantrone this quarter. We are optimistic about these two late stage candidates; however, we are very concerned with the company s cash position. Unfortunately, the company has entered into a survival mode. If the company can manage its cash appropriately, we believe it can survive the current financial and economic turmoil. We maintain the company s shares as Hold with price target of $1.50 per share. Risk Level Above Avg. Type of Stock Industry Med-Drugs Zacks Rank in Industry 23 of 103 ZACKS ESTIMATES Revenue (in millions of $) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) A 2.89 A 2.60 A 2.54 A A A 0.20 E 0.10 E 1.60 E 1.92 E E E Earnings per Share (EPS is operating earnings before non recurring items) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) $5.29 A -$2.45 A -$1.21 A -$0.24 A -$3.66 A $0.09 A -$0.05 E -$0.04 E -$0.03 E -$0.18 E $0.15 E $0.14 E Zacks Projected EPS Growth Rate - Next 5 Years % Copyright 2009, Zacks Investment Research. All Rights Reserved.

2 WHAT S NEW Cell Therapeutics announced financial results for the first quarter of 2009; cash position is our main concern CTIC did not report any revenue for the quarter as it sold its entire stake in the only marketed product Zevalin to Spectrum Pharmaceuticals. Total operating expenses decreased 39% during the first quarter from same period last year. This was possible due to the reduction in both R&D expenses and SG&A expenses following cost-saving initiatives related to the clinical trial programs. CTIC is looking forward to the American Society of Clinical Oncology (ASCO) meeting to be held in Orlando from May 29 to June 2. There it will be presenting full data from a pivotal trial of Pixantrone for the treatment of NHL. The success at the conference is important for CTIC since it is depending very heavily on this drug for future partnership potential and successful NDA filling. On an adjusted basis, CTIC reported a net loss of $24.6 million (per share net loss of $0.09) compared to a net loss of $37.6 million (per share net loss of $5.29) in 1Q 2008, an improvement of 34%. EPS for the two quarters cannot be compared because of the huge dilution of share capital. The company finally decided to close the Italian facility as declared earlier which is expected to save $14 million of operating expenses annually. As of March 31, 2009, CTIC had only $0.7 million in cash, cash-equivalents, and securities available for sale and interest receivables. Subsequently, in April, the company received $6.5 million from Spectrum Pharmaceuticals (related to Zevalin stake sale) and $23.5 million from the sale of series I preferred stock to a single institutional investor and upon the exercise of the associated common stock warrants. But even after this, the company has funds to operate till August. CTIC was expecting another $3.5 million in connection with the Zevalin stake sale, which Spectrum Pharmaceuticals refused to pay. The amount is being held in escrow while the two companies are in dispute regarding some adjustment. CTIC is in a very tight liquidity position, though it recovered a bit due to the issuance of preferred stock and Zevalin stake sale. But this cannot continue for long and without a proper revenue stream, survival will become difficult for the company. OVERVIEW Cell Therapeutics, Inc. (CTIC), based in Seattle, WA, is focused on developing drugs for cancer. The company completed the acquisition of Zevelin for marketing it in the US from Biogen Idec in December It entered into a joint venture agreement in December 2008 with Spectrum Pharmaceuticals to market Zevalin. However, in March 2009 it sold its entire stake in the joint venture for $18 million due to cash shortage. Currently, CTIC has two late stage product candidates in the pipeline. Pixantrone and Xyotax are under phase III development for the treatment of non-hodgkin s lymphoma (NHL) and non-small cell lung cancer (NSCLC), respectively. The company has begun to a rolling NDA filing of Pixantrone with the FDA. Recent acquisition of Brostallicin further fills up its pipeline gap. In 2001, the company granted licensing rights to Chungai Pharmaceutical to develop and commercialize Xyotax in several Asian markets. So far it has earned its revenue from these agreements and from previous product sales. The company sold its only approved product, Trisenox, in July 2005 to Cephalon to help raise cash for Pixantrone and Xyotax development. The company signed an agreement with Novartis in September 2006 for its Xyotax program. Revenue over the next several quarters will be generated by licensing fees and contracts, as well as potential milestone payments from Cephalon and Novartis. The Technology: Cell Therapeutics has developed a novel Polyglutamate Drug Delivery Technology which is a new way to deliver cancer drugs more selectively to tumor tissue which can reduce the toxic side effects to normal organs and tissues, and to improve the anti-tumor activity of existing chemotherapy agents. The technology conjugates cancer drugs to biodegradable polymers, polyglutamate. Two of the product candidates, Xyotax and CT-2106, use a unique biodegradable protein polymer to deliver chemotherapy agents, Taxane and Camptothecin, to tumor tissues more selectively. Because tumor blood vessels are more porous than those in normal tissue, polymers within a specific size-range circulate in the bloodstream and get trapped in tumor tissues, thus accumulating preferentially within the tumor. Once in the tumor tissues, the polymer cancer drug is taken up by the Zacks Investment Research Page 2

