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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 000-28386
CTI BIOPHARMA CORP.
(Exact name of registrant as specified in its charter)
Delaware 91-1533912
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
   
3101 Western Avenue  
Suite 800
Seattle
Washington 98121
(Address of principal executive offices) (Zip Code)
(206) 282-7100
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareCTICThe Nasdaq Capital Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer   Accelerated filer 
Non-accelerated filer   Smaller reporting company 
Emerging growth company




If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Class Outstanding at April 29, 2021
Common Stock, par value $0.001 per share 93,282,212



CTI BIOPHARMA CORP.
TABLE OF CONTENTS
 
   PAGE
PART I - FINANCIAL INFORMATION   
   
ITEM 1: Financial Statements (unaudited)  
   
Condensed Consolidated Balance Sheets  
   
Condensed Consolidated Statements of Operations  
   
Condensed Consolidated Statements of Comprehensive Loss  
   
Condensed Consolidated Statements of Changes in Stockholders' Equity
Condensed Consolidated Statements of Cash Flows  
   
Notes to Condensed Consolidated Financial Statements  
   
ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations  
   
ITEM 3: Quantitative and Qualitative Disclosures about Market Risk 
   
ITEM 4: Controls and Procedures 
   
PART II - OTHER INFORMATION  
   
ITEM 1: Legal Proceedings 
   
ITEM 1A: Risk Factors 
   
ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds 
   
ITEM 3: Defaults upon Senior Securities 
   
ITEM 4: Mine Safety Disclosures 
   
ITEM 5: Other Information 
   
ITEM 6: Exhibits 
   
Signatures 

3


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements

CTI BIOPHARMA CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(unaudited)
 
March 31, 2021December 31, 2020
  
ASSETS  
Current assets:  
Cash and cash equivalents$33,105 $40,394 
Short-term investments4,060 12,057 
Prepaid expenses and other current assets2,183 1,874 
Total current assets39,348 54,325 
Property and equipment, net653 719 
Other assets2,788 3,197 
Total assets$42,789 $58,241 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities:  
Accounts payable$1,171 $1,637 
Accrued expenses7,296 7,191 
Current portion of long-term debt3,252 4,455 
Other current liabilities3,839 3,755 
Total current liabilities15,558 17,038 
Long-term liabilities577 1,174 
Total liabilities16,135 18,212 
Commitments and contingencies
Stockholders' equity:  
Preferred stock, $0.001 par value per share:
Authorized shares - 33,333 as of March 31, 2021 and December 31, 2020
Series O Preferred Stock, 12,575 shares issued and outstanding as of March 31, 2021 and December 31, 2020 (Aggregate liquidation preference of $25,150 as of March 31, 2021 and December 31, 2020)
  
Series X Preferred Stock, 4,429 shares issued and outstanding as of March 31, 2021 and December 31, 2020 (Aggregate liquidation preference of $44,290 as of March 31, 2021 and December 31, 2020)
  
Common stock, $0.001 par value per share:
  
Authorized shares - 166,500,000 as of March 31, 2021 and December 31, 2020
  
Issued and outstanding shares - 76,751,292 and 75,896,884 as of March 31, 2021 and December 31, 2020, respectively
77 76 
Additional paid-in capital 2,371,851 2,367,958 
Accumulated other comprehensive (loss) income(1)2 
Accumulated deficit(2,345,273)(2,328,007)
Total stockholders' equity26,654 40,029 
Total liabilities and stockholders' equity$42,789 $58,241 
 See accompanying notes.
4


CTI BIOPHARMA CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
 
Three Months Ended March 31,
 20212020
Operating costs and expenses:
Research and development$9,444 $3,264 
General and administrative7,626 4,467 
Other operating expenses 4,200 
Total operating costs and expenses17,070 11,931 
Loss from operations(17,070)(11,931)
Non-operating income (expense):
Interest income11 119 
Interest expense(68)(167)
Amortization of debt discount and issuance costs(130)(130)
Foreign exchange loss(9)(77)
Total non-operating expense, net(196)(255)
Net loss$(17,266)$(12,186)
Basic and diluted net loss per common share$(0.23)$(0.20)
Shares used in calculation of basic and diluted net loss per common share 76,367 62,461 
 
See accompanying notes.

5


CTI BIOPHARMA CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(unaudited)
 
Three Months Ended March 31,
 20212020
Net loss $(17,266)$(12,186)
Other comprehensive loss:
Net unrealized loss on available-for-sale securities(3) 
Other comprehensive loss(3) 
Comprehensive loss$(17,269)$(12,186)
 
See accompanying notes.

6


CTI BIOPHARMA CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
(unaudited)


     AdditionalAccumulated Other  Total
 Preferred StockCommon StockPaid-inComprehensiveAccumulatedNoncontrollingStockholders'
 SharesAmountSharesAmountCapitalIncomeDeficitInterestEquity
Balance at January 1, 202117 $ 75,897 $76 $2,367,958 $2 $(2,328,007)$ $40,029 
Issuance of common stock, net of issuance costs— — 858 1 2,961 — — — 2,962 
Equity-based compensation— — — — 932 — — — 932 
Other— — (4)— — — — — — 
Net loss— — — — — — (17,266)— (17,266)
Other comprehensive loss — — — — — (3)— — (3)
Balance at March 31, 202117 $ 76,751 $77 $2,371,851 $(1)$(2,345,273)$ $26,654 


     AdditionalAccumulated Other  Total
 Preferred StockCommon StockPaid-inComprehensiveAccumulatedNoncontrollingStockholders'
 SharesAmountSharesAmountCapitalIncomeDeficitInterestEquity
Balance at January 1, 202013 $ 57,980 $58 $2,299,186 $ $(2,275,556)$(5,758)$17,930 
Issuance of common stock, net of issuance costs— — 15,699 16 15,454 — — — 15,470 
Conversion of Series X preferred stock to common stock — — 3 — 3 — — — 3 
Equity-based compensation— — — — 1,167 — — — 1,167 
Net loss— — — — — — (12,186)— (12,186)
Balance at March 31, 202013 $ 73,682 $74 $2,315,810 $ $(2,287,742)$(5,758)$22,384 

See accompanying notes.

