The Zacks Analyst Blog Highlights: Sprint Nextel, Apple, AT&T, Verizon Communications and Cell Therapeutics

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Oct 10, 2011, 09:30 ET

CHICAGO, Oct. 10, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Sprint Nextel Corp. (NYSE: S), Apple Inc.'s (Nasdaq: AAPL), AT&T Inc. (NYSE: T), Verizon Communications (NYSE: VZ) and Cell Therapeutics (Nasdaq: CTIC).

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Here are highlights from Friday's Analyst Blog:

Sprint, Apple in iPhone Pact

The third-largest U.S. wireless carrier, Sprint Nextel Corp. (NYSE: S), inked a deal to sell the new version of Apple Inc.'s (Nasdaq: AAPL) iPhone from October 14.

Sprint would sell the new version — iPhone 4S — with unlimited data plan, potentially putting pressure on the two dominant players, AT&T Inc. (NYSE: T) and Verizon Communications (NYSE: VZ). Instead of unlimited offerings, both companies charge consumers according to the usage of data services.

We see the iPhone deal as a big win for Sprint, which is struggling to turn around its business after its disastrous merger with Nextel in 2005. Sprint's share has been eroding persistently in the U.S. wireless market due to its inability to keep pace with its peers in providing competitive services. The sale of the iPhone has yielded lucrative returns for both AT&T and Verizon; the former marketing it since 2007 while the latter joining the fray this February.

Sprint has nevertheless revived to a certain extent from subscriber losses and gained from improving customer service. At the end of the second quarter, Sprint had roughly 52 million customers while AT&T and Verizon had 99 million and 106 million subscribers, respectively.

The addition of the iPhone will help Sprint to gain new customers while retaining the old. This will lead to increased subscriber growth, reduced churn and higher average revenue per user. The company expects to sell 6 million iPhones this year.

However, the iPhone might put a drag on Sprint's operating margin because of high subsidy. Sprint has promised to buy about 30.5 million iPhones from Apple over the next four years and pay $500 to subsidize the product.

We currently maintain our long-term Neutral recommendation on Sprint. For the short term (1–3 months), the stock retains a Zacks #3 (Hold) Rank.

Cell Therapeutics Efforts Vindicated

Cell Therapeutics (Nasdaq: CTIC) received a major boost, and validation, when it announced that a second independent radiologic review of data from the pivotal trial PIX301 confirmed the statistical significance of response and progression endpoints of the study. PIX301 was the basis of the original new drug application (NDA) filed by Cell Therapeutics for approval of its lead pipeline candidate pixantrone.

Pixantrone has been developed for the treatment of relapsed or refractory aggressive non-Hodgkin's lymphoma (NHL) in patients who have not responded to other treatment options.

The independent radiologic review was conducted by an independent panel of three radiologists to determine the soundness of the primary endpoint of the PIX301 study. The radiologic review was recommended by the Office of New Drugs (OND) of the FDA in May 2011.

The FDA had issued a complete response letter (CRL) in April 2010 to the NDA for pixantrone based on concerns that PIX301 has not proved sufficiently the effectiveness of the drug. The FDA asked Cell Therapeutics to conduct an additional trial to determine the safety and efficacy of pixantrone.

Even though the company began an additional trial (PIX306) for pixantrone, the company appealed to the Office of New Drugs (OND) in December 2010 to reverse the FDA's decision to deny approval to pixantrone. In early May 2011, Cell Therapeutics met with the Office of New Drugs (OND) of the FDA which allowed the company to re-submit the NDA for review without the need for an additional trial. In addition to the independent radiologic review, the OND recommended that Cell Therapeutics will also require submitting new information regarding circumstances of stopping the PIX 301 trial early.

The company is looking for accelerated approval of the NDA based on data from the PIX301 study. Cell Therapeutics is hoping to re-submit the NDA on the basis of results of the radiologic review in October 2011. The Division of Oncology Drug Products (the DODP) will review the NDA within six months of the resubmission setting forth a target date in April 2012.

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