3 cells. The polymer-bound cancer drugs are inactive while circulating in the bloodstream, which may lower toxicity, compared to the active cancer drug substance alone. This technology eliminates the need for toxic solubilizing agents such as Cremophor/Ethanol. The company has demonstrated that a significant reduction in serious sideaffects can be achieved using this system. Also, CTIC acquired System Medicine Inc. in July 2007 which brings a genomic based research platform to Cell Therapeutics. INVESTMENT THESIS Financial position has been deteriorating In March 2009, CTIC sold its entire stake in Zevalin to Spectrum Pharmaceuticals for $18 million. This stake sale will fetch the company the much-needed financial rejuvenation but at the cost of its only marketable product. The company expects to utilize the cash towards the development of its two products, Pixantrone and Xyotax. Though the company initiated a NDA filing for Pixantrone in April 2009, we don t expect its approval before For 1Q09, CTIC reported adjusted net loss of $24.6 million ($0.09 per share) compared to net loss of $37.6 million ($5.29 per share) attributable to common shareholders. The huge difference in net loss per share is due to the increase in number of shares to 285 million from 7.11 million during the same period last year. As of March 31, 2009, CTIC had only $0.7 million in cash, cash-equivalents, and securities available for sale and interest receivables. Subsequently, in April, the company received $6.5 million from Spectrum Pharmaceuticals (related to the Zevalin stake sale) and $23.5 million from the sale of series I preferred stock to a single institutional investor and upon the exercise of the associated common stock warrants. Total operating expenses decreased 39% during the first quarter from same period last year. This was possible due to the reduction in both R&D expenses and SG&A expenses as a result of cost reduction initiatives related to the clinical trial programs. We think liquidity is the single most important problem for the company. Actually we think the company has entered into a survival mode. The company is under great pressure to raise additional cash to fund its operations. The company has continued to issue notes and shares to raise funds for its operations which have led to massive dilution of its existing shareholder base. We believe this trend will continue in 2009 also. However, at current financial and economic turmoil, it will be extremely difficult to raise any additional funds. Sale of Zevalin stake not sufficient to improve ailing financial position CTIC sold the initial 50% ownership in the joint venture for $15 million in December 2008 and sold the remaining 50% stake for $18 million in March The forced selling of Zevalin has frustrated us. Management made a bad decision to buy the drug in the first place in our view. As a reminder, in December 2007, Cell Therapeutics completed the acquisition of Zevalin (ibritumomab tiuxetan) from Biogen Idec. CTIC will be responsible for marketing, sales, and development of the drug in the United States. The drug will continue to be sold outside the United States by Bayer Schering under an agreement between Biogen Idec and Bayer Schering. Under the terms of the agreement, CTIC will assume control of U.S. marketing, sales, and development of Zevalin. CTIC paid Biogen Idec $10 million in cash up front, and will pay Biogen up to an additional $20 million in milestone payments when the product receives approval for a first-line indication in NHL, and royalties on sales. CTIC has also agreed to share the cost of certain clinical trials of Zevalin with Bayer Schering in the event such trials are undertaken. The FDA approved Zevalin in 2002 to treat patients with relapsed follicular indolent non-hodgkin's lymphoma (NHL) which is the first FDA-approved radioimmunotherapy. Zevalin is an effective yet underutilized drug with a favorable tolerability profile, producing high rates of complete response coupled with long-term remissions, all following just a single therapeutic dose. The potential cost savings and practice efficiencies compared to standard combination chemotherapy will become increasingly attractive to oncology group practices in the ever-evolving reimbursement environment. In 2006, Biogen Idec reported $16.4 million in U.S. Zevalin sales. Zacks Investment Research Page 3

4 On Oct. 2, 2008, CTIC submitted a supplemental Biologics License Application (sbla) with the US FDA for use of Zevalin as first line consolidation therapy after remission induction in previously untreated patients with follicular non-hodgkin's lymphoma. If approved, Zevalin would be the only radioimmunotherapy in the U.S. with approval for use as first-line consolidation therapy. The company has requested priority review, which if granted, would result in a six month review period. Therefore, we expect a FDA action date in early April CTIC gained access to the FIT data through an agreement with Bayer Schering Pharma AG, Germany. Bayer Schering recently announced it had submitted the FIT results to the EMEA for consideration for a new indication for the product in the European Union (EU). The company plans further to expand Zevalin labels going forward to expand its sales potential. As CTIC s financial position got deteriorated, the company formed a JV, RIT Oncology LLC, with Spectrum