<PAGE>
FILED PURSUANT TO RULE 424(b)(4)
REGISTRATION NO. 333-36603
PROSPECTUS
2,300,000 SHARES
[LOGO OF CTI APPEARS HERE]
CELL THERAPEUTICS, INC.
COMMON STOCK
-----------
All of the 2,300,000 shares of Common Stock offered hereby (the "Offering")
are being sold by Cell Therapeutics, Inc. ("cti" or the "Company"). The
Company's Common Stock is quoted on the Nasdaq National Market under the
symbol "CTIC." On October 21, 1997, the last reported sale price for the
Company's Common Stock on the Nasdaq National Market was $17.25. See "Price
Range of Common Stock."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," BEGINNING ON PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............................. $16.00 $0.96 $15.04
- ---------------------------------------------------------------------------------------------
Total(3)............................... $36,800,000 $2,088,000(4) $34,712,000(4)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
1. For information regarding indemnification of the Underwriters, see
"Underwriting."
2. Before deducting expenses of the Offering payable by the Company, estimated
at $450,000.
3. The Company has granted the Underwriters an option, exercisable within 30
days from the date hereof, to purchase up to 345,000 additional shares of
Common Stock on the same terms as set forth above, solely to cover over-
allotments, if any. If such option is exercised in full, the total Price to
Public will be $42,320,000, the Underwriting Discounts and Commissions will
be $2,419,200 and the Proceeds to the Company will be $39,900,800. See
"Underwriting."
4. Assumes that no underwriting discounts and commissions are paid on 125,000
shares which may be purchased in the Offering by an affiliate of one of the
Company's collaborative partners. "See JJDC Investment." If the
Underwriters were to receive underwriting discounts and commissions on such
shares, the Underwriting Discounts and Commissions would increase by
$120,000 and the Proceeds to Company would decrease by a corresponding
amount.
-----------
The shares of Common Stock offered by the Underwriters are subject to prior
sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and to certain other
conditions. It is expected that delivery of such shares will be made through
the offices of UBS Securities LLC, 299 Park Avenue, New York, New York on or
about October 27, 1997.
-----------
UBS SECURITIES
NATIONSBANC MONTGOMERY SECURITIES, INC.
RAYMOND JAMES & ASSOCIATES, INC.
October 22, 1997
<PAGE>
[GRAPHIC SHOWING COMPANY'S TECHNOLOGY PLATFORM]
----------------
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMPANY'S COMMON STOCK ON THE NASDAQ NATIONAL
MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto,
contained elsewhere in this Prospectus or incorporated herein by reference.
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in these forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," as well as those discussed elsewhere in this Prospectus
or incorporated herein by reference. As used in this Prospectus, unless
otherwise indicated or the context otherwise requires, all references to "cti"
or the "Company" include Cell Therapeutics, Inc. and its wholly owned
subsidiary, CTI Technologies, Inc., and all references to "Johnson & Johnson"
include Johnson & Johnson, Ortho Biotech, Inc., The R.W. Johnson Pharmaceutical
Research Institute (a division of Ortho Pharmaceutical Corporation) and Johnson
& Johnson Development Corporation, each of which are wholly-owned subsidiaries
of Johnson & Johnson, but does not include any other subsidiary of Johnson &
Johnson. Except as otherwise specified, all information in this Prospectus
assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."
THE COMPANY
Cell Therapeutics, Inc. ("cti" or the "Company") focuses on the discovery,
development and commercialization of small molecule drugs that selectively
regulate the metabolism of oxidized lipids and phospholipids relevant to the
treatment of cancer and inflammatory and immune diseases. The Company is
conducting three pivotal Phase III clinical trials for its lead product
candidate, Lisofylline ("LSF"), which is being developed to prevent or reduce
treatment-related toxicities, specifically serious and fatal infections,
mucositis and treatment-related mortality, among cancer patients receiving high
dose radiation and/or chemotherapy. In November 1996, cti entered into a
Collaboration and License Agreement (the "Collaboration Agreement") with
Johnson & Johnson for the joint development and commercialization of LSF to
prevent or reduce the toxic side effects among cancer patients receiving high
dose radiation and/or chemotherapy followed by bone marrow transplantation
("BMT"). In September 1997, Johnson & Johnson exercised an option under the
Collaboration Agreement to expand its participation in the development of LSF
for treatment of patients with newly diagnosed acute myelogenous leukemia
("AML") undergoing high dose induction chemotherapy.
In addition to its oncology applications, the Company is also investigating
LSF for use as an agent to prevent or reduce the incidence and severity of
acute lung injury ("ALI") and mortality among patients requiring mechanical
ventilation for respiratory failure for which it expects to begin a pivotal
Phase II/III trial in the fourth quarter of 1997. The Company is also
developing CT-2584, a novel small molecule drug for the treatment of patients
with multidrug (e.g., chemotherapy) resistant cancers, including prostate
cancer and sarcomas, for which it expects to begin a Phase II clinical trial in
the first quarter of 1998. The Company has devoted substantial resources to
building a unique drug discovery platform based on its proprietary technology
in oxidized lipid and phospholipid chemistry and believes it can leverage its
enabling oxidized lipid and phospholipid technologies to identify development
opportunities in other disease states, such as diabetes or cardiovascular
disease, where oxidized lipids may be implicated in the pathogenesis or
manifestations of such diseases.
Oncology
Cancer is the second leading cause of death in the United States, with
approximately 1.4 million new cases diagnosed each year. At some point in their
disease treatment, 70 percent of all cancer patients will receive radiation
therapy and 50 percent of all newly diagnosed cancer patients will receive
chemotherapy. Despite their benefits for treating cancer, there are significant
limitations of, and complications associated with, radiation and chemotherapy
which result in a high rate of treatment failure. The principal causes of
cancer treatment failure include treatment-related toxicities, multidrug
resistance and tumor resistance to radiation. The Company is focusing its
oncology development efforts on a portfolio of drugs that it believes will
address the three principal causes of cancer treatment failure: (i) LSF--a
supportive care agent being investigated to prevent or reduce the incidence of
serious and fatal infections, mucositis (damage to the epithelial cells lining
the mouth, stomach and intestinal tract) and treatment-related mortality among
cancer patients receiving high dose radiation and/or chemotherapy, (ii) CT-
2584--a novel anti-cancer drug in clinical trials for the treatment of patients
with multidrug resistant tumors and (iii) tumor sensitizing agents being
investigated to enhance sensitivity to radiation among tumors that have deleted
or mutated tumor suppressor genes. Additionally the Company may license or
acquire agents from third parties which, when used with other cti oncology
products, may provide added value to the integrated management of oncologic
disease.
3
<PAGE>
Lisofylline. LSF is a synthetic small molecule drug in three pivotal Phase
III clinical trials among cancer patients receiving high dose radiation and/or
chemotherapy. Unlike blood cell growth factors or chemotherapy protecting
agents, LSF is being developed to prevent or reduce the incidence of serious
and fatal infections, mucositis and treatment-related mortality. More than 578
people have participated in over 15 clinical trials of LSF as of September 30,
1997. The Company has completed two Phase II trials for LSF which resulted in a
statistically significant reduction in serious and fatal infections following
BMT and serious infections following induction chemotherapy for AML. The
Company is conducting two pivotal Phase III clinical trials of LSF in patients
who require BMT after receiving ablative, or bone marrow destroying, doses of
radiation and/or chemotherapy. In addition, the Company has an ongoing pivotal
Phase III trial in patients with newly diagnosed AML who receive high dose
induction chemotherapy. In the first quarter of 1998, the Company intends to
commence a Phase II/III clinical trial of LSF in patients with solid tumors
such as head and neck or breast cancers who receive dose-intensive radiation
and/or chemotherapy and who are at risk of developing severe mucositis and
neutropenic infections. Common to each of these three categories of anti-cancer
treatment (ablative, induction and dose-intensive) is the occurrence of
neutropenia and the breakdown of the epithelial barrier cells lining the mouth,
stomach and intestinal tract, placing patients at a high risk of life
threatening infections, severe mucositis and mortality.
CT-2584. CT-2584 is cti's novel small molecule drug under investigation for
the treatment of patients with multidrug resistant cancers, including prostate
cancer and sarcomas. The Company has an ongoing Phase I trial, co-sponsored by
the Cancer Research Campaign, at the Christie Hospital in the United Kingdom
among patients with advanced cancers and a parallel Phase I trial at the
Memorial Sloan Kettering Cancer Research Center in the United States for
patients with advanced cancers including prostate and ovarian cancer. As of
September 30, 1997, 36 patients have been treated with CT-2584 at five
different dose levels without exhibiting the bone marrow or gastrointestinal
toxicities observed with conventional high dose anti-cancer treatment regimens.
Based on the preliminary response rates observed in this trial the Company
anticipates initiating a Phase II trial in advanced hormone refractory prostate
cancer in the first quarter of 1998.
Inflammatory Disease
The Company believes that, in addition to its oncology applications, LSF may
be effective as an agent to prevent or reduce the incidence and severity of ALI
and mortality among patients requiring mechanical ventilation for respiratory
failure. The National Heart, Lung and Blood Institute (the "NHLBI") is
sponsoring a pivotal Phase II/III trial of LSF among patients experiencing ALI
which is expected to begin in the fourth quarter of 1997.
Corporate Collaboration
Under a Collaboration and License Agreement with Johnson & Johnson, cti is
responsible for the development of LSF in the United States, and Johnson &
Johnson has committed to fund 60 percent of cti's budgeted development expenses
incurred with obtaining regulatory approval for LSF in the United States for
BMT and AML indications. The Company and Johnson & Johnson will co-promote LSF
in the United States, and each will share equally in any resulting operating
profits and losses. Johnson & Johnson has the exclusive right to develop and
market LSF, at its own expense, for markets other than the United States and
Canada, subject to specified royalty payments to cti. The Company has recorded
approximately $19.1 million in equity payments, license fees and development
cost reimbursements from Johnson & Johnson as of June 30, 1997. It is currently
anticipated that Johnson & Johnson will make an equity investment of
approximately $2.0 million in this Offering.
Cell Therapeutics, Inc. was incorporated in Washington in September 1991. The
Company has not received any revenue from the sale of products to date and does
not expect to receive revenues from the sale of products for at least the next
several years. The Company's executive offices are located at 201 Elliott
Avenue West, Seattle, Washington 98119, and its telephone number is (206) 282-
7100.
---------------
cti(R) is a registered trademark of the Company. LSF(TM) is a proprietary
trademark of the Company. This Prospectus contains trademarks and service marks
of companies other than cti.
4
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common Stock Offered by the Company.......... 2,300,000 shares
Common Stock Outstanding after this
Offering.................................... 15,363,337 shares(1)
Use of Proceeds.............................. For general corporate purposes
including clinical trials,
other research and development
activities and working capital.
See "Use of Proceeds."
Nasdaq National Market Symbol................ CTIC
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------- -----------------
1994 1995 1996 1996 1997
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues..................... $ -- $ 100 $ 9,121 $ 3,000 $ 5,267
Research and development
expense..................... 14,368 14,606 16,109 7,397 12,627
General and administrative
expense..................... 5,283 6,144 7,602 3,527 4,133
-------- -------- -------- ------- --------
Total operating expenses... 19,651 20,750 23,711 10,924 16,760
-------- -------- -------- ------- --------
Loss from operations......... (19,651) (20,650) (14,590) (7,924) (11,493)
Other income................. 152 658 662 288 977
-------- -------- -------- ------- --------
Net loss..................... $(19,499) $(19,992) $(13,928) $(7,636) $(10,516)
======== ======== ======== ======= ========
Pro forma net loss per
share(2).................... $ (1.69) $ (0.98) $ (0.92)
======== ======= ========
Shares used in computation of
pro forma net loss per
share....................... 8,228 7,770 11,452
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------
AS
ACTUAL ADJUSTED(3)
-------- -----------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and securities available-for-sale.................... $ 47,917 $ 82,179
Working capital............................................................. 45,071 79,333
Total assets................................................................ 56,490 90,752
Long-term obligations, less current portion................................. 1,389 1,389
Deficit accumulated during development stage................................ (84,684) (84,684)
Total shareholders' equity.................................................. 49,354 83,616
</TABLE>
- -------
(1) Excludes (i) 1,523,513 shares of Common Stock issuable upon exercise of
stock options outstanding as of September 30, 1997 at a weighted average
exercise price of $11.86 per share and (ii) 17,070 shares of Common Stock
issuable upon exercise of warrants outstanding as of September 30, 1997 at
a weighted average exercise price of $24.89 per share.
(2) Computed on the basis described in Note 1 of Notes to Consolidated
Financial Statements incorporated by reference herein.
(3) Adjusted to reflect the net proceeds from the sale of the 2,300,000 shares
of Common Stock offered hereby and receipt by the Company of the estimated
net proceeds therefrom, at the public offering price of $16.00 per share
and after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company. See "Use of Proceeds."
5
<PAGE>
RISK FACTORS
Prospective investors in the shares of Common Stock offered hereby should
carefully consider the following risk factors, in addition to the other
information contained in this Prospectus. This Prospectus contains forward-
looking statements which involve risks and uncertainties. When used in this
Prospectus, the words "believes," "anticipates," "expects," "intends" and
other predictive, interpretive and similar expressions are intended to
identify such forward-looking statements. The Company's actual results may
differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed below and in "Management's Discussion and Analysis
of Financial Condition and Results of Operations," as well as those discussed
elsewhere in this Prospectus or incorporated herein by reference. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes no obligation
to publicly release the results of any revisions to these forward-looking
statements which may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
Dependence on Single Drug Candidate. The Company is conducting three pivotal
Phase III clinical trials for its lead product candidate, LSF. There can be no
assurance that such Phase III trials will be successfully completed, that
further clinical studies will not be needed or that any such clinical trials
will lead to product approval by the United States Food and Drug
Administration (the "FDA"). Furthermore, there can be no assurance that the
Company will be successful in its efforts to develop LSF for any indications.
The remainder of the Company's drug candidates are still in research and
development, preclinical trials or clinical trials. Any additional product
candidates will require significant research, development, preclinical and
clinical testing, regulatory approval and commitments of resources prior to
commercialization. The Company is, therefore, dependent on the successful
completion of its pivotal Phase III trials and obtaining regulatory approval
of LSF to generate revenues while it continues the research, development and
regulatory approval processes for its other drug candidates. Although the
Company is currently seeking to develop other drug candidates and to expand
the number of drug candidates it has under development, there can be no
assurance that it will be successful in such development or expansion. If LSF
does not successfully complete clinical testing and meet applicable regulatory
requirements, or is not successfully manufactured or marketed, the Company may
not have the financial resources to continue research and development of other
product candidates. The failure to successfully develop, manufacture or market
LSF would have a material adverse effect on the Company's business, prospects,
financial condition, liquidity and results of operations. See "--No Assurance
of FDA Approval; Comprehensive Government Regulation" and "Business--Products
Under Development."
No Assurance of Successful Product Development; Uncertainties Related to
Clinical Trials. The Company has no products commercially available for sale
and does not expect to have any products commercially available for sale for
at least the next several years, if ever. The time frame for achievement of
market introduction for any potential product is long and uncertain. Two of
the Company's product candidates, LSF and CT-2584, are currently in clinical
trials for certain indications. However, the results obtained to date in
preclinical and clinical studies of LSF and in preclinical studies and
preliminary clinical trials of CT-2584 are not necessarily indicative of
results that will be obtained during future clinical testing. A number of
companies in the pharmaceutical industry, including biotechnology companies,
have suffered significant setbacks in advanced clinical trials, even after
reporting promising results in earlier trials. In addition, data obtained from
clinical trials are susceptible to varying interpretations. There can be no
assurance that the Company and its collaborators will agree on the
interpretation of the Company's future clinical trial results or that the
Company's clinical trials will demonstrate sufficient terms of safety and
efficacy necessary to obtain the requisite regulatory clearance or will result
in marketable products.
The Company's research and development programs for products other than LSF
and CT-2584 are at an early stage of development. Preclinical in vitro and
animal studies are not necessarily indicative of results that may be obtained
during human clinical testing. Many potential therapeutic products indicate
positive preclinical
6
<PAGE>
results which are not subsequently reproduced in humans. Any additional
product candidates will require significant research, development, preclinical
and clinical testing, regulatory approval and commitments of resources prior
to commercialization. There can be no assurance that the Company's research
will lead to the discovery of additional product candidates or that LSF, CT-
2584 or any other products will be successfully developed, prove to be safe
and efficacious in clinical trials, meet applicable regulatory standards, be
capable of being produced in commercial quantities at acceptable costs or be
successfully or profitably marketed. There can be no assurance as to the
extent to which any products developed by cti will be able to penetrate the
potential market for a particular therapy or indication or gain market
acceptance among health care providers, patients or third-party payors.
The rate of completion of the Company's clinical trials is dependent upon,
among other factors, the rate of patient enrollment. Patient enrollment is a
function of many factors, including the size of the patient population, the
nature of the protocol, the proximity of patients to clinical sites and the
eligibility criteria for the study. Delays in planned patient enrollment may
result in increased costs, delays or termination of clinical trials, which
could have a material adverse effect on the Company's business, prospects,
financial condition, liquidity and results of operations. There can be no
assurance that the Company will be able to submit a New Drug Application
("NDA") as scheduled if clinical trials are completed, or that any such
application will be reviewed and cleared by the FDA in a timely manner, or at
all.
There can be no assurance that unacceptable toxicities or side effects will
not occur at any dose level at any time in the course of toxicology studies or
clinical trials of the Company's potential products. The appearance of any
such unacceptable toxicities or side effects in toxicology studies or clinical
trials could cause the Company or regulatory authorities to interrupt, limit,
delay or abort the development of any of the Company's potential products and
could ultimately prevent their clearance by the FDA or foreign regulatory
authorities for any or all targeted indications. Even after being cleared by
the FDA or foreign regulatory authorities, a product may later be shown to be
unsafe or to not have its purported effect, thereby preventing widespread use
or requiring withdrawal from the market. There can be no assurance that any
potential products under development by the Company will be safe or effective
when administered to patients.
Reliance on Relationship with Johnson & Johnson. The Company is dependent on
the future payments from Johnson & Johnson to continue the development and
commercialization of LSF as presently planned. Under the terms of the
Collaboration Agreement between Johnson & Johnson and the Company, Johnson &
Johnson has committed to fund 60 percent of cti's budgeted development
expenses in the United States incurred in connection with obtaining regulatory
approval for LSF for the prevention or reduction of the toxic side effects
among cancer patients receiving high dose radiation and/or chemotherapy
followed by BMT and the treatment of patients with newly diagnosed AML
undergoing high dose chemotherapy. Johnson & Johnson will be responsible for
obtaining regulatory approval for LSF outside of the United States and Canada
at its own expense. Although cti and Johnson & Johnson will co-promote LSF in
the United States, Johnson & Johnson will have primary responsibility for
commercializing LSF. There can be no assurance that Johnson & Johnson will be
able to establish effective sales and distribution capabilities or will be
successful in gaining market acceptance for LSF or that Johnson & Johnson will
devote sufficient resources to the commercialization of products under the
Collaboration Agreement. If Johnson & Johnson did not continue its
participation in the development and commercialization of LSF, the Company
would not be able to continue the development of LSF as presently planned
which could have a material adverse effect on the Company's business,
prospects, financial condition, liquidity and results of operations.
Although Johnson & Johnson has committed to fund 60 percent of cti's
budgeted development expenses incurred with obtaining regulatory approval in
the United States for the BMT and AML indications, Johnson & Johnson may
terminate the Collaboration Agreement at any time based upon material safety
or tolerability issues related to LSF upon 30 days notice, and for any reason
after November 8, 1997, subject to a six month notice period. Johnson &
Johnson would have no further obligation to fund cti's development expenses
related to LSF following such termination. However, the financial and other
obligations of Johnson & Johnson (aside from Johnson & Johnson's obligation to
make additional payments to, and equity investments in, cti if certain
development milestones are achieved after the notice date) would continue
during such six month notice period. If Johnson &
7
<PAGE>
Johnson were to terminate its participation in the Collaboration Agreement,
the Company would not be able to continue the development of LSF as presently
planned which could have a material adverse effect on the Company's business,
prospects, financial condition, liquidity and results of operations. If
adequate funds were not then available from other sources, the Company would
be required to delay, reduce the scope of, or eliminate one or more of its
research, development and clinical activities or seek to obtain funds through
arrangements with collaborative partners or others on terms which may be less
favorable to cti than the Collaboration Agreement. See "--Need for Substantial
Additional Funds."
Ability to Protect Intellectual Property. The Company's success will depend
in part on its ability to obtain patent protection for its products and
technologies in the United States and other countries, effectively preserve
its trade secrets, enforce its rights against third parties which may infringe
on its technology and operate without infringing on the proprietary rights of
third parties. The patent positions of biotechnology and pharmaceutical
companies can be highly uncertain and involve complex legal and factual
questions, and therefore the breadth of claims allowed in biotechnology or
pharmaceutical patents, or their enforceability, cannot be predicted. The
Company intends to file applications as appropriate for patents covering both
its products and processes. There can be no assurance that any patents will
issue from any present or future applications or, if patents do issue, that
such patents will be issued on a timely basis or that claims allowed on issued
patents will be sufficient to protect the Company's technology. In addition,
there can be no assurance that the patents issued to cti will not be
challenged, invalidated or circumvented or that the rights granted thereunder
will provide proprietary protection or commercial advantage to the Company.
There can be no assurance that patents issued to the Company currently or in
the future will effectively protect the technology involved, foreclose the
development of competitive products by others or otherwise be commercially
valuable.
The commercial success of the Company will also depend in part on the
Company's neither infringing the patents or proprietary rights of third
parties nor breaching any technological licenses which relate to the Company's
technologies and potential products. In general, the development of
therapeutic products is intensely competitive and many pharmaceutical
companies, biotechnology companies, universities and research institutions
have filed and will continue to file patent applications and receive patents
in this field. If patents are issued to other entities that contain
competitive or conflicting claims with respect to technology pursued by cti
and such claims are ultimately determined to be valid, no assurance can be
given that cti will be able to obtain licenses to these patents at a
reasonable cost or develop or obtain alternative technology or compounds. In
such case, the Company could be precluded from using technology that is the
subject matter of such patents, which could have a material adverse effect on
the Company's business, prospects, financial condition, liquidity and results
of operations. There has been significant litigation in the pharmaceutical and
biotechnology industry regarding patents and other proprietary rights, and
although the Company is not currently engaged in litigation regarding
intellectual property matters, from time to time the Company sends and
receives communications to and from third parties regarding such matters. In
order to enforce any patents issued to the Company or determine the scope,
validity or priority of other parties' proprietary rights, the Company may
have to engage in litigation or interference or other administrative
proceedings, which would result in substantial cost to, and diversion of
efforts by, the Company. There can be no assurance that third parties will not
assert infringement claims in the future with respect to the Company's current
or future products or that any such claims will not require the Company to
enter into license arrangements or result in litigation or interference or
other administrative proceedings, regardless of the merits of such claims. No
assurance can be given that any necessary licenses can be obtained on
commercially reasonable terms, or at all. Should litigation or interference or
other administrative proceedings with respect to any such claims commence,
such litigation or interference or other administrative proceedings could be
extremely costly and time consuming and could have a material adverse effect
on the Company's business, prospects, financial condition, liquidity and
results of operations, regardless of the outcome of such litigation or
interference or other administrative proceedings.
