Aiming to build arsenal, biotech purchasing firm

By Ángel González

Seattle Times business reporter

In an effort to fill gaps in its research pipeline, Cell Therapeutics agreed Wednesday 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 in two stages, when the U.S. Food and Drug Administration clears the way for a final clinical study and the FDA gives its final blessing.

Systems Medicine is developing Brostallicin, a genetically engineered drug being tested for effectiveness in cancer patients. Executives of the Seattle biotech said the drug 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 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 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.

The acquisition could be positive for Cell Therapeutics once it closes, as Brostallicin belongs to a new class of cancer-fighting drugs, said Hamed Khorsand, an analyst with BWS Financial.

"You have a good drug in midstage development," Khorsand said. "My only concern is to actually get the deal done."

Earlier this year, Miami-based Dor BioPharma rebuffed an unsolicited bid from Cell Therapeutics. But the Seattle company said the Systems Medicine transaction is expected to close soon.

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.