Pharmaceuticals in November, 2008 to commercialize and develop Zevalin (R) in the US. As per the agreement, CTIC has received two installments of $ 7.5 million each in December 2008 and January 2009, in addition up to $ 15 million product sales milestone payments upon the achievements of certain revenue targets. However, on Feb 20, 2009, the company exercised its option to sell its 50% stake in the joint venture for $18 million. It expects that with this sale, it will be able to reduce annual expenses (earlier associated with Zevalin) by $15 million and will be able to concentrate its focus on Pixantrone and Opaxio. The Xyotax Program The STELLAR trials did not meet primary end-points, but met significant second end-points and provided important findings: Xyotax is a novel polyglutamate polymer that elutes the chemotherapy drug paclitaxel (Taxane). The device offers a more direct and steady regimen for chemotherapy treatment. In 2005 CTIC completed three large-scale phase III trials on Xyotax in various stages of non-small cell lung cancer (NSCLC). The trials were as such: STELLAR-2: Xyotax vs. docetaxel (2 nd -line NSCLC) STELLAR-3: Xyotax vs. paclitaxel in combination with carboplatin (1 st -line NSCLC, PS2) STELLAR-4: Xyotax vs. gemcitabine/vinorelbine (1 st -line NSCLC, PS2) All three of these trials failed to meet the primary end-point of extended survival (superior survival compared to control arms). Yet there were significant secondary end-point benefits of tolerability, convenience, and safety. Across the various trials, patients receiving Xyotax reported less cardiac toxicities, less gastrointestinal toxicities, less nausea and vomiting, less anemia, less neutropenia, less hair loss, less fatigue, less mucositis, and less ocular toxicity. Also, patients taking Xyotax required no steroids or pre-medications such as Cremophor/Ethanol. More phase III results were presented at the American Society of Clinical Oncology (ASCO) meeting in May, The results demonstrated that Xyotax improved overall survival (in-line with the control), but reduced serious side effects in NSCLC patients. Then In July, 2005 the company presented additional data on Xyotax at the International Association for the study of Lung Cancer (IASLC) meeting demonstrating another important characteristic of Xyotax: Xyotax was more effective in women than in men in terms of survival. New data presented at the UBS Global Life Science Conference in September 2005 backed the earlier findings. In June, 2006 at the annual meeting of ASCO, the company presented composite data analysis of STELLER 3 and STELLER 4 trials on women. The analysis demonstrated that Xyotax had a significant impact on survival in women compared to those on the control arms. In addition, in women younger than 55 years old, overall survival was prolonged for patients on the Xyotax arm compared to the control arm (p=0.03), whereas in women 55 years and older, overall survival was similar between treatment groups (p=0.134). Patients with pre-menopausal estrogen levels (serum estrogen >30 pg/ml), regardless of age, had a significant improvement in survival when treated with Xyotax in combination with carboplatin compared to patients treated with paclitaxel plus carboplatin (p=0.039), but survival was similar between the two arms of the study in patients with post-menopausal estrogen levels (p=0.676). CTI believes that estrogen levels are playing an important role in the response performance for Xyotax. Estrogen seems to be involved in depredating the polyglutamate polymer and releasing the paclitaxel directly into the cancerous cell. This could be the more targeted delivery of paclitaxel CTI was hoping to demonstrate with Xyotax in the STELLAR trials. The median survival for women taking Xyotax was 9.5 months vs. 7.7 months for paclitaxel alone in a phase II (PGT202) trial in The one-year survival rate increased from 25% to 40% for Xyotax over traditional paclitaxel. In the composite analysis of the phase III STELLER 3 and 4 at ASCO, the median survival for pre-menopausal women taking Xyotax was 309 days, versus 181 days for control (p=0.008). One-year survival rate for pre-menopausal women was 43% for Xyotax versus 19% for control. Zacks Investment Research Page 4

5 The new PGT307 trial specifically targets women with normal estrogen levels: Based on findings from STELLAR trials, the company designed a new phase III PGT307 trial for women with advanced lung cancer. The PGT307 trial is under Special Protocol Assessment (SPA) with the FDA. PGT307 specifically targets women who have PS0, PS1 and PS2 advanced lung cancer with normal estrogen level. PGT307 will study Xyotax in combination with carboplatin vs paclitaxel with carboplatin and will enroll 450 patients. We think the new trials have a better chance to succeed since estrogen level is more objective than age for the stratification. In April 2007, Xyotax for women was granted a Fast Track designation by FDA. The company started PGT307 trial in September 2007 and originally planed an interim analysis planned in the first half of However, in order to save cash and re-allocate its limited resources, in early 2008, the company announced that the PGT307 will be limited to US sites only, until either approval of Xyotax in EU (2H09) or until positive results from the GOG212 trial are positive (2H09, see below for details). US NDA filing for Xyotax has been delayed and MAA has been filed with EMEA: CTIC met with FDA in