7


CTI BIOPHARMA CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
 Three Months Ended March 31,
 20212020
Operating activities  
Net loss before noncontrolling interest$(17,266)$(12,186)
Adjustments to reconcile net loss to net cash used in operating activities:  
Equity-based compensation 932 1,167 
Depreciation and amortization135 133 
Provision for Italian VAT receivables and deposit 4,200 
Other(99)(38)
Changes in operating assets and liabilities:  
Prepaid expenses and other assets617 1,038 
Accounts payable, accrued expenses and other liabilities(1,096)(4,756)
Net cash used in operating activities(16,777)(10,442)
Investing activities  
Proceeds from maturities of short-term investments 8,000 2,500 
Net cash provided by investing activities8,000 2,500 
Financing activities  
Proceeds from at-the-market equity offering, net of issuance costs2,804  
Proceeds from rights offering, net of issuance costs 59,280 
Principal payments on debt(1,333)(1,333)
Proceeds from stock option exercises17  
Net cash provided by financing activities1,488 57,947 
Net (decrease) increase in cash and cash equivalents (7,289)50,005 
Cash and cash equivalents at beginning of period40,394 31,144 
Cash and cash equivalents at end of period$33,105 $81,149 
Supplemental disclosure of cash flow information  
Cash paid during the period for interest$75 $179 
 
See accompanying notes.
8


CTI BIOPHARMA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1. Description of Business and Summary of Significant Accounting Policies

CTI BioPharma Corp., together with its subsidiary, also referred to collectively in this Quarterly Report on Form 10-Q as “we,” “us,” “our,” the “Company” and “CTI,” is a biopharmaceutical company focused on the acquisition, development and commercialization of novel targeted therapies for blood-related cancers that offer a unique benefit to patients and their healthcare providers. Our goal is to build a profitable company by generating income from products we develop and commercialize, either alone or with partners. We concentrate our efforts on treatments that target blood-related cancers where there is an unmet medical need. In particular, we are focused on evaluating pacritinib, our sole product candidate currently in active development, for the treatment of adult patients with myelofibrosis. In addition, in response to the COVID-19 pandemic, we started developing pacritinib for use in hospitalized patients with severe COVID-19.

We operate in a highly regulated and competitive environment. The manufacturing and marketing of pharmaceutical products requires approval from, and is subject to, ongoing oversight by the Food and Drug Administration, or the FDA, in the United States, the European Medicines Agency, or the EMA, in the European Union, or the EU, and comparable agencies in other countries. Obtaining approval for a new therapeutic product is never certain, may take many years and may involve the expenditure of substantial resources.

Basis of Presentation

The accompanying unaudited financial information as of and for the three months ended March 31, 2021 and 2020 has been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such dates and the operating results and cash flows for such periods. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission, or the SEC. These unaudited financial statements and related notes should be read in conjunction with our audited financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K filed with the SEC on March 17, 2021.

The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of CTI and its majority-owned subsidiary, Aequus Biopharma, Inc., or Aequus, until its dissolution in June 2020. We had an approximately 60% interest in Aequus, and the remaining interest in Aequus not held by CTI was reported as noncontrolling interest in the condensed consolidated financial statements until its dissolution. All intercompany transactions and balances were eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles, or GAAP, requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of loss contingencies in the condensed consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, clinical accruals, income taxes, useful lives of equipment, commitments and contingencies, equity-based compensation forfeiture rates, collectability of receivables and impairment of investments. Given the global economic climate and additional or unforeseen effects from the COVID-19 pandemic, these estimates are becoming more challenging, and actual results could differ materially from those estimates.

9


Liquidity

The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the condensed consolidated financial statements are issued. Our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.

Over the next year and in the normal course of business, we will need to continue to conduct research, development, testing and regulatory compliance activities with respect to pacritinib and prepare for potential commercialization, and in the course of such activities, we will incur general and administrative expenses. Additional business activities will include procuring manufacturing and drug supply services, the costs of which, together with our projected general and administrative expenses, are expected to result in operating losses for the foreseeable future. We have incurred a net operating loss every year since our formation. As of March 31, 2021, we had an accumulated deficit of $2.3 billion, and we expect to continue to incur net losses for the foreseeable future. Our available cash, cash equivalents and short-term investments were $37.2 million as of March 31, 2021, and in April 2021, we received the net proceeds of approximately $53.5 million upon completion of the public offering of our common stock and our Series X1 Preferred Stock. We expect that our present financial resources will be sufficient to meet our obligations as they come due and to fund our operations into the fourth quarter of 2021. Based on our evaluation completed pursuant to Accounting Standards Update No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, these factors raise substantial doubt about our ability to continue as a going concern.

Accordingly, we will need to acquire additional funds in order to develop our business and continue the development and prepare for the potential commercialization of pacritinib. The amount of funds that we will ultimately require will depend, in part, upon: regulatory approval developments and the extent to which we are required to conduct additional clinical trials; competitive market developments which require us to alter our business practices; and other unplanned expenses or business developments. We may seek to raise such capital through public or private equity financings, partnerships, collaborations, joint ventures, disposition of assets, debt financings or restructurings, bank borrowings or other sources of financing. However, we have a limited number of authorized shares of common stock available for issuance and additional funding obtained through the sale of such shares of common stock or otherwise may not be sufficient, available on favorable terms or available at all. If additional funds are raised by issuing equity securities, substantial dilution to existing stockholders may result. If we fail to obtain additional capital when needed, our ability to operate as a going concern will be harmed, and we may be required to delay, scale back or eliminate some or all of our research and development programs and the commercial capabilities that we are developing to support a potential drug approval, be required to reduce our general and administrative expenses, be unable to attract and retain highly-qualified personnel, be unable to obtain and maintain contracts necessary to continue our operations at affordable rates with competitive terms, have to refrain from making our contractually required payments when due (including debt payments) and/or may be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection. The amount of financing we require is dependent upon many factors relating to drug approval status and our commercialization plans, as well as our clinical trials. These factors include the number of clinical trial sites in a given clinical trial, the number of patients treated in a given clinical trial, the pace of patient enrollment and other matters that may impact clinical development, including changes to a clinical trial that we may initiate or that may be requested by the FDA or other regulators. There can be no assurance as to the amount of funding necessary to fund the development of pacritinib to completion or that we will be able to obtain this funding. In addition, our ability to comply with covenants under our loan and security agreement with Silicon Valley Bank, or SVB, may be affected by events beyond our control, and we may not be able to meet those covenants. A breach of any of these covenants, including a material adverse change in our business, operations or condition (financial or otherwise) could result in an event of default under the loan and security agreement, which could cause all of the outstanding indebtedness under the facility to become immediately due and payable. The accompanying condensed consolidated financial statements do not include adjustments, if any, that may result from the outcome of this uncertainty.

Cash, Cash Equivalents and Short-term Investments

As of March 31, 2021 and December 31, 2020, our cash, cash equivalents and short-term investments consisted of cash, money market funds and corporate debt securities. Cash equivalents and short-term investments are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. There are three levels of inputs used to measure fair value, with Level 1 having the highest priority and Level 3 having the lowest:

Level 1—Valuations based on unadjusted quoted prices for identical assets and liabilities in active markets.
10


Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Valuations based on unobservable inputs that are supported by little or no market activity, reflecting our own assumptions. These valuations require significant judgment or estimation.

We measure the fair value of money market funds based on the closing price reported by the fund sponsor from an actively traded exchange. We value all other securities using broker quotes that utilize observable market inputs. We did not hold cash, cash equivalents and short-term investments categorized as Level 3 assets as of March 31, 2021 and December 31, 2020. The following table summarizes, by major security type, our cash, cash equivalents and short-term investments that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):
March 31, 2021December 31, 2020
Cost or Amortized CostGross Unrealized LossesTotal Estimated Fair ValueTotal Estimated
Fair Value
Cash
$266 $— $266 $385 
Level 1 securities:
Money market funds
32,839 — 32,839 40,009 
Level 2 securities:
Corporate debt securities
4,061 (1)4,060 12,057 
Total cash, cash equivalents and short-term investments$37,166 $(1)$37,165 $52,451 


Leases

Under ASC 842 - Leases, we determine if an arrangement is a lease at inception. We recognize a right-of-use asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as operating or finance at lease commencement, which will affect the pattern and classification of expense recognition in our condensed consolidated statements of operations.

Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our leases do not provide a readily determinable implicit rate of return, we derive the present value of lease payments using our incremental borrowing rate, which is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
An operating lease right-of-use asset is measured at the amount of the lease liability, adjusted for prepaid or accrued lease payments, lease incentives received, unamortized initial direct costs and the impairment of the right-of-use asset. A lease may include options to extend or terminate the lease. When it is reasonably certain that we will exercise such an option, it is considered in the lease term. Right-of-use assets are tested for impairment in the same manner as long-lived assets used in operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.

Lease expense for operating leases is recognized on a straight-line basis over the lease term as part of Research and development expenses and General and administrative expenses in our condensed consolidated statements of operations. Right-of-use assets are included in Other assets, and the current portion of lease liabilities and the non-current portion of lease liabilities are included in Other current liabilities and Other liabilities, respectively, in our condensed consolidated balance sheets.

Equity-based Compensation

Equity-based compensation expense is recognized over the requisite service periods on awards ultimately expected to vest. We apply estimated forfeiture rates at the time of grant and revise, if necessary, in subsequent periods if actual forfeitures differ from those estimates. For performance-based stock options and restricted stock, we record compensation expense over the estimated service period once the achievement of the performance-based milestone is considered probable. We recorded equity-based compensation expense of $0.9 million and $1.2 million for the three months ended March 31, 2021 and 2020,
11


respectively. All equity-based compensation expense was related to option awards, and substantially all of the expense was included in General and administrative expenses for the periods presented.

Net Loss per Share

Basic net loss per common share is calculated based on the net loss attributable to common stockholders divided by the weighted average number of shares outstanding for the period. The calculation of diluted net loss per common share excludes the potential conversion of all dilutive convertible securities, such as convertible preferred stock, using the if-converted method, and the potential exercise or vesting of other dilutive securities, such as stock awards and warrants, using the treasury stock method, as their inclusion would have an anti-dilutive effect.

Common shares underlying stock awards, warrants and convertible preferred stock aggregating to 69.0 million shares and 29.6 million shares for the three months ended March 31, 2021 and 2020, respectively, were excluded from the calculation of diluted net loss per share because they were anti-dilutive.

Recently Adopted Accounting Standards

In June 2016, the FASB issued new accounting guidance which amends the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other financial instruments, the standard requires the use of a new forward-looking "expected credit loss" model that generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, the standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. For smaller reporting companies, the guidance is effective for fiscal years beginning after December 15, 2022, including interim periods therein. We early adopted this accounting guidance as of January 1, 2021. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

In August 2020, the FASB issued new accounting guidance for convertible instruments which eliminates two of the three models in ASC 470-20 that require separate accounting for embedded conversion features. Separate accounting is still required in certain cases. For smaller reporting companies, the guidance is effective for fiscal years beginning after December 15, 2023, including interim periods therein. Early adoption is permitted in fiscal years beginning after December 15, 2020. We early adopted this guidance as of January 1, 2021. There was no impact on our condensed consolidated financial statements as of and for the period ended March 31, 2021. In April 2021, as discussed in “Note 6. Subsequent Events”, we completed the public offering of our common stock and our Series X1 Preferred Stock. We expect no beneficial conversion feature to be recognized on Series X1 Preferred Stock upon issuance as a result of adopting this guidance.

Recently Issued Accounting Standards

In October 2020, the FASB issued new accounting guidance to provide incremental improvements to its Accounting Standards Codification on various topics. Such improvements include conforming amendments, clarifications to guidance, simplifications to wording or structure of guidance and other minor changes. For smaller reporting companies, the guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early adoption is permitted for any annual or interim period for which financial statements have not been issued. The codification amendments do not change GAAP, therefore we do not expect the adoption of this accounting guidance to have a material impact on our condensed consolidated financial statements.

Although there were several other new accounting pronouncements issued or proposed by the FASB, we do not believe any of these have had or will have a material impact on our condensed consolidated financial statements.

2. Other Assets

Other assets consisted of the following (in thousands):
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 March 31, 2021December 31, 2020
Right-of-use assets$1,803 $2,149 
Clinical trial deposits770 770 
Refundable security deposit194 194 
Other 21 84 
Other assets $2,788 $3,197 


3. Other Current Liabilities

Other current liabilities consisted of the following (in thousands):
 March 31, 2021December 31, 2020
Operating lease liabilities, current portion$2,278 $2,194 
End-of-facility lender fee (1)1,440 1,440 
Other current obligations121 121 
Total other liabilities$3,839 $3,755 

(1) End-of-facility lender fee represents an amount payable to Silicon Valley Bank upon repayment of our secured term loan due in November 2021. See Part II, Item 8, “Notes to Consolidated Financial Statements, Note 7. Long-term Debt” of our Annual Report on Form 10-K for the year ended December 31, 2020 for additional information.


4. Equity Transactions

At-The-Market Equity Offering

In January 2021, we entered into an Open Market Sale Agreement℠ with Jefferies LLC, or the Sale Agreement, to sell shares of our common stock having aggregate sales proceeds of up to $50.0 million, from time to time, through an “at the market” equity offering program under which Jefferies will act as sales agent.

Under the Sale Agreement, we will set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitation on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made. Subject to the terms and conditions of the Sale Agreement, Jefferies may sell the shares by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, including sales made directly on The Nasdaq Capital Market or on any other existing trading market for the common stock. Jefferies will use commercially reasonable efforts in conducting such sales activities consistent with its normal trading and sales practices, applicable state and federal laws, rules and regulations and the rules of The Nasdaq Stock Market LLC.

We and Jefferies may each terminate the Sale Agreement at any time upon ten trading days’ prior notice. We may also sell shares to Jefferies acting as principal for Jefferies’ own account. The compensation to Jefferies for sales of our common stock will be an amount equal to 3% of the gross proceeds of any shares of our common stock sold under the Sale Agreement. We have no obligation to sell any shares under the Sale Agreement, and may at any time suspend solicitation and offers under the Sale Agreement.

For the three months ended March 31, 2021, we sold 0.9 million shares of our common stock for net proceeds of approximately $2.8 million under the Sale Agreement.

Public offering of Common Stock and Series X1 Preferred Stock

In April 2021, we completed the public offering of our common stock and our Series X1 Preferred Stock. See “Note 6. Subsequent Events” for further details.

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5. Contingencies

In April 2009, December 2009 and June 2010, the Italian Tax Authority, or the ITA, issued notices of assessment to CTI - Sede Secondaria, or CTI (Europe), based on the ITA’s audit of CTI (Europe)’s value added tax, or VAT, returns for the years 2003, 2005, 2006 and 2007, or, collectively, the VAT Assessments. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-Italian clients for services performed by CTI (Europe). The assessments, including interest and penalties, for the years 2003, 2006 and 2007 are €0.6 million, €2.8 million and €0.9 million, respectively. We believe that the services invoiced were non-VAT taxable consultancy services and that the VAT returns are correct as originally filed. We have appealed all of the assessments and are defending ourselves against the assessments both on procedural grounds and on the merits of the cases, although we can make no assurances regarding the ultimate outcome of these cases. There have been no changes to the status of the legal proceedings surrounding each respective VAT year return at issue since the filing of our Annual Report on Form 10-K for the year ended December 31, 2020. See Part II, Item 8, “Notes to Consolidated Financial Statements, Note 14. Commitments and Contingencies” of our Annual Report on Form 10-K for the year ended December 31, 2020 for additional information.

