The unique goal of CEL-SCI's global Phase III head and neck cancer study in 84 sites in 24 countries is to prove that injecting its three week Multikine drug regime before mandatory surgery, radiation and/or chemotherapy must start will show at least a 10% improvement in overall survival. With planned full patient enrollment of 880 by summer in 2016 and estimated completion in 2017 a valuation reset from a recent $48 million to billions could follow. More importantly, a new era of cancer treatment could follow with significant patient benefits.
By Robert J. and Brian D. Flaherty
"We're almost at the finish line!" says CEO Geert Kersten of CEL-SCI Corporation (NYSE:CVM-0.37).Currently CEO Kersten couldn't be more optimistic. Why is this CEO smiling after all he and his cancer immunotherapy pioneer have soldiered through?
"The big opportunity in our stock is that we will be proven right on our unique Phase III cancer immunotherapy study," Kersten explains. "Our stock price is down because we had to change the original Contract Research Organization (CRO) running our Phase III research study. That CRO was acquired in a private equity roll up of multiple CROs. Key people left. Things got totally messed up. We dismissed them. Our stock price took a brutal beating and still hasn't recovered.
"But under the guidance of our replacement CRO Ergomed plc (AIM: ERGO) which took over the patient enrollment, the study is going extremely well. Two years ago there was a fear our study would never be finished. No one expresses that fear to me today. The old CRO's enrollment of newly diagnosed cancer patients was about one a month. Today Ergomed is enrolling over one patient a day. Is that not an amazing comeback?"
Over 650 patients are enrolled-74% of the full enrollment goal of 880. Future monthly enrollment should continue to average upward. Why? The rate should significantly increase in the first quarter with a number of new clinical centers being activated.
"Ergomed has invested $10 million in the Phase III study," Kersten continues. "They will get that money back plus a profit only in the form of licensing or royalties. That suggests they think we will have a successful drug. In October Ergomed upped its ante and added another $2 million." (For more details please read the section (De-risking Events!) later in this newsletter.)
Time to dream of a new era of cancer treatment! The CEO's prime focus is on CEL-SCI's Phase III Multikine drug treatment to boost the immune system of newly diagnosed head and neck cancer patients because that is the real driver for his company and his stock
"This is our message," says Kersten. "All cancer drug development happens in patients who have failed initial treatment of surgery, radiation and/or chemotherapy. What does the immune system look like then? It's debilitated, right? Do you really want to wait to boost the immune system of these people? What's left to be boosted?
"In contrast, CEL-SCI thinks the best place to start and develop a cancer immunotherapy treatment is to give it to the newly diagnosed patients who have not yet had chemotherapy, radiation and surgery. That's where we have the greatest change of success in boosting their immune system. Yet we are the only ones in the world to be doing that in our Phase III trial."
Starting with newly diagnosed cancer patients instead of sicker ones with recurrent cancer explains why CEL-SCI's Phase III is taking so much longer to obtain final results to submit to global regulators. All too often after surgery, and /or radiation and chemotherapy the cancer comes back and the patient ends up in a brutal fight for survival. So the results of most cancer immunotherapy treatments in these sicker groups come quickly because the great majority of them will die quickly.
"In our case instead of most of the patients dying within a short time period, it's about 40% to 50% dying within two to three years," Kersten explains. "Therefore, to achieve statistical significance our Phase III studies are larger and take longer."
"We have already enrolled roughly 650 newly diagnosed cancer patients which is more than most cancer studies ever enroll," says Kersten. "We are looking to enroll about 880." CEL-SCI's Phase III has 84 treatment study centers in 24 countries including 10 in Canada and the U.S., plus Israel and parts of Europe and Asia.
Research has its ups and downs but in the end it all depends upon the data- the test results. Survival rates can't be calculated and released until the 298th patient in the two main comparison groups has died, possibly in late 2017. For success CEL-SCI's study should show the patients receiving its Multikine drug treatment plus surgery, radiation and/or chemotherapy have a 10% improvement in overall survival over those in the group receiving only the current standard of care of surgery, radiation and/or chemotherapy. Phase II studies showed much higher results so 10% does not seem to be an unreachable benchmark.
