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Celator Pharmaceuticals: Progressing The Paradigm Of Combination Chemotherapy


  • We discuss the “Trident” of Celator: its three branches of value creation.
  • We discuss the significance of CPXX’s approach to delivery and how it puts it a step ahead of the competition.
  • We discuss how the company’s technology will likely see quick market adoption.
  • We highlight the risks of an investment in Celator, specifically outlining the cash burn and possible future financing.
  • CPXX’s potential is about so much more than just AML and sAML.

Author’s Update, March 2, 2016: The article has been updated to reflect information regarding an ATM offering, of which $18.71 million was remaining as of the last 10-Q. Information about this can be found towards the end of this article.

Celator Pharmaceuticals (NASDAQ:CPXX) is a clinical-stage drug development company currently focused on combination therapies of already proven chemotherapy agents cytarabine and daunorubicin.

The company’s patented delivery system maintains molar ratios of the drugsat the tumor site, unlike other regimes which have their ratios change due to things such as solubility, biological responses, and antagonistic effects.

Its intellectual property is broad and covers liposome and liposome-like delivery systems for chemotherapy agents in combination. Because Celator’s combinatorial therapies rely on already proven chemo agents, market adoption is accelerated in comparison to new drugs. We list some of its important patents below:

The company’s Phase 3 clinical trials have already met some end-point criteria, and its full results are due March 2016.

Below, we show what we consider to be Celator’s Trident and its unfair competitive advantage:

Figure 1


Celator’s Trident: Patent-protected nanotechnology delivery system, patent-protected high-throughput screening CombiPlex, and its clinical trial branches.

CombiPlex and Combination Therapies Drug Market

One key strength in Celator’s value is its CombiPlex® intellectual property. CombiPlex provides Celator with a quick, and cost-effective way to identify potent molar ratios for combination oncology treatments. Essentially, CombiPlex automates a process in which hundreds of ratios of two chemotherapy agents can be potentially tested. These ratios are then administered to tumor cells, and computational algorithms identify what ratios are most effective at killing the tumors.

From our research, we discovered that the number of combination therapies expected from now to 2020 is expected to double. See Figure 2. Additionally, many key large-cap pharmaceutical companies are pursuing combinational treatments (Roche (OTCQX:RHHBY) is an excellent example), indicating that the technology is not limited to small-cap speculative biotechs.

Figure 2

Combo therapy market and anticipation...


It is worth outlining the following as well:

  1. Most cancer therapies involve a combination of drugs.
  2. The number of new combination therapies is expected to double in five years.
  3. Despite growing popularity, combination therapies and their respective delivery systems have gone largely unchanged, and relatively little money has gone into venturing for improvement of these older, yet effective, therapies (Liboiron papers, 2012).
  4. Celator was awarded the 2015 Best Nanomedicine Product Award due to its simplicity and concurrent effectiveness.
  5. Large-cap biotech companies are increasingly starting to pay attention to combination therapies. Celator has already done the leg work, and bio juggernauts are likely to seek collaborations with CPXX should CombiPlex and liposomic delivery platforms give good readouts under CPX-351 (VYXEOS).

Celator’s paradigm:

“Simply combining single agents or administering them in sequence, whether they are conventional chemotherapeutics or novel molecularly targeted agents, does not guarantee optimal anti-cancer activity. For combinations to be most effective, the molar ratios of the individual components must be optimized for maximum synergy upon reaching the target tumor. Celator is working to establish a new treatment paradigm in which rationally-designed, fully-integrated combination products replace combination regimens of individual agents.”

Understanding the Science: CombiPlex Screening, Formulation, and Validation

This is our personal rendition of how Celator’s workflow for drug discovery ultimately approaches to clinical trial works:

Source, and supporting technical sheet

Understanding the Science: Nanotech, Liposomes, and More

Figure 3



Figure 3 represents a drug crystallized in fluid encapsulated within a lipid bi-layer, which is termed a liposome. Liposomes are classically defined as consisting of molecules such as fats, waxes, sterols, fat-soluble vitamins, monoglycerides, diglycerides, and others, which form a spherical “capsule.”