The Company has seven issued patents covering the pharmaceutical
composition, commercial manufacturing process and oncology and anti-
inflammatory uses of LSF in the United States. The Company is aware of a
patent belonging to third parties that could be interpreted to compromise the
Company's freedom to sell LSF in the United States for certain non-oncology
applications. The Company believes, upon the advice of its patent
counsel, that
8
<PAGE>
any such interpretation is relevant only in connection with the Company's use
of LSF in preventing lung injury following traumatic injury (such as acute
lung injury and Acute Respiratory Distress Syndrome) or sepsis and,
irrespective of such interpretation, that the Company's planned manufacture,
sale or use of LSF as described in this Prospectus does not infringe any valid
claim of such third party patent. If such third party patent rights were
interpreted to limit the use of LSF, the Company could be required to obtain a
license from such parties. There can be no assurance that any such license
would be available to the Company upon reasonably acceptable terms, if at all.
If the Company were so required to obtain a license from such parties, the
inability of the Company to obtain such a license on reasonably acceptable
terms would have a material adverse effect on the Company's business,
prospects, financial condition, liquidity and results of operations. The
Company could also face significant costs associated with any litigation
relating to such patent.
In order to protect its proprietary technology and processes, cti also
relies on confidentiality and material transfer agreements with its corporate
partners, consultants, outside scientific collaborators and sponsored
researchers, other advisors and, in most cases, employees. There can be no
assurance that these agreements will not be breached, that the Company will
have adequate remedies for such a breach or that the Company's trade secrets
will not otherwise become known or independently discovered by competitors.
See "Business--Patents and Proprietary Rights."
Technological Uncertainty and Medical Advances. The Company currently relies
exclusively upon its lipid-based technology for the discovery, development and
commercialization of drugs for the treatment of cancer and inflammatory and
immune diseases. To date, the Company's resources have been dedicated
primarily to the research and development of potential pharmaceutical products
that the Company believes regulate the production and/or degradation of
oxidized lipids such as hydroperoxyoctadecadienoic acids ("HPODEs") or
phospholipids such as phosphatidic acids ("PAs"). The physiology of cancer,
inflammatory and immune disease is complex, and the roles of HPODEs and PAs,
and the stress-activated pathways ("SAPs") which they appear to activate, are
not fully known. Although preclinical and clinical data to date suggest that
the species of HPODEs and PAs targeted by the Company's products under
development play an important role in the cellular inflammatory and injurious
response to cell-damaging stimuli such as radiation, chemotherapy and
oxidative injury, there can be no assurance that the Company's therapeutic
approaches are correct or that its drug candidates will be proven safe or
effective. The Company believes that the elevation and production of HPODEs
and PAs and the activation of SAPs do not appear to be primarily utilized for
normal cellular processes, and that the Company's drug candidates will not
substantially interfere with normal cellular processes at therapeutically
relevant levels. There can be no assurance that the HPODEs, PAs or SAPs
believed to be targeted by the Company's drug candidates do not serve a
currently unidentified beneficial purpose which might be adversely affected by
the mechanism of action of the Company's drug candidates. No assurance can be
given that unforeseen problems will not develop with the Company's
technologies or applications, or that commercial products will ultimately be
developed by cti. There can be no assurance that research and discoveries by
others will not render some or all of cti's programs or products
noncompetitive or obsolete or that the Company will be able to keep pace with
technological developments or other market factors. Technological changes or
medical advancements could diminish or eliminate the commercial viability of
the Company's focus on cell membrane lipids in regulating cellular processes.
The failure to commercialize such products would have a material adverse
effect on the Company's business, prospects, financial condition, liquidity
and results of operations.
History and Continuation of Losses; Development Stage Company. The Company
is a development stage company which currently has no sources of operating
revenues and has incurred net operating losses since its inception. As of June
30, 1997, the Company had an accumulated deficit of approximately $84.7
million. Such losses have resulted principally from costs incurred in
research, development, clinical trials and general and administrative costs
associated with the Company's operations. The Company expects that operating
losses will continue at increasing levels for at least the next several years
as its research, product development, clinical testing and marketing
activities expand, and does not expect to receive revenues from the sale of
products for at least the next several years, if ever. The Company is working
on a number of costly long-term development projects which involve
experimental and unproven technology and which may ultimately prove
unsuccessful. In addition, since cti does not currently have any marketable
products, it expects to incur substantial operating losses for a number of
years. The amount of net losses
9
<PAGE>
and the time required by the Company to reach profitability are highly
uncertain. There can be no assurance that the Company will be able to develop
additional revenue sources or that its operations will ever become profitable.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Need for Substantial Additional Funds. To date, the Company's operations
have been funded primarily through the sale of equity securities, which has
raised aggregate net proceeds of approximately $132.8 million as of June 30,
1997. The Company expects that its revenue sources for at least the next
several years will consist primarily of future expense reimbursements and
milestone payments under its collaboration agreements with Johnson & Johnson
and with an affiliate of BioChem Pharma, Inc. ("BioChem Pharma"), and interest
income. The Company will require substantial additional funds to conduct its
existing and planned preclinical and clinical trials, to establish
manufacturing and marketing capabilities for any products it may develop and
to continue research and development activities. The Company expects that its
existing capital resources and the interest earned thereon, combined with
anticipated funding from Johnson & Johnson under the Collaboration Agreement
and the proceeds from this Offering will enable the Company to maintain its
current and planned operations at least through the middle of 1999. The
Company will need to raise substantial additional capital to fund its
operations beyond such time. See "--Reliance on Relationship with Johnson &
Johnson," "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business--Collaborations."
The Company's future capital requirements will depend on, and could increase
as a result of, many factors, including: the continuation of the Company's
collaboration with Johnson & Johnson; continued scientific progress in its
research and development programs; the magnitude and scope of such programs;
the terms of any additional collaborative arrangements that the Company may
enter into; the progress of preclinical and clinical testing; the time and
costs involved in obtaining regulatory approvals; the costs involved in
preparing, filing, prosecuting, maintaining, enforcing and defending patent
claims; competing technological and market developments; changes in
collaborative relationships; the ability of the Company to establish research,
development and commercialization arrangements pertaining to products other
than those covered by existing collaborative arrangements; the cost of
establishing manufacturing facilities; the cost of commercialization
activities; and the demand for the Company's products if and when approved.
The Company intends to raise additional funds through additional equity or
debt financings, research and development financings, collaborative
relationships, or otherwise. The Company may engage in these capital raising
activities even if it does not have an immediate need for additional capital
at that time. There can be no assurance that any such additional funding will
be available to cti or, if available, that it will be on acceptable terms. If
additional funds are raised by issuing equity securities, further dilution to
existing shareholders may result. If adequate funds are not available, cti may
be required to delay, reduce the scope of, or eliminate one or more of its
research, development and clinical activities. If the Company seeks to obtain
funds through arrangements with collaborative partners or others such partners
may require cti to relinquish rights to certain of its technologies, product
candidates or products that the Company would otherwise seek to develop or
commercialize itself. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
No Assurance of FDA Approval; Comprehensive Government
Regulation. Regulatory approval to market human therapeutics must be obtained
from the FDA and comparable health authorities in foreign countries and, to a
lesser extent, by state and local regulatory authorities in the United States.
This process requires lengthy and detailed laboratory and clinical testing and
other costly and time-consuming procedures, which must establish that such
therapeutics are safe and efficacious. Obtaining regulatory approval to market
drugs typically takes one or more years after the completion of clinical
trials and the filing of an NDA, with no assurance that such approval will
ever be obtained. The time involved for regulatory review varies substantially
based upon the type, complexity and novelty of the drug. In addition, delays
or rejections may be encountered based upon existing and changing policies of
regulatory authorities for drug approval during the period of drug development
and regulatory review of each submitted NDA. The results obtained in
preclinical and early clinical studies are not necessarily indicative of
results that will be obtained during future clinical testing. There can be no
assurance that the results obtained by the Company to date will continue as
testing and trials progress or that the Company's products will ever be
approved for commercial sale by the FDA or other regulatory authorities.
10
<PAGE>
In addition to the substantial time commitment required, the regulatory
process, which includes preclinical testing and clinical trials of each
compound to establish its safety and efficacy, requires the expenditure of
substantial resources. Preclinical studies must be conducted in conformity
with the FDA's current Good Laboratory Practices ("GLP"). Clinical trials must
meet requirements for institutional review board oversight and informed
consent, as well as FDA prior review and acceptance of Investigational New
Drug applications ("IND"), continued FDA oversight and current Good Clinical
Practices ("GCP"). The Company's experience in conducting clinical trials is
limited. Data obtained from preclinical studies and clinical trials are
susceptible to varying interpretations which could delay, limit or prevent
regulatory approval. Furthermore, studies conducted with alternative designs
or alternative patient populations could produce results which vary from those
obtained by the Company. There can be no assurance that the Company's data or
its interpretation of its data will be accepted by governmental regulators,
the medical community or the Company's collaborators. See "--No Assurance of
Successful Product Development; Uncertainties Related to Clinical Trials."
Government regulation also affects the manufacture and marketing of
pharmaceutical drug products. Any future FDA or other governmental approval of
drug products developed by cti may entail significant limitations on the
indicated uses for which such products may be marketed. Approved drug products
will be subject to additional testing and surveillance programs required by
the regulatory agencies. For example, the Company will be obligated to report
certain adverse reactions, if any, to the FDA. In addition, product approvals
may be withdrawn or limited for noncompliance with regulatory standards or the
occurrence of unforeseen problems following initial marketing. Failure to
comply with applicable regulatory requirements can result in, among other
things, fines, suspensions of approvals, seizures or recalls of products,
operating restrictions or criminal proceedings. In the event that cti were to
manufacture therapeutic products, cti would be required to adhere to
applicable standards for current Good Manufacturing Practices ("GMP")
prescribed by the FDA, engage in extensive record keeping and reporting, and
submit its manufacturing facilities to periodic inspections by state and
federal agencies, including the FDA, and comparable agencies in other
countries. In the event that third parties were to manufacture cti's
therapeutic products, cti would be required to obtain FDA approval for such
manufacture (or any change in manufacturer), and those third party
manufacturers would also be required to adhere to GMP requirements.
The effect of government regulation may be to considerably delay or prevent
the marketing of any product that cti may develop and/or to impose costly
procedures upon cti's activities, the result of which may be to furnish an
advantage to its competitors. There can be no assurance that regulatory
approval for any products developed by cti will be granted on a timely basis
or at all. Any such delay in obtaining or failure to obtain such approvals
would adversely affect cti's ability to market the proposed products and earn
product revenue. The Company is unable to predict the extent and impact of
regulation resulting from future federal, state or local legislation or
administrative actions, or whether such government regulation may have a
material adverse effect on cti.
Outside the United States, the Company's ability to market a product is
contingent upon receiving marketing authorizations from the appropriate
regulatory authorities. The requirements governing the conduct of clinical
trials, marketing authorization, pricing and reimbursement vary widely from
country to country. At present, foreign marketing authorizations are applied
for at a national level, although within the European Union ("EU") certain
registration procedures are available to companies wishing to market a product
in more than one EU member state. This foreign regulatory approval process
includes all of the risks associated with FDA approval set forth above.
Substantial Competition. The Company faces substantial competition from a
variety of sources, both direct and indirect. The Company faces direct
competition from many companies focusing on areas such as cell signal
transduction, surface receptor technology, transcription factors and gene
therapies. There are many companies, both public and private, including well-
known pharmaceutical companies, chemical companies and specialized
biotechnology companies, engaged more generally in developing synthetic
pharmaceutical and biotechnological products for the same therapeutic
applications as those which are the subject of the Company's research and
development efforts. In some instances, such products have already entered
clinical trials or received approval from the FDA. In addition, many of these
competitors have significantly greater experience than cti in undertaking
preclinical testing and clinical trials of new pharmaceutical products and
obtaining FDA and other regulatory approvals. The Company also competes with
companies that have substantially greater capital
11
<PAGE>
resources and research and development, manufacturing, marketing and sales
capabilities. Moreover, certain academic institutions, governmental agencies
and other public and private research organizations are conducting research in
areas in which the Company is working. These institutions are becoming
increasingly aware of the commercial value of their findings and are becoming
more active in seeking patent protection and licensing arrangements to collect
royalties for the use of technology that they have developed. These
institutions may also market competitive commercial products on their own or
through joint ventures and compete with the Company in recruiting highly
qualified scientific personnel. Other companies may succeed in developing
products that are more effective or less costly than any that may be developed
by cti and may also prove to be more successful than cti at marketing such
products. Competition may increase further as a result of the potential
advances in the commercial applicability of genetic engineering technologies
and organic chemistry. There can be no assurance that the Company's
competitors will not develop more effective or more affordable products or
achieve earlier patent protection or product commercialization than cti. See
"Business--Competition."
Reliance on Third Party Manufacturers; Manufacture of Products in Commercial
Quantities. The manufacturing of sufficient quantities of new drugs is a time
consuming, complex and unpredictable process. The Company currently has no
internal facilities for the manufacture of any of its products for clinical or
commercial production. The Company currently relies on one third party,
ChiRex, Ltd. ("ChiRex"), to manufacture LSF for preclinical testing and
clinical trials. The Company's manufacture and supply agreement with ChiRex
provides for the manufacture and supply of LSF bulk drug and corresponding
intermediate compounds for the Company's requirements for ongoing and future
clinical trials and commercial requirements during product launch and
commercialization. Under the terms of the Collaboration Agreement with Johnson
& Johnson, the Company will be responsible for the manufacture of LSF for
development and commercialization purposes until November 8, 1999. Thereafter,
Johnson & Johnson will assume responsibility for the manufacture of LSF.
However, Johnson & Johnson may elect to assume responsibility for the
manufacture of LSF at any time prior to such date. LSF has never been
manufactured on a commercial scale, and no assurance can be given that the
Company, together with Johnson & Johnson will be able to make the transition
to commercial production. The Company has recently entered into an agreement
with a third party vendor to furnish CT-2584 bulk drug substance for future
clinical studies. The Company may need to develop additional manufacturing
resources, or may seek to enter into collaborative arrangements with other
parties which have established manufacturing capabilities or may elect to have
other third parties manufacture its products on a contract basis. All
manufacturing facilities must comply with applicable regulations of the FDA.
The Company has established a quality control and quality assurance program,
including a set of standard operating procedures and specifications, designed
to ensure that the Company's products are manufactured in accordance with
current GMP and other applicable domestic and foreign regulations. However,
the Company is dependent upon Johnson & Johnson and contract manufacturers
including ChiRex to comply with such procedures and regulations. There can be
no assurance that Johnson & Johnson or these contract manufacturers will meet
the Company's requirements for quality, quantity or timeliness. See
"Business--Competition."
Absence of Sales and Marketing Organization. The Company has no experience
in marketing, sales or distribution. To directly market any of its potential
products, the Company must obtain access to marketing and sales forces with
technical expertise and with supporting distribution capability. To this end,
the Company has entered into a collaboration with Johnson & Johnson which
permits cti to co-promote LSF with Johnson & Johnson in the United States
while providing that Johnson & Johnson will have primary responsibility for
commercializing LSF. If the Company develops additional products with
commercial potential outside of the Johnson & Johnson collaboration, cti may
need to develop marketing and additional sales resources, may seek to enter
into collaborative arrangements with other parties which have established
marketing and sales capabilities or may choose to pursue the commercialization
of such products on its own. There can be no assurance that the Company,
Johnson & Johnson or any other third parties with whom the Company may enter
into any commercialization arrangements will establish adequate sales and
distribution capabilities or be successful in gaining market acceptance for
the Company's products.
The successful commercialization of the Company's products in certain
markets will be dependent, among other things, on the establishment of
commercial arrangements with others in such markets. Such arrangements
12
<PAGE>
could include the granting of marketing or other rights to third parties in
exchange for royalties, milestone development payments or other payments.
There can be no assurance that any such additional arrangements will be
established. If the Company is not able to establish such arrangements it
would encounter delays in introducing its products into certain markets. While
the Company believes that parties to any such arrangements will have an
economic motivation to succeed in performing their contractual
responsibilities, the amount and timing of resources they devote to these
activities will not be within the Company's control. There can be no assurance
that the Company will enter into any such arrangements on acceptable terms or
that any such parties will perform their obligations as expected or that any
revenue will be derived from such arrangements. See "Business--Marketing."
Management of Growth. The Company has recently experienced, and expects to
continue to experience, significant growth in the number of its employees and
the scope of its operations. This growth has placed, and may continue to
place, a significant strain on the Company's management and operations. The
Company's ability to manage effectively such growth will depend upon its
ability to broaden its management team and its ability to attract, hire and
retain skilled employees. The Company's success will also depend on the
ability of its officers and key employees to continue to implement and improve
its operational, management information and financial control systems and to
expand, train and manage its employee base. These demands are expected to
require the addition of new management personnel and the development of
additional expertise by existing management personnel. In addition, if cti
reaches the point where its activities require additional expertise in
clinical testing, in obtaining regulatory approvals, and in production and
marketing, there will be increased demands on cti's resources and
infrastructure. There can be no assurance that the Company will be able to
effectively manage the expansion of its operations, that its systems,
procedures or controls will be adequate to support the Company's operations or
that Company management will be able to exploit opportunities for the
Company's products or proprietary technology. There can be no assurance that
the Company will be successful in adding technical personnel as needed to meet
the staffing requirements of the Company's collaboration with Johnson &
Johnson or any additional collaborative relationships into which the Company
may enter. An inability to manage growth, if any, could have a material
adverse effect on the Company's business, prospects, financial condition,
liquidity and results of operations.
Attraction and Retention of Key Employees and Consultants. The Company is
highly dependent on the principal members of its scientific and management
staff, the loss of whose services might impede the achievement of research and
development objectives. Recruiting and retaining qualified scientific
personnel to perform research and development work are critical to cti's
success. There is intense competition for qualified scientists and managerial
personnel from numerous pharmaceutical and biotechnology companies, as well as
from academic and government organizations, research institutions and other
entities. Although cti believes it will be successful in attracting and
retaining skilled and experienced scientific and technical personnel, there
can be no assurance that cti will be able to attract and retain such personnel
on acceptable terms. Loss of the services of, or the failure to recruit, key
managerial and scientific and technical personnel could have a material
adverse effect on cti's research and product development programs, as well as
its business, financial condition and results of operations. In addition, cti
relies on consultants and advisors, including its scientific and clinical
advisors, to assist the Company in formulating its research and development
strategy. All of cti's consultants and advisors are employed by employers
other than the Company or are self-employed, and have commitments to or
consulting or advisory contracts with other entities that may limit their
availability to the Company. See "Business--Human Resources" and "Management."
Product Liability; Potential Difficulty of Obtaining Insurance. The
Company's business exposes it to potential product liability risks which are
inherent in the testing, manufacturing and marketing of human pharmaceutical
products. Although the Company is insured against such risks up to a $20
million annual aggregate limit in connection with human clinical trials, there
can be no assurance that the Company's present clinical trials liability
insurance coverage is adequate or that the Company will be able to maintain
such insurance on acceptable terms. The Company has no products commercially
available for sale and has not procured product liability insurance covering
claims in connection with commercially marketed products. There can be no
assurance that the Company will be able to obtain comparable insurance on
commercially reasonable terms if and when it commences the commercial
marketing of any products or that such insurance will provide adequate
13
<PAGE>
coverage against potential liabilities. In addition, there can be no assurance
that any collaborators and licensees of the Company will agree to indemnify
the Company from, be adequately insured against or have a sufficient net worth
to protect the Company from product liability claims. A successful product
liability claim in excess of the Company's insurance coverage could have a
material adverse effect on the Company and may prevent the Company from
obtaining adequate product liability insurance in the future on commercially
reasonable terms.
Uncertainty of Pharmaceutical Pricing and Reimbursement. Sales of cti's
proposed products will be dependent in part on the availability and extent of
reimbursement for the cost of such products and related treatments from third-
party health care payors, such as government and private insurance plans.
Significant uncertainty exists as to the reimbursement status of newly
approved health care products. Government and other third-party payors are
increasingly attempting to contain health care costs by limiting both coverage
and the level of reimbursement for new medical products and services and by
refusing, in some cases, to provide any coverage of uses of approved products
for disease indications other than those for which the FDA has granted
marketing approval. If cti succeeds in bringing any of its proposed products
to the market, there can be no assurance that any such products will be
considered cost-effective or that third-party reimbursement will be available
or will be sufficient to enable cti to sell its proposed products on a
competitive basis and to maintain price levels sufficient to realize an
appropriate return on its investment in product development. If adequate
coverage and reimbursement levels are not provided by government and other
third-party payors, the market acceptance of cti's products would be adversely
affected. In addition, legislation and regulations affecting the pricing of
pharmaceuticals may change in ways adverse to cti before or after any of the
Company's proposed products are approved for marketing. While cti cannot
predict whether any such legislative or regulatory proposals will be adopted,
the adoption of such proposals could have a material adverse effect on cti's
business, financial condition and results of operations.
No Assurance of Market Acceptance. There can be no assurance that the
Company's drug candidates, if approved by the FDA and other regulatory
agencies, will achieve market acceptance. The degree of market acceptance will
depend on a number of factors, including the receipt and timing of regulatory
approvals, the availability of third-party reimbursement and the establishment
and demonstration in the medical community of the clinical safety, efficacy
and cost-effectiveness of the Company's drug candidates and their advantages
over existing technologies and therapeutics. There can be no assurance that
the Company will be able to manufacture and successfully market its drug
candidates even if they perform successfully in clinical applications.
Furthermore, there can be no assurance that physicians or the medical
community in general will accept and utilize any therapeutic products that may
be developed by the Company.
Use of Hazardous Materials. The Company's research and development involves
the controlled use of hazardous materials, chemicals and various radioactive
compounds. Although the Company believes that its safety procedures for
handling and disposing of such materials comply with the standards prescribed
by state and federal regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, the Company could be held liable for any damages that result
and any such liability not covered by insurance could exceed the resources of
the Company.
Concentration of Ownership. Upon completion of this Offering, directors and
officers of cti, and their affiliates, will beneficially own in the aggregate
2,380,128 shares of the Company's Common Stock (including shares of Common
Stock subject to options or warrants exercisable or convertible within 60 days
of September 30, 1997), representing approximately 15.1 percent of the voting
power of the Company's outstanding securities. Such concentration of ownership
may have the effect of delaying, deferring or preventing a change in control
of the Company. See "Principal Shareholders."
Possible Volatility of Stock Price. The market price for securities of
biopharmaceutical and biotechnology companies, including that of cti,
historically have been highly volatile, and the market from time to time has
experienced significant price and volume fluctuations that are unrelated to
the operating performance of such companies. Factors that may have a
significant impact on the market price and marketability of the Company's
Common Stock include: announcements of technological innovations or new
commercial therapeutic products by the Company, its collaborative partners or
the Company's present or potential competitors; announcements by
14
<PAGE>
the Company or others of results of preclinical testing and clinical trials;
developments or disputes concerning patent or other proprietary rights;
developments in the Company's relationships with Johnson & Johnson or future
collaborative partners; acquisitions; litigation; adverse legislation; changes
in governmental regulation, third party reimbursement policies, or the status
of the Company's regulatory approvals or applications; changes in earnings;
changes in securities analysts' recommendations; changes in health care
policies and practices; economic and other external factors; period-to-period
fluctuations in financial results of the Company and general market
conditions. Fluctuations in the trading price or liquidity of the Company's
Common Stock may adversely effect the Company's ability to raise capital
through future equity financing.