If the final decision of the Italian Supreme Court is unfavorable to us, or if, in the interim, the ITA were to make a demand for payment and we were to be unsuccessful in suspending collection efforts, we may be requested to pay the ITA an amount up to €4.3 million, or approximately $5.1 million converted using the currency exchange rate as of March 31, 2021, including interest and penalties for the period lapsed between the date in which the assessments were issued and the date of effective payment. We have not recorded this contingent liability in the financial statements as we do not believe the potential payment to the ITA is probable at this time.


6. Subsequent Events

On April 6, 2021, we completed the public offering of our common stock and our Series X1 Preferred Stock whereby we issued 14,260,800 shares of our common stock, par value $0.001 per share, at a public offering price of $2.50 per share, and 600 shares of our Series X1 Preferred Stock, par value $0.001 per share, at a public offering price of $25,000 per share. In addition, we granted the underwriters a 30-day option to purchase up to additional 2,139,120 shares of our common stock on the same terms and conditions, which was exercised in full in April 2021. The net proceeds to us, after deducting underwriting discounts and offering expenses, were approximately $53.5 million.

Each share of Series X1 Preferred Stock is convertible into 10,000 shares of our common stock at a conversion price of $2.50 per share of common stock, at the option of the holder at any time, subject to certain limitations, including that a holder of Series X1 Preferred Stock is prohibited from converting Series X1 Preferred Stock into common stock if, as a result of such conversion, such holder, together with its affiliates, would own more than 9.99% of the total number of shares of our common stock issued and outstanding immediately after giving effect to such conversion.

Shares of Series X1 Preferred Stock generally have no voting rights, except as otherwise expressly provided in the Certificate of Designation of Preferences, Rights and Limitations of Series X1 Convertible Preferred Stock, or Certificate of Designation, or as otherwise required by law. However, as long as any shares of Series X1 Preferred Stock are outstanding, we shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of Series X1 Preferred Stock, (i) alter or change adversely the powers, preferences or rights given to the Series X1 Preferred Stock or alter or amend this Certificate of Designation, amend or repeal any provision of, or add any provision to, the Certificate of Incorporation or bylaws of the Company, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of preferred stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series X1 Preferred Stock, regardless of whether any of the foregoing actions shall be by means of amendment to the Certificate of Incorporation or by merger, consolidation or otherwise, (ii) issue further shares of Series X1 Preferred Stock or increase or decrease (other than by conversion) the number of authorized shares of Series X1 Preferred Stock, or (iii) enter into any agreement with respect to any of the foregoing.

In the event of our liquidation, dissolution or winding up, holders of Series X1 Preferred Stock will participate pari passu with any distribution of proceeds to holders of our common stock. Holders of Series X1 Preferred Stock are entitled to receive dividends on shares of Series X1 Preferred Stock equal (on an as-converted to common stock basis, without regard to the Beneficial Ownership Limitation (as defined in the Certificate of Designation)) to and in the same form as dividends actually paid on shares of common stock, plus an additional amount equal to any dividends declared but unpaid on such shares, before
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any payments shall be made or any assets distributed to holders of any class of Junior Securities (as defined in the Certificate of Designation).


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical fact in this Quarterly Report are forward-looking statements. In some cases, forward-looking statements can be identified by terms such as “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should” or “will” or the negative thereof, variations thereof and similar expressions. These forward-looking statements include, but are not limited to, statements about:

our expectations regarding sufficiency of cash resources, cash expenditures, sources of cash flows and other projections, product manufacturing and sales, research and development expenses, general and administrative expenses and additional losses;
our ability to obtain funding for our operations;
the timing of, and our ability to develop, commercialize, and obtain regulatory approval of pacritinib, including priority review and potential accelerated approval of pacritinib as a treatment for myelofibrosis patients with severe thrombocytopenia, and other development programs we may pursue in the future;
the design of our clinical trials and anticipated enrollment, and the progress and potential of pacritinib and other development programs we may pursue in the future;
the safety, effectiveness and potential benefits and indications of pacritinib and any other product candidates we may develop in the future;
the timing of and results from clinical trials and pre-clinical development activities, including those related to pacritinib and any other product candidates we may develop in the future;
our ability to advance product candidates, including pacritinib and any other product candidates we may develop in the future, into, and the successful completion of, clinical trials;
our ability to achieve profitability, including our ability to effectively implement cost reduction strategies and realize anticipated cost savings from those efforts;
our expectations regarding federal, state and foreign regulatory requirements;
the rate and degree of market acceptance and clinical utility of pacritinib or any other product candidates we may develop in the future;
our and our collaborators’ ability to obtain and maintain regulatory approvals for pacritinib or any other product candidates we may develop in the future, and the timing of such approvals;
our ability to maintain and establish collaborations;
our expectations regarding market risk, including interest rate changes and foreign currency fluctuations;
our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
the impact of government laws and regulations;
our ability to negotiate, integrate, and implement collaborations, acquisitions and other strategic transactions;
our ability to engage and retain the employees required to advance our development activities and grow our business;
developments relating to our competitors and our industry, including the success of competing therapies that are or become available;
our expectations regarding business disruptions and related risks resulting from the ongoing worldwide coronavirus pandemic known as COVID-19; and
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other risks and uncertainties, including those listed under the heading Risk Factors and in other filings we periodically make with the U.S. Securities and Exchange Commission, or the SEC.

Such statements are based on management’s current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially from those set forth in the forward-looking statements. There can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. We urge you to carefully review the disclosures we make concerning risks and other factors that may affect our business and operating results and cause them to differ materially from our current expectations, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q and those made under Part I, Item 1, “Business,” Part I, Item 1A, “Risk Factors,” Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and any risk factors contained in our subsequent Quarterly Reports on Form 10-Q that we file with the SEC.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

We do not intend to update any of the forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or changes in our expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.

In this Quarterly Report on Form 10-Q, all references to “we,” “us,” “our,” the “Company” and “CTI” mean CTI BioPharma Corp. and our subsidiaries, except where it is otherwise made clear.

OVERVIEW

We are a biopharmaceutical company focused on the acquisition, development and commercialization of novel targeted therapies for blood-related cancers that offer a unique benefit to patients and their healthcare providers. Our goal is to build a profitable company by generating income from products we develop and commercialize, either alone or with partners. We concentrate our efforts on treatments that target blood-related cancers where there is an unmet medical need. In particular, we are focused on evaluating pacritinib, our sole product candidate currently in active development, for the treatment of adult patients with myelofibrosis. In addition, in response to the COVID-19 pandemic, we started developing pacritinib for use in hospitalized patients with severe COVID-19.