early June of FDA agreed on a NDA route for Xyotax for women with lung cancer. The FDA agreed to review an NDA submission based on interim results of the PGT307 trial with the results of the STELLAR 3 and 4 trials to support the filing. Based on this feedback, the company originally planed to file an NDA in the 2H08 if the PGT307 trial meets its pre-specified interim endpoint. However, with the limit of the PGT307 trial, the NDA filing will be delayed at least for one year. In Europe, the filing strategy is a little different. CTIC will seek to claim non-inferiority as a first-line monotherapy in all PS2 patients (men and women) based on the existing STELLER trial data. Recently, the EMEA's Scientific Advice Working Party (SAWP) agreed in principle that a switch from the superiority endpoints in the STELLAR trials to non-inferiority endpoints could be justified as a pathway to approval based on the possibility of favorable safety profile and/or quality of life or use of rescue medications of Xyotax compared to comparators. As a result, CTIC submitted a marketing authorization application (MAA) in Europe in March 2008 for Xyotax for the first line treatment of patients with non-small cell lung cancer (NSCLC) who have ECOG (Eastern Cooperative Oncology Group) performance status 2 (PS2). The EMEA accepted the MAA submission in early April The marketing approval review process generally takes 15 to 18 months. The brand name for Xyotax in EU is Opaxio. Although the EMEA accepted the application based on the favorable safety and non-inferiority efficacy results of STELLER studies. However, we don t think EMEA will give an outright approval of Xyotax based on the STELLER results. The EMEA probably will wait for the PGT307 trial results to make a final decision. Paclitaxel, the chemical found in Bristol-Myers Taxol, is one of the most widely prescribed chemotherapies for cancer. The physician acceptance of Paclitaxel s efficacy benefit is high, yet the drug has many negative side effects, as most chemotherapy do. Xyotax, CTIC s polyglutamate polymer paclitaxel, could seriously reduce the negative side effects, while increasing the tolerability and convenience of the drug. This has the potential to vault CTIC s Xyotax product to the forefront of physicians choices when seeking to prescribe chemotherapy. Lung cancer is the second most common and the most common cause of cancer related death in both men and women in the United States. While the incidence and mortality rates for men have dropped since 1990, this trend has not been observed for women. Lung cancer is a major unmet medical crisis for women and will kill 70,000 women this year in the US. Lung cancer remains the biggest cancer killer in Europe. The incidence of lung cancer in Europe is more than 13 percent of all cancers, and in 2000 resulted in nearly 350,000 deaths. This provides Xyotax a huge market potential once it gets approved by FDA and EMEA. We estimate Xyotax potential peak sales will reach $500 million for lung cancer in the US. Label expansion to other cancers may further expand Xyotax franchise: Xyotax also offers potential outside of lung cancer as well. A large-scale (n=1500) phase III trial (GOG212) is being sponsored by the Gynecologic Oncology Group (GOG) to study Xyotax in women with completely remised ovarian cancer. The trial will study the ability of Xyotax vs. paclitaxel to maintain remission and extend progression-free survival, and improve the quality of life. The trial began in early 2005 and Interim results should be available in 2H09. This could be the basis for a snda filing on Xyotax in 2010 and potential approval in In late February 2007, Cell Therapeutics presented positive preliminary results from an investigator-sponsored phase II study of Xyotax in patients with androgen independent prostate cancer at The Prostate Cancer Symposium in Orlando. The results demonstrated a major response rate of 24 percent (five of 21 patients) with a median overall survival at follow up of 8.5 months and a median time to progression of 3.5 months. Of the 24 patients on the study, 80 percent (n = 19) had received prior chemotherapy and 84 percent of those patients (16 of 19) were resistant or refractory to prior taxane chemotherapy. Xyotax was well tolerated in the studies. The results Zacks Investment Research Page 5

6 are encouraging in that Xyotax may offer an alternative to such patients who failed prior taxane therapy. Further, Xyotax was administered in a short, ten to twenty minute, infusion without routine pre-medication. Based on the encouraging preliminary data, the study continues to enroll and follow patients and the protocol has been amended to include the use of estrogen with Xyotax to determine safety and if efficacy is enhanced. The addition of estrogen is consistent with previous findings from preclinical and clinical studies that estrogen greatly increases anti-tumor activity of Xyotax. The Pixantrone Program Third Line Aggressive non-hodgkin s Lymphoma: CTIC is developing Pixantrone, a novel anthracycline derivative, for relapsed aggressive (third line) non-hodgkin s lymphoma (NHL). An ongoing phase III trial (EXTEND, PIX301) is under way to evaluate Pixantrone in 140 patients with relapsed, aggressive non-hodgkin's lymphoma who have received two or more prior therapies. Patients are randomized to receive either Pixantrone or another single-agent drug of physician's choice. The trial is designed to examine the complete