How liposomes deliver the drug is by membrane fusion with a cell. The liposome coat is soluble within the cellular membrane of tumors, and once fusion occurs, the internal contents of the liposome (chemotherapy drugs) are then unloaded within the cytoplasm of the cell.

Advantages to liposomes:

  1. Chemotherapy drugs can maintain higher concentrations when they arrive to the tumor cells than if the drugs were administered without a liposome.
  2. Solubility differences between chemotherapy agents are less of an issue.
  3. Prevention of free drugs from entering the bloodstream.
  4. They are inherently targeted to the tumor cells; liposomes’ large size inhibits them from entering small pores from the blood, selectively targeting cells which have leaky blood vessels which is the case for many cancers.

Liposomes, in general, should be able to diminish adverse events in chemotherapy regimes. However, we have seen increased adverse events (albeit in the presence of significantly increasing life span) with Celator’s CPX-351. We discuss this later.

Celator’s Patent Leverage

Liposomes by definition require a mono- or bi-layer of lipids. However, the company’s patents extend beyond that to cover polymer nanoparticles, polymer microparticles, polymer-lipid hybrids, and derivatized single-chain polymers.

This makes it extremely difficult for other companies to enter into this therapeutic space without royalties paid to Celator. As a result, CPXX stands to gain significant leverage in the field of combinatorial therapies – a competitive advantage that is hard to match.

Understanding the Science: Above and Beyond AML and sAML

Figure 4


Celator’s “Trident” is completed with its clinical trials in ratiometric liposomal drug combination therapies. The current leading candidate is CPX-351 with CPX-1 trailing and less mature.

Celator has spent most of its resources wisely on using the CPX-351 trials to validate the other parts of its Trident: CombiPlex, and broad patent base.

Per biotech valuations, this not only gives CPXX higher valuations on the therapeutic potential of the CPX-351 asset, but it also reinforces the concepts and methods outlined in the wide IP and makes the value more “tangible.” It is our belief that while AML and sAML are a good starting market, the Celator end-game is in expanding its technologies to multitudes of other therapeutic areas, on the back of approval and sales of VYXEOS, along with a new round of funding, which we will discuss further.

Thus, we reiterate that the Celator story is so much more than AML/sAML, and the technology above and beyond just liposomes. We have done our research and found that the space although crowded is attractive.

Understanding VYXEOS: Short and Grim Walk Through AML

Acute myeloid leukemia (AML) represents a collection of clonal hematopoietic stem cell disorders in which both a block in differentiation and unchecked proliferation result in the accumulation of myeloblasts at the expense of normal hematopoietic precursors.

In layman’s terms, it means that it is a nasty and rapid disease where there are too many immature blood-forming cells in the blood and bone marrow, the cells being specifically designated to give rise to white blood cells.

AML is unfortunately most prominent in adults, but there have been multiple cases in children. It is mostly combated with a two-phase treatment program. Induction therapy is the first phase where a combination of drugs is used to put the leukemia cells into a state of remission. The second phase is called post-remission therapy. The post-remission therapy is designed to kill any remaining leukemia cells using high doses of chemotherapy and other times more combinations of drugs. The popular therapy is referred to as a 7+3 combination of cytarabine and daunorubicin.

Cytarabine causes damage to the DNA during synthesis, and this rapidly dividing cells (cancer) are affected the most.

Daunorubicin inhibits DNA replication, again this targets rapidly dividing cells (cancer) the most.

CPX-351 is a 5:1 ratio of cytarabine:daunorubicin encapsulated in Celator’s liposomal powerhouse.

Figure 5


Company presentation

The average age of a patient with AML is 67. The incidence rate increases rapidly with age. The age-adjusted incidence is 12.2 per 100,000 people older than 65 compared to 1.3 per 100,000 for those younger than 65.

Understanding Combination Therapy Market: Where We Are, Where We Are Going

At the moment, combination therapy is the standard and most-utilized form of treatment especially for a lot of advanced forms of cancers. The rationale behind combination therapy is to use a mix of drugs that work by different means and attack in different vectors as to choke the cancer on two fronts or more. This form of therapy accomplishes three objectives that are usually not possible in a single agent therapy:

  1. Provides maximum cell kill within the range of toxicity tolerated by the host for each drug.
  2. It can work on a broad range of cancer types.
  3. It prevents or slows the development of drug-resilient cell lines.