Pacritinib is an investigational oral kinase inhibitor with specificity for JAK2, IRAK1 and CSF1R. The JAK family of enzymes is a central component in signal transduction pathways, which are critical to normal blood cell growth and development, as well as inflammatory cytokine expression and immune responses. Mutations in these kinases have been shown to be directly related to the development of a variety of blood-related cancers, including myeloproliferative neoplasms, leukemia and lymphoma. In addition to myelofibrosis, the kinase profile of pacritinib suggests its potential therapeutic utility in conditions such as acute myeloid leukemia, or AML, myelodysplastic syndrome, or MDS, chronic myelomonocytic leukemia, or CMML, prevention of graft versus host disease, or GvHD, and chronic lymphocytic leukemia, or CLL, due to its inhibition of JAK2, IRAK1 and CSF1R. We believe pacritinib has the potential to be delivered as a single agent or in combination therapy regimens.

In September 2020, we reached an agreement with the U.S. Food and Drug Administration, or FDA, to submit a New Drug Application, or NDA, for the potential accelerated approval of pacritinib as a treatment for myelofibrosis patients with severe thrombocytopenia, and in March 2021 we completed our rolling NDA submission. The NDA is based on the available data from our completed Phase 3 PERSIST-1 and PERSIST-2 trials and the Phase 2 PAC203 dose-ranging trial. If the NDA is successful, the PACIFICA Phase 3 trial will be completed as a post-approval commitment.

PACIFICA Phase 3 Trial

In January 2020, we received the FDA's preliminary comments from a Type A meeting request and reached an agreement on the final design changes to our PACIFICA pivotal Phase 3 clinical trial, including changes to the statistical analysis plan that would allow for an accelerated approval pathway for pacritinib. We have amended our PACIFICA Phase 3
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trial protocol, to allow for the primary analysis of Spleen Volume Reduction, or SVR, rate on the first 168 patients, with an end-of-study analysis of Total Symptom Score, or TSS, and Overall Survival, or OS, following the full enrollment of 348 patients. Enrollment in this trial has recently improved, in part due to the abatement of the COVID-19 pandemic, and we expect to report top-line data in 2023.

PRE-VENT Phase 3 Trial

In April 2020, in response to the public health crisis due to the global COVID-19 pandemic, we initiated PRE-VENT, a Phase 3 trial evaluating pacritinib in hospitalized patients with severe COVID-19. PRE-VENT, a randomized, double-blind, placebo-controlled multicenter study will compare pacritinib plus Standard of Care, or SOC, versus placebo plus SOC in hospitalized patients with severe COVID-19, including those with a current or prior diagnosis of cancer. The primary endpoint of the trial will assess the proportion of patients who progress to invasive mechanical ventilation and/or extracorporeal membrane oxygenation or die by Day 28. We commenced enrollment of PRE-VENT in the second quarter of 2020 in the United States and currently anticipate the reporting of interim analysis from the PRE-VENT trial in the third quarter of 2021.

Patients enrolled in PRE-VENT will be randomized 1:1 to receive pacritinib (400 mg once on Day 1, then 200 mg twice daily from Day 2 to Day 14) plus SOC or placebo plus SOC. Assigned treatment will continue for up to Day 14 or until the patient experiences intolerable adverse events, withdraws consent, initiates another investigational therapy or until the study is terminated. Assigned therapy may be given for an additional 7 days (for a total of 21 days) at the discretion of the investigator and with medical monitor approval. In the event of hospital discharge, patients will complete treatment with the assigned therapy as an outpatient.

As a JAK2, IRAK1 and CSF1R inhibitor, pacritinib may ameliorate the effects of cytokine storm, a pathological immune reaction that can be triggered by viral infection and can lead to serious complications, including acute respiratory distress syndrome, or ARDS. Multiple inflammatory cytokines are upregulated in patients with severe COVID-19, including IL-1 and IL-6, and some patients have evidence of over-active macrophage activation. As a JAK2/IRAK1 inhibitor, pacritinib may ameliorate the effects of cytokine storm via inhibition of IL-6 and IL-1 signaling. Furthermore, as a CSF1R inhibitor, pacritinib may mitigate effects of macrophage activation syndrome.

aGvHD Phase 1 Trial

In March 2021, results were published from a Phase 1 study conducted by Joseph Pidala, MD, PhD (Moffitt Cancer Center), and Brian C. Betts, MD (Masonic Cancer Center at the University of Minnesota), evaluating pacritinib, an investigational oral kinase inhibitor with specificity for JAK2, for the prevention of acute graft-versus-host disease (aGvHD). The results demonstrated that pacritinib, combined with sirolimus and low-dose tacrolimus (PAC/SIR/TAC), has a promising safety profile and exhibits preliminary therapeutic activity in preventing aGvHD after allogeneic hematopoietic cell transplantation from HLA matched related and unrelated donors. The Phase 2 portion of the trial, designed to evaluate the therapeutic effect of pacritinib in combination with sirolimus and low-dose tacrolimus for aGvHD prevention, is ongoing.

We face numerous risks in connection with clinical development of pacritinib generally and with respect to the potentially expedited FDA regulatory approval process specifically. For more information, see Item 1A, “Risk Factors – Risks Related to the Development, Clinical Testing and Regulatory Approval of Our Product Candidates.”

We have historically funded our operations through the sale of equity securities, funding received from our licensees and collaborators and debt financing. We do not expect to achieve or sustain profitability for the foreseeable future. We had a net loss of $17.3 million for the three months ended March 31, 2021 and an accumulated deficit of $2.3 billion as of March 31, 2021, primarily from expenses incurred in connection with our research programs and from general and administrative costs associated with our operations. We believe that our cash, cash equivalents and short-term investments, together with the net proceeds of $53.5 million received upon completion of the public offering of our common stock and our Series X1 Preferred Stock in April 2021, will be sufficient to fund our projected operations into the fourth quarter of 2021. This raises substantial doubt about our ability to continue as a going concern. See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on our assessment.

We have incurred significant operating losses to date and expect to continue to incur significant expenses and operating losses for at least the next 12 to 24 months. We anticipate that our expenses will increase as we:

prepare for and execute the commercialization of pacritinib;

continue our research and clinical development of pacritinib;
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seek regulatory and marketing approvals for pacritinib if we successfully complete the remainder of its anticipated clinical development paths; and

maintain, protect and expand our intellectual property portfolio.

Factors Affecting Performance

Research and Development Activities

We will need to commit significant time and resources to develop our current and any future product candidates. Our sole product candidate currently in active development, pacritinib, is currently in clinical development in two clinical trial pathways. Many drugs in human clinical trials fail to demonstrate the desired safety and efficacy characteristics. We are unable to provide the nature, timing and estimated costs of the efforts necessary to complete the development of pacritinib because, among other reasons, we cannot predict with any certainty the pace of patient enrollment of our clinical trials, which is a function of many factors, including the availability and proximity of patients with the relevant condition and the availability of the compounds for use in the applicable trials. We rely on third parties to conduct clinical trials, which may result in delays or failure to complete trials if the third parties fail to perform or meet applicable standards.