response (CR) or unconfirmed complete response (ucr) rate, time to tumor progression, and overall survival. The study was powered based on a CR rate assumption of less than 5 percent for the control arm and a percent CR rate for the Pixantrone arm. The phase III trial is being conducted under a Special Protocol Assessment from FDA and Pixantrone has received fast track designation for this indication. In Nov 2008, Cell Therapeutics reported positive results from the EXTEND trial. Patients randomized to treatment with Pixantrone achieved a high rate of confirmed and unconfirmed complete remissions compared to patients treated with standard chemotherapy (14/70 (20.0%) for Pixantrone arm compared to 4/70 (5.7%) for the standard chemotherapy arm, p = 0.02). No patient in the standard chemotherapy arm achieved a confirmed complete remission compared to 8/70 (11%) of Pixantrone recipients. Pixantrone treatment also significantly increased the overall response rate (CR/uCR+PR) with (26/70 (37.1%) for Pixantrone arm compared to 10/70 (14.3%) for the control arm, p = 0.003). CR/uCR and ORR were determined by an independent assessment panel that was blinded to the treatment assignments. The most common serious toxicities (>5%) seen in previous trials of Pixantrone include grade 3 and 4 neutropenia and febrile neutropenia. Complete safety information is not yet available for the study, however, the study was monitored on an ongoing basis by an independent Data Safety Monitoring Committee and no serious concerns were raised. 74% of patients discontinued therapy for disease progression or death, the majority of which were in the standard chemotherapy control arm. In Feb, 2009, Cell Therapeutics announced the updated safety and efficacy data from the phase III trial of Pixantrone for the treatment of multiple, relapsed, aggressive NHL according to which Pixantrone reduces time to achieve complete remission by 47% compared to standard therapies. The Pixantrone recipients who achieved a complete remission did so during the first 2 cycles of therapy, compared to 4 cycles among standard chemotherapy recipients (1.9 months vs 3.6 months, Pixantrone vs standard chemotherapy). 32% of Pixantrone patients received all 6 cycles of therapy, with 84% receiving 5 of the 6 cycles of treatment in all. The results for Pixantrone were quite encouraging with improved overall PFS (4.7 months vs 2.6months, hazard ratio=0.6, p=0.0074, Pixantrone vs standard chemotherapy), low incidence of severe neutropenia complicated by either fever or documented infections, or severe vomiting or diarrhea, low incidence of hair loss, which are very common side effects of other drugs in this class. The Pixantrone patients had a higher incidence of leucopenia and neutropenia and numerically more severe cardiac events (4 vs 2) than in the control arm. Disease progression reported as an adverse event was less frequent in the Pixantrone than in the control arm (1.5% vs. 13.4%). Cell Therapeutics on Feb 10, 2009 signed an agreement with IDIS to manage Pixantrone on a named patient basis in Europe. Under this program which is supposed to begin by the second quarter of 2009, the company will be able to provide the drug to patients in need while simultaneously moving it through the approval process in the US. In April 2009, the company began a rolling submission of a New Drug Application (NDA) to the US FDA for pixantrone to treat relapsed or refractory aggressive non-hodgkin's lymphoma (NHL). CTI expects to complete the submission this quarter and will request priority review which if granted could lead to an approval decision from the FDA in late 2009 or early In order to save cash and re-allocate resources, CTIC has closed enrollment on its other clinical trials of Pixantrone, including the RAPID trial, a first-line randomized phase II study of CHOP-R versus CPOP-R in previously untreated aggressive NHL patients, and the PIX303 trial, a study of fludarabine, Pixantrone and rituximab (FP-R) compared to the combination of fludarabine and rituximab (F-R) in the treatment of patients who have received at least one prior treatment for indolent NHL. See below for details. Zacks Investment Research Page 6

7 First Line Aggressive non-hodgkin s Lymphoma: The Company also completed a phase II trial for Pixantrone as a replacement for the standard anthracycline agent Doxorubicin as part of the CHOP (Cyclophosphamide + Doxorubicin + Vincristine + Prednisone) regimen in aggressive NHL patients who previously failed CHOP and other multi-agent regimens. Full results of the phase II trial were presented at the annual American Society of Hematology meeting in December, Among 30 patients available for efficacy and safety assessment, the overall response rate (ORR) was 73%, with 14 (47%) patients achieving complete response (CR/CRu) and 8 (26%) patients with partial responses (PR). For responses lasting at least 8 weeks (63%), the median duration of response was 10.3 months (range 2.5 to 27). The CPOP (Cyclophosphamide + Pixantrone + Vincristine + Prednisone) combination therapy exhibited an acceptable toxicity profile and can be administered safely in an outpatient setting even in this cohort of elderly, anthracycline-pretreated patients. Based on these results, a randomized phase II/III study comparing CPOP-rituximab with CHOP-rituximab (known as RAPID trial) for the first line treatment in patients with untreated diffuse large-b-cell NHL has been initiated. About 280 