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Here's What CTI BioPharma Corp (NASDAQ:CTIC) Needs To Get Out Of Its Cash To Justify The Raise

Here's What CTI BioPharma Corp (NASDAQ:CTIC) Needs To Get Out Of Its Cash To Justify The Raise
Written by
Chris Sandburg
Published on
June 8, 2017
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CTI BioPharma Corp (NASDAQ:CTIC) announced an underwritten public offering at the start of this week and the company took an immediate 25% hit on the back of the news. Price has since recovered slightly, gaining just shy of 7% on the post-announcement lows, but there's still a gap to be closed.As is always the case in the biotech space, a public offering like this generates a selloff as markets realign to accommodate for the dilution brought about by the equity issue. As we've said on numerous occasions in the past, however, if the cash is put to good use, the gap is sure to close, and these gap downs can – in turn – be a nice opportunity to jump in and out of the markets for a quick turnaround play.Use of proceeds is key and – in this instance – we think CTI has its ducks in a line.For those new to CTI, the company is a biotechnology stock that's trying to bring a few different assets to market, all of which target various oncologic indications (and primarily, blood cancers). The company has been a bit of a rollercoaster over the past half decade, having picked up approval for one of its assets (Pixuvri in relapsed or refractory aggressive non-Hodgkin's) in Europe back in 2012 pursuant to a post-marketing study that it's still not completed; and also having submitted for approval in Europe for a secondary asset (pacritinib in Myelofibrosis) and subsequently withdrawing the application after some feedback with the agency and a resulting necessity to put together some extra data and refine the application. This data is yet to be collected.When we heard that the company was set to conduct a raise, and a raise to the tune of $45 million (which is pretty substantial for a company of this size), our immediate thoughts were this: use of proceeds needs to address, and address quickly and in their entirety, the two above mentioned shortfalls. Specifically, the completion of the conformational study to wrap up the pathway for Pixuvri in relapsed or refractory aggressive non-Hodgkin's and the completion of the second pivotal for pacritinib in Myelofibrosis, which can then underpin an approval in a slightly revised indication.Here are two quotes from the public offering release:

"CTI plans to use the net proceeds from this Offering to conduct the PAC203 clinical trial, submit a new Marketing Authorization Application for pacritinib to the European Medicines Agency"

And

"… complete the PIX306 clinical trial"

The PAC203 trial is the Myelofibrosis trial that will support the reapplication to the EMA. The PIX306 trial is the confirmatory trial that will serve up the post-marketing data that the company needs to shore up its commercialization strategy in Europe for its NHL asset.In other words, we got exactly what we wanted.But that's only the first step – we now need to see these two catalysts hit press as reinforcing an efficacy thesis in both indications. If we do see this, the company is going to have two very strong assets in two indications with unmet needs. Not only that, but both approved indications would be strongly indicative of success for the assets in question in the US, which is the next step for both once Europe is wrapped up.We should get some insight into both studies before the end of the year, giving markets plenty of time to load up (and by proxy, close the gap) before the numbers hit.Looking at the raise specifically, the company is going to pick up (as mentioned $45 million) through the issue of what it calls its Series N-3 Preferred Stock, offered at a price to the public of $2,000 per share. This preferred stock is convertible into shares of our common stock at a conversion price of $3.00 per share of common stock, for a total of approximately 15.0 million shares of common stock.We'll keep track of this one to make sure it's on track to meet the targets we (and it) set for this capital injection.We will be updating our subscribers as soon as we know more. For the latest updates on CTIC, sign up below!Disclosure: We have no position in CTIC and have not been compensated for this article.

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