Shares Available for Future Sale; Registration Rights. Sales of substantial
amounts of Common Stock (including shares issued upon the exercise of
outstanding options) in the public market after this Offering or the prospect
of such sales could adversely affect the market price of the Common Stock and
the Company's ability to raise additional equity capital. The number of shares
of Common Stock available for sale in the public market is limited by
restrictions under the Securities Act of 1933, as amended (the "Securities
Act"), and lock-up agreements ("Lock-Ups") under which the holders of
4,410,846 shares have agreed not to sell or otherwise dispose of any of their
shares for a period of 90 days after the date of this Prospectus without the
prior written consent of UBS Securities LLC. In its sole discretion and at any
time without notice, UBS Securities LLC may release all or any portion of the
shares subject to Lock-Ups. While a majority of the shares of Common Stock
outstanding at September 30, 1997 will be freely tradeable without restriction
or further registration under the Securities Act following the Lock-Up period,
(i) 3,667,584 shares currently owned by "affiliates" of the Company, as that
term is defined in Rule 144 under the Securities Act ("Affiliates"), and (ii)
1,165,785 additional shares, generally may be sold only in compliance with the
volume limitations and other provisions of Rule 144. The Company has
registered 2,615,720 shares of Common Stock reserved for issuance under the
Company's 1994 Equity Incentive Plan and 1996 Employee Stock Purchase Plan as
of the date of this Prospectus. Pursuant to certain registration rights, the
Company intends to file a resale registration statement with respect to
2,869,100 shares promptly after the Offering. The holders of such shares are:
International Biotechnology Trust plc (1,108,156 shares), Kummell Investments
Limited (1,287,456 shares), Johnson & Johnson Development Corporation (443,262
shares), Strategic Healthcare Investment Fund (22,163 shares) and BT Alex.
Brown Incorporated (8,063 shares issuable upon the exercise of outstanding
warrants). Each of these holders, other than Strategic Healthcare Investment
Fund and BT Alex. Brown Incorporated, has signed a Lock-Up. Upon effectiveness
of such resale registration statement, all of such shares will be freely
tradeable without registration, subject to the Lock-Ups. In addition, the
holders of approximately 1,854,716 shares of Common Stock and warrants
exercisable for 9,007 shares of Common Stock outstanding as of September 30,
1997, are entitled to certain registration rights. Sales of a large number of
such shares in the public market could have a material adverse effect on the
market price of the Company's Common Stock. See "Underwriting."
Anti-Takeover Provisions; Possible Issuance of Preferred Stock; Rights
Plan. The Company's Restated Articles of Incorporation and Bylaws contain
provisions that may make it more difficult for a third party to acquire, or
may discourage acquisition bids for, cti. These provisions could limit the
price that certain investors might be willing to pay in the future for shares
of Common Stock. In addition, shares of the Company's preferred stock may be
issued in the future without further shareholder approval and upon such terms
and conditions, and having such rights, privileges and preferences, as the
Board of Directors may determine. The rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of any
holders of preferred stock that may be issued in the future. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of cti.
The Company has no present plans to issue any shares of preferred stock. In
addition, the Company has adopted a shareholder rights plan that, along with
certain provisions of the Company's Restated Articles of Incorporation, may
have the effect of discouraging certain transactions involving a change of
control of the Company.
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,300,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$34.3 million ($39.5 million if the Underwriters' over-allotment option is
exercised in full), at the public offering price of $16.00 per share and after
deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company.
The Company intends to use the net proceeds of this Offering for general
corporate purposes which include funding its expanded research and development
activities with respect to the Company's LSF and CT-2584 programs and
expanding its drug discovery efforts by applying its enabling technology to
other potential therapeutic areas, such as diabetes and cardiovascular
disease. These expenditures will include preclinical testing, clinical trials
and process development and pre-commercialization activities relating to LSF.
The amounts actually expended for research and development activities and the
timing of such expenditures will depend upon numerous factors, including the
progress of the Company's research and development programs, the results of
preclinical and clinical trials, the timing of regulatory submissions and
approvals (if any), technological advances, determinations as to the
commercial potential of the Company's compounds, and the status and timing of
competitive products. The amount of expenditures will also depend upon the
continued participation of Johnson & Johnson in the Collaboration Agreement,
the timing and availability of alternative methods of financing the Company's
research and development activities and preclinical and clinical trials, and
the establishment of collaborative agreements with other companies. In
addition, the Company's research and development expenditures will vary as
product development programs are added, expanded or discontinued. A variety of
other factors, some of which are beyond the Company's control, could also
affect the application of the proceeds.
The balance of the net proceeds of this Offering is expected to be used to
improve facilities, to purchase capital equipment and for general corporate
purposes. The Company has not identified precisely the amount it plans to
spend on these specific programs or the timing of such expenditures. Pending
such uses, the Company intends to invest the net proceeds from this Offering
in United States government obligations and other highly rated liquid debt
instruments. The Company may also from time to time consider the acquisition
of other companies, technologies or products that complement the business of
the Company, although no agreements or understandings are in effect with
respect to any such transactions at this time. See "Risk Factors--Need for
Substantial Additional Funds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
JJDC INVESTMENT
It is currently anticipated that Johnson & Johnson Development Corporation
("JJDC"), an affiliate of one of the Company's collaborative partners and an
existing shareholder, will purchase from the Underwriters shares of Common
Stock having an aggregate purchase price of approximately $2.0 million (the
"JJDC Investment"). All of such shares will be registered and will be
purchased at the per share Price to Public set forth on the cover of this
Prospectus. At the public offering price of $16.00 per share, JJDC would
purchase an aggregate of 125,000 shares of Common Stock. The Underwriters will
not receive underwriting discounts or commissions on the JJDC Investment. JJDC
has agreed with the Company and the Underwriters that it will not sell or
otherwise dispose of any shares held by it, including shares purchased in the
JJDC Investment, until 90 days after the closing of the Offering. See
"Business--Collaborations" and "Underwriting."
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PRICE RANGE OF COMMON STOCK
The Company's Common Stock commenced trading on the Nasdaq National Market
under the symbol "CTIC" on March 21, 1997. The following table sets forth, for
the periods indicated, the high and low reported sales prices per share of the
Common Stock as reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
1997
<S> <C> <C>
Fourth Quarter (through October 21, 1997)................. $18 3/4 $14 7/8
Third Quarter............................................. 16 1/4 10 5/8
Second Quarter............................................ 13 5/8 7 5/8
First Quarter (commencing March 21, 1997)................. 10 7/8 10
</TABLE>
The last reported sale price of the Common Stock on the Nasdaq National
Market on October 21, 1997 was $17.25 per share. At September 30, 1997, there
were approximately 534 shareholders of record of the Company's Common Stock.
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on its capital stock
since its inception. The Company currently intends to retain all of its cash
and any future earnings to finance the growth and development of its business
and therefore does not anticipate paying any cash dividends in the foreseeable
future. Any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon the Company's
financial condition, results of operations, capital requirements and such
other factors as the Board of Directors deems relevant.
CAPITALIZATION
The following table sets forth, at June 30, 1997, (i) the actual
capitalization of the Company and (ii) the capitalization of the Company as
adjusted to reflect the sale by the Company of 2,300,000 shares of Common
Stock offered hereby and receipt by the Company of the estimated net proceeds
therefrom, at the public offering price of $16.00 per share and after
deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company.
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(in thousands)
<S> <C> <C>
Long-term obligations, less current portion.......... $ 1,389 $ 1,389
Shareholders' equity:
Preferred stock, 10,000,000 shares authorized (of
which 100,000 shares have been designated as
Series C Preferred Stock, no par value); no shares
issued and outstanding, actual and as adjusted.... -- --
Common Stock, no par value, 100,000,000 shares
authorized; 13,028,377 shares issued and
outstanding, actual; 15,328,377 shares issued and
outstanding, as adjusted(1)....................... 134,038 168,300
Deficit accumulated during development stage....... (84,684) (84,684)
-------- --------
Total shareholders' equity....................... 49,354 83,616
-------- --------
Total capitalization............................. $ 50,743 $ 85,005
======== ========
</TABLE>
- --------
(1) Excludes (i) 1,349,085 shares of Common Stock issuable upon exercise of
stock options outstanding as of June 30, 1997 at a weighted average
exercise price of $11.75 per share and (ii) 77,907 shares of Common Stock
issuable upon exercise of warrants outstanding as of June 30, 1997 at a
weighted average exercise price of $19.12 per share.
17
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below with respect to the Company's
consolidated statement of operations for each of the three years in the period
ended December 31, 1996 and with respect to the consolidated balance sheets at
December 31, 1995 and 1996 are derived from the consolidated financial
statements of the Company incorporated by reference in this Prospectus that
have been audited by Ernst & Young LLP, independent auditors, and is qualified
by reference to such financial statements and the notes related thereto. The
consolidated balance sheet data at December 31, 1992, 1993 and 1994 and the
consolidated statements of operations data for the years ended December 31,
1992 and 1993 are derived from audited financial statements of the Company not
included or incorporated by reference in this Prospectus. The consolidated
statement of operations data for the six months ended June 30, 1996 and June
30, 1997 and the consolidated balance sheet data at June 30, 1997 are derived
from unaudited consolidated financial statements incorporated by reference in
this Prospectus. The unaudited financial statements have been prepared on the
same basis as the audited consolidated financial statements and in the opinion
of management contain all adjustments, consisting only of normal recurring
adjustments, necessary for fair presentation of the financial position at such
date and the results of operations for such periods. The historical results
are not necessarily indicative of the results of operations to be expected for
the entire year. The data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto and
other financial information incorporated by reference herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- -------- -------- -------- -------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Revenues:
Collaboration
agreements........... $ -- $ -- $ -- $ 100 $ 9,121 $ 3,000 $ 5,267
Operating expenses:
Research and
development.......... 3,926 11,862 14,368 14,606 16,109 7,397 12,627
General and
administrative....... 1,661 4,052 5,283 6,144 7,602 3,527 4,133
------- -------- -------- -------- -------- ------- --------
Total operating
expenses............ 5,587 15,914 19,651 20,750 23,711 10,924 16,760
------- -------- -------- -------- -------- ------- --------
Loss from operations.... (5,587) (15,914) (19,651) (20,650) (14,590) (7,924) (11,493)
Other income (expense):
Investment income..... 292 723 616 1,167 1,174 547 1,182
Interest expense...... (29) (137) (464) (509) (512) (259) (205)
------- -------- -------- -------- -------- ------- --------
Net loss................ $(5,324) $(15,328) $(19,499) $(19,992) $(13,928) $(7,636) $(10,516)
======= ======== ======== ======== ======== ======= ========
Pro forma net loss per
share(1)............... $ (1.69) $ (0.98) $ (0.92)
======== ======= ========
Shares used in
computation of
pro forma net loss per
share.................. 8,228 7,770 11,452
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
------- -------- -------- -------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEETS DATA:
Cash, cash equivalents
and securities
available-for-sale..... $28,648 $ 27,452 $ 9,131 $ 21,906 $ 30,987 $ 47,917
Working capital......... 27,563 23,387 4,094 18,342 26,300 45,071
Total assets............ 33,422 35,230 17,278 28,048 37,002 56,490
Long-term obligations,
less current portion... 319 3,635 2,620 2,606 2,005 1,389
Deficit accumulated
during development
stage.................. (5,324) (20,652) (40,151) (60,119) (74,083) (84,684)
Total shareholders'
equity................. 31,851 28,848 10,051 21,858 30,054 49,354
</TABLE>
- -------
(1) See Note 1 of Notes to Consolidated Financial Statements, incorporated by
reference herein, for information concerning the computation of pro forma
net loss per share.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. When used in this Prospectus, the words "believes,"
"anticipates," "expects," "intends" and other predictive, interpretive and
similar expressions are intended to identify such forward-looking statements.
The Company's actual results may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed below and in "Risk
Factors," as well as those discussed elsewhere in this Prospectus or
incorporated herein by reference. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the results
of any revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
OVERVIEW
Since commencement of operations in 1992, the Company has been engaged in
research and development activities, including conducting preclinical studies
and clinical trials, and recruiting its scientific and management personnel,
establishing laboratory facilities and raising capital. The Company has not
received any revenue from the sale of products to date and does not expect to
receive revenues from the sale of products for at least the next several
years.
In the fourth quarter of 1995, the Company began to receive revenue under a
collaboration agreement with BioChem Pharma, and in the fourth quarter of
1996, the Company began to receive revenue under the Collaboration Agreement
with Johnson & Johnson. The Company has recorded approximately $19.1 million
in equity payments, license fees and development cost reimbursements from
Johnson & Johnson as of June 30, 1997. The Company expects that its revenue
sources for at least the next several years will consist primarily of future
expense reimbursements and milestone payments under its collaboration
agreements with Johnson & Johnson and BioChem Pharma, and of interest income.
The timing and amounts of such revenues will likely fluctuate. The Company
will be required to conduct significant research, development and clinical
activities during the next several years to fulfill its obligations under the
Collaboration Agreement with Johnson & Johnson. There can be no assurance that
Johnson & Johnson will not terminate the Collaboration Agreement in accordance
with its terms. See "Risk Factors--Reliance on Relationship with Johnson &
Johnson" and "Business--Collaborations."
As of June 30, 1997, the Company had an accumulated deficit of approximately
$84.7 million. The Company expects to continue to incur significant additional
net losses over the next several years as its research, development and
clinical trial efforts expand. Operating losses may fluctuate from quarter to
quarter as a result of differences in the timing of expenses incurred and
revenues recognized. To date, the Company's operations have been funded
primarily from the sale of equity securities, which have raised aggregate net
proceeds of approximately $132.8 million.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997 and 1996
During the six months ended June 30, 1997, the Company recorded
approximately $5.3 million of revenues for development cost reimbursements
from Johnson & Johnson in accordance with the Collaboration Agreement. During
the six months ended June 30, 1996, the Company received a $3.0 million
signing fee from Schering AG ("Schering") pursuant to an agreement to
collaborate on the funding, research, development and commercialization of LSF
and CT-2584. This agreement was terminated by Schering in April 1996. See Note
11 of Notes to Consolidated Financial Statements incorporated herein by
reference.
Research and development expenses increased to approximately $12.6 million
for the six months ended June 30, 1997 from approximately $7.4 million for the
six months ended June 30, 1996. This increase was primarily due to the
recruitment of additional personnel and expanded research, manufacturing,
preclinical and clinical-related development activities with respect to LSF.
19
<PAGE>
General and administrative expenses increased to approximately $4.1 million
for the six months ended June 30, 1997 from approximately $3.5 million for the
six months ended June 30, 1996. This increase was primarily due to operating
expenses associated with supporting the Company's increased research,
development and clinical activities, offset in part by transaction costs
associated with the collaboration agreement with Schering discussed above
during the six months ended June 30, 1996.
Investment income increased to approximately $1.2 million for the six months
ended June 30, 1997 from approximately $548,000 for the six months ended June
30, 1996. This increase was primarily associated with interest earnings on a
higher average cash balance between the six month periods due to the proceeds
of the Company's initial public offering and concurrent sale of Common Stock
to Johnson & Johnson completed late in the first quarter of 1997. Interest
expense decreased to approximately $206,000 for the six months ended June 30,
1997 from approximately $259,000 for the six months ended June 30, 1996. This
decrease was primarily due to lower average balances of outstanding long-term
obligations.
Years Ended December 31, 1996 and 1995
During the year ended December 31, 1996 the Company recorded a $5.0 million
license fee and $871,000 in development cost reimbursements from Johnson &
Johnson in connection with the Collaboration Agreement and a $250,000
milestone payment from BioChem Pharma. The Company also received a $3.0
million signing fee from Schering in connection with the collaboration
agreement which was terminated in April 1996. See Note 11 of Notes to
Consolidated Financial Statements incorporated herein by reference. During the
year ended December 31, 1995, the Company received a milestone payment of
$100,000 under the collaboration agreement with BioChem Pharma. See
"Business--Collaborations."
Research and development expenses increased to approximately $16.1 million
for the year ended December 31, 1996 from approximately $14.6 million for the
year ended December 31, 1995. This increase was primarily due to expanded
manufacturing and preclinical and clinical development activities with respect
to LSF, which increase was partially offset by costs of approximately $1.2
million incurred in connection with the purchase of all the intellectual
property of Lipomed Corporation in October 1995, which was accounted for as
in-process research and development expense. The Company expects that research
and development expenses will increase significantly in future years as the
Company expands its research and development programs and undertakes
additional clinical trials, including research, development and clinical
activities undertaken pursuant to the Collaboration Agreement with Johnson &
Johnson.
General and administrative expenses increased to approximately $7.6 million
for the year ended December 31, 1996 from approximately $6.1 million for the
year ended December 31, 1995. This increase was primarily due to transaction
costs associated with the collaboration agreement with Schering, transaction
costs associated with the Collaboration Agreement with Johnson & Johnson,
offering costs associated with the Company's withdrawn registration statement
in 1996, and operating expenses associated with supporting the Company's
increased research, development and clinical activities. General and
administrative expenses are expected to increase to support the Company's
expected increase in research, development and clinical trial efforts.
Investment income was approximately $1.2 million for each of the years ended
December 31, 1996 and 1995, as average cash balances and interest earned
thereon were substantially unchanged. Interest expense was approximately
$500,000 for both the year ended December 31, 1996 and 1995.
Years Ended December 31, 1995 and 1994
Revenue from the BioChem Pharma collaboration totalled $100,000 in 1995, all
of which was received in the third quarter of 1995. The Company did not have
any operating revenue during 1994.
Research and development expenses increased to approximately $14.6 million
in 1995 from approximately $14.4 million in 1994. This increase was primarily
due to costs of approximately $1.2 million incurred in connection
20
<PAGE>
with the purchase of all the intellectual property of Lipomed Corporation in
October 1995, which was accounted for as in-process research and development
expense, partially offset by a reduction in manufacturing costs associated
with LSF.
General and administrative expenses increased to approximately $6.1 million
in 1995 from approximately $5.3 million in 1994. This increase was primarily
due to operating expenses associated with supporting the Company's increased
research, development and clinical activities, including business development,
marketing studies and recruitment of additional personnel.
Investment income net of interest expense increased to approximately
$658,000 in 1995 from approximately $152,000 in 1994. This increase was
associated with interest earnings on a higher average balance of cash reserves
resulting from a private placement of equity securities in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through
the sale of equity securities. As of June 30, 1997, the Company had raised
aggregate net proceeds of approximately $132.8 million from such financing
activities, including approximately $26.8 million net proceeds from the sale
of Common Stock in its initial public offering in March 1997 and $3.0 million
from the sale of Common Stock to Johnson & Johnson concurrent with the closing
of the Company's initial public offering. The remaining proceeds of
approximately $103.0 million were raised from private placements of Series A
and B Convertible Preferred Stock and Common Stock, a bridge loan and the
exercise of stock options and warrants. In addition, the Company financed the
purchase of approximately $11.3 million of property and equipment through
financing agreements, of which approximately $2.6 million remained outstanding
as of June 30, 1997.
The Company's principal sources of liquidity are its cash balances, cash
equivalents and securities available-for-sale, which totaled approximately
$47.9 million as of June 30, 1997. The Company invests in U.S. government
obligations and other highly rated liquid debt instruments.
The Company expects that its capital requirements will increase as the
Company expands its research and development programs and undertakes
additional clinical trials. In connection with such expansion, the Company
expects to incur substantial expenditures for hiring additional management,
scientific and administrative personnel, for planned expansion of its
facilities, and for the purchase or lease of additional equipment. See "Risk
Factors--Management of Growth."
The Company does not expect to generate a positive cash flow from operations
for several years due to substantial additional research and development
costs, including costs related to drug discovery, preclinical testing,
clinical trials, manufacturing costs and operating expenses associated with
supporting such activities. The Company expects that its existing capital
resources, together with the net proceeds of this Offering and the interest
earned thereon, combined with anticipated funding from Johnson & Johnson under
the Collaboration Agreement, will enable the Company to maintain its current
and planned operations at least through the middle of 1999. In the event that
Johnson & Johnson were to terminate its participation in the Collaboration
Agreement prior to such date, cti expects that it would eliminate certain
presently planned development activities. Furthermore, the Company will need
to raise substantial additional capital to fund its operations beyond such
time. The Company's future capital requirements will depend on, and could
increase as a result of, many factors, including; the continuation of the
Company's collaboration with Johnson & Johnson; continued scientific progress
in its research and development programs; the magnitude of such programs; the
terms of any additional collaborative arrangements that the Company may enter
into; the progress of preclinical testing and clinical trials; the time and
costs involved in obtaining regulatory approvals; the costs involved in
preparing, filing, prosecuting, maintaining, enforcing and defending patent
claims; competing technological and market developments; changes in
collaborative relationships; the ability of the Company to establish research,
development and commercialization arrangements pertaining to products other
than those covered by existing collaborative arrangements; the cost of
establishing manufacturing facilities; the cost of commercialization
activities and the demand for the Company's products if and when approved.
21
<PAGE>
The Company intends to raise additional funds through additional equity or
debt financings, research and development financings, collaborative
relationships, or otherwise. The Company may engage in these capital raising
activities even if it does not have an immediate need for additional capital
at that time. There can be no assurance that any such additional funding will
be available to cti or, if available, that it will be on acceptable terms. If
additional funds are raised by issuing equity securities, further dilution to
existing shareholders may result. If adequate funds are not available, cti may
be required to delay, reduce the scope of, or eliminate one or more of its
research, development and clinical activities. If the Company seeks to obtain
funds through arrangements with collaborative partners or others, such
partners may require cti to relinquish rights to certain of its technologies,
product candidates or products that the Company would otherwise seek to
develop or commercialize itself. See "Risk Factors--History and Continuation
of Losses; Development Stage Company," "--Need for Substantial Additional
Funds," and "--Reliance on Relationship with Johnson & Johnson."
As of June 30, 1997 the Company had available for Federal income tax
purposes net operating loss carryforwards of approximately $81 million and
research and development credit carryforwards of approximately $2.2 million.
These carryforwards begin to expire in 2007. The Company's ability to utilize
its net operating loss and research and development credit carryforwards is
subject to an annual limitation in future periods pursuant to the "change in
ownership" rules under Section 382 of the Internal Revenue Code of 1986. See
Note 10 of Notes to Consolidated Financial Statements incorporated herein by
reference.
22
<PAGE>
BUSINESS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. When used in this Prospectus, the words "believes,"
"anticipates," "expects," "intends" and other predictive, interpretative and
similar expressions are intended to identify such forward-looking statements.