Since Celator’s approach to combination therapies is only limited by available chemotherapy agents, the potential market for its patented technology ismassive and easily accessible. Every oncology indication could potentially benefit from Celator’s CombiPlex technology and liposomal delivery systems.

Our Bear and Bull Key Notes

Bull and Bear Notes on Celator

Bullish Bearish
Market/Momentum Market/Momentum
  • Trend is strongly bullish for the past 10 days
  • Biotech market is desperate for more proven (less speculative) technologies
  • Biotech sector is currently very volatile
  • Stock has risen >75% over the past two weeks
Science Science
  • Drugs are de-risked, they are already FDA approved
  • Intellectual property is broad and powerful
  • CPX-351 doubled the median-survival length in Phase II
  • Adverse events are higher in CPX-351 than standard regime (we’re unsure if this is dose related, or an outcome of liposomes)
  • High-risk populations like AML are less predictable in clinical trials
Finance/Medium-Term Finance/Medium-Term
  • Acute myeloid leukemia (AML) market was $239 million in 2011, and expected to grow to $731 million by 2018
  • Compare this to CPXX’s market cap of $74 million
  • It will require a second Phase III trial to acquire total market share of AML
  • It will likely require additional cash before VYXEOS hits the market (dilution possible)
  • Trading above book value
  • Executive compensation is exceptionally high
Long Term Long Term
  • Comprehensive intellectual property makes competition low
  • Market adoption of Celator’s combination therapies will be accelerated due to de-risked drugs
  • Celator has an active partnership with the Leukemia and Lymphoma Society (LLS)
  • Many large-cap pharmaceutical companies are pursuing combination therapies, indicating Celator as a strong candidate for buyout
  • There are other liposome companies on the market, CERU, which may inhibit their liposomal formulation expansion
  • Failure in Phase III VYXEOS will plummet the stock

Financial Risk and Looking at the Company as an Investment

It is quite obvious that Celator’s financial position, like any other cash-burning biotech company, is not attractive. The company will continue to burn cash until its drugs are approved, and it can either go back to the credit market for more cash or generate cash medium/long term from sales of VYXEOS and CombiPlex licensing.

As it stands, CPXX burns roughly $4 million per quarter. Some of this may be softened by the weak Canadian dollar, but in the long term, that is negligible. This is shown below in Figure 6, from the company’s financial statements.

Figure 6

Another questionable item is the management compensation which is high given the cash on hand of the company. But having seen the work of management, the securing of IP and progress made, this could be justifiable. Figure 7 shows the compensation of management.

Figure 7

Company Should Be Fine on Good VYXEOS Readout and Approval

As we have highlighted, the market for the company’s therapy is quite live, and due to partnerships such as the one with the LLS, and general knowledge of the clinical programs and their efficacy, Celator should have no problem going to market. We generally expect dilution on a liquidity event such as a readout or approval in the form of an At-The-Market stock offering, which the company has already done once before.

Concluding Thoughts and Thesis

We believe that on good data from VYXEOS, Celator will be able to show the market the value of the “Trident” it holds in the form of its CombiPlex screening, delivery IP, and clinical trial results. We believe that while the sAML/AML market holds good potential in the short term, the long-term applications of Celator’s IP and assets reach out much further than just to the AML/sAML market. We do not see the stock exploding hundreds of percents upward, but could see it lift 30-50% on good VYXEOS readout and assurance of financing afterwards via either a stock, debt, or convertible offering.


It should be noted that CPXX is still in the process of completing an ATM offering of $18.71 million. We like ATM offerings, and they have generally been positive and resulted in upward PPS movement later on; we cite Novavax (NASDAQ:NVAX) as a precedent.

CPXX 10-Q filed on 11/12/15 for the period ending 9/30/2015

During the period October 19, 2015 through November 11, 2015, the company has sold 745,985 shares of common stock under the Sales Agreement at an average price of approximately $1.73 per share, for gross proceeds of $1.29 million and net proceeds of $1.26 million after deducting Cantor’s commission.As of November 11, 2015, $18.71 million of common stock remains available to be sold under this facility.

Disclosure: I am/we are long CPXX, CERU.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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