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Anno 8 - Numero 280 26/05/2009

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Cell Therapeutics

Registrazione al Tribunale di Roma n.521/2002 del 03/09/2002 Direttore: Fabrizio Spagna

Axia financial research - Studi Ricerche e Analisi Finanziarie

Pixantrones study results presentedRating: BUY(2,5 euro per share)previous rating (08/05/2009):(0,97 euro per share, HOLD)

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Cell Therapeutics

FTSEMIB

Market price (24/06/2009) 1,08

Sector Pharmaceutical

FTSEMIB Index 19.040,6

Market capitalization(Mgl Euro) 516.349,1

Ordinary shares number(Mgl) 478.101

Free floating 79,7%

Major shareholder: Cranshire Capital, L.P. 7,10%

Min - Max 2009 0,0377 - 1,670

Medium trading volume over 3 months (mln) 9.543

Relative Performance 1M 3M 6M

VS Mibtel Index 26% 2023% 802%

Source: corporate data, Axia's estimates

- Cell Therapeutics announced the final results of itsseparate concurrent fixed price exchange offers theapproximately $118.9 million outstanding principal amountof five series of its convertible notes.The company has accepted for exchange approximately

$52.9 million (44.5% of the total amount) aggregateprincipal amount of the convertible notes for the previouslyannounced exchange consideration of 1) $134.50 cash, and2) 458 shares of common stock per $1,000 principal amountof convertible notes.As a result of this transaction, theCompany will eliminate approximately $52.9 million ofdebt, reduce its annual interest expense by approximately$3.3 million. - Cell Therapeutics has been included on a listof preliminary additions to the Russell 3000 Index andRussell Global Index.

- Cell Therapeutics presented Pixantrones phase 3 data atthe annual meeting of ASCO (American Society of Clinical

Oncology).Phase 3 results were overall very positive, showing a

superior complete remission rate among patients treatedwith Pixantrone.and a lower than expected incidence ofcardiac adverse events..Pixantrone is already available in Europe on a named basisprogram.

Cell Therapeutics completed the submission of the NDA forpixantrone and requested priority review from the FDA

- Cell Therapeutics presented first quarter results showing a76% Net Loss decrease if compared to the same period of

previous year. Total net operating expenses decreased $21.8million, or 77%, to $6.6 million for the quarter ended March31, 2009 compared to $28.4 million for the same period in2008 as a result of a $10.2 million gain on the sale CTI'sshare in the Zevalin joint venture with Spectrum and areduction of research and development (-50%) andadministrative (-20,8%) costs. - Cell Therapeutics received$20.5 million in gross proceeds in 2009 from SpectrumPharmaceuticals, Inc. associated with the initial divestitureof Zevalin.

- Considering the new data on Pixantrone we reviewed ourestimates and moved the target price to 2,5 per share. Our

recommendation on the stock is BUY.

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PRODUCTS

The company is focusing on the approval of two drugs: Pixantrone and Opaxio.

Pixantrone

Pixantrone is a drug destined to the treatment of non-Hodgkins lymphoma. Cell therapeutics completed thesubmission of the New Drug Application for Pixantrone and requested priority review from the FDA.The company estimates that if the product receives approval in late 2009 in the United States in the first halfof 2010 in Europe, it could potentially reach USD 1 billion sales by the end of 2014.This assuming there will be 15905 patients that receive this treatment in the US and 8700 in Europe in 2014.Right now Pixantrone is already available on a named-patient program in Europe. Under this type of

program investigational drugs like Pixantrone can be administered to patients who are suffering from seriousillnesses prior to the drug being approved by the EMEA (European Medicines Evaluation Agency).

Opaxio

Cell Therapeutics is developing Opaxio for the treatment of non-small cell lung cancer and ovarian cancer.On April 2008 the company submitted to the EMEA ( European Medicine Agency) a MarketingAuthorization Application and expects to receive an opinion by July/August 2009.Cell Therapeutics is also developing Opaxio as potential maintenance therapy for women with advancedstage ovarian cancer. This study is in phase III and if results are positive the company believes it couldsubmit a New Drug Application in 2010.