The Company's actual results may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations," as well as those discussed elsewhere in this Prospectus or
incorporated herein by reference. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the results
of any revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
GENERAL
Cell Therapeutics, Inc. ("cti" or the "Company") focuses on the discovery,
development and commercialization of small molecule drugs that selectively
regulate the metabolism of oxidized lipids and phospholipids relevant to the
treatment of cancer and inflammatory and immune diseases. The Company is
conducting three pivotal Phase III clinical trials for its lead product
candidate, Lisofylline ("LSF"), which is being developed to prevent or reduce
treatment-related toxicities, specifically serious and fatal infections,
mucositis and treatment-related mortality, among cancer patients receiving
high dose radiation and/or chemotherapy. In November 1996, cti entered into a
Collaboration and License Agreement (the "Collaboration Agreement") with
Johnson & Johnson for the joint development and commercialization of LSF to
prevent or reduce the toxic side effects among cancer patients receiving high
dose radiation and/or chemotherapy followed by bone marrow transplantation
("BMT"). In September 1997, Johnson & Johnson exercised an option under the
Collaboration Agreement to expand its participation in the development of LSF
for treatment of patients with newly diagnosed acute myelogenous leukemia
("AML") undergoing high dose induction chemotherapy.
In addition to its oncology applications, the Company is also investigating
LSF for use as an agent to prevent or reduce the incidence and severity of
acute lung injury ("ALI") and mortality among patients requiring mechanical
ventilation for respiratory failure for which it expects to begin a pivotal
Phase II/III trial in the fourth quarter of 1997. The Company is also
developing CT-2584, a novel small molecule drug for the treatment of patients
with multidrug (e.g., chemotherapy) resistant cancers, including prostate
cancer and sarcomas, for which it expects to begin a Phase II clinical trial
in the first quarter of 1998. The Company has devoted substantial resources to
building a unique drug discovery platform based on its proprietary technology
in oxidized lipid and phospholipid chemistry and believes it can leverage its
enabling oxidized lipid and phospholipid technologies to identify development
opportunities in other disease states, such as diabetes or cardiovascular
disease, where oxidized lipids may be implicated in the pathogenesis or
manifestations of such diseases.
SCIENTIFIC OVERVIEW
Cell communication occurs through a complex process that commences when
"first messengers" outside the cell, such as hormones, cytokines and growth
factors, recognize and bind to cellular receptors, some of which are embedded
in the cell membrane. The first messenger initiates a series of biochemical
events within the cell, known as signal transduction, which result in cellular
responses. In the 1970s, scientists discovered that in response to
extracellular binding of first messengers certain molecules, including cell
membrane lipids, are chemically altered to form "second messengers" which
participate in transducing chemical information from the cell membrane to the
cell nucleus. Certain signal transduction pathways are essential for normal
day-to-day cellular processes and are often referred to as "housekeeping
pathways" or "physiologic pathways." These housekeeping pathways are involved
in the normal growth and replenishment of cells in the body, such as blood
cells and the cells lining the intestinal tract. In contrast, there are also
signal transduction pathways, termed "stress-activated pathways" or "SAPs,"
which are part of the cellular response to injury following exposure to cell-
damaging stimuli such as radiation, chemotherapy or oxidative injury and which
are also activated in many disease states.
23
<PAGE>
The Company believes that such cell-damaging stimuli cause a number of their
toxic effects by altering the chemical composition of certain cell membrane
lipids and phospholipids, resulting in the production of biologically reactive
oxidized lipids such as hydroperoxyoctadecadienoic acids ("HPODEs") and
phospholipids termed phosphatidic acids ("PAs"). These oxidized lipids and
phospholipids in turn activate stress-related signaling pathways within the
cell which carry the cell-damaging message to the cell nucleus, resulting in
the activation of transcription factors. The activation of these transcription
factors may in turn lead to (i) the production of inflammatory cytokines and
the resulting activation of inflammatory and immune responses, (ii) the
production of cytokines which inhibit the growth and renewal of the stem cells
in the bone marrow and of the cells lining the intestinal tract and (iii) cell
membrane damage leading to cell death.
Appearance of oxidized lipids, PA elevation and activation of SAPs are
associated with many disease states and do not appear to be primarily utilized
for normal cellular processes. The Company believes that therapeutics which
regulate the production and/or degradation of oxidized lipids or phospholipids
such as HPODEs and PAs and which regulate the activation of SAPs may offer
greater specificity and safety profiles for the treatment of oncologic,
inflammatory and immune diseases than pharmaceuticals that modulate the
housekeeping or physiologic pathways necessary for normal day-to-day cellular
function.
PRODUCTS UNDER DEVELOPMENT
The following table summarizes the potential therapeutic indications,
current development status and current collaborators for the Company's
products under development:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
DEVELOPMENT POTENTIAL DEVELOPMENT
PROGRAM THERAPEUTIC INDICATIONS STATUS(1) COLLABORATORS(2)
- ---------------------------------------------------------------------------------------
ONCOLOGY
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lisofyline Prevent or reduce Pivotal Phase III trial for Johnson & Johnson
infection, mucositis BMT- related donors BioChem Pharma
and treatment-related (enrollment complete;
mortality following results expected
high dose radiation Q1 1998)
and/or chemotherapy
Pivotal Phase III trial for Johnson & Johnson
BMT-unrelated donors BioChem Pharma
(ongoing)
Pivotal Phase III trial for Johnson & Johnson
AML (ongoing) BioChem Pharma
Phase II/III trial for Johnson & Johnson
mucositis (expected to BioChem Pharma
begin Q1 1998)
CT-2584 Anti-cancer agent Phase I trials (ongoing) BioChem Pharma
targeting multidrug
resistant tumors
Phase II trial for prostate BioChem Pharma
cancer (expected to begin
Q1 1998)
CT-2412 Tumor sensitizer Research lead --
- ---------------------------------------------------------------------------------------
INFLAMMATION
- ---------------------------------------------------------------------------------------
Lisofylline Prevent or reduce ALI Pivotal Phase II/III trial Johnson & Johnson
and mortality among for ALI (expected to begin BioChem Pharma
patients requiring Q4 1997)
mechanical ventilation
for respiratory failure
- ---------------------------------------------------------------------------------------
IMMUNOLOGY
- ---------------------------------------------------------------------------------------
CT-3578 Treatment of acute organ Research lead --
transplant rejection
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Research lead refers to a compound that exhibits pharmacological
properties which are evaluated in vitro and in animal models prior to
the commencement of the additional pharmacology and toxicology studies,
formulation work and manufacturing scale-up. The Company will then be
required to submit an IND. See "--Government Regulation" for a
description of the phases of human clinical trials.
(2) See "--Collaborations" for a description of cti's collaboration
agreements and commercial rights to such products.
24
<PAGE>
ONCOLOGY
Overview
Cancer is the second leading cause of death in the United States, resulting
in over 550,000 deaths annually. The National Cancer Advisory Board reports
that more than eight million people in the United States have cancer, and
projects that cancer will surpass heart disease as the leading cause of death
in the United States by the end of the decade. Approximately 1.4 million new
cases of cancer are diagnosed each year in the United States. The most
commonly used methods for treating cancer patients include surgery, radiation
and chemotherapy. A cancer patient often receives a combination of these
treatment modalities depending upon the type and extent of the disease. At
some point in their disease treatment, 70 percent of all cancer patients will
receive radiation therapy and 50 percent of all newly diagnosed cancer
patients will receive chemotherapy. Despite their benefits for treating
cancer, there are significant limitations of, and complications associated
with, radiation and chemotherapy which result in a high rate of treatment
failure. For example, only ten percent of patients treated with chemotherapy
are cured. The three principal causes of treatment failure include treatment-
related toxicities, multidrug resistance and tumor resistance to radiation.
Treatment-Related Toxicities. Despite their benefits for treating cancer,
radiation and chemotherapy treatment result in toxicities that limit the use
of potentially more effective doses. These treatment-related toxicities are
directly responsible for placing patients at risk for serious and often life-
threatening infections and other undesirable side effects. Radiation and
chemotherapy are toxic to rapidly dividing cells, which include not only
cancer cells but also certain normal cells such as bone marrow cells, hair
follicle cells and the epithelial cells lining the mouth, stomach and
intestinal tract. The most common and problematic of the severe side effects
attributable to radiation and chemotherapy are neutropenia, or bone marrow
suppression of infection-fighting white blood cells ("WBCs"), and mucositis,
or damage to the epithelial cells lining the mouth, stomach and intestinal
tract. Epithelial cells form an important barrier, preventing potentially
lethal bacterial, fungal and viral organisms which reside in the intestinal
tract from entering the sterile blood stream and organs. Damage from radiation
or chemotherapy to intestinal epithelial cells disrupts this important
barrier, allowing infectious pathogens to gain access to the systemic blood
circulation. When neutropenia and mucositis occur together, patients are at
high risk for serious and fatal infections. Patients often require supportive
care agents as an adjunct to the primary therapy in order to lessen the
toxicities associated with radiation and chemotherapy.
Approximately 575,000 patients receive chemotherapy each year in the United
States, with more than 20 percent developing severe neutropenia and/or
mucositis. WBC growth factors such as Neupogen(R) (G-CSF), marketed by Amgen
Inc., target the fever and neutropenia (two surrogate markers that indicate
risk for developing infection) induced by radiation and chemotherapy, but in
most studies have failed to prevent serious or fatal infections, have had no
impact on survival, and have failed to treat other acute toxicities of cancer
treatment such as mucositis. Despite these limitations, Neupogen generated
worldwide sales in excess of $1 billion in 1996. There are currently no
supportive care measures that prevent mucositis.
Multidrug Resistance. Multidrug resistance to conventional chemotherapeutic
agents is a major impediment to the effective treatment of certain cancers.
Approximately 90 percent of all cancer patients undergoing chemotherapy
express or will develop multidrug resistance. Because most chemotherapeutic
agents share a similar mechanism of action, once a tumor develops resistance
to a single therapeutic agent, it becomes resistant to a broad range of
chemotherapeutic drugs.
Tumor Resistance to Radiation. Radiation therapy kills tumor cells by
generating highly reactive and toxic oxygen free radicals, resulting in damage
to cell replication machinery (e.g., DNA). Tumors are classified as being
sensitive (e.g., lymphomas) or resistant (e.g., colon or skin cancers) to
radiation therapy. Almost 50 percent of certain cancer cell types, such as
prostate and lung cancer, are resistant to radiation therapy at the time of
diagnosis. Mechanisms by which tumor cells develop resistance to radiation
include mutations or deletions in tumor suppressor genes (e.g., p53) that
control cell replication, abnormal regulation of proteins which inhibit
programmed cell death, such as bcl-2, or mechanisms by which DNA is repaired
during cell replication. The p53 tumor suppressor gene is mutated or deleted
in approximately 50 percent of newly diagnosed cancers and is a major
contributor to the failure of radiation therapy among such malignancies.
25
<PAGE>
The Company is focusing its oncology development efforts on a portfolio of
drugs that it believes will address the three principal causes of cancer
treatment failure. These include (i) LSF--a supportive care agent being
investigated to prevent or reduce the incidence of serious and fatal
infections, mucositis and treatment-related mortality among patients receiving
high doses of radiation and/or chemotherapy, (ii) CT-2584--a novel anti-cancer
drug in clinical trials for the treatment of patients with multidrug resistant
tumors and (iii) tumor sensitizing agents including CT-2412--a research lead
with the potential ability to enhance sensitivity to radiation among tumors
that have deleted or mutated tumor suppressor genes, which the Company
believes will increase the effectiveness of radiation treatment on such
tumors. Additionally, the Company may license or acquire agents from third
parties which, when used with other cti oncology products, may provide added
value to the integrated management of oncologic disease.
Lisofylline
LSF is a synthetic small molecule drug in three pivotal Phase III clinical
trials among cancer patients receiving high dose radiation and/or
chemotherapy. Unlike blood cell growth factors or chemotherapy protecting
agents, LSF is being developed to prevent or reduce the incidence of serious
and fatal infections, mucositis and treatment-related mortality. The Company
believes that the use of LSF may permit the safer delivery of higher,
potentially more effective doses of radiation and chemotherapy. The Company is
collaborating with Johnson & Johnson to jointly develop and commercialize LSF
for the BMT and AML indications. See "--Collaborations."
The Company's development strategy for LSF has been to target anti-cancer
treatment regimens which are accompanied by a high incidence of serious
neutropenic infections, mucositis and treatment-related mortality. The Company
is pursuing the development of LSF for the treatment of cancer patients
receiving high dose radiation and/or chemotherapy followed by BMT and for
patients with AML undergoing high dose induction chemotherapy for the
following reasons: (i) following BMT or induction chemotherapy for AML, up to
50 percent of patients may develop serious infections, and up to 50 percent of
those patients may die from the side effects of the high doses of radiation
and chemotherapy, (ii) in these patient groups there is a high unmet need for
agents which reduce serious and fatal infections, (iii) under recent FDA
initiatives, New Drug Applications ("NDAs") for serious, life threatening or
severely debilitating indications that provide a meaningful therapeutic
benefit to patients over existing treatments may be eligible to receive
accelerated review and approval and (iv) the Company believes that once
approved, agents which target life threatening side effects of cancer therapy
and improve patient outcomes will be adopted by health care providers,
patients and third party payors. The FDA staff has indicated that priority
review status may be appropriate for the Company's BMT application; however,
there can be no assurance such priority review will be granted or, if granted,
will be successful.
In 1995, approximately 20,000 patients in the United States were treated
with ablative doses of chemotherapy requiring BMT or peripheral blood stem
cell replacement. This type of chemotherapy regimen is one of the fastest
growing types of cancer treatments in the United States, with an estimated
annual growth rate of 15 to 20 percent. Despite this growth rate, only 25
percent of patients will find an acceptable family member bone marrow donor.
In 1986 the National Marrow Donor Program was established to provide bone
marrow from unrelated donors for patients who lacked a family member donor.
However, the high incidence of infection and mortality associated with this
type of treatment limits its more widespread potential application. In 1995,
in the United States 75,000 patients received induction-type chemotherapy
regimens for the treatment of leukemias, such as AML, and lymphomas, and
almost 200,000 patients received dose-intensive chemotherapy for a variety of
solid tumor types, 30 percent of whom are at risk to develop severe mucositis.
The Company is conducting two pivotal Phase III clinical trials of LSF in
patients who require BMT after receiving ablative, or bone marrow destroying,
doses of radiation and/or chemotherapy. In addition, the Company is conducting
an ongoing pivotal Phase III trial in patients with newly diagnosed AML who
receive high dose induction chemotherapy. Additionally, in the first quarter
of 1998, the Company intends to commence a
26
<PAGE>
Phase II/III clinical trial of LSF in patients with solid tumors such as head
and neck or breast cancers who receive dose-intensive radiation and/or
chemotherapy and who are at risk of developing severe mucositis and
neutropenic infection. Common to each of these three categories of anti-cancer
treatment (ablative, induction and dose-intensive) is the occurrence of
neutropenia and the breakdown of the epithelial barrier cells lining the
mouth, stomach and intestinal tract, placing patients at a high risk of life
threatening infections, severe mucositis and mortality.
Clinical Trials--Related Donor BMT. In the first quarter of 1996, the
Company completed a 60 patient, multi-center, double blind placebo controlled
Phase II trial which investigated the effect of two different doses (2 mg/kg
and 3 mg/kg) of LSF on the rate of blood cell recovery and the incidences of
fever, infection, toxicity and mortality in cancer patients undergoing high
dose radiation and/or chemotherapy followed by BMT from related donors
(siblings).
The table below summarizes the results on an intent to treat analysis of the
Phase II BMT trial of LSF at 100 days following BMT which the Company plans to
more fully assess in its Phase III clinical trials:
<TABLE>
<CAPTION>
LSF
3 MG/KG(1) PLACEBO P VALUE(2)
---------- ------- ----------
<S> <C> <C> <C>
Mortality rate............................ 11% 44% 0.026
Incidence of neutropenic infections(3).... 0% 39% 0.003
Incidence of serious neutropenic
infections............................... 0% 28% 0.015
Incidence of serious and fatal
infections(4)............................ 0% 39% 0.005
Duration of absolute neutropenia(5)....... 3 days 6 days 0.046
Incidence of severe mucositis............. 26% 44% 0.104
</TABLE>
--------
(1) Patients receiving a 2 mg/kg dose of LSF did not demonstrate
statistically significant results when compared with placebo
recipients.
(2) A p value of less than or equal to 0.05 is considered
statistically significant.
(3) Neutropenic period was measured through the first 35 days
after BMT.
(4) Through first 100 days after BMT.
(5) Duration of absolute neutropenia is defined as the number of
days following BMT with fewer than 100 neutrophils per
microliter of blood.
Certain endpoints of the trial regarding neutrophil and platelet recovery,
the duration of fever and transfusion requirements were not met. No serious
adverse side effects attributable to LSF were detected in this trial.
In October 1997, the Company plans to complete the enrollment of 132
patients in a multi-center, double blind placebo controlled pivotal Phase III
trial for LSF in patients undergoing high dose radiation and/or chemotherapy
followed by BMT from related donors (siblings). This trial utilizes a 3 mg/kg
dose of LSF. The primary endpoints of this study are the prevention or
reduction of neutropenia-related infection and treatment-related mortality at
100 days following BMT. Based on the Company's discussions with the FDA, if
either endpoint of this study is met with statistical significance, the
Company believes that the results of this trial, together with the results of
the completed Phase II BMT trial discussed above and the safety data from the
recently completed Phase II AML trial discussed below, may be adequate to
provide a basis for an NDA for LSF for BMT indications. See "Risk Factors--No
Assurance of Successful Product Development; Uncertainties Related to Clinical
Trials."
Clinical Trials--Unrelated Donor BMT. In the first quarter of 1997, the
Company commenced a 100 patient pivotal Phase III trial which will examine the
effect of a 5 mg/kg dose of LSF on patients with cancer receiving high dose
radiation and/or chemotherapy followed by BMT from unrelated donors. In
addition to being at high risk for serious and fatal infections, these
patients have a high incidence of severe mucositis and treatment-related
deaths. This study will determine the effect of higher doses of LSF on serious
neutropenic infection and treatment-related mortality and will provide
supportive dosing and efficacy data for mucositis applications of LSF. If
effective, the Company believes that the use of LSF may increase the number of
patients who receive BMT from unrelated donors. See "Risk Factors--No
Assurance of Successful Product Development; Uncertainties Related to Clinical
Trials."
27
<PAGE>
Clinical Trials--AML. In the third quarter of 1997, the Company reported the
preliminary results of its 70 patient, single center, double blind placebo
controlled Phase II trial of LSF (3 mg/kg) among patients with newly diagnosed
AML undergoing high dose induction chemotherapy. This trial examined the
effects of LSF on the incidence of neutropenic infections (serious and non-
serious), infection related deaths, overall mortality and complete remission.
The table below summarizes the results on an intent to treat analysis of the
Phase II trial of LSF following high dose induction chemotherapy:
<TABLE>
<CAPTION>
LSF
3 MG/KG PLACEBO P VALUE(1)
------- ------- ----------
<S> <C> <C> <C>
Incidence of serious neutropenic
infections(2)................................ 17% 34% 0.04
Incidence of fungal neutropenic
infections(2)................................ 0% 14% 0.01
Overall incidence of neutropenic infections
(serious and non-serious)(2)................. 37% 49% 0.23
Infection-related deaths(3)................... 9% 17% 0.29
Overall mortality rate(3)..................... 17% 20% 0.75
Complete remission............................ 77% 74% >0.90
</TABLE>
--------
(1) A p value of less than or equal to 0.05 is considered
statistically significant.
(2) Incidence of infections was scored after completion of the
first 28-day cycle of high dose induction chemotherapy.
(3) Infection-related deaths and overall mortality were scored
for the first 60 days following the start of induction
chemotherapy.
This trial did not demonstrate that LSF had an effect on overall mortality.
No serious adverse side effects attributable to LSF were detected in this
trial. The most common side effect was mild to moderate nausea seen in LSF
recipients. Despite this side effect, 99.5 percent of the anticipated doses of
LSF were received by trial participants.
In the fourth quarter of 1996, the Company initiated an 80 patient, multi-
center, double blind placebo controlled pivotal Phase III trial of LSF (3
mg/kg) among patients with newly-diagnosed AML undergoing high dose induction
chemotherapy. The primary endpoint of this study is the reduction of the
incidence of serious neutropenic infections. The Company plans to amend this
ongoing Phase III AML trial to increase enrollment to 160 patients to provide
adequate statistical power for this endpoint. Based on the Company's
discussions with the FDA in connection with the ongoing Phase III related
donor BMT trial, the Company believes that if both primary endpoints in the
Phase III related donor BMT trial are met with statistical significance, those
results together with the results of the recently completed Phase II AML trial
and the completed Phase II BMT trial may be adequate to provide the basis for
an expanded NDA label which would include both BMT and AML indications. There
can be no assurance however that such clinical trials will be successful or
that LSF will be eligible for such an expanded NDA label before completion of
additional Phase III trials, if at all. See "Risk Factors--No Assurance of
Successful Product Development; Uncertainties Related to Clinical Trials."
Clinical Trials--Mucositis. In the first quarter of 1998, the Company
intends to commence a 100 patient, multi-center, double blind placebo
controlled Phase II/III trial of LSF in patients with head and neck tumors
receiving dose-intensive radiation and/or chemotherapy who are at risk for
developing severe mucositis and neutropenic infections.
Mechanism of Action. Following exposure to radiation, chemotherapy or
oxidative injury, highly reactive oxygen free radicals are generated. These
oxygen free radicals are "soaked up" both in the blood stream and in cell
membranes by a pool of lipids termed "oxidizable lipids" to produce highly
reactive oxidized lipids and lipid peroxides such as HPODEs. HPODEs are
elevated in hematological cancers such as AML or lymphoma and are further
elevated following induction chemotherapy or high dose radiation and
chemotherapy followed by BMT. By comparison, elevated HPODE levels have not
been detected among normal volunteers. It has been shown that elevated HPODE
levels statistically correlate with the development of toxicity and mortality
28
<PAGE>
following high dose radiation and/or chemotherapy followed by BMT. Oxidized
lipids have also been shown to have immediate effects on cell membranes,
resulting in membrane perturbation or disruption which may lead to cell damage
or cell death among the barrier cells lining the intestine or respiratory
tract. As such, lipid peroxides such as HPODEs may contribute to the early
breakdown in mucosal barrier function observed following radiation,
chemotherapy or oxidative injury, allowing potentially pathogenic bacteria and
fungi to gain access to an otherwise sterile bloodstream and tissues. In
addition to the direct effects that HPODEs may have on cell membranes, they
may also lead to the activation of a number of SAPs within the cell, resulting
in further tissue injury, inflammation and delayed healing.
While the biomolecular target for LSF is presently unknown, its therapeutic
activity appears to be due to the result of LSF's effect on oxidized lipids,
and the subsequent activation of SAPs. In the Phase II BMT clinical trial, LSF
decreased elevated HPODE levels present at study entry. In addition, LSF
blocked the rise or reduced the levels of such lipid peroxides following
exposure to radiation and/or chemotherapy when compared to the elevated levels
present among placebo recipients. In doing so, LSF appears to inhibit the
early, immediate effects of HPODEs on cell membranes, thereby reducing injury
to mucosal barriers such as the gastrointestinal tract. LSF also appears to
prevent the activation of SAPs, and the ensuing cellular inflammatory and
injurious response which contribute to the delay in tissue healing following
dose-intensive radiation and chemotherapy.
The Company believes that the effects of LSF on lipid peroxides and on the
activation of SAPs may represent a critical upstream point of intervention in
the initiation of the cellular stress and injury response. By modulating the
production of such oxidized lipids and the activation of SAPs, LSF may be able
to prevent the early and late damage to the epithelial barrier cells lining
the mouth, stomach and intestinal tract, resulting in a reduction in
infection, mucositis and mortality following high dose anti-cancer treatment.
