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May 11, 2006 at 2:29 PM

Cell Therapeutics still under scrutiny

A report from Deputy Business Editor Rami Grunbaum:

Cell Therapeutics shed a little more light today on the investigation into its business practices by the U.S. Attorney’s Office.

In its quarterly SEC filing, the company reports it is providing documents and holding periodic meetings with the U.S. Attorney’s Office, and still “cannot predict whether [the government] will bring formal criminal enforcement proceedings.”

The investigation has been under way since last year, and centers on the company’s promotional practices relating to Trisenox, a drug approved for one cancer but used by doctors “largely for uses not approved by the FDA,” according to the company. In March, Cell Therapeutics for the first time disclosed that the investigation stemmed from a whistleblower lawsuit, also called a “qui tam’ suit, filed under seal by a private person on behalf of the government.

Today’s filing adds that “based on information currently available to the company, we believe that the [U.S. Attorney] may recommend to the Department of Justice that the government intervene in the qui tam action, as is its right, and assume the conduct of this lawsuit.”

It continues: “One of the primary claims that might be pursued would be that CTI violated the Federal False Claims Act by receiving reimbursement from Medicare for improper off-label use of Trisenox or otherwise ineligible sales of Trisenox.”

The company says it’s not clear what portion of its Trisenox sales might be challenged under this legal theory, so it can’t estimate any potential damages. But it notes that under the False Claims Act, “damages can be trebled and separate fines imposed for each violation.”

Trisenox brought the company sales of about $40 million from January 2004 through July 2005, when it sold the drug rights to another company.

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