Cell Therapeutics buys Arizona firm for $20 million

In an effort to fill gaps in its research pipeline, Cell Therapeutics agreed yesterday to acquire cancer therapy developer Systems Medicine for $20 million in stock.

Shareholders of the privately held firm, which is based in Tucson, Ariz., could receive up to $15 million in additional cash or shares upon clearing certain regulatory hurdles.

Systems Medicine is developing Brostallicin, a genetically-engineered drug being tested for effectiveness in cancer patients. Executives of the Seattle biotech said it could reach the market by 2010.

"We think this is the perfect pipeline fit for us," said Cell Therapeutics chief executive James Bianco in a conference call with investors on Wednesday.

The company will invest $2 million per quarter over the next three years to sustain its new acquisition's research efforts.

Systems Medicine will remain in its Tucson location and will operate as a wholly-owned subsidiary.

The deal comes amid a major push by Cell Therapeutics to build up its drug arsenal. The company is close to an agreement for the acquisition of a product that has $15 million to $18 million in annual sales, Bianco said.

Cell Therapeutics, which hasn't turned a profit since it was founded in 1991, doesn't have any drugs on the market. It sold off Trisenox, a leukemia treatment, in 2005.

Its flagship drug, Xyotax, has failed several major trials, but the company still hopes to get it on the market.

Cell Therapeutics also expects to market pixantrone, a therapy designed to treat immune-system cancer, in 2009.

Shares of Cell Therapeutics were up 6 cents, or 1.3 percent, to $4.56 in mid-day trading.

Ángel González: 206-515-5644 or agonzalez@seattletimes.com