patients will be enrolled in this trial. In July 2007, the company reported the interim results of the RAPID trial from 60 patients. The interim analysis resulted in essentially all patients on both arms achieving a major objective anti-tumor response (complete response or partial response). The preliminary results showed that patients who received Pixantrone had a reduction in severe (grade 3/4) side effects when compared to patients treated with standard doxorubicin-based therapy. The company intends to report data from this trial at the American Society of Hematology (ASH) annual meeting in December. Despite Pixantrone patients receiving more treatment cycles, a three-fold reduction in the incidence of severe heart damage (LVEF decline >15 percent) was seen as well as clinically significant reductions in infections and thrombocytopenia. In addition a significant reduction in febrile neutropenia was also observed. Febrile neutropenia is a life-threatening complication of chemotherapy. The RAPID study was originally expected to complete enrollment in 2008, but closed enrollment in early 2008 due to limited resources. Pixantrone has been granted fast-track status for relapsed aggressive NHL. Second Line Indolent NHL: CTIC is also studying Pixantrone in a phase II/III trial for the second line treatment of indolent NHL, a less rapidly progressive but ultimately fatal form of NHL, with NHL category leader Rituxan (Genentech). Recent data presented at the CIBC World Markets 16 th Annual Healthcare Conference met the primary end-point of prolonging time to disease progression (TTP). Patients on Rituxan + Pixantrone achieved an 87% improvement in TTP (13.2 months vs. 8.1 months) versus Rituxan alone (p<0.001). Rituxan + Pixantrone patients also achieved progression free survival of 66% at year-1 and 44% at year-2 versus 0% for both years in the Rituxan alone arm. Secondary end points in major response were also achieved. Roughly 75% of the Rituxan + Pixantrone patients achieve major response, with 35% attaining complete response. This compares to only 33% major response rates (11% complete) for Rituxan alone. We are very encouraged by this data. The original trial was designed under an FDA special protocol assessment (SPA). The trial was to enroll over 725 patients. However, enrollment was difficult and the company decided to proceed with only a small population of 38 patients and the trial was modified and reduced to a study to support registration and market development. Alternatively, the company initiated a phase I/II trial to study a combination therapy FPD-R (Fludarabine + Pixantrone + Dexamethasone + Rituxan) as a replacement of FND-R (Fludarabine + Mitoxantrone +Dexamethsone + Rituxan) for relapsed indolent NHL. The phase I/II trial results were presented at the annual American Society of Hematology meeting in November, Data showed that the overall response rate was 89% for 27 evaluable patients, with 17 (63%) complete responses (CR), 2 (7%) unconfirmed complete responses (CRu), and 5 (19%) partial responses (PR). Seventy percent of patients experienced a CR/CRu/PR that lasted at least 8 weeks, with a median duration of response of 25 months (range 2.4 to 43) and the estimated progression-free survival rate at three years was 50.4 percent. No serious cardiotoxicity was observed. This treatment is highly active and is associated with major, durable responses. The regimen can be given on an outpatient basis and is well tolerated in relapsed and refractory indolent NHL patients. Based on the above results, CTIC filed a Special Protocol Assessment (SPA) with FDA for the design of a pivotal phase III trial of Pixantrone in relapsed indolent NHL on March 13, 2007, and started the trial in September The trial, PIX303, will examine the complete remission rates and time to disease progression of the combination regimen of Fludarabine, Pixantrone and Rituximab (FP-R) compared to the combination of fludarabine and rituximab (F-R) in the treatment of patients who have failed up to five prior treatments for relapsed or refractory indolent NHL. The trial was originally expected to enroll 300 patients, to be completed over a 12 to 16 month period. However, CTIC closed the enrollment of this trial in order to save cash and resources. Pixantrone has received fast track designation from the FDA for this indication in May The Deal with Novartis Zacks Investment Research Page 7

8 On September 18, 2006, Cell Therapeutics, Inc. entered into an exclusive worldwide licensing agreement with Novartis for the development and commercialization of Xyotax. Pursuant to the agreement, Novartis will pay as much as $270 million product registration and sales milestones to Cell Therapeutics for Xyotax. Novartis also agreed to make a $15 million equity investment in the company which accounts for about 8% of outstanding shares. Cell Therapeutics will have the option of co- detailing Xyotax in the United States under the direction of Novartis, under an agreement to be entered into if CTIC exercises the option. The agreement also provides Novartis with an option to develop and commercialize Pixantrone based on agreed terms. If Novartis exercises its option on Pixantrone under certain conditions, Novartis would pay Cell Therapeutics a $7.5M fee and up to $104M in registration and sales related milestones. The milestones include phase III data for ovarian cancer, interim data from PGT307 trial of Xyotax, and interim data from Extend trial