Additionally, we continue to evaluate and manage the impact of the global COVID-19 pandemic on our operations and the conduct of our clinical trials, including considerations of the vulnerable nature of the patient population participating in our trials, reduced or halted activities at our clinical trial sites, and an increase in fatalities or other adverse events due to medical problems related to the COVID-19 pandemic and the benefits of continued patient access to pacritinib. Even after a clinical trial is enrolled, preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval and advancement of this compound through the development process.

Regulatory agencies, including the FDA and EMA, regulate many aspects of a product candidate’s life cycle, including research and development and preclinical and clinical testing. We or regulatory authorities may suspend clinical trials at any time on the basis that the participants are being exposed to unacceptable health risks. In addition, based on our interactions with regulatory authorities, we have sought, and may in the future seek, changes to the protocol of clinical trials if we believe such changes may enhance the probability of approval or are necessary to protect patient safety. Such changes, if any, would impact the size, timing and cost of clinical development. Even if a product candidate progresses successfully through initial human testing in clinical trials, it may fail in later stages of development, including as a result of a failure to adequately demonstrate safety or efficacy to the satisfaction of applicable regulatory authorities. A number of companies in the pharmaceutical industry, including us, have suffered significant setbacks in advanced clinical trials, even after reporting promising results in earlier trials. For these reasons, among others, we cannot estimate the date on which clinical development of any product candidate will be completed, if ever, or when we will be able to begin commercializing pacritinib to generate material net cash inflows. In order to generate revenue from any of these compounds, any product candidate needs to be developed to a stage that will enable us to commercialize, sell or license related marketing rights to third parties.

We may also enter into collaboration agreements for the development and commercialization of our product candidates. We cannot control the amount and timing of resources our collaborators devote to product candidates, which may also result in delays in the development or marketing of products. Because of these risks and uncertainties, we cannot accurately predict when or whether we will successfully complete the development of any of our product candidates or the ultimate product development costs.

The risks and uncertainties associated with completing development on schedule and the consequences to operations, financial position and liquidity if the project is not timely completed are discussed in more detail in our risk factors, which can be found in Part II, Item 1A, “Risk Factors” of this report.

Financial Summary

Loss from operations was $17.1 million and $11.9 million for the three months ended March 31, 2021 and 2020, respectively, and net loss for the three months ended March 31, 2021 and 2020 was $17.3 million and $12.2 million, respectively. Results of operations may vary substantially from year to year and from quarter to quarter and, as a result, you should not rely on them as being indicative of our future performance.

As of March 31, 2021, our cash, cash equivalents and short-term investments were $37.2 million.

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RESULTS OF OPERATIONS

Three months ended March 31, 2021 and 2020

Operating costs and expenses

Research and development expenses. Our research and development expenses for compounds under development and preclinical development were as follows (in thousands):
 Three Months Ended
March 31,
20212020
Pacritinib$7,969 $1,735 
Unallocated operating expenses1,475 1,529 
Total research and development expenses$9,444 $3,264 
 
Costs for our compounds include external direct expenses such as principal investigator fees, charges from contract research organizations, or CROs, and contract manufacturing fees incurred for preclinical, clinical, manufacturing and regulatory activities associated with preparing the compounds for submissions of NDAs or similar regulatory filings to the FDA, the EMA or other regulatory agencies outside the United States and Europe, as well as upfront license fees for acquired technology. Operating expenses include our personnel costs and an allocation of occupancy, depreciation and amortization expenses associated with developing our compounds. We are not able to capture the total cost of each compound because we do not allocate operating expenses to all of our compounds. Cumulative to date external direct costs incurred by us as of March 31, 2021 were $191.4 million for pacritinib (excluding costs for pacritinib prior to our acquisition of certain assets from S*BIO in May 2012 and $29.1 million of in-process research and development expenses associated with the acquisition of certain assets from S*BIO).

Research and development expenses increased to $9.4 million for the three months ended March 31, 2021 compared to $3.3 million for the same period in 2020. The increase between the three-month periods ended March 31, 2021 and 2020 was primarily attributable to a $1.4 million increase in costs related to the PACIFICA Phase 3 trial, a $3.2 million increase in regulatory and other costs, which include activities related to rolling NDA submission for pacritinib, and a $1.5 million increase in costs related to the PRE-VENT Phase 3 trial.

General and administrative expenses. General and administrative expenses were $7.6 million for the three months ended March 31, 2021 compared to $4.5 million for the same period in 2020. Substantially all of the increase between the three-month periods ended March 31, 2021 and 2020 was attributable to activities associated with preparation for the potential commercialization of pacritinib, which included, among other things, additional staffing, professional services, legal and consulting, and infrastructure.

Other operating expenses. Other operating expense of $4.2 million for the three months ended March 31, 2020 relates to a full provision for the uncollectability of our Italian VAT receivables and deposit. There was no such expense for the three months ended March 31, 2021.

Non-operating income and expenses

Interest income. Interest income was $11,000 and $0.1 million for the three months ended March 31, 2021 and 2020, respectively. Interest income was related to our short-term investments and cash equivalent securities. The change was primarily related to decreases in cash equivalent securities and interest rates between periods.

Interest expense. Interest expense was $0.1 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively. Interest expense was related to our secured term loan. The change between periods was primarily related to a lower average loan principal balance outstanding.

Amortization of debt discount and issuance costs. Amortization of debt discount and issuance costs of $0.1 million for each of the three months ended March 31, 2021 and 2020 was related to our secured term loan.

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LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

We have funded our operations from proceeds from the sales and the issuance of equity securities, payments pursuant to license and collaboration agreements and the incurrence of debt. As of March 31, 2021, we had $37.2 million in cash, cash equivalents and short-term investments.

Public Offering of Common Stock and Series X1 Preferred Stock. In April 2021, we issued 16.4 million shares of our common stock at a $2.50 per share price and 600 shares of our Series X1 Preferred Stock at a $25,000 per share price, collecting net proceeds of approximately $53.5 million upon completion of the public offering.

Rights Offering. In March 2020, we issued 15.7 million shares of our common stock at a $1.00 per share price and 4,429 shares of our Series X Preferred Stock at a $10,000 per share price, collecting net proceeds of $59.1 million.

At-The-Market Equity Offering. In November 2019, we entered into an Open Sale Agreement with Jefferies LLC to sell shares of our common stock, having aggregate sales proceeds of up to $15.0 million, from time to time, through an “at the
market” equity offering program under which Jefferies acted as sales agent. In November and December 2020, we sold 2.1 million shares of our common stock for net proceeds of approximately $7.2 million after compensation to Jefferies. In January 2021 we entered into a new Open Sale Agreement with Jefferies LLC to sell shares of our common stock having aggregate sales proceeds of up to $50.0 million. We sold 0.9 million shares of our common stock for net proceeds of approximately $2.8 million during the first quarter of 2021.

