CHMP has recommended that rilonacept, an interleukin-1 blocker, be granted marketing authorization under exceptional circumstances. Such authorizations are granted to products on which comprehensive data cannot be provided by the company, which may happen due to the the rarity of the condition. The agency also asked Regeneron to  provide new information, if available, pertaining to the drug every year for review.

The company submitted a Marketing Authorization Application (MAA) with the EMEA for Arcalyst for the treatment of CAPS in the European Union in Jul 2008. We expect the agency to approve the drug for marketing in Europe in the fourth quarter of 2009. EU approval of Arcalyst could double its sales potential. Arcalyst has received Orphan Drug designation in the EU for the treatment of CAPS.

As a reminder, Arcalyst (Rilonacept) for CAPS was approved by the US Food and Drug Administration (FDA) in Feb 2008 for CAPS including Familial Cold Auto-inflammatory Syndrome (FCAS) and Muckle-Wells Syndrome (MWS) in adults and children aged twelve years and above. The drug is available in US markets since Mar 2008. Although CAPS is a small market, Regeneron will gain marketing experience from this indication.

In June 2009, the FDA approved Novartis’ (NVS) canakinumab, a fully human anti-interleukin-IL1β antibody, for CAPS in the US. This will have some negative impact on Arcalyst sales. Regeneron is entitled to receive royalties on worldwide sales of canakinumab on CAPS and other inflammatory diseases.

In addition to Arcalyst, which is Regeneron’s sole marketed product, the company boasts of six clinical development programs, including three late-stage clinical programs, targeting various oncology or eye-disorder indications.

We believe the current price provides an attractive entry-point to long-term investors.

The FDA has not yet accepted the NDA submission, which we expect to be decided by the FDA in the next couple of months. Pixantrone is currently available in Europe on a named-patient basis.

The NDA submission is a major event for the company but still we doubt its ability to challenge the dominance of Biogen Idec's (BIIB) Rituxan in this field. Though Pixantrone belongs to a class of cancer medicines known anthracylines, its molecular structure is different.

In spite of the effectiveness of anthracyclines especially for the treatment of NHL and breast cancer, its usage is however limited, due to severe cardiac toxicity. Since the company does not have any marketable product at present, FDA approval is quite crucial in respect of its future operations

Cash position of the company is not at all comfortable. Though the management expects to break even by fourth quarter this year, we have our doubts. Its financials present a different picture altogether. The company posted a net operating loss of $11 million in April and May, more than the company's guidance of $9.5 million. Cell Therapeutics has undertaken several cost cutting initiatives reducing the operating expenses by 72%. The company sold its rights to its only marketed product Zevalin to Spectrum Pharmaceuticals (SPPI).

Cell Therapeutics is in a very tight liquidity position, though it recovered a bit due to the issuance of preferred stock and Zevalin rights sale. But this cannot continue for long and without a proper revenue stream, survival will become difficult for the company. The company is under great pressure to raise additional cash to fund its operations, which seems to be quite difficult at current financial conditions.

The company has yet to submit NDA for another candidate under development, Opaxio for the treatment of women with lung cancer. Any successful partnership related to these two programs (pixantrone and Opaxio) with a cash rich entity should be able to solve the liquidity crunch for the company. We continue to maintain our Hold rating.

Additionally, positive results from the AGENDA trial will support the worldwide filing of Genasense as a treatment for melanoma. However, results from the phase III trial are not expected before mid-2009. Therefore, we rate the shares Hold with a target price of $0.70 on a market cap of $26 million.

In April 2008, the company reduced its workforce by approximately 30% in order to conserve cash. Genta also announced that it would seek a buyer for its sole marketed product, Ganite. We do not see the company attaining profitability in the near future. We believe that Genta shares are fairly valued at the current level.

Maharathi Basu contributed to this report.

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Unfortunately, the company has entered into a survival mode due to the shortage of cash. With the non-approval of Genasense for chronic lymphocytic leukemia by FDA, the future of Genasense remains uncertain. In July 2007, the EMEA indicated that approval of Genasense in melanoma will require the conduct of another clinical study. Genta believes that the AGENDA trial will be able to address the EMEA’s requirement adequately.

Positive data from this trial will enable the company for the worldwide filing of Genasense as a treatment for melanoma. However, we do not expect to see data from the trial before end-2008. The company had cash and marketable securities of only $16.3 million at June 30, 2008. It raised $3.1 million through the issuance of 6 million shares to institutional investors in February 2008 and issued $20 million senior notes with 15% interest rate in June 2008.

The sales of Genasense and Ganite outside the U.S. on a named patient/compassionate basis only provide the company with limited revenue which cannot offset high R&D costs due to the current phase III trial of AGNDA. In April 2008, the Company reduced its workforce by approximately 30% in order to conserve cash. Genta also announced that it would seek a buyer for its sole marketed product, Ganite.

We do not see the company attaining profitability in the near future. We believe that Genta shares are fairly valued at the current level. Our target price is $0.70 which corresponds to a market cap of $26 million.

Read the full analyst report on GNTA