CEO Gaffe of the Week: Cell Therapeutics

This year, I introduced a weekly series called "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!

This week, I want to highlight perhaps the biggest disappointment in the history of all biotechnology companies, Cell Therapeutics (NAS: CTIC) , and it's CEO and founder, James Bianco.

The dunce cap
I know what you're thinking: "Does this guy ever stop ripping on Cell Therapeutics and James Bianco?" The answer to that question is more or less "no," because there's never a shortage of bad news streaming from the company.

Before I get into the meat and potatoes of why Cell Therapeutics is this week's dubious honoree, I'll start by mentioning that it did finally get Pixuvri approved and launched in the European Union for the treatment of multiple relapsed or refractory aggressive B-cell non-Hodgkins lymphoma, or NHL. According to the company's press release, there are about 37,000 new cases diagnosed annually. Cell Therapeutics also acquired a JAK 2 inhibitor, known as pacritinib, from Singapore's S*BIO in April that demonstrated good tolerability and cancer-fighting activity in early stage trials. The company also received orphan drug status for brain cancer drug Opaxio last week.

That should give you a brief round-up on the potential catalysts for Cell Therapeutics.

Now, here's the roundup on how things have actually gone for Cell Therapeutics. Pixantrone (the common name for Pixuvri in the U.S.), has failed to get by the Food and Drug Administration on two separate occasions due to Cell Therapeutics' failure to enroll enough patients in its phase 3 study, and the FDA's unwillingness to declare pixantrone an effective treatment for NHL. The back and forth action here has been better than watching John McEnroe and a line judge go at it on the tennis court.

There's also the fact that alternative NHL treatments have existed for a while, including Rituxan from Biogen Idec (NAS: BIIB) and Genetech, Zevalin from Spectrum Pharmaceuticals (NAS: SPPI) (which it ironically acquired from Cell Therapeutics), and a radioimmunotherapy drug, Bexxar, made by GlaxoSmithKline (NYS: GSK) . Though these aren't targeted at multiple relapsed NHL like Pixuvri is, they still present a competitive challenge to the currently partnerless Cell Therapeutics.

What really set me off was yet another stock offering from Cell Therapeutics, which was announced one week ago. Keep in mind that this came just weeks after the company's reverse split to stay compliant with Nasdaq's listing rules. The offering of $60 million worth of preferred shares, each priced at $1,000 and convertible to common shares at a "bargain price" of $1.40, should ultimately help the company raise just over $55 million after expenses to help launch Pixuvri and continue its study of pacritinib.

There's just one problem with these offerings and reverse splits -- they just keep happening! The sad truth is that if you made an investment in Cell Therapeutics on Oct 20, 2000, you've seen the per-share price decline from a split-adjusted closing value of $87,847.20 to yesterday's closing value of $1.41. That's right -- one dollar and forty-one cents! Each share you previously owned prior to its first reverse split in 2006 has been diluted to just 0.000833 shares.

To the corner Mr. Bianco...
But wait ... there's more!

Somehow, there always seems to be more when it comes to Cell Therapeutics. After examining Cell Therapeutics' performance, I think it only prudent that we take a look at what its leader is doing to rein in expenses.

According to Forbes, Bianco brought in total compensation of $4.6 million in 2011, consisting of a $650,000 salary, a bonus of $767,500, and $2.9 million in restricted stock awards! Did I mention that Cell Therapeutics' share price fell 48% in 2011? What's more, that's not even the biggest checkmark against Bianco when it comes to his compensation package. In 2009, with his stock trading for as much as the change in your pocket, Bianco took home $12.6 million in pay - all while his company had yet to turn a dime in profit ... ever!

As a final slap in the face, I direct your attention to a recent interview conducted by James Bianco and the Puget Sound Business Journal. In that interview, Bianco answered two questions in a way that completely stopped my thought process and had me saying "No... he didn't actually just say that, did he?"

The first question, "When do you expect to see a significant turnaround for the stock?" was answered by Bianco with this following tidbit: "We saw a reversal. I mean we were down to $0.38, $0.39, we're up 25 percent off the low [$0.46]." Keep in mind that this is pre-split, but that's right folks, you've seen a 25% pop. Move along ... nothing to see here!

The second question, "So you don't have a clear timeframe in which you anticipate a major uptick and relief for shareholders?" was actually the question I was immediately attracted to. I give you Bianco's answer: "I don't have that crystal ball. Let's put it that way." Clearly...

Perhaps I should grab my magic-8 ball and see if it will give me an answer as to where Cell Therapeutics is headed in the future. *Shakes magic-8 ball*... Outlook not so good. Shocking!

Do you have a CEO you'd like to nominate for this dubious honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may see your suggestion in the spotlight.

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The article CEO Gaffe of the Week: Cell Therapeutics originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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