Because epithelial barrier cells also line the lung tissue in the respiratory
tract, cells which are also susceptible to such oxidative injury, the Company
believes that LSF may also be effective for preventing or reducing ALI in
patients requiring mechanical ventilation for respiratory failure. See "--
Inflammatory Disease." The Company is utilizing its proprietary oxidized lipid
and phospholipid technologies as a platform to investigate structure-function
relationships with respect to the LSF chemical moiety and its anti-lipid
oxidation effects. The Company is developing chemical analogs of LSF, such as
CT-2408R and other agents, which have the potential to be administered orally.
CT-2584
CT-2584 is the Company's novel small molecule drug under investigation for
the treatment of patients with multidrug (e.g., chemotherapy) resistant
cancers, including prostate cancer and sarcomas. The Company believes that CT-
2584 has a unique mechanism of action which may allow the drug to be (i) toxic
to cancers which have multidrug resistance to conventional chemotherapeutic
agents, (ii) more toxic to cancer cells than to non-cancerous cells and (iii)
not susceptible to multidrug resistance.
The Company's development strategy for CT-2584 is to target multidrug
resistant cancers, such as hormone-refractory prostate cancer and sarcomas,
for which effective treatments are lacking and for which such applications may
qualify for accelerated regulatory approval. The Company believes that
targeting therapeutic applications of the drug where alternative treatments
are lacking or ineffective may also accelerate market acceptance. The Company
intends to pursue line extensions of CT-2584 to be used as a second line
therapy for cancers such as colon, lung and breast cancers which frequently
express or acquire multidrug resistance to conventional first line
chemotherapeutic agents, resulting in treatment failure. Because CT-2584's
mechanism for tumor cell killing appears to be unique, and because it has not
demonstrated the toxicities of conventional anti-cancer agents, the Company
believes that CT-2584 ultimately may be used both alongside conventional
chemotherapeutic agents and as a first line therapy for a variety of cancer
types.
29
<PAGE>
Preclinical and Clinical Trials. In preclinical testing, CT-2584
demonstrated toxicity to all tumor cell lines tested and to human tumor biopsy
samples. These cell lines and samples included prostate, sarcomas, brain,
colon, breast, lung and ovarian cancers, as well as certain leukemias and
lymphomas.
The Company has ongoing a Phase I trial, co-sponsored by the Cancer Research
Campaign, at the Christie Hospital in the United Kingdom, among patients with
advanced cancers, and a parallel Phase I trial at the Memorial Sloan Kettering
Cancer Research Center in the United States, for patients with advanced
cancers including prostate and ovarian cancer. As of September 30, 1997, 36
patients have been treated with CT-2584 at five different dose levels without
exhibiting the bone marrow or gastrointestinal toxicities observed with
conventional high dose anti-cancer treatment regimens. To date, a maximum
tolerated dose level has not been achieved. The majority of patients enrolled
in this trial have tumor types which are known to express multidrug resistance
and have failed or were ineligible for conventional chemotherapy and surgery.
Among these 36 patients, 11 patients (30%) experienced disease stabilization
or disease regression following more than two cycles of CT-2584 therapy. As of
September 30, 1997, nine of these patients remain alive at a median of 11
months since initiating CT-2584 therapy (range 2-18 months). Each of the three
patients with endstage prostate cancer experienced stabilization of disease.
Four of 13 patients (28%) with advanced sarcomas experienced stabilization of
disease and clinical improvement. Based on the preliminary response rates
observed in this trial the Company anticipates initiating a Phase II trial in
advanced hormone refractory prostate cancer in the first quarter of 1998 and a
Phase II trial for sarcomas by the end of 1998. See "Risk Factors--No
Assurance of Successful Product Development; Uncertainties Related to Clinical
Trials."
Mechanism of Action. CT-2584's unique mechanism of action of tumor cell
killing is believed to result from the effects it has on tumor cell
phospholipids such as PAs. Unlike normal growing cells, such as bone marrow
cells, tumor cells overproduce PAs through the activation of an enzyme called
phosphatidylcholine phospholipase-D ("PC-PLD"). CT-2584 appears to further
activate tumor cell PC-PLD leading to tumor cell death. This enzyme may be one
of the biochemical targets responsible for effecting tumor cell killing.
Because of its unique mechanism of action, CT-2584 appears to inactivate or
bypass multidrug resistance mechanisms and does not appear to be susceptible
to multidrug resistance. Company scientists have cloned PC-PLD, and the
Company intends to establish high throughput assays based on PC-PLD and its
other proprietary technologies to discover more potent or selective analogs of
CT-2584.
Tumor Sensitizing Agents
The Company has recently focused a drug discovery effort on the development
of agents which would enhance the effectiveness of radiation therapy. The
Company believes that its drug discovery and core technology platform may
provide a novel approach to the development of tumor sensitizing agents. The
Company is investigating the role of oxidized lipids and phospholipids and
their contribution to the mechanisms by which tumors express or develop
resistance to radiation. The Company has identified compounds, including CT-
2412, which have the potential ability to enhance sensitivity to radiation in
certain resistant cancers, including those which have deleted or mutated tumor
suppressor genes.
INFLAMMATORY DISEASE
Acute lung injury ("ALI") may be caused by or associated with many diseases
or conditions, but is most frequently observed following mechanical
ventilation for respiratory failure. More than one million patients are at
risk each year in the United States for developing ALI. When severe, ALI can
be fatal in a substantial percentage of patients and can also lead to a
condition termed Acute Respiratory Distress Syndrome ("ARDS"). There are no
specific therapies to prevent or treat the estimated 150,000 new cases of ARDS
diagnosed each year. ALI results from oxidative injury to the epithelial
barrier cells which line the respiratory tract following exposure to high
levels of oxygen in connection with mechanical ventilation and/or following
resuscitation with blood transfusions after multiple traumatic injury. In each
setting, oxidative injury to the epithelial cell membranes lining the lung
causes a breakdown in the normal barrier function, leading to the inability to
provide adequate oxygen to the blood stream and organs and resulting in
multiorgan failure ("MOF") and death.
30
<PAGE>
In addition to its potential oncology applications, LSF is also under
investigation by cti as an agent to prevent or reduce the incidence and
severity of ALI and mortality among patients requiring mechanical ventilation
for respiratory failure. The mechanisms underlying the toxicity to
gastrointestinal barrier cells observed in the oncology setting may also
operate to cause the toxicity to respiratory barrier cells observed in the
critical care setting. The Company's development strategy for LSF in critical-
care applications is to target patient populations at high risk for developing
ALI, where early intervention is feasible and clinically meaningful endpoints
can be assessed after relatively short (14-21 days) duration of drug
treatment.
Clinical Trials. The Company has completed a 13 patient, multi-center,
double blind placebo controlled Phase II feasibility study of LSF in patients
suffering from septic shock randomized to receive a low dose (1.5 mg/kg) of
LSF or placebo. This study examined the safety and pharmacokinetics of LSF
given to critically ill patients. Of the 12 patients evaluable for endpoint
analysis, the improvement from baseline in median MOF scores experienced by
LSF recipients was 40 percentage points greater than the improvement
experienced by placebo recipients. All patients receiving LSF survived to day
28 compared to 67 percent of placebo recipients.
The National Heart, Lung and Blood Institute (the "NHLBI"), through its ARDS
Network, notified the Company that after reviewing the preclinical and
clinical data to date, it had selected LSF for investigation in a multi-
center, double blind placebo controlled pivotal Phase II/III trial among
patients experiencing ALI. The ARDS Network was established by the NHLBI in
cooperation with the FDA and the National Institutes of Health to accelerate
the investigation and approval of novel therapies for ALI. The trial, expected
to begin in the fourth quarter of 1997, will examine the effect of a 3 mg/kg
dose of LSF on the duration of mechanical ventilation and early (day 28)
mortality among 800 patients who develop ALI. After each group of 200 patients
enters the study, an independent data safety monitoring board will recommend
continuing the trial based on trends toward efficacy, or stopping the trial
for successful completion of study endpoint or lack of efficacy or safety. The
Company believes the design of this trial and NHLBI sponsorship, including its
provision for a majority of the direct patient costs, provides a cost-
effective investigation of LSF expansion into this patient population.
Mechanism of Action. The Company believes that following exposure to high
levels of inspired oxygen by mechanical ventilation or following blood
transfusion resuscitation after multiple traumatic injury, the generation of
reactive oxygen free radicals leads to the production of oxidized lipids and
lipid peroxides such as HPODEs. See "--Oncology--Lisofylline--Mechanism of
Action." These HPODEs exert their damaging effects on cell membrane lipids and
phospholipids which may lead to the activation of SAPs, resulting in cellular
inflammation and injury. In addition, HPODEs may also cause an immediate
disturbance in the integrity of the cells lining the respiratory tract,
allowing the undesired movement of proteins and fluids into the lung air
spaces, and decreasing the ability of oxygen in the lung to cross into the
bloodstream and reach the tissues.
In animal studies, LSF prevented the occurrence of lung injury and/or
mortality following exposure to high levels of inspired oxygen, resuscitation
following blood loss and shock, and following severe systemic bacterial
infections. In clinical studies, LSF decreased the pool of oxidized lipids and
decreased HPODE generation and the activation of SAPs and subsequent
production of multiple inflammatory cytokines. The Company believes that the
effects of LSF on such lipids and on the activation of SAPs may represent a
critical upstream point of intervention in the initiation of the complex
biochemical cascade that leads to cellular and systemic inflammation, cell
injury and cell death.
IMMUNE DISEASE
The Company is investigating a class of novel compounds which inhibit the PA
regulating enzyme diacylglycerol kinase ("DAG Kinase") and which have been
identified for potential use in the prevention of organ transplant rejection
and in the treatment of immune diseases. Early in vitro testing suggests that
one of these compounds, CT-3578, unlike currently used immunosuppressives
including cyclosporine A, leads to non-responsiveness of the immune system to
specific foreign antigens. The Company believes that such a compound could
induce tolerance to a specific foreign antigen and thus allow patients to
accept organ transplants from genetically different donors without the need
for long-term immunosuppressive therapy.
31
<PAGE>
METABOLIC DISEASE
The Company believes it can leverage its enabling oxidized lipid and
phospholipid technologies to identify opportunities in other disease states
where elevated levels of oxidized lipids may play an important role in the
pathogenesis and clinical manifestations of disease. Oxidized lipids,
including HPODEs, have been reported to be elevated in a variety of metabolic
and cardiovascular diseases. In diabetes, oxidized lipids have been associated
with the destruction of pancreatic islet cells (the cells responsible for
insulin production) in Type I, juvenile onset diabetes, and are believed to be
responsible for development of resistance to insulin and its ability to lower
blood sugar in Type II, adult onset diabetes. In addition, oxidized lipids
have been linked to the glycosylation of proteins resulting in what are termed
advanced glycosylation end products, which are believed to contribute to the
blood vessel damage leading to heart disease, kidney disease and blindness
that accompanies diabetes.
In 1995, the Company established a research collaboration with a leading
diabetes research and treatment center utilizing the Company's proprietary
technologies and drug prototypes to investigate the role of specific forms of
oxidized lipids and phospholipids in the development of diabetes and its
complications. Company scientists and their collaborators have demonstrated
that agents like LSF, which reduce oxidized lipids, can significantly restore
blood sugar utilization by the body and decrease blood sugar to normal levels
in diabetic animal models.
PROPRIETARY DRUG DISCOVERY TECHNOLOGY
The Company's proprietary drug discovery technology consists of four
components: (i) analytical technology for quantitative measuring of specific
species of oxidized lipids and phospholipids; (ii) cloning of critical lipid
regulatory enzymes; (iii) using the cloned enzymes and drug candidate probes
to validate targets and to develop high throughput screens capable of
analyzing large chemical libraries; and (iv) development of novel linker
chemistry to develop directed mini-diversity chemical libraries.
The Company has developed proprietary technology that enables it to
determine the effects of a variety of physical and chemical stimuli (such as
radiation and chemotherapy), growth factors, hormones, cytokines and oncogene-
induced events on the production of oxidized lipids such as HPODEs, various
species of PAs and the enzymes which control their production and degradation.
Standard industry techniques for measuring oxidized lipids, such as HPODEs,
complex lipids and phospholipids such as PAs are time consuming and often
inadequate. Moreover, separation of specific species of oxidized lipids and
PAs is difficult. The Company possesses several proprietary lipid analytical
technologies which can identify different oxidized lipids and different
species of PA produced in response to a variety of stimuli in various cell
types. These technologies provide a qualitative and quantitative methodology
to examine the effects of cti compounds on a variety of such lipids and
phospholipids that are involved in normal and/or pathological functions in
certain cells.
The Company has also developed certain proprietary technologies that permit
the qualitative and quantitative analysis of a variety of complex lipids for
their content of oxidizable and oxidized lipid components such as HPODEs. The
Company believes that such technologies may be utilized in conjunction with
its chemical libraries and novel cloned enzymes to elucidate the relationship
of such complex oxidized lipids to conditions such as cancer, inflammatory and
immune disease. From these studies, the Company intends to identify additional
novel targets for future drug development.
32
<PAGE>
The Company believes that PAs have different functions within cells,
depending on how they are made and their biochemical species. In order to
further investigate the role of these phospholipids in cellular response
mechanisms and to provide a platform to develop novel targets for drug
development, Company scientists have cloned several of the critical enzymes
that produce or metabolize (degrade) PAs. The following table lists some of
the human enzymes cloned by the Company, their biological effects and implied
areas of indication:
<TABLE>
<CAPTION>
CLONED ENZYME BIOLOGICAL EFFECT DISEASE AREA
- ---------------------------------------- -------------------------------- ------------
<S> <C> <C>
PC-PLD (phosphatidylcholine- Cancerous transformation, Cancer
phospholipase-D) angiogenesis
LPAAT (lyso-PA acyl transferase) Stress activated protein kinase Inflammation
("SAPK") activation; TNFa,
Interleukin-6 release
CDS (cytidyl diphosphate-diacylgycerol SAPK activation; TNFa, Inflammation
synthase) Interleukin-6 release
PAP (phosphatidic acid phosphatase) Glycerolipid synthesis, signal Inflammation
transduction
</TABLE>
The PA regulating enzyme, DAG-Kinase, has been identified as a target enzyme
for modifying the immune response and is inhibited by cti's lead
immunosuppressive compound, CT-3578.
Through application of genetic, molecular and biochemical techniques, the
Company may be able to determine the relationship between the PA species
controlled by these enzymes and abnormal cellular functions which are thought
to be related to disease processes. The Company believes that its oxidized
lipid technologies and PA modulating enzymes, when coupled with high
throughput screens and combinatorial diversity libraries, may provide it with
unique therapeutic targets for drug development for oncological, inflammatory
and immune diseases.
STRATEGY
The key elements of the Company's business strategy are to:
Target large markets which are not adequately served by existing
therapeutics. The Company focuses its drug development activities on cancer
and inflammatory and immune diseases--three therapeutic areas that represent
large market opportunities not adequately served by existing therapeutics. The
Company intends to develop its oncology product portfolio by integrating its
understanding of cancer disease management with novel products derived from
its internal research and discovery efforts. The Company's two potential
cancer drugs in clinical trials, LSF and CT-2584, target the toxic side
effects of current cancer treatment modalities and multidrug resistant cancer
cells, respectively. LSF is also in clinical trials as an agent for the
prevention or reduction of ALI and mortality among patients requiring
mechanical ventilation for respiratory failure, conditions for which no
effective therapies currently exist. The Company believes that these agents,
if effective, may provide additional treatment options and opportunities which
are not presently available to health care providers and their patients. The
Company intends to further develop its product portfolio to exploit these
potential opportunities through internal research and discovery efforts, in-
licensing or product acquisitions.
Maximize product opportunities by entering into late-stage collaborative
relationships. The Company believes that by developing its products through
mid- to late-stage clinical development before seeking potential development
and/or commercialization partners, the Company is better positioned to (i)
assess the potential value of its products, (ii) evaluate the
commercialization requirements for such products and (iii) if advantageous,
choose a suitable collaborative partner on more favorable terms than would be
available if the Company were to enter into collaborative relationships for
products in early-stage clinical or preclinical development. The Company is
collaborating with Johnson & Johnson for the worldwide (excluding Canada)
development and commercialization of LSF for the BMT and AML indications and
with BioChem Pharma for the development and commercialization of LSF and CT-
2584 in Canada. See "--Collaborations."
33
<PAGE>
Accelerate regulatory approval, market penetration and acceptance. The
Company initially intends to launch its products for life threatening
indications, followed by product line extensions to less urgent indications.
The Company believes that this strategy will accelerate the regulatory review
and approval of its products and facilitate their acceptance for use and
adoption by health care providers, patients and third party payors. The
Company intends to pursue approval for LSF for BMT and AML, and CT-2584 for
advanced prostate cancer and sarcomas, under FDA initiatives intended to
provide accelerated review and approval of therapies to treat patients
suffering from serious, life-threatening or severely debilitating diseases and
that provide a meaningful therapeutic benefit to patients over existing
treatments. Once approval has been obtained for the initial indication, cti
will seek to extend the use of LSF in less urgent, but clinically meaningful
applications such as mucositis. However, there can be no assurance that any of
the Company's products will be evaluated for regulatory approval on such an
accelerated basis.
Focused sales and marketing efforts. The Company intends to develop its own
sales and marketing infrastructure in the United States to co-promote LSF with
Johnson & Johnson as permitted under the Collaboration Agreement and to launch
and commercialize its portfolio of other potential oncology products, either
on its own or jointly with Johnson & Johnson or other collaborators. With
respect to the commercialization of its oncology products outside the United
States, and with respect to the worldwide commercialization of its portfolio
of products for inflammatory and immune diseases, the Company's strategy is to
pursue commercialization arrangements with collaborators, including Johnson &
Johnson.
Leverage proprietary technology to create a unique drug discovery platform
for new product opportunities. The Company is leveraging its proprietary
technology to create a unique platform for future drug discoveries. The
Company believes that its oxidized lipid technologies and PA modulating
enzymes, when coupled with high throughput screens and combinatorial diversity
libraries, may provide the Company with unique therapeutic targets for drug
development for cancer and inflammatory and immune diseases.
Expand product portfolio through the acquisition of complementary
technologies. The Company intends to pursue acquisition or in-licensing
opportunities to expand its oncology portfolio of products with agents which
complement the utility or deliverability of the Company's novel oncology
products. Additionally, the Company believes it can also leverage its enabling
oxidized lipid and phospholipid technologies to identify development
opportunities in other disease states, such as diabetes or cardiovascular
disease, where oxidized lipids may be implicated in the pathogenesis or
manifestations of disease.
COLLABORATIONS
Johnson & Johnson
In November 1996, the Company entered into a Collaboration and License
Agreement (the "Collaboration Agreement") with Ortho Biotech, Inc. and The
R.W. Johnson Pharmaceutical Research Institute (a division of Ortho
Pharmaceutical Corporation), each of which are wholly-owned subsidiaries of
Johnson & Johnson (collectively, "Johnson & Johnson"), for the joint
development and commercialization of LSF to prevent or reduce the toxic side
effects among cancer patients receiving high dose radiation and/or
chemotherapy followed by BMT. Upon execution of the Collaboration Agreement,
Johnson & Johnson paid to cti a $5.0 million license fee. In September 1997,
Johnson & Johnson exercised an option under the Collaboration Agreement to
expand its participation to include the development of LSF to include the
treatment of patients with AML undergoing high dose chemotherapy, and made a
$1.0 million payment to cti in connection with this milestone. The Company has
recorded approximately $19.1 million in equity payments, license fees and
development cost reimbursements from Johnson & Johnson as of June 30, 1997.
Under the Collaboration Agreement, cti is responsible for the development of
LSF in the United States, and Johnson & Johnson has committed to fund
60 percent of cti's budgeted development expenses incurred in connection with
obtaining regulatory approval for LSF in the United States for the BMT and AML
indications. Any development expenses in excess of such currently budgeted
agreed upon amounts will be funded solely by cti unless otherwise mutually
agreed. Johnson & Johnson will be responsible for obtaining regulatory
approval for LSF for markets outside of the United States and Canada at its
own expense.
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The Company and Johnson & Johnson will co-promote LSF in the United States,
and each will share equally in any resulting operating profits and losses.
Although cti and Johnson & Johnson will co-promote LSF in the United States,
Johnson & Johnson will have primary responsibility for commercializing LSF.
See "--Marketing." Johnson & Johnson has the exclusive right to develop and
market LSF, at its own expense, for markets other than the United States and
Canada, subject to specified royalty payments to cti. Johnson & Johnson will
make additional payments to, and equity investments in, cti if certain
milestones are achieved in the development and commercialization of LSF.
In addition to participating in the development of LSF for BMT and AML
indications, Johnson & Johnson also has certain options to expand the
collaboration to include the development of LSF for any other indication for
which LSF is being developed by cti. In the event that Johnson & Johnson
exercises any such option, it would be required to fund 60 percent of cti's
budgeted development expenses incurred in connection with the development of
LSF for such indication, including expenses incurred prior to the exercise of
such option, and would also be required to pay additional license fees and
milestone payments to cti. Thereafter, any development expenses in excess of
the then agreed upon budgeted amounts for any such additional indication would
be funded solely by Johnson & Johnson unless otherwise mutually agreed. If
Johnson & Johnson does not exercise such option with respect to any such
indication, cti would be free to develop LSF for such indication either on its
own or in collaboration with third parties. Johnson & Johnson also has the
option to sponsor research at cti with respect to discovering compounds
structurally related to LSF.
The Company is dependent on the future payments from Johnson & Johnson to
continue the development and commercialization of LSF as presently planned.
Johnson & Johnson may terminate the Collaboration Agreement at any time and
for any reason after November 8, 1997, subject to a six month notice period.
Johnson & Johnson would have no further obligation to fund cti's development
expenses related to LSF following such termination. However, the financial and
other obligations of Johnson & Johnson (aside from Johnson & Johnson's
obligation to make additional payments to, and equity investments in, cti if
certain development milestones are achieved within the notice period) would
continue during such six month notice period. In addition, Johnson & Johnson
has the right to terminate the Collaboration Agreement at any time based on
material safety or tolerability issues related to LSF upon 30 days notice. In
the event of a termination of the Collaboration Agreement by Johnson &
Johnson, cti would regain all development and commercialization rights.
Without Johnson & Johnson's continued collaborative support, cti would not be
able to continue the development of LSF as presently planned, which could have
a material adverse effect on the Company's business, prospects, financial
condition and results of operations. See "Risk Factors--Reliance on
Relationship with Johnson & Johnson."
In accordance with the terms of a Stock Purchase Agreement entered into
between the Company and Johnson & Johnson Development Corporation ("JJDC"), a
wholly-owned subsidiary of Johnson & Johnson, JJDC made a $5.0 million equity
investment in cti upon execution of the Collaboration Agreement. Concurrent
with the closing of the Company's initial public offering in March 1997, JJDC
made an additional $3.0 million equity investment in the Company. It is
currently anticipated that JJDC will make an equity investment of
approximately $2.0 million in this Offering. Pursuant to the Stock Purchase
Agreement, JJDC must make additional payments to, and equity investments in,
cti if certain milestones are achieved in the development and
commercialization of LSF.