Loan Agreement. In November 2017, we entered into a Loan and Security Agreement with Silicon Valley Bank, or SVB. As of March 31, 2021, we had an outstanding principal balance under our secured term loan agreement of $3.6 million. We are required to pay interest plus principal payments in the approximate amount of $0.5 million per month until November 1, 2021, with the final principal plus interest payment totaling approximately $0.4 million as well as a back-end fee of $1.4 million. These borrowings are secured by a first priority security interest on substantially all of our personal property except our intellectual property and subject to certain other exceptions. In addition, the secured term loan agreement requires us to comply with restrictive covenants, including those that limit our operating flexibility and ability to borrow additional funds. A failure to make a required loan payment or an uncured covenant breach could lead to an event of default, and in such case, all amounts then outstanding may become due and payable immediately.

Historical Cash Flows

Net cash used in operating activities. Net cash used in operating activities increased to $16.8 million during the three months ended March 31, 2021 compared to $10.4 million for the same period in 2020. The increase was primarily due to increases in research and development and general and administrative expenses associated with continued development and preparation for the potential commercialization of pacritinib.

Net cash provided by investing activities. Net cash provided by investing activities was $8.0 million and $2.5 million during the three months ended March 31, 2021 and 2020, respectively. The change was due to the amounts of short-term investments matured between periods.

Net cash provided by financing activities. Net cash provided by financing activities was $1.5 million and $57.9 million during the three months ended March 31, 2021 and 2020, respectively. The change was primarily attributable to the net proceeds from the completion of our rights offering in March 2020.

In October 2016, we resumed primary responsibility for the development and commercialization of pacritinib as a result of the termination of the Pacritinib License Agreement. We currently have no commitments for additional financing to fund the development and commercial launch of pacritinib, and we may need to seek additional funding. The development and commercialization of a major product candidate like pacritinib without a collaborative partner will require a substantial amount of our time and financial resources, and as a result, we could experience a decrease in our liquidity and a new demand on our capital resources. For additional information relating to the Pacritinib License Agreement, see Part I, Item 1, “Business – License Agreements – Baxalta” of our Annual Report on Form 10-K for the year ended December 31, 2020.


Capital Resources

21


We have prepared our condensed consolidated financial statements assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. However, we believe that, as of the date of the filing of this Quarterly Report on Form 10-Q, our present financial resources will be sufficient to fund our operations into the fourth quarter of 2021. This raises substantial doubt about our ability to continue as a going concern and we will need to raise substantial additional capital in the near term in order to fund our operations through and beyond the fourth quarter of 2021 and to continue as a going concern thereafter. See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on our assessment. Further, we have incurred net losses since inception and expect to generate losses for the foreseeable future, primarily due to research and development costs for pacritinib. Because of our reacquisition of worldwide rights for pacritinib, we are no longer eligible to receive cost sharing or milestone payments for pacritinib’s development from Baxalta, and losses related to research and development for pacritinib have increased. We have historically funded our operations through equity financings, borrowings and funds obtained under product collaborations, any or all of which may not be available to us in the future. As of March 31, 2021, our available cash, cash equivalents and short-term investments totaled $37.2 million, and we had an outstanding principal balance under our secured term loan agreement of $3.6 million.

Financial resource forecasts are subject to change as a result of a variety of risks and uncertainties. Changes in manufacturing, developments in and expenses associated with our clinical trials and the other factors identified under “Capital Requirements” below may consume capital resources earlier than planned. Due to these and other factors, the foregoing forecast for the period for which we will have sufficient resources to fund our operations may be inaccurate.

Capital Requirements

We will need to acquire additional funds in order to develop our business and continue the development of pacritinib. We may seek to raise such capital through public or private equity financings, partnerships, collaborations, joint ventures, disposition of assets, debt financings or restructurings, bank borrowings or other sources of financing. However, we have a limited number of authorized shares of common stock available for issuance and additional funding may not be available on favorable terms or at all. If additional funds are raised by issuing equity securities, substantial dilution to existing stockholders may result. If we fail to obtain additional capital when needed, our ability to operate as a going concern will be harmed, and we may be required to delay, scale back or eliminate some or all of our research and development programs and/or reduce our general and administrative expenses, be unable to attract and retain highly qualified personnel, be unable to obtain and maintain contracts necessary to continue our operations and at affordable rates with competitive terms, refrain from making our contractually required payments when due (including debt payments) and/or be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection. Our future capital requirements will depend on many factors, including:

disruptions or other delays to our business and clinical trials resulting from the ongoing worldwide COVID-19 pandemic;

developments in and expenses associated with our research and development activities;

changes in manufacturing;

our clinical development plans and any changes that we may initiate or that may be requested by the FDA or other regulators;

regulatory approval developments;

our ability to generate sales of any approved product;

our ability to execute appropriate collaborations for development and commercialization activities;

our ability to reach milestones triggering payments under certain of our contractual arrangements;

acquisitions of compounds or other assets;

litigation and other disputes;

competitive market developments; and

other unplanned business developments.
22



LICENSE AGREEMENTS AND MILESTONE ACTIVITIES

For information regarding our license agreements and milestone activities, please see Part I, Item 1, “Business – License Agreements” of our Annual Report on Form 10-K for the year ended December 31, 2020.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures in the preparation of our condensed consolidated financial statements and accompanying notes. Our critical accounting policies are those that significantly impact our financial condition and results of operations and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Because of this uncertainty, actual results may vary from these estimates. For a discussion of our critical accounting estimates, please see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to our critical accounting policies and estimates discussed therein.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, we are not required to provide the information requested by this item pursuant to Item 305(e) of Regulation S-K.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Our management, under the supervision and with the participation of our President and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our President and Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes to our internal control over financial reporting that occurred during the first fiscal quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
23


PART II – OTHER INFORMATION

Item 1. Legal Proceedings

See Part I, Item 1, “Notes to Condensed Consolidated Financial Statements, Note 5. Contingencies” of this report for information regarding material pending legal proceedings.

Item 1A. Risk Factors

Our business is subject to various risks, including those described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes from the risk factors disclosed in Item 1A of our Annual Report on Form 10-K.

This report contains forward-looking statements that involve risks and uncertainties. The occurrence of any of the risks described in our Annual Report on Form 10-K could materially adversely affect our business, financial condition, liquidity, operating results or prospects and the trading price of our securities. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial may also harm our business, financial condition, operating results and prospects and the trading price of our securities.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities
None.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
None.

24


Item 6. Exhibits
Incorporated by Reference
Exhibit NumberExhibit DescriptionFormFile No.Exhibit NumberFiling Date
3.18-K000-283863.1April 6, 2021
10.1*Filed herewith
31.1Filed herewith.
31.2Filed herewith.
32Furnished herewith.
101The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Loss, (iv) Condensed Consolidated Statements of Changes in Stockholders' Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104Cover page interactive data file (formatted in Inline XBRL and contained in Exhibit 101).
* Indicates a management contract or compensatory plan.
25


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized:
 
  CTI BIOPHARMA CORP.
  (Registrant)
     
Dated: May 6, 2021 By: /s/ Adam R. Craig
    Adam R. Craig
    President, Chief Executive Officer and Interim Chief Medical Officer
     
Dated: May 6, 2021 By: /s/ David H. Kirske
    David H. Kirske
    Chief Financial Officer
    

26
Document

Exhibit 10.1

CTI BIOPHARMA CORP.