for Pixantrone. We see the agreement with Novartis very positive to Cell Therapeutics. This agreement not only validates the technology and drug development programs for Xyotax and Pixantrone, at the same time, it provides great ease for cash burn which we are very concerned about as Cell Therapeutics advances both Xyotax and Pixantrone into filing stage. The acquisition of System Medicines Inc. fills pipeline gap with late stage drug candidate and provides genomic research platform In July, 2007, Cell Therapeutics, Inc. acquired Systems Medicine, Inc. (SMi), a privately held oncology company in Italy, in a stock for stock merger valued at $20 million. SMi stockholders could also receive a maximum of $15 million in additional consideration, payable in either cash or shares of CTIC common stock, upon the achievement of certain regulatory milestones. Under the terms of the agreement, SMi will continue to operate as a wholly-owned subsidiary of CTIC, utilizing its genomic-based platform to guide development of CTIC's oncology products, including Brostallicin. We believe the acquisition is a strategic fit in two aspects. First, the acquisition fills the pipeline gap of CTIC. CTIC acquired worldwide rights to Brostallicin, a first in class of DNA minor groove binding agent with proven anti-tumor activity and a favorable safety profile in more than 200 patients treated to date in clinical trials. Brostallicin is currently in multiple phase I and phase II clinical studies. The company plans to bring Brostallicin into market by 2010 after Pixantrone and Xyotax which are expected to be launched in early and late 2009 respectively. Second, the acquisition provides a genomics research platform which will expand CTIC s drug research coverage. The acquisition will leverage SMi's strategic affiliation with Translational Genomics Research Institute (TGen) by utilizing their extensive genomic platform and high throughput capabilities to guide clinical trials toward patient populations where the highest likelihood of success should be observed, thereby potentially lowering risk and shortening time to market. Management anticipates that incremental operating expense from Brostallicin clinical development is expected to have minimal impact on burn rate. RECENT NEWS May 12, 2009: Cell Therapeutics announced the commencement of a Modified Dutch Auction tender offer in order to exchange $89.2 million principal amount of convertible notes for shares of its common stock and cash. May 7, 2009: Cell Therapeutics (CTIC) announced financial results for the first quarter of CTIC did not report any revenue for the quarter as it sold its entire stake in the only marketed product Zevalin to Spectrum Pharmaceuticals. Total operating expenses decreased 39% during the first quarter from the same period last year. This was possible due to the reduction in both R&D expenses and SG&A expenses as a result of cost cutting initiatives related to the clinical trial programs. On an adjusted basis, CTIC reported net loss of $24.6 million (per share net loss of $0.09) compared to net loss of $37.6 million (per share net loss of $5.29) in 1Q 2008, an improvement of 34%. As of March 31, 2009, CTIC had cash, cash-equivalents, and securities available for sale and interest receivables. Subsequently, in April, the company received $6.5 million from Spectrum Pharmaceuticals (related to the Zevalin stake sale) and $23.5 million from the sale of series I preferred stock to a single institutional investor and upon the exercise of the associated common stock warrants. Zacks Investment Research Page 8

9 May 5, 2009: Cell Therapeutics announced the availability of Pixantrone on a named-patient basis in Europe. The drug will be supplied by IDIS to healthcare professionals for the treatment of individual patients with aggressive non- Hodgkin's lymphoma (NHL) that has either relapsed after standard therapies or is refractory to them. April 21, 2009: At the 2009 American Association for Cancer Research (AACR) annual meeting in Colorado, Systems Medicine, a wholly-owned subsidiary of Cell Therapeutics, Inc. presented data from a preclinical study, which utilized RNA interference (RNAi) and bioinformatics to identify genetic markers that enhance the anti-tumor response to brostallicin, the experimental drug candidate. April 13, 2009: Cell Therapeutics, Inc raised $23.5 million through the sale of series I preferred stock to a single institutional investor and upon the exercise of the associated common stock warrants. April 14, 2009: Cell Therapeutics, Inc. announced that it began a rolling submission of a New Drug Application (NDA) to the U.S. FDA for Pixantrone to treat relapsed or refractory aggressive non-hodgkin's lymphoma (NHL). The company expects to complete the submission this quarter requesting for priority review which if granted could lead to an approval decision from the FDA by 4Q April 6, 2009: Cell Therapeutics, Inc. announced that it has received $6.5 million from Spectrum Pharmaceuticals, in connection with the sale of its 50% interest in the Zevalin joint venture to Spectrum for approximately $16.5 million that closed in March Earlier, during March it had already received $6.5 million and is supposed to receive the remaining amount by April end. Source: Cell Therapeutics, Inc. VALUATION We maintain our Hold rating for CTIC shares based on the new developments in the company. Our price target is $1.50. The company has a liquidity issue and has entered