BioChem Pharma
In March 1995, the Company entered into a collaboration agreement with
BioChem Pharma for the development and commercialization of LSF and CT-2584 in
Canada. Under this collaboration agreement, BioChem Pharma will be responsible
for obtaining regulatory approval for LSF and CT-2584 in Canada. Although
BioChem Pharma will have no obligation to conduct any research and development
activities, it will have the right to have cti perform clinical trials in
Canada at BioChem Pharma's expense. BioChem Pharma will have the exclusive
right to commercialize LSF and CT-2584 in Canada, subject to the payment of
royalties to cti. The Company will also receive payments under the
collaboration agreement if certain milestones are
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achieved. BioChem Pharma may terminate this agreement with respect to any
product at any time for any reason upon 30 days' notice. In connection with
the collaboration agreement, BioChem Pharma made an equity investment in the
Company of $2.5 million.
PATENTS AND PROPRIETARY RIGHTS
The Company has dedicated significant resources to protect its intellectual
property. In the United States, the Company has rights in 18 issued patents
and 63 allowed or pending patent applications, including divisional patent
applications and continuations-in-part, covering a variety of new chemical
entities, pharmaceutical compositions, synthetic processes, methods of use,
discovery research tools and diagnostics. Seven of the issued patents in which
the Company has rights cover the pharmaceutical composition, commercial
manufacturing process and oncology and anti-inflammatory methods of use for
LSF, and six of the Company's allowed or pending patent applications cover
other methods of use for LSF. One issued patent covers the chemical compounds
and pharmaceutical compositions of CT-2584 and CT-3578. The Company intends to
file additional patent applications, when appropriate, with respect to
improvements in its core technology and to specific products and processes
that it develops. Generally it is the Company's policy to file foreign
counterparts in countries with significant pharmaceutical markets and a patent
granting and enforcement infrastructure. The Company has filed 60 foreign
national patent applications in 16 countries and the European Patent Office,
including 20 counterparts of certain of its issued patents and allowed or
pending U.S. patent applications for LSF and 14 counterparts of certain of its
issued patents and allowed or pending U.S. patent applications for CT-2584 and
CT-3578. There can be no assurance that any patents will issue from any
present or future applications or, if patents do issue, that such patents will
be issued on a timely basis or that claims allowed on issued patents will be
sufficient to protect the Company's technology. In addition, there can be no
assurance that the patents issued to the Company will not be challenged,
invalidated or circumvented or that the rights granted thereunder will provide
proprietary protection or commercial advantage to the Company. With respect to
such issued U.S. patents or any patents that may issue in the future, there
can be no assurance that they will effectively protect the technology
involved, foreclose the development of competitive products by others or
otherwise be commercially valuable.
The commercial success of the Company will also depend in part on the
Company's neither infringing patents or proprietary rights of third parties
nor breaching any technology licenses which relate to the Company's
technologies and potential products. In general, the development of
therapeutic products is intensely competitive and many pharmaceutical
companies, biotechnology companies, universities and research institutions
have filed and will continue to file patent applications and receive patents
in this field. If patents are issued to other entities that contain
competitive or conflicting claims with respect to the technology and compounds
pursued by cti and such claims are ultimately determined to be valid, no
assurance can be given that cti would be able to obtain licenses to these
patents at a reasonable cost or develop or obtain alternative technology or
compounds.
The Company is aware of a patent belonging to third parties that could be
interpreted to compromise the Company's freedom to sell LSF in the United
States for certain non-oncology applications. The Company believes, upon
advice of its patent counsel, that any such interpretation is relevant only in
connection with the Company's use of LSF in preventing lung injury following
traumatic injury (such as ALI and ARDS) or sepsis; and, irrespective of such
interpretation, that the Company's planned manufacture, sale or use of LSF as
described in this Prospectus does not infringe any valid claim of such third
party patent. If such third party patent rights were interpreted to limit the
use of LSF, the Company may be required to obtain a license from such parties.
There can be no assurance that any such license would be available to the
Company upon reasonably acceptable terms, if at all. The Company could also
face significant costs associated with any litigation relating to such patent.
See "Risk Factors--Ability to Protect Intellectual Property."
The Company has sought and intends to aggressively seek patent protection in
the United States, Europe and Japan to protect any products that it may
develop. The Company also intends to seek patent protection or rely upon trade
secrets to protect certain of its enabling technologies that will be used in
discovering and evaluating new drugs which could become marketable products.
However, there can be no assurance that such
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steps will effectively protect the technology involved. To protect any such
trade secrets and other proprietary information, cti relies on confidentiality
and material transfer agreements with its corporate partners, employees,
consultants, outside scientific collaborators and sponsored researchers and
other advisors. There can be no assurance that these agreements will not be
breached, that the Company will have adequate remedies for breach or that the
Company's trade secrets will not otherwise become known or independently
discovered by competitors. The Company also has members of its Scientific
Advisory Board and Clinical Advisory Board, its consultants and, in most
cases, its employees enter into agreements requiring disclosure to cti of
ideas, developments, discoveries or inventions conceived during employment or
during consulting and assignment to cti of proprietary rights to such matters
related to the business and technology of cti. The extent to which efforts,
including interference proceedings, by others will result in patents and the
effect on cti of the issuance of such patents is unknown. There has been
significant litigation in the pharmaceutical and biotechnology industry
regarding patents and other proprietary rights, and although the Company is
not currently engaged in litigation regarding intellectual property matters,
from time to time the Company sends and receives communications to and from
third parties regarding such matters. In order to enforce any patents issued
to the Company or determine the scope, validity or priority of other parties'
proprietary rights, the Company may have to engage in litigation or
interference or other administrative proceedings, which would result in
substantial cost to, and diversion of efforts by, the Company. There can be no
assurance that the Company's issued or licensed patents would be held valid.
An adverse outcome in any litigation or interference or other administrative
proceeding could subject the Company to significant liabilities to third
parties, require disputed rights to be licensed from third parties or require
the Company to cease or modify its use of such technology, any of which could
have a material adverse effect on the Company.
There can be no assurance that others will not independently develop
substantially equivalent proprietary information or otherwise obtain access to
cti's know-how or that others will not be issued patents which may prevent the
sale of Company products or require licensing and the payment of significant
fees or royalties by cti for the pursuit of its business. Trade secrets and
other unpatented proprietary information of cti may be difficult to protect,
notwithstanding confidentiality agreements with cti's employees and
consultants. See "Risk Factors--Ability to Protect Intellectual Property."
MANUFACTURING
The Company currently does not have the internal facilities to manufacture
products under current Good Manufacturing Practices ("GMP") prescribed by the
FDA. The Company seeks to develop such capacity through manufacturing
relationships. The Company has qualified and selected manufacturers which it
believes comply with GMPs and other regulatory standards, and LSF is currently
being manufactured by third party vendors on a fee for service basis. In
January 1997 the Company entered into a supply agreement with ChiRex, Ltd.
("ChiRex"), a British manufacturer of pharmaceutical intermediates and active
ingredients, for the manufacture and supply of LSF and corresponding
intermediate compounds. Under the terms of the agreement, ChiRex will
manufacture and supply LSF bulk drug and a key intermediate compound in
sufficient quantities to meet the Company's requirements for ongoing and
future clinical trials and commercial requirements during product launch and
commercialization. ChiRex is obligated to comply with all regulatory
requirements and policies concerning GMPs for all phases of production. The
agreement will expire on December 31, 2001, but may be terminated by cti upon
12 months written notice prior to such date.
The Company believes it has developed a process for manufacturing LSF in its
own laboratories and those of external manufacturers that would enable its
manufacture in commercial quantities. Under the terms of the Collaboration
Agreement with Johnson & Johnson, the Company will be responsible for the
manufacture of LSF for development and commercialization purposes until
November 8, 1999. Thereafter, Johnson & Johnson will assume responsibility for
the manufacture of LSF. However, Johnson & Johnson may elect to assume
responsibility for the manufacture of LSF at any time prior to such date. The
Company currently uses ChiRex for the manufacture of LSF bulk drug and uses
three suppliers for clinical trial quantities of the finished drug product.
Following commercial launch of LSF, the Company expects that it will continue
to use ChiRex to manufacture LSF bulk drug and expects that OMJ
Pharmaceuticals, Inc., an affiliate of Johnson & Johnson, will be the
Company's primary supplier for the finished drug product pursuant to the
Collaboration Agreement.
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The Company has established a quality control and quality assurance program,
including a set of standard operating procedures and specifications, designed
to ensure that the Company's products are manufactured in accordance with GMPs
and other applicable domestic and foreign regulations. However, the Company is
and expects to continue to be dependent upon Johnson & Johnson and contract
manufacturers such as ChiRex to comply with such procedures and regulations.
There can be no assurance that Johnson & Johnson or these manufacturers will
meet the Company's requirements for quality, quantity or timeliness. LSF has
never been manufactured on a commercial scale, and no assurance can be given
that the Company, together with Johnson & Johnson or such other third party
contract manufacturers, will be able to make the transition to commercial
production.
If the Company develops other products with commercial potential outside of
the Johnson & Johnson collaboration, cti will need to develop additional
manufacturing resources, and may seek to enter into additional collaborative
arrangements with other parties which have established manufacturing
capabilities or may elect to have a third party such as ChiRex manufacture its
products on a contract basis. The Company has recently entered into another
such agreement with a third party vendor to furnish CT-2584 bulk drug
substance for future clinical studies. If cti is unable to enter into
collaborative relationships or to obtain or retain third party manufacturing
on commercially acceptable terms, it may be delayed in its ability to
commercialize its products or may not be able to commercialize its products as
planned. The Company will be dependent upon such collaborators or third
parties to supply it in a timely manner with products manufactured in
compliance with GMPs or similar standards imposed by foreign regulators.
Collaborators and contract manufacturers may violate GMPs, and the FDA has
intensified its oversight of drug manufacturers. There can be no assurance
that the FDA would not take action against a collaborator or a contract
manufacturer who violates current GMPs. Such actions may include requiring
such collaborator or contract manufacturer to cease manufacturing activities.
See "Risk Factors--Reliance on Third Party Manufacturers; Manufacture of
Products in Commercial Quantities."
MARKETING
The Company intends to develop its own sales and marketing infrastructure in
the United States to commercialize its portfolio of oncology products,
including the oncology products that the Company plans to co-promote with
Johnson & Johnson pursuant to the Collaboration Agreement and any other
oncology products that the Company may commercialize, either on its own or, to
the extent the Company enters into any commercialization arrangements, with
collaborators. With respect to the commercialization of its oncology products
outside the United States, and with respect to the worldwide commercialization
of its portfolio of products for inflammatory and immune disease, the
Company's strategy is to pursue commercialization arrangements with
collaborators, including Johnson & Johnson.
The Company has no experience in marketing, sales or distribution. The
Company believes, however, that the United States oncology market is
accessible by a limited marketing staff due to the concentrated market of
prescribing physicians. Approximately 5,000 oncologists control the vast
majority of prescriptions for cancer therapeutics. Under the Collaboration
Agreement, Johnson & Johnson will have primary responsibility for
commercializing LSF. To assist in commercializing LSF for the BMT and AML
indications, cti will employ medical affairs and marketing personnel who will
work with Johnson & Johnson's sales force to provide various medical and
marketing support functions. In connection with the launch and
commercialization of LSF for all other indications, cti will be permitted to
provide its own field sales force to co-promote LSF under the direction and
control of Johnson & Johnson. See "--Collaborations."
If the Company develops additional products with commercial potential
outside of the Johnson & Johnson collaboration, cti may need to develop
marketing and additional sales resources, and may seek to enter into
collaborative arrangements with third parties which have established marketing
and sales capabilities or may choose to pursue the commercialization of such
products on its own. There can be no assurance that the Company, Johnson &
Johnson or, to the extent the Company enters into any commercialization
arrangements with any other third parties, such other third parties, will
establish adequate sales and distribution capabilities or
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be successful in gaining market acceptance for products. There can be no
assurance that cti will enter into any such alliances or that the terms of any
such alliances will be favorable to cti. See "Risk Factors--Absence of Sales
and Marketing Organization."
COMPETITION
Competition in the pharmaceutical and biotechnology industries is intense.
The Company faces competition from a variety of sources, both direct and
indirect. The Company believes there may be several pharmaceutical or
biotechnology companies that focus on cell membrane lipids in regulating
cellular processes. Many other companies compete indirectly with cti for the
same therapeutic indications but with different approaches by focusing, for
example, on signal transduction, cell receptor technology, transcription
factors and gene therapies. The Company also competes with other large
pharmaceutical companies that produce and market synthetic compounds and with
other specialized biotechnology firms in the United States, Japan, Europe and
elsewhere. Many of the Company's existing or potential competitors have
substantially greater financial, technical and human resources than the
Company and may be better equipped to develop, manufacture and market
products. Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large pharmaceutical and
established biotechnology companies. Many of these competitors have
significant products that have been approved or are in development and operate
large, well funded research and development programs.
The Company expects to encounter significant competition for the principal
pharmaceutical products it plans to develop. Companies that complete clinical
trials, obtain required regulatory approvals and commence commercial sales of
their products before their competitors may achieve a significant competitive
advantage. Accordingly, the relative speed with which the Company and Johnson
& Johnson or any future collaborators can develop products, complete
preclinical testing and clinical trials and approval processes, and supply
commercial quantities of the products to the market are expected to be
important competitive factors. A number of biotechnology and pharmaceutical
companies are developing new products for the treatment of the same diseases
being targeted by cti. In some instances, such products have already entered
late-stage clinical trials or received FDA approval.
Significant levels of research in biotechnology, medicinal chemistry and
pharmacology occur in academic institutions, governmental agencies and other
public and private research institutions. These entities have become
increasingly active in seeking patent protection and licensing revenues for
their research results. They also compete with cti in recruiting and retaining
skilled scientific talent.
The Company believes that its ability to compete successfully will be based
on its ability to create and maintain scientifically advanced technology,
develop proprietary products, attract and retain scientific personnel, obtain
patent or other protection for its products, obtain required regulatory
approvals and manufacture and successfully market its products either alone or
through outside parties. Many of cti's competitors have substantially greater
financial, marketing and human resources than cti. The Company will continue
to seek licenses with respect to technology related to its field of interest
and may face competition with respect to such efforts. There can be no
assurance that the Company's competitors will not develop more effective or
more affordable products, or achieve earlier patent protection or product
commercialization than the Company. See "Risk Factors--No Assurance of
Successful Product Development; Uncertainties Related to Clinical Trials," "--
Substantial Competition" and "--Ability to Protect Intellectual Property."
GOVERNMENT REGULATION
Drug Approval Process
Regulation by governmental authorities in the United States and other
countries is a significant factor in the development, production and marketing
of cti's proposed drug products. All of cti's products will require regulatory
approval by governmental agencies prior to commercialization. In particular,
new drugs are subject to rigorous preclinical and clinical testing and other
approval procedures in the United States by the FDA and
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similar health authorities in foreign countries. Various federal statutes and
regulations also govern or influence the testing, manufacturing, quality
control, safety, labeling, storage, record-keeping and marketing of such
products. The process of obtaining these approvals and the subsequent
compliance with appropriate federal and foreign statutes and regulations
require the expenditure of substantial resources. Any failure by cti or its
collaborators or licensees to obtain, or any delay in obtaining, regulatory
approval could adversely affect the marketing of any product that cti may hope
to develop and its ability to receive revenues therefrom. The Company has
neither applied for nor received regulatory approval to market any products.
The steps required before a new drug may be marketed in the United States
include (i) preclinical laboratory, in vivo and formulation studies, (ii) the
submission to the FDA of an Investigational New Drug application ("IND"),
which must become effective before human clinical trials may commence, (iii)
adequate and well-controlled human clinical trials to establish the safety and
efficacy of the proposed drug in its intended indication, (iv) the submission
of, for non-biologic drugs, an NDA to the FDA, and (v) the FDA approval of the
NDA.
In order to clinically test, produce and market products for diagnostic or
therapeutic use, a company must comply with safety and efficacy requirements
established by the FDA and comparable agencies in foreign countries. Before
beginning human clinical testing of a potential new drug, a company must file
an IND, which must become effective before clinical trials may begin, and
receive clearance from the FDA. The IND is a summary of the preclinical
studies which were carried out to characterize the drug, including toxicity
and safety studies, as well as an in-depth discussion of the human clinical
studies which have been conducted and those which are being proposed. Approval
of a local institutional review board ("IRB") and informed consent of trial
subjects is also required.
Human clinical trials are typically conducted in three sequential phases
which may overlap. Phase I involves the initial introduction of the drug into
healthy human subjects or patients where the product is tested for safety,
dosage tolerance, absorption, metabolism, distribution and excretion. Phase II
involves studies in a limited patient population to (i) identify possible
adverse effects and safety risks, (ii) determine the efficacy of the product
for specific, targeted indications, and (iii) determine dosage tolerance and
optimal dosage. When Phase II evaluation demonstrates that the product may be
effective and has an acceptable safety profile, Phase III trials are
undertaken to further evaluate dosage and clinical efficacy and to further
test for safety in an expanded patient population at multiple clinical study
sites. A pivotal Phase III trial is an adequate and well-controlled study
which provides a primary basis for determining whether there is "substantial
evidence" to support the claims of safety and effectiveness for new drugs and
forms a critical component of an NDA. Usually two well-controlled clinical
studies are required for approval of a new drug. The regulatory authority may
suspend clinical trials at any point in this process if it concludes that
clinical subjects are being exposed to an unacceptable health risk, that the
study is not being conducted in compliance with applicable regulatory
requirements, or for other reasons. See "Risk Factors--No Assurance of
Successful Product Development; Uncertainties Related to Clinical Trials."
The results of product development, preclinical studies and clinical studies
are submitted to the FDA as part of an NDA for approval of the marketing and
commercial shipment of the product. Other information is also required in the
NDA, including manufacturing and labeling information. The FDA may deny
approval of an NDA if applicable regulatory criteria are not satisfied, or may
require additional data. Even if such data is submitted, the FDA may
ultimately decide that the NDA does not satisfy the criteria for approval.
Once issued, a product approval may be withdrawn if compliance with regulatory
standards is not maintained or if problems occur after the product reaches the
market. In addition, the FDA may require testing and surveillance programs to
monitor the effect of approved products which have been commercialized, and it
has the authority to prevent or limit further marketing of a product based on
the results of these post-marketing programs. Any subsequent changes to the
product, labeling or manufacturing may require additional FDA approval.
Satisfaction of FDA requirements, or similar requirements by foreign
regulatory agencies, typically takes several years and the time needed to
satisfy them may vary substantially, based upon the type, complexity and
novelty of the drug product. The effect of government regulation may be to
delay or to prevent marketing of potential products for a considerable period
of time and to impose costly procedures upon the Company's
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activities. There can be no assurance that the FDA or any other regulatory
agency will grant approval for any products being developed by the Company on
a timely basis, or at all. Success in preclinical or early stage clinical
trials does not assure success in later stage clinical trials. Data obtained
from preclinical and clinical activities are susceptible to varying
interpretations which could delay, limit or prevent regulatory approval. If
regulatory approval of a product is granted, such approval may impose
limitations on the indicated uses for which a product may be marketed.
Further, even if regulatory approval is obtained, later discovery of
previously unknown problems with a product may result in restrictions on the
product, including withdrawal of the product from the market. Delay in
obtaining or failure to obtain regulatory approvals would have a material
adverse affect on the Company's business. Marketing the Company's products
abroad will require similar regulatory approvals and is subject to similar
risks. In addition, the Company is unable to predict the extent of adverse
government regulations that might arise from future United States or foreign
governmental action. See "Risk Factors--No Assurance of FDA Approval;
Comprehensive Government Regulation."
The FDA has implemented accelerated review and approval procedures for
certain pharmaceutical agents that have been studied for their safety and
effectiveness in treating serious life-threatening or severely debilitating
diseases, and that provide a meaningful therapeutic benefit to patients over
existing treatments. Products intended to remove a serious or life-threatening
toxicity associated with cancer treatment may potentially qualify for review
under these accelerated procedures. The Company believes that LSF may qualify
for this accelerated review and approval process and has designed its pivotal
Phase III BMT trial with the objective of securing accelerated approval. The
FDA staff has indicated that priority review status may be appropriate for the
Company's planned NDA for LSF for BMT indications. However, significant
uncertainty exists as to the extent to which accelerated review and approval
will be granted. The FDA retains considerable discretion in determining
eligibility for accelerated review and approval. Accordingly, the FDA could
employ such discretion to deny eligibility of LSF as a candidate for
accelerated review or require additional clinical trials or other information
before approving LSF. In addition, the approval of a product under the
accelerated approval procedures is subject to various conditions, including
the requirement to verify clinical benefit in postmarketing studies and the
authority on the part of the FDA to withdraw approval under streamlined
procedures if such studies do not verify clinical benefit or under various
other circumstances. The Company cannot predict the ultimate impact, if any,
of the accelerated approval process on the timing or likelihood of FDA
approval of LSF or any of its other potential products.
Facilities and manufacturing procedures used for the manufacture of products
for clinical use or for sale must be operated in conformity with current GMP
regulations, the FDA regulations governing the production of pharmaceutical
products. The Company intends to operate its facilities or to arrange for the
manufacture of products at facilities which are operated, as required, in
accordance with GMPs where necessary; however, no assurance can be provided
that such manufacture will successfully comply with GMPs. In addition, the FDA
also regulates promotion, marketing and distribution of prescription drug
products, particularly those subject to accelerated approval; and inspects
drug manufacturers to evaluate compliance with regulatory requirements. Among
other things, the FDA evaluates truthfulness and accuracy of materials
submitted to it, or otherwise prepared by a drug manufacturer and may take
legal or regulatory action against companies or their products if such
materials contain any untrue statement of a material fact.
Before the Company's products can be marketed outside of the United States,
they are subject to regulatory approval similar to that required in the United
States, although the requirements governing the conduct of clinical trials,
product licensing, pricing and reimbursement vary widely from country to
country. No action can be taken to market any product in a country until an
appropriate application has been approved by the regulatory authorities in
that country. The current approval process varies from country to country, and
the time spent in gaining approval varies from that required for FDA approval.
In certain countries, the sales price of a product must also be approved. The
pricing review period often begins after market approval is granted. No
assurance can be given that, even if a product is approved by a regulatory
authority, satisfactory prices will be approved for such product.
No assurance can be provided that the Company's INDs or NDAs will be
successfully reviewed by the FDA, or that accelerated approval will apply or
that similar applications will be successfully reviewed by foreign
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regulatory authorities. Further, the FDA and foreign authorities may at any
time take legal or regulatory action against a product or the Company if it
concludes that cti has not complied with applicable laws and regulations or
that earlier evaluations of a product's safety or effectiveness may not have
been adequate or appropriate. Such action may include, but is not limited to,
restrictions on manufacture and shipment of products, seizure of products,
injunctions and civil and criminal penalties. The FDA's policies may change
and additional government regulations may be promulgated which could prevent
or delay regulatory approval of the Company's potential products. Moreover,
increased attention to the containment of health care costs in the United
States and in foreign markets could result in new government regulations which
could have a material adverse effect on the Company's business. The Company is
unable to predict the likelihood of adverse governmental regulation which
might arise from future legislative or administrative action, either in the
United States or abroad.
