CTI’s déjà vu is now Shire’s problem

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CTI Biopharma’s latest clinical hold – this time on pacritinib – might be of little importance to the group’s own dwindling valuation, but the disappointment has been acutely felt by its partner Baxalta, and by implication by Baxalta’s proposed acquirer, Shire.

CTI stock crashed 61% yesterday, but the group is valued at just $121m and below Nasdaq’s $1 minimum share price requirement. Baxalta and Shire were off 4%, equivalent to the loss of about $1bn of market cap each, casting yet more doubt over the deeply unpopular takeout of the Baxter biopharma spin-out to which Shire is by now committed.

This is not to say that either CTI or pacritinib is a major reason for Shire buying Baxalta, whose haemophilia franchise forms the focal point of a rare disease expansion. But Shire had to go to great lengths to justify the takeout price, and deliberately highlighted pacritinib as a potentially valuable oncology asset (Tax U-turn means Shaxalta is a go, January 11, 2016).

The sellside reckons that pacritinib could sell $546m by 2020, according to consensus estimates compiled by EvaluatePharma, and this view will have been emboldened by CTI’s completion of a rolling US filing for the Jak2/FLT3 inhibitor in myelofibrosis last month.

Nasty surprise

As such, the US hold on pacritinib will have come as a nasty surprise. CTI actually received written notification of the hold from the FDA on Thursday, but did not announce it to the markets until four days later.

No new pacritinib studies can now be initiated, and no new patients can receive the project, though the phase III Persist-2 trial, which recently completed enrolment, can continue. Patients already on pacritinib can continue to receive it, though placebo recipients will not be allowed to cross over into the active arm.

The reason given is deaths and other adverse events in pacritinib-treated patients in the earlier Persist-1 trial, seen most prominently during crossover from placebo to active after an initial 24 weeks’ treatment. This might simply reflect more disease-progressive patients, Piper Jaffray speculated, as these would naturally be more likely to cross over after progressing on placebo.

Interestingly CTI stock traded up as much as 48% from its low base in the premarket today, presumably as investors surmised that the hold had a good chance of being lifted after protocol modification, and it opened up 21%.

Lamentable record

This is not CTI’s first setback; the company, formerly known as Cell Therapeutics, has a lamentable stock market record, having completed multiple equity raises since the late 1990s.

Its myelodysplastic syndrome project tosedostat was put on US clinical hold in 2013, though this has now been lifted. CTI markets the anthracycline Pixuvri in Europe for non-Hodgkin’s lymphoma, but sales are negligible and the project got a US complete response letter.

Even if the pacritinib hold is lifted other doubts remain, such as the fact that it had already been ditched by a previous partner, Onyx. Moreover, as the relatively slow sales trajectory of Incyte’s Jakafi shows, treating myelofibrosis with a Jak inhibitor has yet to live up fully to the promise.

Including the CTI setback Shire has lost over a third of its value since its interest in Baxalta first came to light last August. When Shire reports 2015 financials on Thursday it might find itself having to defend this move again, though as a means of fighting off predators in the current market it still just about works.

To contact the writer of this story email Jacob Plieth in London at jacobp@epvantage.com or follow @JacobPlieth on Twitter

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