into a survival mode. The stake sale in the joint venture is likely to give CTIC the much needed cash. OPAXIO is under review for market authorization application approval in Europe. CTIC also began a rolling NDA filing for Pixantrone for NHL. But cash position is the single most important factor in our evaluation of the company. Actually we think the company has entered into a survival mode. The company is under great pressure to raise additional cash to fund its operations. But at current financial and economic conditions, it will be extremely difficult for the company to raise any additional amount of money. With current low share price, share offering is nearly impossible to do that. With positive phase III data for Pixantrone, the company may be able to find a partner for this program. Although the company says it is on target to accomplish cash flow break-even in the fourth quarter of 2009, we will keep a close eye on the company s cash position. We set our price target of $1.50 which corresponds to a market cap of $494 million. We believe CTIC s shares will trade sideways until additional catalysts kick in which will not happen until 2009 end. Industry Comparables Top competitors P/E EPS Gr. P/S (TTM ) 5-Yr Est. (TTM) Cell Therapeutics N/M Biotech Mean 38.0x 29% 10.0 x S&P x 6% 3.1x Celgene, Inc. N/M 28.7% 7.8x Zacks Investment Research Page 9

10 PROJECTED INCOME STATEMENT $ in millions except for per share data 12/07 Q1 Q2 Q3 Q Q1 Q2 Q3 Q E 2010 E 2011 E Trisenox $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Xyotax $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $1.0 $1.0 $10.0 $18.0 Pixantrone $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.5 $0.5 $10.0 $14.0 Lic + Contracts $0.08 $0.02 $0.02 $0.02 $0.02 $0.1 $0.0 $0.2 $0.1 $0.1 $0.4 $2.0 $2.5 Zevalin $0.05 $3.37 $2.87 $2.58 $2.52 $11.3 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Total Revenues $0.13 $3.39 $2.89 $2.60 $2.54 $11.42 $0.02 $0.20 $0.10 $1.60 $1.92 $22.00 $34.50 Growth 58.8% % % % % % -99.4% -93.1% -96.2% -37.0% -83.2% % 56.8% CoR $0.05 $0.89 $0.77 $0.69 $0.90 $3.2 $0.0 $0.4 $0.4 $0.5 $2.0 $22.9 $35.9 Gross Income $0.1 $2.5 $2.1 $1.9 $1.6 $8.2 $0.0 ($0.2) ($0.3) $1.1 $0.1 $0.9 $1.4 Gross Margin 61.4% 73.8% 73.5% 73.4% 64.8% 71.6% 100.0% % % 68.8% -4.2% -4.2% -4.2% SG&A $35.5 $11.2 $11.5 $7.8 $11.1 $41.6 $8.9 $7.5 $7.0 $6.5 $29.9 $31.0 $40.0 % SG&A % 329.2% 398.5% 301.3% 436.2% 364.2% % % % 406.3% % 140.9% 115.9% R&D $96.6 $15.9 $15.9 $11.3 $8.5 $51.5 $8.0 $7.5 $7.0 $6.5 $29.0 $25.0 $20.0 % R&D % 467.1% 548.7% 435.6% 334.6% 451.1% % % % 406.3% % 113.6% 58.0% Amortization $0.9 $0.4 $0.5 $0.6 $0.1 $1.7 $0.0 $0.3 $0.3 $0.2 $0.8 $1.5 $1.0 % Other 718.9% 12.8% 18.6% 23.3% 4.6% 14.8% 0.0% 150.0% 300.0% 12.5% 41.7% 6.8% 2.9% Operating Income ($133.0) ($25.0) ($25.8) ($17.9) ($18.1) ($86.7) ($16.8) ($15.5) ($14.6) ($12.1) ($59.7) ($58.4) ($62.4) Operating Margin % % % Other Net ($9.8) ($13.2) ($32.2) ($27.7) ($20.2) ($93.4) $4.0 ($2.5) ($3.0) ($2.0) $3.5 ($2.5) ($2.5) Pre-Tax Income ($142.8) ($38.2) ($58.0) ($45.6) ($38.2) ($180.0) ($12.9) ($18.0) ($17.6) ($14.1) ($63.3) ($60.9) ($64.9) Taxes + Other $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $1.0 $1.5 Tax Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -1.6% -2.3% Preferred stock beneficial conversion $5.2 $0.0 $1.1 $0.0 $0.0 $1.1 $0.0 $0.5 $0.6 $0.7 $1.8 $3.2 $4.4 Preferred stock dividends $0.5 $16.4 $0.2 $2.1 $3.1 $21.8 $0.3 $5.2 $6.0 $4.8 $16.3 $24.8 $26.2 Reported Net Income ($148.4) ($54.6) ($59.3) ($47.6) ($41.3) ($202.9) ($13.1) ($23.7) ($24.2) ($19.6) ($81.3) ($89.9) ($97.0) Net Margin Growth Shares Out Reported EPS ($32.80) ($7.68) ($5.18) ($2.83) ($0.52) ($7.03) ($0.05) ($0.05) ($0.05) ($0.04) ($0.19) ($0.19) ($0.20) Growth 168.8% 0.5% -20.7% -74.0% -93.1% -78.6% -99.4% -99.0% -98.2% -91.9% -97.2% -1.1% 5.7% FAS-123R Adjustment $1.52 $0.88 $1.02 $1.08 $1.01 $4.00 $0.51 $0.60 $0.60 $0.80 $2.5 $3.50 $3.80 FAS-123R Net Income ($146.9) ($53.7) ($58.3) ($46.6) ($40.3) ($198.9) ($12.6) ($23.1) ($23.6) ($18.8) ($78.8) ($86.4) ($93.2) FAS-123R EPS ($32.46) ($7.56) ($5.09) ($2.77) ($0.50) ($6.89) ($0.04) ($0.05) ($0.05) ($0.04) ($0.19) ($0.18) ($0.19) One time charge $26.54 $16.99 $31.22 $27.35 $21.73 $97.29 ($11.49) $8.20 $9.60 $7.50 $21.61 $30.50 $33.10 Non GAAP Net Income ($121.9) ($37.6) ($28.1) ($20.3) ($19.6) ($105.6) ($24.6) ($15.5) ($14.6) ($12.1) ($59.7) ($59.4) ($63.9) Non GAAP EPS ($26.93) ($5.29) ($2.45) ($1.21) ($0.24) ($3.66) ($0.09) ($0.03) ($0.03) ($0.03) ($0.14) ($0.13) ($0.13) Copyright 2009, Zacks Investment Research. All Rights Reserved.

11 HISTORICAL ZACKS RECOMMENDATIONS DISCLOSURES The analysts contributing to this report do not hold any shares of CTIC. Zacks EPS and revenue forecasts are not consensus forecasts. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the securities it covers. Buy- Zacks expects that the subject company will outperform the broader U.S. equity market over the next one to two quarters. Hold- Zacks expects that the company will perform in line with the broader U.S. equity market over the next one to two quarters. Sell- Zacks expects the company will under perform the broader U.S. Equity market over the next one to two quarters. The current distribution of Zacks Ratings is as follows on the 1047 companies covered: Buy- 23.4%, Hold- 66.8%, Sell 9.5%. Data is as of midnight on the business day immediately prior to this publication. Copyright 2009, Zacks Investment Research. All Rights Reserved.