Cell Therapeutics has survived a near-death experience this year, and now it is dishing out a new batch of potentially rich rewards for management to stick around at least two more years.
The Seattle-based biotech company (NASDAQ: CTIC) said today in a regulatory filing that the board’s compensation committee has approved a new series of bonuses for the company’s top five executives, and six non-employee directors. The bonuses will come in the form of common stock if Cell Therapeutics reaches any of eight different goals the company hopes to achieve between now and December 31, 2011, or if the company is sold.
You pretty much need a Ph.D in modern executive compensation practices to decode how much money the Cell Therapeutics shareholders stand to shell out to CEO James Bianco; his brother and CFO Lou Bianco; Dan Eramian, the company’s executive vice president of corporate communications; Craig Philips, the president; and Jack Singer, the chief medical officer. But the chart offered in today’s 8-k filing offers some interesting insights nonetheless about what the company considers important.
Here are the eight key goals being set up for Cell Therapeutics’ management team.
1. European Union regulators approve paclitaxel poliglumex (Opaxio) for cancer.
2. FDA approval of paclitaxel poliglumex.
3. Total sales of $50 million in a fiscal year.
4. Total sales of $100 million in a fiscal year.
5. FDA approval of pixantrone, the treatment for non-Hodgkin’s lymphoma.
6. Reaching cash-flow break-even in the fourth quarter of the 2010 fiscal year.
7. Reaching the earnings goal of a nickel per share.
8. Boosting the company’s stock price to $2.94.
If Cell Therapeutics reaches one of these goals, it will trigger a payment in stock based on a formula that places different values on each of the goals.
Interestingly, the most important goal based on this formula contained in the regulatory filing, is to boost the stock price. The actual number of shares they stand to get isn’t being disclosed in today’s filing, but it will be determined by multiplying a fixed percentage and the number of outstanding shares at the company at the time. There is a cap in that plan, according to the filing.
This gets complicated in a hurry, but just take CEO James Bianco for one example. The company will multiply 0.3 percent by the number of outstanding shares if the company breaks even by the fourth quarter of 2010. The reward under the formula increases to 0.45 percent if the company can win FDA approval of pixantrone, and 0.75 percent if Cell Therapeutics’ stock almost triples from today’s close of $1.14 to $2.94 sometime in the next two years. The company has 574 million shares outstanding at last count, according to data compiled on the NASDAQ website. If my math is correct, 0.75 percent multiplied by 574.43 million shares means that he would get shares worth $4.3 million.
Eramian didn’t say how much the company stands to pay through the management bonuses, but he did offer an explanation of the program.
“The grant opportunities are based on performance only—contingent upon achieving certain milestones over a two year period,” Eramian said in an e-mail. “The plan further aligns the goals of management with those of the shareholders with the success the milestones would bring to the company and to shareholders. The value of each milestone would be dependent upon the number of outstanding shares at the time the goal was reached.”
This is at least the second time this year that Cell Therapeutics has provided bonuses to management. The compensation committee of the Seattle biotech company’s board agreed on June 4 to pay bonuses worth more than $250,000 to its top executives, according to a filing.
The incentives come at the tail end of an extraordinary roller coaster ride for this 18-year-old biotech company, which has no marketed products at the moment. Back in February, CEO James Bianco said Cell Therapeutics was on a “tight-wire” act to stay alive. When it was down to just a few weeks of cash in February, it found a way to stay in business through layoffs, closing its Italian research center, and selling off its lone marketed cancer drug.
The company seized on some renewed investor enthusiasm for its pixantrone therapy for non-Hodgkin’s lymphoma, and used that to raise an amazing $115 million in a month-to-month series of equity offerings from April through August. The company also found a way to shed $53 million in debt. But Cell Therapeutics is still up on a high wire. It had $96.8 million in liabilities at the end of September, and it still only has enough cash to operate until the end of June, according to its most recent quarterly report.
The big dramatic day on the calendar, which will go a long way toward determining if Cell Therapeutics’ management can snag any of those bonuses, is February 10. That’s the day when Cell Therapeutics will try to make its case for FDA approval of pixantrone in front of an expert advisory panel. The FDA usually follows the advice of its expert panels, although it isn’t required to do so. The other big day for Cell Therapeutics in the coming year is April 23, when the agency’s deadline to complete its review of pixantrone.
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