By Debbie Strickland

Cell Therapeutics Inc.'s initial public offering in March apparently didn't quench investors' thirst for shares in the developer of lisofylline, a cancer drug in Phase III trials and partnered with Johnson & Johnson.

Citing strong investor demand, the company grossed $36.8 million in a follow-on offering — 38 percent more than the maximum of $26.6 million proposed in the registration statement.

"From the time we went public, we had a series of milestones that we had projected would happen over the second and third quarters. We met those milestones," said James Bianco, CEO.

"We're only five years old," he said, "and we have three Phase III trials ongoing and the lead product targets a very large application in oncology."

In the new offering, investors snapped up 2.3 million shares at $16 each. Both the number of shares and the price were increased from the originally proposed 2 million shares at a top price of $13.31. Net proceeds totaled $34.3 million. Investors were primarily new institutional investors.

The underwriters — UBS Securities L.L.C., of New York, NationsBanc Montgomery Securities, of San Francisco, and Raymond James & Associates Inc., of St. Petersburg, Fla. — have an overallotment option to purchase an additional 345,000 shares.

If their option is exercised, the company will end the offering with 15.7 million shares outstanding.

Proceeds have not been earmarked for specific projects.

Cancer Drug In Phase III Trials

Cell Therapeutics' lead drug candidate, lisofylline, is a synthetic small molecule drug now in three pivotal Phase III trials in cancer patients receiving high-dose radiation or chemotherapy. Partnered with Johnson & Johnson, of New Brunswick, N.J., lisofylline is under development for prevention of serious and fatal infections, mucositis and treatment-related mortality.

"We had a game plan of not doing early-stage collaborations," said Bianco, whose company opted to wait until reporting strong clinical results before seeking a partner.

Lisofylline works by modulating selective stress-activated cell signaling pathways that respond to chemotherapy, radiation and trauma. The drug is designed to inhibit phosphatidic acid and reduce oxidative damage to tissues.

In addition to cancer, the drug will be tested in patients requiring mechanical ventilation for respiratory failure in an upcoming trial sponsored by the National Heart, Lung and Blood Institute.

Also at the clinical level is CT-2584 — a small molecule drug for patients with multidrug-resistant cancer, including prostate cancer and sarcomas. CT-2584 is undergoing Phase I trials, with a Phase II trial for advanced refractory prostate cancer expected to begin in early 1998.

In addition to its centerpiece Johnson & Johnson collaboration, Cell Therapeutics has an agreement with BioChem Pharma Inc., of Laval, Quebec, that grants BioChem Canadian commercialization rights to both lisofylline and CT-2584.

As of June 30, Cell Therapeutics had $47.9 million in cash, cash equivalents and securities available for sale. Net losses totaled $10.6 million for the first half of 1997.

Cell Therapeutics' shares (NASDAQ:CTIC) closed Thursday unchanged at $16.125. *

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