Third Party Reimbursement and Health Care Reform
The commercial success of the Company's products under development will be
substantially dependent upon the availability of government or private third-
party reimbursement for the use of such products. There can be no assurance
that Medicare, Medicaid, health maintenance organizations and other third-
party payors will authorize or otherwise budget such reimbursement. Such
governmental and third party payors are increasingly challenging the prices
charged for medical products and services. If the Company succeeds in bringing
one or more products to market, there can be no assurance that such products
will be viewed as cost-effective or that reimbursement will be available to
consumers or will be sufficient to allow the Company's products to be marketed
on a competitive basis. Furthermore, federal and state regulations govern or
influence the reimbursement to health care providers of fees and capital
equipment costs in connection with medical treatment of certain patients. In
response to concerns about the rising costs of advanced medical technologies,
the current administration of the federal government has publicly stated its
desire to reform health care, including the possibility of price controls and
revised reimbursement policies. There can be no assurance that actions taken
by the administration, if any, with regard to health care reform will not have
a material adverse effect on the Company. If any actions are taken by the
administration, such actions could adversely affect the prospects for future
sales of the Company's products. Further, to the extent that these or other
proposals or reforms have a material adverse effect on the Company's ability
to secure funding for its development or on the business, financial condition
and profitability of other companies that are prospective collaborators for
certain of the Company's product candidates, the Company's ability to develop
or commercialize its product candidates may be adversely affected. See "Risk
Factors--Uncertainty of Pharmaceutical Pricing and Reimbursement."
Given recent government initiatives directed at lowering the total cost of
health care throughout the United States, it is likely that the United States
Congress and state legislatures will continue to focus on health care reform
and the cost of prescription pharmaceuticals and on the reform of the Medicare
and Medicaid systems. The Company cannot predict the likelihood of passage of
federal and state legislation related to health care reform or lowering
pharmaceutical costs. In certain foreign markets pricing of prescription
pharmaceuticals is already subject to government control. Continued
significant changes in the nation's health care system could have a material
adverse effect on the Company's business.
Environmental Regulation
In connection with its research and development activities and its
manufacturing materials and products, the Company is subject to federal, state
and local laws, rules, regulations and policies governing the use, generation,
manufacture, storage, air emission, effluent discharge, handling and disposal
of certain materials, biological specimens, and wastes. Although the Company
believes that it has complied with these laws, regulations and policies in all
material respects and has not been required to take any significant action to
correct any noncompliance, there can be no assurance that the Company will not
be required to incur significant costs to comply with environmental and health
and safety regulations in the future. The Company's research and development
involves the controlled use of hazardous materials, including but not limited
to certain hazardous chemicals and radioactive materials. Although the Company
believes that its safety procedures for handling and
42
<PAGE>
disposing of such materials comply with the standards prescribed by state and
federal regulations, the risk of accidental contamination or injury from these
materials cannot be eliminated. In the event of such an accident, the Company
could be held liable for any damages that result and any such liability could
exceed the resources of the Company. See "Risk Factors--Use of Hazardous
Materials."
FACILITIES
The Company leases approximately 66,000 square feet of space at 201 Elliott
Avenue West in Seattle, Washington for its executive office, laboratory and
administrative operations. The lease expires January 31, 2003, with two
consecutive five-year renewal options at the then prevailing market rent.
Although the Company's existing and planned facilities are believed adequate
to meet its present requirements, the Company currently expects that it will
require additional office and laboratory space. Despite a decrease in local
vacancy rates for commercial space, the Company currently anticipates that
additional space will be available to it, when needed, on commercially
reasonable terms. See "--Manufacturing."
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
HUMAN RESOURCES
As of September 30, 1997 cti employed 160 individuals (including 46 holding
doctoral or other advanced degrees). In recruiting additional staff members,
cti expects to receive continued input from its consultants and members of its
Scientific Advisory Board and Clinical Advisory Board.
The Company's policy is to have each employee and consultant enter into an
agreement which contains provisions prohibiting the disclosure of confidential
information to anyone outside cti and, in most cases, requires disclosure to
cti of ideas, developments, discoveries or inventions conceived during
employment and assignment to cti of proprietary rights to such matters related
to the business and technology of cti. The extent to which this policy will
effectively protect cti's proprietary technology and trade secrets is unknown.
See "--Patents and Proprietary Rights."
The Company has assembled a Scientific Advisory Board ("SAB") composed of
leaders in the fields of immunology, cell and molecular biology, and synthetic
and medicinal chemistry, and a Clinical Advisory Board ("CAB") composed of
leaders in the fields of hematology, oncology, immunology, cell and molecular
biology, critical care and medicinal chemistry. The SAB assists cti in
identifying scientific and product development opportunities, reviewing with
management the progress of cti's specific projects, and recruiting and
evaluating cti's scientific staff. The CAB assists cti in determining clinical
regulatory strategy, interpreting clinical trial data and identifying optimal
indications for cti's products. Although cti expects to receive guidance from
the members of its SAB and CAB, all of such members are employed on a full-
time basis by others and, accordingly, are not likely to devote more than a
small portion of their time to cti. See "Management--Scientific Advisory
Board" and "Management--Clinical Advisory Board."
43
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
directors and executive officers of cti as of September 30, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Max E. Link, Ph.D.(1).......... 57 Chairman of the Board of Directors
James A. Bianco, M.D.(1)....... 41 President, Chief Executive Officer, and
Director
Jack W. Singer, M.D............ 54 Executive Vice President, Research Program
Chairman, and Director
Louis A. Bianco................ 44 Executive Vice President, Finance and
Administration
Maurice J. Schwarz, Ph.D. ..... 58 Executive Vice President, Product
Development
Robert A. Lewis, M.D........... 52 Executive Vice President, Chief Scientific
Officer
Susan O. Moore................. 48 Executive Vice President, Human Resource
Development
Jack M. Anthony................ 51 Executive Vice President, Marketing and
Business Development
Dalton W. Weekley.............. 55 Managing Director, Project Planning and
Support
Jack L. Bowman(2).............. 65 Director
Jeremy L. Curnock Cook(1)(2)... 48 Director
Wilfred E. Jaeger, M.D.(2)(3).. 41 Director
Terrence M. Morris(2)(3)....... 50 Director
Mary O'Neil Mundinger, D.P.H... 60 Director
Phillip M. Nudelman,
Ph.D.(1)(3)................... 61 Director
</TABLE>
- --------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
Dr. Link joined the Board of Directors in July 1995 as its Vice Chairman and
has served as Chairman of the Board of Directors since January 1996. In
addition, Dr. Link has held a number of executive positions with
pharmaceutical and healthcare companies. Most recently, he served as Chief
Executive Officer of Corange, Limited ("Corange"), from May 1993 until June
1994. Prior to joining Corange, Dr. Link served in a number of positions
within Sandoz Pharma Ltd., including Chief Executive Officer from 1987 until
April 1992, and Chairman from April 1992 until May 1993. Dr. Link currently
serves on the boards of directors of Alexion Pharmaceutical, Inc., Human
Genome Sciences, Inc., Procept, Inc. and Protein Design Labs, Inc., Sulzer
Medica Ltd. and CytRx Corporation. Dr. Link received his Ph.D. in Economics
from the University of St. Gallen.
Dr. Bianco is the principal founder of cti and has been cti's President and
Chief Executive Officer since February 1992 and a Director of cti since the
Company's inception in September 1991. Prior to joining cti, Dr. Bianco was an
Assistant Professor of Medicine at the University of Washington, Seattle, and
an Assistant Member in the clinical research division of the Fred Hutchinson
Cancer Research Center ("FHCRC"), the world's largest bone marrow
transplantation center. From 1990 to 1992, Dr. Bianco was the director of the
BMT Program at the Veterans Administration Medical Center in Seattle. Dr.
Bianco received his B.S. degree in Biology and Physics from New York
University and his M.D. from Mount Sinai School of Medicine.
Dr. Singer is a founder and Director of cti and currently serves as cti's
Executive Vice President, Research Program Chairman. Dr. Singer has been a
Director of cti since the Company's inception in September 1991. From April
1992 to July 1995, Dr. Singer was cti's Executive Vice President, Research and
Development. Prior to joining cti, Dr. Singer was Professor of Medicine at the
University of Washington and full Member of the FHCRC. From 1975 to 1992, was
the Chief of Medical Oncology at the Veterans Administration Medical Center in
Seattle. In addition, from 1978 to 1992, he served as director for the
National Transplant Board for the
44
<PAGE>
Veterans Administration. Dr. Singer has authored approximately 220 scientific
publications in the areas of cell biology, hematopoiesis and BMT. Prior to
joining cti, he headed the Growth Factor Research Program at the FHCRC. Dr.
Singer received his B.A. degree in Mathematics from Columbia College and his
M.D. from State University of New York, Downstate Medical College. His
clinical training was performed at the University of Chicago and at the
University of Washington.
Mr. Bianco is a founder of cti and has been cti's Executive Vice President,
Finance and Administration since February 1, 1992, and a Director of cti from
the Company's inception in September 1991 to April 1992 and from April 1993 to
April 1995. From January 1989 through January 1992, Mr. Bianco was a Vice
President at Deutsche Bank Capital Corporation in charge of risk management.
Mr. Bianco is a Certified Public Accountant and received his M.B.A. from New
York University.
Dr. Schwarz has been cti's Executive Vice President, Product Development
since May 1994. Dr. Schwarz held a variety of product development positions at
Ciba-Geigy for 26 years prior to joining cti, most recently as Vice President
of Pharmaceutical and Analytical Development and Chairman of the Development
Operations Board at Ciba-Geigy Pharmaceuticals Division. Dr. Schwarz received
his B.A. and Ph.D. degrees in Chemistry from the University of Oregon.
Dr. Lewis has been cti's Executive Vice President, Chief Scientific Officer
since April 1996. From September 1994 to May 1995, Dr. Lewis was Senior Vice
President and Director, Preclinical Research and Development at Syntex-Roche
("Syntex"). From February 1992 to September 1994, he was President, Discovery
Research at Syntex. From February 1986 to February 1992, he held various
Senior and Executive Vice Presidential offices at Syntex. While at Syntex, he
held associate professorships at Stanford University and at the University of
California, San Francisco, where he also held an adjunct professorship from
1992 to 1994. Prior to joining Syntex, Dr. Lewis was an Associate Professor of
Medicine at Harvard Medical School where he authored 150 publications on mast
cell biology and oxidized lipids. Dr. Lewis received his M.D. from the
University of Rochester and B.S. degree in Chemistry from Yale University.
Ms. Moore has been cti's Executive Vice President, Human Resource
Development since July 1995. From March 1993 to July 1995, Ms. Moore was cti's
Vice President of Human Resources. Prior to joining cti in March 1993,
Ms. Moore was self-employed as a compensation consultant. From 1991 to
December 1992, Ms. Moore was the Director of Human Resources of ICOS
Corporation, a biotechnology company.
Mr. Anthony has been cti's Executive Vice President, Marketing and Business
Development since January 1997. From April 1996 to January 1997, Mr. Anthony
was cti's Vice President of Marketing and Business Development. Prior to
joining cti, Mr. Anthony was Vice President of Marketing and Business
Development at Inhale Therapeutic Systems, a drug delivery company, from
October 1994 to April 1996. From August 1989 to October 1994, he was Vice
President of Marketing and Business Development of Applied Immune Sciences, a
cell and gene therapy concern. From 1973 to 1989, Mr. Anthony held various
executive management positions at Baxter Healthcare Corporation, most recently
as Vice President, Blood Therapy Group.
Mr. Weekley has been cti's Managing Director, Project Planning and Support
since July 1995. From April 1994 to July 1995, Mr. Weekley was cti's Director
of Planning Support Services. Prior to joining cti, he was an Executive
Director/Senior Consultant of Milestone Computing, Inc., a management
consulting firm.
Mr. Bowman has been a Director of cti since April 1995. From 1987 until
January 1994, Mr. Bowman was a Company Group Chairman at Johnson & Johnson,
having primary responsibility for a group of companies in the diagnostic,
blood glucose monitoring and pharmaceutical businesses. From 1980 to 1987, Mr.
Bowman held various positions at American Cyanamid Company, most recently as
Executive Vice President. Mr. Bowman was a member of the Board of Trustees of
The Johns Hopkins University and serves on the board of directors of NeoRx
Corporation, CytRx Corporation, Cellegy Pharmaceuticals, Inc., Targeted
Genetics Corp., Osiris Therapeutics, Inc. and Vaxcell, Inc.
45
<PAGE>
Mr. Curnock Cook has been a Director of cti since March 1995. Mr. Curnock
Cook has been a director of the Bioscience Unit of Rothschild Asset Management
Limited since 1987. He is a director of several British companies, including
The International Biotechnology Trust, plc, Biocompatibles International, plc,
and Cantab Pharmaceuticals plc. He also serves on the boards of directors of
Creative Biomolecules, Inc., Targeted Genetics, Corp., Sugen Inc. and Ribozyme
Pharmaceuticals, Inc. in the United States and Inflazyme Pharmaceuticals Inc.
in Canada.
Dr. Jaeger has been a Director of cti since September 1992. Dr. Jaeger is a
founding general partner of Three Arch Partners, a venture capital firm which
focuses on health care investments. Prior to joining Three Arch Partners in
1993, he was a partner at Schroder Venture Advisers (presently named Collinson
Howe Venture Partners) and The Phoenix Partners. Dr. Jaeger is also a director
of Intensiva Healthcare Corporation and several privately held companies. Dr.
Jaeger received his M.D. from the University of British Columbia in Vancouver,
B.C., Canada, in 1981. He practiced medicine for six years before earning an
M.B.A. from Stanford University.
Mr. Morris has been a Director of cti since July 1995. He is the Chief
Executive Officer of T. Morris & Company (d/b/a Morningside Ventures), which
advises Kummell Investments Limited, an international investment concern based
in Hong Kong, on its private venture capital portfolio. Mr. Morris has served
as Chief Executive Officer of Morningside Ventures since 1991. His previous
positions include product line manager at Baxter Healthcare Corporation and
strategy consultant with the Boston Consulting Group. Mr. Morris is a director
of several privately held companies.
Dr. Mundinger has been a Director of cti since April 1997. Since 1986, she
has been a Dean and Professor at the School of Nursing, and an Associate Dean
on the Faculty of Medicine at Columbia University. Dr. Mundinger is a
Commissioner on the Commonwealth Fund Commission on Women's Health and also
serves on the Board of Health Care Services, Institute of Medicine of the
National Academy of Science, United Healthcare, the Walt Disney Imagineering
"Wonders of Medical Life" Medical Advisory Board and the Health Policy
Advisory Committee. Dr. Mundinger also serves on the editorial board of
National Health Publishing Company, Inc. Dr. Mundinger is a cum laude graduate
of the University of Michigan and received her Doctorate of Public Health from
Columbia's School of Public Health.
Dr. Nudelman has been a Director of cti since March 1994. Since 1990 Dr.
Nudelman has been the President and Chief Executive Officer of Group Health
Cooperative of Puget Sound, a health maintenance organization. Dr. Nudelman is
a member of the American Hospital Association House of Delegates, Regional
Policy Board, and chairs the Governing Counsel for Health Care Systems. Dr.
Nudelman serves on the boards of directors of ATL Ultrasound, SpaceLabs
Medical, Inc., Cytran Ltd. and Intensiva Healthcare Corporation. Dr. Nudelman
received his B.S. degree in Microbiology, Zoology and Pharmacy from the
University of Washington, and holds an M.B.A. and a Ph.D. in Health Systems
Management from Pacific Western University.
The Board of Directors of cti is divided into three approximately equal
classes of Directors serving staggered three-year terms and until their
successors are elected and qualified. As a result, approximately one-third of
the total number of Directors will be elected every year. The current terms of
Dr. Nudelman and Messrs. Bowman and Curnock Cook expire in 1998; the current
terms of Drs. Link and Jaeger and Mr. Morris expire in 1999; and the current
terms of Drs. Bianco, Singer and Mundinger expire in 2000. Executive Officers
of cti serve at the discretion of the Board of Directors. Under cti's Bylaws,
the number of Directors constituting the entire Board of Directors may be
decreased or increased by majority action of either the Board of Directors or
the shareholders, but no decrease in the number of Directors may have the
effect of shortening the term of any incumbent Director. Currently, the Board
of Directors has fixed the number of Directors at nine. James A. Bianco and
Louis A. Bianco are brothers.
46
<PAGE>
SCIENTIFIC ADVISORY BOARD
The Company has a Scientific Advisory Board and plans to make arrangements
from time to time with other scientists to work with cti's management and the
Scientific Advisory Board. The Scientific Advisory Board is chaired by Dr.
Michael R. Hanley. Scientific Advisory Board members are expected to meet as a
board with management and key scientific employees of cti on a semi-annual
basis and in smaller groups or individually from time to time on an informal
basis. The Scientific Advisory Board members assist cti in identifying
scientific and product development opportunities, reviewing with management
the progress of cti's specific projects, and recruiting and evaluating cti's
scientific staff. Members of cti's Scientific Advisory Board are leaders in
the fields of immunology, cell and molecular biology, and synthetic and
medicinal chemistry.
Current Members of cti's Scientific Advisory Board include:
Michael R. Hanley, Ph.D. is the Chairman of cti's Scientific Advisory Board.
He is a Professor, Department of Biological Chemistry, at the University of
California, Davis School of Medicine. He is a noted authority in cell
communication processes and proto-oncogenes, as well as an expert in
phosopholipid signaling mechanisms in the central nervous system focusing on
regulation of neurotransmitter receptors. Dr. Hanley has authored over
80 manuscripts and has served as an editorial member for several journals,
including Molecular and Cellular Neurobiology and Nature.
Irwin M. Arias, M.D. is a Professor and Chairman of the Department of
Physiology at Tufts University School of Medicine. He is a noted authority in
the physiology of multidrug resistance proteins. He is the recipient of
numerous awards and honors.
Lewis Cantley, Ph.D. is a noted authority in cellular biochemical signaling
pathways that employ phosphatidyl inositol and its metabolites and is the
discoverer of one of the most critical enzymes in those pathways, the PI3
Kinase. He is currently Professor of Cell Biology at Harvard Medical School
and Chief of the Division of Signal Transduction in the Department of
Medicine, Beth Israel Hospital, Boston and is the author of over 180
publications.
Edward A. Dennis, Ph.D. is the Vice Chair of Medical Biochemistry at the
University of California, San Diego. He is a noted authority on
phospholipases, cell signaling and phospholipid metabolism. Dr. Dennis serves
on the Scientific Advisory Board and Management Committee of, and chairs the
Management Executive Board of, the Keystone Symposia. He sits on the Editorial
Board of the Journal of Cellular Biochemistry and on the Publications
Committee of the American Society for Biochemistry and Molecular Biology. He
has authored over 185 manuscripts.
Edwin Krebs, M.D. is a Professor Emeritus, Department of Pharmacology and
Biochemistry, at the University of Washington in Seattle and a Senior
Investigator Emeritus at the Howard Hughes Medical Institute. He is a
recognized authority on the mechanisms of action of second messengers,
including protein kinases and phosphorylation reactions. He is the recipient
of numerous awards and honors and has authored 297 manuscripts. In 1992, Dr.
Krebs was awarded the Nobel Prize in Physiology of Medicine for his work on
second messenger pathways.
L. Jackson Roberts, II, M.D. is an internationally-recognized authority on
the oxidative metabolism of polyunsaturated fatty acids. He is known for
having identified PGD2 as the major mast cell lipid mediator and, more
recently, for having originated the field of studying non-enzymatically-
generated prostanoids, including the isprostanes and neuroprostanes. He is
currently Professor of Pharmacology and Medicine at Vanderbilt University and
is the author of over 170 publications.
The Company has entered into consulting agreements with each member of the
Scientific Advisory Board. These agreements generally have a three-year term
and may be terminated by either party upon 30 days' written notice. These
agreements generally restrict the consultant from competing with cti during
the term of the agreement. These agreements contain provisions prohibiting the
disclosure of confidential information to anyone
47
<PAGE>
outside of cti and require disclosure to cti of ideas, developments,
discoveries or inventions conceived during consulting and assignment to cti of
proprietary rights to such matters related to the business and technology of
cti. Each consultant is required to serve on cti's Scientific Advisory Board
and provide such other consulting services as cti may reasonably request. Each
Scientific Advisory Board member is paid an annual fee and is granted an
option to purchase Common Stock.
CLINICAL ADVISORY BOARD
The Company has a Clinical Advisory Board which meets with cti's management
and the Scientific Advisory Board not less than three times per year and in
smaller groups or individually from time to time on an informal basis. The
Clinical Advisory Board members assist cti in determining its clinical
regulatory strategy, interpreting clinical trial data and identifying optimal
indications for its products. Members of cti's Clinical Advisory Board are
leaders in the fields of hematology, oncology, immunology, cell and molecular
biology, critical care and medicinal chemistry.
Current members of cti's Clinical Advisory Board include:
E. Donnall Thomas, M.D. is the Chairman of cti's Clinical Advisory Board. He
is the former Associate Director of Clinical Research and presently a
Professor Emeritus at the FHCRC. Dr. Thomas was a founding member of the
FHCRC. His research has spanned a wide array of fields from radiation biology
to developmental immunology, and from cancer causing genes to gene transfer
therapies. For his pioneering work in BMT, Dr. Thomas was awarded the Nobel
Prize for Medicine in 1990. Among the other honors awarded to Dr. Thomas in
recognition of his medical research are the American Cancer Society Award for
Distinguished Service in Basic Research and the Kettering Prize of the General
Motors Cancer Research Foundation. He is a member of the U.S. National Academy
of Sciences.
Karen H. Antman, M.D. is the Chief of the Division of Medical Oncology,
College of Physicians & Surgeons of Columbia University. Dr. Antman is an
expert in emerging treatment strategies for solid tumors, notably breast
cancer and sarcomas. From 1994 to 1995 she served as President of the American
Society of Clinical Oncology. Since 1993 Dr. Antman has served on the Sarcoma
Committee of the Southwest Oncology Group, and has been its chairperson since
1995. From 1993 to 1994 she was program committee chair of the American
Association for Cancer Research. She is on the editorial board of several
prestigious journals, including Associate Editor of The New England Journal of
Medicine. She has authored over 100 manuscripts and textbooks.
Frederick Appelbaum, M.D. is the Director of Clinical Research and Senior
Vice President of the FHCRC. He is a recognized authority in the treatment of
patients with leukemia and lymphoma. He serves on several editorial boards and
national committees, including the FDA Advisory Committee on Biologics; serves
as Chairman of the Southwest Oncology Group Leukemia Committee; and serves on
the Board of Directors of the American Society for Blood and Marrow
Transplantation. He has authored more than 450 manuscripts.
H. Franklin Bunn, M.D. is the Director of the Hematology Division of the
Brigham and Women's Hospital and Professor of Medicine at Harvard Medical
School. His research interest focuses on blood cell production and regulation.
He is the recipient of numerous awards and honors and is Chairman of the
Advisory Committee of the American Society of Hematology.
O. Michael Colvin, M.D. is the Director of the Duke Comprehensive Cancer
Center at Duke University Medical Center. Dr. Colvin is an expert in
therapeutic drug modeling and rational drug design. His work led to the
discovery of several chemotherapeutic agents. He was previously Chief of the
Division of Pharmacology and Experimental Therapeutics at The Johns Hopkins
Oncology Center. He has authored over 100 manuscripts.