DIRECTOR COMPENSATION POLICY

Effective March 10, 2021


Directors of CTI BioPharma Corp., a Delaware corporation (the “Company”), who are not employed by the Company or one of its subsidiaries (“non-employee directors”) shall be entitled to the compensation set forth below for their service as a member of the Board of Directors (the “Board”) of the Company. Except as provided in the next sentence, this policy supersedes all prior policies or provisions of any equity plans concerning compensation of the Company’s non-employee directors effective as of the date set forth above. This policy does not, however, modify the terms of any equity or incentive award granted by the Company prior to the date set forth above. The Board has the authority to amend this policy from time to time.

Cash Compensation

Annual Retainer for Board Service

Each non-employee director shall be entitled to an annual cash retainer while serving on the Board in the amount of $45,000 (the “Annual Retainer”). The Company shall pay the Annual Retainer on a semi-annual basis, with half of the Annual Retainer to be paid on each of the first business day of January and the first business day of July.

Annual Retainer for Chairman of the Board Service

A non-employee director who serves as the Chair of the Board shall be entitled to an annual cash retainer while serving in that position in the amount of $80,000 (the “Chair of the Board Retainer”). The Company shall pay the Chair of the Board Retainer on a semi-annual basis, with half of the Chair of the Board Retainer to be paid on each of the first business day of January and the first business day of July.

Board Committee Retainers

A non-employee director who serves as a member of or as the chair of one of the following committees of the Board shall be entitled to an annual cash retainer while serving in that position in the corresponding amount set forth below (the “Committee Retainer”). For clarity, a non-employee director serving as the chair of one of the following committees of the Board shall be entitled to both the retainer for service as a member of that committee as well as the additional retainer for service as the chair of that committee.


Committee of the Board
Retainer for
Committee Member
Additional Retainer
for the Chair
Audit Committee
$9,000
$18,000
Compensation Committee
$7,000
$14,000
Nominating and Governance Committee
$4,500
$9,000


The Company shall pay the Committee Retainer on a semi-annual basis, with half of the Committee Retainer to be paid on each of the first business day of January and the first business day of July.

Equity Compensation

Initial Equity Award for New Directors

A new non-employee director shall be granted a stock option to acquire shares of Company common stock in connection with joining the Board (an “Initial Award”). The number of shares of Company common stock covered by an Initial Award



shall be 120,000 shares. An employee director who ceases to be an employee, but who remains a director, will not receive an Initial Award. Each Initial Award granted will be scheduled to vest ratably over thirty-six months, beginning on the date of grant of such Initial Award.

Annual Equity Award for Continuing Board Members

On an annual basis in connection with each annual meeting of the Company’s stockholders, each non-employee director continuing on the Board after such meeting shall be granted a stock option to acquire shares of Company common stock (an “Annual Award”). The number of shares of Company common stock covered by an Annual Award shall be 80,000 shares. Each Annual Award granted will be scheduled to vest on the date that is twelve months after the date of grant of the Annual Award or, if earlier, immediately prior to the first annual meeting of the Company’s stockholders at which one or more members of the Board are to be elected and that occurs in the calendar year after the calendar year in which the Annual Award is granted.

Provisions Applicable to All Non-Employee Director Stock Option Awards

The date of grant of each Initial Award and each Annual Award (each, an “Award”) shall be determined by the Board. Each Award shall be granted under the Company’s Amended and Restated 2017 Equity Incentive Plan or any successor equity compensation plan approved by the Company’s stockholders and in effect at the time of grant (as applicable, the “Equity Plan”). Unless otherwise provided by the Board in connection with a particular Award, each Award will be evidenced by and subject to the terms and conditions of the Company’s standard form of stock option award agreement for non-employee director stock option grants under the Equity Plan as in effect on the date of grant of the award.

The per share exercise price of each Award will equal the closing price of a share of Company common stock on the date of grant of the Award (or, if such date of grant is not a trading day, the closing price of a share of Company common stock on the last trading day immediately preceding the date of grant of the Award). Such exercise price and the number of shares subject to an Award will be subject to adjustment for stock splits and similar events as provided in the applicable stock option award agreement.

The maximum term of each Award is ten years from the date of grant of the Award, subject to earlier termination as provided in the applicable stock option award agreement.

In addition, the stock options subject to a particular Award (as well as any stock options, restricted stock awards, and restricted stock unit awards granted to the non-employee director under prior versions of this policy), to the extent then outstanding and unvested, shall become fully vested in the event of a Change in Control (as such term is defined in the applicable Equity Plan under which the award was granted or, if not so defined, as defined in the applicable award agreement) that occurs while such non-employee director is a member of the Board.

Expense Reimbursement

All non-employee directors shall be entitled to reimbursement from the Company for their reasonable travel (including airfare and ground transportation), lodging and meal expenses incident to meetings of the Board or committees thereof or in connection with other Board related business. The Company shall also reimburse directors for attendance at director continuing education programs that are relevant to their service on the Board and which attendance is pre-approved by the Chair of the Nominating and Governance Committee or Chair of the Board. In each case and unless otherwise provided by the Board, such expenses shall be in accordance with and subject to the Company’s expense reimbursement policy as presented to the Audit Committee of the Board. The Company shall make reimbursement to a non-employee director within a reasonable amount of time following submission by the non-employee director of reasonable written substantiation for the expenses (and in all events not later than the end of the year following the year in which the related expense was incurred).




* * *




Document

Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
SECURITIES EXCHANGE ACT OF 1934 RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Adam R. Craig, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of CTI BioPharma Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions) of internal control over financial reporting:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Dated: May 6, 2021 By: /s/ Adam R. Craig
    Adam R. Craig
    President, Chief Executive Officer and Interim Chief Medical Officer


Document

Exhibit 31.2
CERTIFICATION OF PRINCIPAL CHIEF FINANCIAL OFFICER
PURSUANT TO
SECURITIES EXCHANGE ACT OF 1934 RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David H. Kirske, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of CTI BioPharma Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions) of internal control over financial reporting:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Dated: May 6, 2021 By: /s/ David H. Kirske
    David H. Kirske
    Chief Financial Officer
    


Document

Exhibit 32
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Adam R. Craig, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of CTI BioPharma Corp., that, to my knowledge, the Quarterly Report of CTI BioPharma Corp. on Form 10-Q for the fiscal quarter ended March 31, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of CTI BioPharma Corp.
A signed original of this written statement required by Section 906 has been provided to CTI BioPharma Corp. and will be retained by CTI BioPharma Corp. and furnished to the Securities and Exchange Commission or its staff upon request.
 
Dated: May 6, 2021By: /s/ Adam R. Craig
   Adam R. Craig
   President, Chief Executive Officer and Interim Chief Medical Officer
 
I, David H. Kirske, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of CTI BioPharma Corp., that, to my knowledge, the Quarterly Report of CTI BioPharma Corp. on Form 10-Q for the fiscal quarter ended March 31, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of CTI BioPharma Corp.
A signed original of this written statement required by Section 906 has been provided to CTI BioPharma Corp. and will be retained by CTI BioPharma Corp. and furnished to the Securities and Exchange Commission or its staff upon request.
 
Dated: May 6, 2021By: /s/ David H. Kirske
   David H. Kirske
   Chief Financial Officer