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NOVARTIS CTI AGREEMENTS

Novartis and CTIC entered into the OPAXIO/Pixantrone agreement on September 15, 2006.The option cost $ 15 million to NVS, and if exercised grants Novartis an exclusive worldwide license for thedevelopment and commercialisation of Opaxio and Pixantrone.

Novartis can exercise its option on Opaxio until 30 days after its approval by either the EMEA in Europe orthe FDA in the US. In case it happens, Cell Therapeutics is eligible for up to $ 270 million in milestones,plus royalties.

The rights on Pixantrone can be picked up by Novartis until the later to occur of:

Three hundred sixty-five days after the database on the Pixantrone extend trial is locked

Thirty days after the Opaxio participation period expires, which means sixty days after Opaxioapproval.

In case Novartis exercises its option for Pixantrone, the license would contemplate that Novartis:

Reimburses Cell Therapeutics for 50% of the expenses from 9/06 ($ 25 million circa); Pays CTI $ 7,5 million option fee upon license execution; Pays $ 10 million FDA approval milestone; Pays additional $ 94 million in potential future registration and sales milestones: Controls commercialization and development of the product paying 100% future expenses; Pays CTI royalties on net sales.

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OUR VALUATION

Cell Therapeutics is shifting from a research-based company to a commercial one, the first quarter resultsclearly show how the company is cutting its research and developing operations and is focusing on bringingits products to the market.

The key of the matter now is the approval of the two drugs, Pixantrone and Opaxio. Recently CellTherapeutics presented the results of phase 3 data. Although we dont want to belabor the studys details, itis safe to say that Pixantrone exhibited a significantly lower cardiac toxicity than expected and better activitythan that observed with alternative anthracyclines.The study results seemed to be received well by the medical community, and they show that Pixantrone hasan edge on existing drugs and therefore it could occupy a safe niche in the market when approved.Opaxios approval is expected in July/August, and thats when the clock would start for Novartis to exercise

its option on Cell Therapeuticss products. There is no certainty about the matter, but we believe that CTI atthe ASCO presentation showed that Pixantrone has an advantage over existing products and that thereforeNovartis will exercise its option on the drug.

After considering the new data on Pixantrone presented by Cell Therapeutics in May 2009 we revieved ourestimates and obtained a target price of 2,5 per share.

Forecast Income Statement, data in USD millions

2007 2008 2009 2010 2011 2012

Net Revenues 0,047 11,352 6,5 129,6 155,52 233,28

Total Revenues 0,127 11,432 6,5 129,6 155,52 233,28

Operating Costs -88,1 -68,7 -45,0 -30,0 -20,0 -20,0

Labour Costs -45,0 -30,0 -12,0 -12,0 -12,0 -12,0

EBITDA -133,0 -87,3 -50,5 87,6 123,5 201,3

Depreciation and amortization -4,3 -66,5 -40 -20 -10 -10

EBIT -137,3 -153,8 -90,5 67,6 113,5 191,3

Current Financial Charges -11,1 -58,7 -20 -15 -10 -5

Net Operating margin -148,4 -212,5 -110,5 52,6 103,5 186,3

Risults from discontinued

operations 0,0 9,4 32,5 0 0 0

Pre taxes net income -148,4 -203,1 -78,0 52,6 103,5 186,3

Taxes 0,0 0,0 0 0 0 0

Risultato dell'esercizio -148,4 -203,1 -78,0 52,6 103,5 186,3

Third Party Result 0,1 0,1 0,1 0,1 0,1 0,1

Net income -148,3 -202,9 -77,9 52,7 103,6 186,4

Source: Company's data, Axia estimates

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Report ResearchNewsletter a diffusione elettronica

Direttore responsabile Fabrizio Spagna

Axia Multimedia SrlVia Pellegrino Matteucci 118 RomaPresidente Fabrizio Spagna

Diffusione: protocolli Internet - Isp: Mclink Rom

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