48
<PAGE>
Milo Gibaldi, Ph.D. is the Gibaldi Endowed Professor of Pharmaceutics of the
School of Pharmacy at the University of Washington, with past faculty
appointments at Columbia University and the State University of New York at
Buffalo. His expertise in drug metabolism has led to consultantships with such
pharmaceutical firms as Hoffman-LaRoche, Ciba-Geigy and Glaxo. Dr. Gibaldi has
also served on FDA's Panel on Generic Drugs. His research has focused on
gastrointestinal absorption of drugs and the development of stable
formulations for therapeutic compounds.
William P. Peters, M.D., Ph.D. is a Director of the Meyer L. Prentis
Comprehensive Cancer Center of Metropolitan Detroit and the President and
Chief Executive Officer of the Karmanos Cancer Institute. He is a recognized
leader in the use of dose-intensive chemotherapy regimens with peripheral
blood stem cell support as a cost-effective approach to the treatment of
cancer. He has published extensively and is the recipient of many honors and
awards, among them the American Cancer Society Clinical Fellowship Award and
the R. Wayne Rundles Award for Excellence in Cancer Research.
Thomas A. Raffin, M.D. is the Chief of the Division of Pulmonary and
Critical Care Medicine of the Stanford University Medical Center. He is a
recognized authority on mechanisms of ALI, Multi-Organ Failure and Systemic
Inflammatory Response Syndrome among critically ill patients. He serves on
numerous editorial boards and societies, including the Editorial Board of
Chest and Critical Care Medicine, the American Thoracic Society and the
Society of Critical Care Medicine. He has authored more than 175 manuscripts
and 60 book chapters.
Merle A. Sande, M.D. is a Professor and the Chairman of the Department of
Medicine at the University of Utah, School of Internal Medicine. He is a noted
authority in infectious disease and serves on the editorial boards of several
journals, including Journal of Infectious Disease and Infection and Immunity.
He is a member of the Infectious Disease Society of America.
Thomas E. Starzl, M.D., Ph.D. is the Director of the Transplantation
Institute of the University of Pittsburgh. He is a noted expert in the field
of immunology and solid organ transplantation. He is the recipient of numerous
awards and was founding President of several prestigious societies, including
the American Society of Transplant Surgeons. He has authored approximately
1,400 manuscripts and more than 160 book chapters.
The Company has entered into consulting agreements with each member of the
Clinical Advisory Board. These agreements generally have a three-year term and
may be terminated by either party upon 30 days' written notice. These
agreements generally restrict the consultant from competing with cti during
the term of the agreement. These agreements contain provisions prohibiting the
disclosure of confidential information to anyone outside of cti and require
disclosure to cti of ideas, developments, discoveries or inventions conceived
during consulting and assignment to cti of proprietary rights to such matters
related to the business and technology of cti. Each consultant is required to
serve on cti's Clinical Advisory Board and provide such other consulting
services as cti may reasonably request. Each Clinical Advisory Board Member is
paid an annual fee and is granted an option to purchase Common Stock.
49
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of Common Stock, at September 30, 1997, by (i) all shareholders
known by the Company to be the beneficial owner of more than 5% of its
outstanding shares of Common Stock, (ii) each of the Company's Directors, the
Company's chief executive officer and the three other most highly compensated
executive officers who were serving as executive officers at September 30,
1997 and (iii) all Directors and executive officers as a group:
<TABLE>
<CAPTION>
PERCENTAGE
OWNERSHIP(1)
-----------------
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OFFERING OFFERING
- ------------------------------------ --------------------- -------- --------
<S> <C> <C> <C>
LGT Capital........................... 1,766,700 13.52% 11.50%
50 California Street, 27th Floor
San Francisco, CA 94104
The International Biotechnology Trust
plc(2)............................... 1,358,156 10.40 8.84
c/o Rothschild Asset Management
Limited
Five Arrows House
St. Swithin's Lane
London, England EC4N 8NR
Kummell Investments Limited(3)........ 1,287,456 9.86 8.38
922 Europort
Gibraltar
Biotechnology Investment Group,
L.L.C.(4)............................. 948,801 7.26 6.17
Collinson Howe Venture Partners, Inc.
Edward Blech Trust
Jeffrey J. Collinson
Schroder Ventures Limited Partnership
Schroder Ventures U.S. Trust
Schroders Incorporated
c/o Collinson Howe Venture Partners
1055 Washington Boulevard
Stamford, CT 06901
Johnson & Johnson Development
Corporation(5)....................... 743,262 5.69 5.65
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
The Phoenix Partners(6)............... 724,592 5.55 4.72
1000 Second Avenue, Suite 3600
Seattle, WA 98104
James A. Bianco, M.D.**(7)............ 387,804 2.94 2.51
Jack L. Bowman**(8)................... 24,763 * *
Jeremy L. Curnock Cook**(9)........... 1,379,109 10.54 8.96
Wilfred E. Jaeger, M.D.**(10)......... 22,667 * *
Max E. Link, Ph.D.**.................. 40,952 * *
Terrence M. Morris**(11).............. 20,953 * *
Mary O'Neil Mundinger, D.P.H.**(12)... 2,858 * *
Phillip M. Nudelman, Ph.D.**(13)...... 24,191 * *
Jack W. Singer, M.D.**(14)............ 225,470 1.72 1.47
Louis A. Bianco(15)................... 153,326 1.17 *
Robert A. Lewis, M.D.(16)............. 10,001 * *
Maurice J. Schwarz, Ph.D.(17)......... 31,476 * *
All Directors and executive officers
as a group (15 persons)(18).......... 2,380,128 17.68 15.10
</TABLE>
- --------
* Less than 1%
** Denotes Director of the Company
50
<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities. This
table is based upon information supplied by officers, directors and
principal shareholders and Schedules 13D and 13G filed with the
Commission. Shares of Common Stock subject to options or warrants
currently exercisable or convertible, or exercisable or convertible
within 60 days of September 30, 1997, are deemed outstanding for
computing the percentage of the person holding such option or warrant but
are not deemed outstanding for computing the percentage of any other
person. Except as indicated in the footnotes to this table and pursuant
to applicable community property laws, the persons named in the table
have sole voting and investment power with respect to all shares of
Common Stock beneficially owned.
(2) Consists of 1,358,156 shares of Common Stock beneficially owned by The
International Biotechnology Trust plc, a company formed under the laws of
England ("IBT") and managed by Rothschild Asset Management Limited
("Rothschild"). Rothschild has or shares voting and investment power with
respect to the shares held by IBT and may be deemed to be the beneficial
owner of such shares. Mr. Curnock Cook is a director of IBT and
Rothschild, and may be deemed to be the beneficial owner of any shares
beneficially owned by each of IBT and Rothschild. Mr. Curnock Cook
disclaims beneficial ownership of shares beneficially owned by IBT and
Rothschild except to the extent of his proportionate interest therein.
Rothschild is advisor to Biotechnology Investment Limited ("BIL") and to
Rothschild Asset Management (C.I.) Limited, which is the manager of BIL.
See footnote (9) below.
(3) Mr. Morris is the Chief Executive Officer of Morningside Ventures, which
advises Kummell Investments Limited ("Kummell") on its private venture
capital portfolio. Mr. Morris does not have or share voting or investment
power with respect to the shares held by Kummell. See footnote (11)
below.
(4) Biotechnology Investment Group, L.L.C., a Delaware limited liability
company ("BIG") is a limited liability company which was created to
acquire, hold, protect, manage and dispose of equity, debt and derivative
securities of biotechnology and other companies. 771,429 of the shares of
Common Stock held by BIG were acquired in January 1995 from The Edward
Blech Trust ("EBT"). The sole beneficiary of EBT is the minor child of
David Blech, a founder, former director and shareholder of the Company.
The present members of BIG are (i) the managing member, Collinson Howe
Venture Partners ("CHVP"), an investment management firm of which Jeffrey
J. Collinson is President, sole director and majority shareholder, (ii)
EBT, and (iii) Wilmington Trust Company ("WTC"), as voting trustee under
a voting trust agreement (the "Voting Trust Agreement") among WTC, BIG
and BIO Holdings L.L.C. ("Holdings"). The managing member of BIG is CHVP.
The members of BIG share voting and investment power with respect to all
shares held of record by BIG. 771,429 shares held of record by BIG have
been pledged as collateral to Citibank, N.A. ("Citibank") to secure
indebtedness owed to such bank. Each of Citibank and Holdings has the
right pursuant to the Voting Trust Agreement to direct certain actions of
WTC as a member of BIG. WTC, as the member holding a majority interest in
Holdings, has the right to direct the actions of Holdings under the
Voting Trust Agreement. Citibank, pursuant to a separate voting trust
agreement among WTC, David Blech and Holdings, has the right to direct
the actions of WTC as a member of Holdings with respect to the rights of
Holdings under the Voting Trust Agreement. By virtue of their status as
members of BIG, each of CHVP and EBT may be deemed to be the beneficial
owner of all shares held of record by BIG. By virtue of his status as the
majority owner and controlling person of CHVP, Jeffrey J. Collinson may
also be deemed the beneficial owner of all shares held of record by BIG.
Each of CHVP, EBT and Mr. Collinson disclaims beneficial ownership of
shares held by BIG except to the extent of such person's proportionate
interest therein. CHVP is a venture capital investment management firm
which is the managing member of BIG, and is the investment advisor to
Schroder Ventures Limited Partnership ("SVLP"), Schroder Ventures U.S.
Trust ("SVUST") and Schroders Incorporated ("SI"). As such, CHVP has or
shares voting and investment power with respect to the shares held by
BIG, SVLP, SVUST and SI and may be deemed to be the beneficial owner of
such shares. The shares listed above consist of (i) 815,755 shares of
Common Stock held by BIG, 66,991 shares of Common Stock held by SVLP,
16,748 shares of Common Stock held by SVUST and 36,449 shares of Common
Stock held by SI, and (ii) an additional 8,230, 2,057 and 2,571 shares of
Common Stock issuable upon exercise of options beneficially owned by
SVLP, SVUST and SI, respectively, pursuant to an agreement with Dr.
Jaeger. See footnote (10) below.
(5) Percentage of shares beneficially owned after the Offering includes
125,000 shares of Common Stock currently anticipated to be purchased by
JJDC in this Offering. See "JJDC Investment."
(6) Consists of 190,133 shares of Common Stock held by The Phoenix Partners
II Limited Partnership Liquidating Trust ("PPII"), 234,459 shares of
Common Stock held by The Phoenix Partners III Limited Partnership
("PPIII"), and 300,000 shares of Common Stock held by The Phoenix
Partners IV Limited Partnership ("PPIV"). Stuart C. Johnston and David B.
Johnston are the Managing General Partner and Non-Managing General
Partner, respectively, of Phoenix Management Partners II ("PMPII"), which
is the General Partner of PPII, the Managing General Partner and Non-
Managing General Partner, respectively, of Phoenix Management Partners
III ("PMPIII"), which is the General Partner of PPIII, and the Managing
Member and Non-Managing Member, respectively, of Phoenix Management IV
LLC ("PMIV"), which is the General Partner of PPIV. As such, Mr. Stuart
C. Johnston and Mr. David B. Johnson each have voting and investment
power with respect to the shares held by PPII, PPIII and PPIV, and may be
deemed to be
51
<PAGE>
the beneficial owner of such shares. Mr. Stuart Johnston and Mr. David B.
Johnston disclaim beneficial ownership of shares held by PPII, PPIII and
PPIV, except to the extent of their proportionate partnership interest
therein. PPII and PMPII disclaim beneficial ownership of the shares held by
PPIII and PPIV; PPIII and PMPIII disclaim beneficial ownership of the
shares held by PPII and PPIV; and PPIV and PMIV disclaim beneficial
ownership of the shares held by PPII and PPIII.
(7) Includes 114,146 shares issuable upon exercise of options that are
currently exercisable or exercisable within 60 days of September 30,
1997. Does not include 109,526 shares issuable upon exercise of options
not yet vested. 52,382 of such options vest in equal installments on
December 5, 1997 and 1998, and 57,144 of such options vest in equal
installments on November 19, 1998 and 1999.
(8) Consists of 24,763 shares issuable upon exercise of options that are
currently exercisable or exercisable within 60 days of September 30,
1997. Does not include 1,905 shares issuable upon exercise of options not
yet vested. Such options vest on May 22, 1998.
(9) Includes 1,358,156 shares of Common Stock beneficially owned by IBT. IBT
is managed by Rothschild and Rothschild has or shares voting and
investment power with respect to the shares held by IBT and may be deemed
to be the beneficial owner of such shares. Mr. Curnock Cook is a director
of IBT and Rothschild and may be deemed to be the beneficial owner of any
shares beneficially owned by each of IBT and Rothschild. Mr. Curnock Cook
disclaims beneficial ownership of shares beneficially owned by IBT and
Rothschild except to the extent of his proportionate interest therein.
Also includes an immediately exercisable option to purchase 20,953 shares
of Common Stock. Mr. Curnock Cook is a shareholder, but is not an officer
or director, of BIL. See footnote (2) above.
(10) Consists of 22,667 shares issuable upon exercise of options that are
currently exercisable or exercisable within 60 days of September 30,
1997. Does not include 12,858 shares issuable upon exercise of options
beneficially owned by affiliates of CHVP pursuant to an agreement with
Dr. Jaeger. Dr. Jaeger, a director of the Company, is a former partner at
CHVP. Dr. Jaeger disclaims beneficial ownership of shares of Common Stock
beneficially owned by affiliates of CHVP. See footnote (4) above.
(11) Consists of an immediately exercisable option to purchase 20,953 shares
of Common Stock. Mr. Morris is the Chief Executive Officer of Morningside
Ventures, which advises Kummell on its private venture capital portfolio.
Mr. Morris does not have or share voting or investment power with respect
to the shares held by Kummell. See footnote (3) above.
(12) Consists of an immediately exercisable option to purchase 2,858 shares of
Common Stock.
(13) Consists of 24,191 shares issuable upon exercise of options that are
currently exercisable or exercisable within 60 days of September 30,
1997. Does not include 1,905 shares issuable upon exercise of options not
yet vested. Such options vest on May 22, 1998.
(14) Includes 25,721 shares issuable upon exercise of options that are
currently exercisable or exercisable within 60 days of September 30,
1997. Does not include 23,810 shares issuable upon exercise of options
not yet vested. 4,762 of such options vest in equal installments on
December 5, 1997 and 1998, and 19,048 of such options vest in equal
installments on November 7, 1998 and 1999.
(15) Includes 50,816 shares issuable upon exercise of options that are
currently exercisable or exercisable within 60 days of September 30,
1997. Does not include 25,715 shares issuable upon exercise of options
not yet vested. 11,429 of such options vest in equal installments on
December 5, 1997 and 1998, and 14,286 of such options vest in equal
installments on November 7, 1998 and 1999.
(16) Consists of an immediately exercisable option to purchase 10,001 shares
of Common Stock. Does not include 57,144 shares issuable upon exercise of
options not yet vested. 28,585 of such options vest on April 1, 1998,
14,273 of such options vest on April 1, 1999, and 14,286 of such options
vest in equal installments on November 7, 1998, and 1999.
(17) Includes 30,476 shares issuable upon exercise of options that are
currently exercisable or exercisable within 60 days of September 30,
1997. Does not include 26,668 shares issuable upon exercise of options
not yet vested. 7,620 of such options vest in equal installments on
December 5, 1997 and 1998, and 19,048 of such options vest in equal
installments on November 7, 1998 and 1999.
(18) Includes an aggregate of 398,753 shares of Common Stock issuable upon
exercise of options that are currently exercisable or exercisable within
60 days of September 30, 1997. See footnotes (8) through (17).
52
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), for whom UBS Securities LLC,
NationsBanc Montgomery Securities, Inc. and Raymond James & Associates, Inc.
are acting as representatives (the "Representatives"), have agreed to purchase
from the Company the following respective numbers of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
UBS Securities LLC................................................. 1,150,000
NationsBanc Montgomery Securities, Inc............................. 575,000
Raymond James & Associates, Inc. .................................. 575,000
---------
Total............................................................ 2,300,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company and its counsel. The
nature of the Underwriters' obligation is such that they are committed to
purchase all shares of Common Stock offered hereby if any of such shares are
purchased. The Underwriting Agreement contains certain provisions whereby if
any Underwriter defaults in its obligation to purchase shares, and the
aggregate obligations of the Underwriters so defaulting do not exceed 10% of
the shares offered hereby, the remaining Underwriters, or some of them, must
assume such obligations.
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock directly to the public at the offering
price set forth on the cover of this Prospectus, and to certain dealers at
such price less a concession not in excess of $.57 per share. The Underwriters
may allow and such dealers may reallow a concession not in excess of $.10 per
share to certain other dealers. After the public offering of the shares of
Common Stock, the offering price and other selling terms may be changed by the
Underwriters.
It is currently anticipated that Johnson & Johnson Development Corporation
("JJDC"), an affiliate of one of the Company's collaborative partners and an
existing shareholder, will purchase from the Underwriters shares of Common
Stock having an aggregate purchase price of approximately $2.0 million (the
"JJDC Investment") at the per share Price to Public set forth on the cover of
this Prospectus. At the public offering price of $16.00 per share, JJDC will
purchase an aggregate of 125,000 shares of Common Stock. The JJDC Investment
will be registered in this Offering and covered by the Underwriting Agreement.
The Underwriters will not receive underwriting discounts or commissions on the
JJDC Investment. See "JJDC Investment" and "Business--Collaborations."
The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 345,000
additional shares of Common Stock to cover over-allotments, if any, at the
public offering price set forth on the cover page of this Prospectus, less the
underwriting discounts and commissions. To the extent that the Underwriters
exercise this option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage thereof which the number of shares
of Common Stock to be purchased by it shown in the above table bears to the
total number of shares of Common stock offered hereby. The Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters to
the extent the option is exercised.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act and to contribute
to payments the Underwriters may be required to make in respect thereof.
53
<PAGE>
The officers, directors and certain other shareholders of the Company, who
will beneficially own in the aggregate approximately 4,410,846 shares of
Common Stock after the Offering, have agreed that, except as noted below, they
will not, without the prior written consent of UBS Securities LLC, during the
period ending 90 days after the date of this Prospectus, (i) sell, offer,
contract to sell, make any short sale, pledge, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for or
any rights to purchase or acquire Common Stock or (ii) enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. The Company has agreed
that it will not, without the prior written consent of UBS Securities LLC,
offer, sell or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable for or
convertible into shares of Common Stock during the 90-day period following the
date of this Prospectus, except that the Company may issue stock upon the
exercise of options and warrants granted prior to the date hereof, and may
issue additional stock and grant additional options, under its stock option
and stock purchase plans in effect on the date hereof.
In connection with the offering of the Common Stock and in compliance with
applicable law and industry practice, the Underwriters may over-allot or
effect transactions which stabilize, maintain or otherwise affect the market
price of the Common Stock at levels above those which might otherwise prevail
in the open market, including by entering stabilizing bids, effecting
syndicate covering transactions or imposing penalty bids. A stabilizing bid
means the placing of any bid or effecting of any purchase, for the purpose of
pegging, fixing or maintaining the price of the Common Stock. A syndicate
covering transaction means the placing of any bid on behalf of the
underwriting syndicate or the effecting of any purchase to reduce a short
position created in connection with the Offering. A penalty bid means an
arrangement that permits UBS Securities LLC, as managing underwriter, to
reclaim a selling concession from a syndicate member in connection with the
Offering when shares of Common Stock originally sold by the syndicate member
are purchased in syndicate covering transactions. Such transactions may be
effected on the Nasdaq National Market, in the over-the-counter market or
otherwise. The Underwriters are not required to engage in any of these
activities. Any such activities, if commenced, may be discontinued at any
time.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Davis Wright Tremaine LLP, Seattle, Washington.
Certain legal matters related to the sale of the shares of Common Stock
offered hereby will be passed upon for the Company by Brobeck, Phleger &
Harrison LLP, San Francisco, California. Certain legal matters with respect to
information contained in this Prospectus under the captions "Risk Factors--
Ability to Protect Intellectual Property" and "Business--Patents and
Proprietary Right" will be passed upon by Foley & Lardner, Washington, D.C.,
patent counsel to the Company. Venture Law Group, A Professional Corporation,
Menlo Park, California, is acting as counsel for the Underwriters in
connection with certain legal matters relating to the shares of Common Stock
offered hereby. Michael J. Kennedy, a partner of Brobeck, Phleger & Harrison
LLP, is Secretary of the Company.
EXPERTS
The consolidated financial statements of Cell Therapeutics, Inc. appearing
in cti's Annual Report (Form 10-K) for the year ended December 31, 1996, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
54
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). This Registration
Statement, including exhibits thereto, and such reports, proxy statements and
other information filed by the Company with the Commission can be inspected
without charge and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at its Regional Offices located at Seven World Trade Center,
Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of all or any part
thereof may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 upon the payment of the fees
prescribed by the Commission. The Commission maintains a World Wide Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The
address of the site is http://www.sec.gov. Reports and other information
concerning the Company also may be inspected at the offices of the Nasdaq
National Market, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the shares of Common Stock being
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the
rules and regulations of the Commission. For further information with respect
to the Company and the Common Stock, reference is hereby made to the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated by reference in this Prospectus:
(1) the Company's Annual Report on Form 10-K for the year ended December
31, 1996;
(2) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997; and
(3) the description of the Company's capital stock contained in the
Company's Registration Statement on Form 10 filed on April 29, 1996 (as
amended on June 27, 1996 and June 28, 1996), and the description of the
Company's Preferred Stock Purchase Rights contained in its Registration
Statement on Form 8-A filed on November 15, 1996.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this
Prospectus and prior to the termination of this Offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the respective
dates of the filing of such documents. Any statement contained in any document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified of superseded, to constitute a part of
this Prospectus. The Company will provide without charge to each person to
whom a copy of the Prospectus has been delivered, and who makes a written or
oral request, a copy of any and all of the foregoing documents incorporated by
reference in the Registration Statement (other than exhibits unless such
exhibits are specifically incorporated by reference into such documents).
Requests should be submitted in writing or by telephone to Investor Relations,
Cell Therapeutics, Inc., 201 Elliott Avenue West, Seattle, Washington 98119,
telephone (206) 282-7100.
55
<PAGE>
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No dealer, salesperson or any other person has been authorized to give any
information or make any representation not contained in this Prospectus in
connection with the offer made by this Prospectus and, if given or made, such
information or representation must not be relied upon as having been
authorized by the Company or the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby by anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that the information herein is correct as of any time subsequent to the date
of this Prospectus or that there has been no change in the affairs of the
Company since such date.
------------
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 16
JJDC Investment.......................................................... 16
Price Range of Common Stock.............................................. 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 17
Selected Financial Data.................................................. 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 23
Management............................................................... 44
Principal Shareholders................................................... 50
Underwriting............................................................. 53
Legal Matters............................................................ 54
Experts.................................................................. 54
Available Information.................................................... 55
Incorporation of Certain Documents by
Reference............................................................... 55
</TABLE>
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2,300,000 Shares
[LOGO OF CTI APPEARS HERE]
Cell Therapeutics, Inc.
Common Stock
-----------------------
PROSPECTUS
October 22, 1997
-----------------------
UBS Securities
NationsBanc Montgomery Securities, Inc.
Raymond James & Associates, Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