Boosting the immune system up front while it's still healthy is such a logical idea. How is it possible that CEL-SCI is the only company in the world doing so in its Phase III trial? "Ethically, as a doctor, you are supposed to do no harm," says Kersten. "Therefore you cannot delay your surgery which must take place within four weeks. Unless an experimental drug can be given in that four week window, it cannot be given.
"That's where CEL-SCI's Multikine regime fits in. WE CAN THINK OF NO OTHER CANCER IMMUNOTHERAPY THAT FITS INTO THOSE THREE WEEKS BETWEEN INITIAL CANCER DIAGNOSIS AND SURGERY. ( For example, if you wanted to use the Check Point Inhibitor class of drugs PD-1 or PDL-1 which are three months of treatment you couldn't fit them in without postponing surgery.)
"We are about boosting a healthy immune system and making that first cancer treatment more successful. We started with head and cancer and from there we hope to go on to other solid cancers.
"If we're right, we may develop a new standard of care. If we increase overall survival, the gold standard for cancer approval, in the largest study ever done in head and neck cancer wouldn't we have a shot at becoming the new standard of care? Cancer patients would get our drug first. That's what this is about."
There must be a better way! Most people don't die from the original tumor. They die from the recurrence, mostly from tumor cells left over around the tumor and in the lymph nodes. Any suspected areas are cut out with wide margins. Still people have recurrence of tumors near the original location or in the lymph nodes and then they tend to die. To kill the left over tumor cells patients get radiation and chemotherapy. Yet even with radiation and chemotherapy added, the death rates are still very high.
"We postulated that if we inject our Multikine for three weeks, five days a week, at 12, 3, 6 and 9 o'clock around the tumor and near lymph nodes, we can boost the immune system while it is still relatively healthy," says Kersten. "The goal is for Multikine to clean the margins and kill the tumor micro metastases. Subsequently, surgery takes the tumor out. This combination should lead to less recurrence and increased survival. That's what we showed in Phase II and that is what we now hope to prove now in the biggest Phase III head and neck cancer study in the world."
What is Multikine? Multikine is a mixture of 14 cytokines. These are various proteins secreted by cells which carry signals to the neighboring cells. That mixture is one of the reasons why it cost CEL-SCI almost $100 million to develop and validate the manufacturing process. Everyone knows people who seem perfectly healthy who die of cancer. They took their vitamins and did exercise but they died because essentially the immune system generally cannot see cancer. That's the problem. The tumor makes itself invisible to the immune system. .
"Our Multikine drug treatment regime unmasks the cancer," says Kersten. "The immune system before surgery, chemotherapy and radiation is potentially strong enough to help win the fight against cancer. We have seen massive immune responses against the tumor in just two or three weeks. However, these are not necessary. Just eliminating the micro metastases should be helpful for reducing the cancer recurrence."
Large unmet medical need! The last approval for advanced primary head and neck cancer was half a century ago. Head and neck cancer represents 6% of all the solid cancer cases. There are about 650,000 new cases annually, 150,000 in the U.S. and EU. It's a big unmet need and it's fatal in far too many people. The FDA would like to approve something to help patients. CEL-SCI already has an orphan drug designation for advanced primary head and neck cancer from the FDA.
"Cancer immunotherapy is considered to be the future," says Kersten. "We are one of the grandfathers. We are further along than most other companies. We have already enrolled more patients than most companies in our Phase III study than most cancer immunotherapy companies have enrolled in their history.
"There will be investors who will see the discrepancy in valuation is so great between us in Phase III and the Phase I and II cancer immunotherapy companies. They will recognize the opportunity. They will see 24 global regulators should know something. The European regulators who came to inspect our manufacturing facilities should know something.
"Most investors don't know this. Half of the approval process for a biologic like Multikine is for manufacturing. It is called a BLA, a Biologics License Application. That means your manufacturing facility is a vital part of the process. Unless you have that locked up before Phase III you might have a successful study and you will still not get to the finish line.
"We spent an enormous amount of time and money on manufacturing. This is a complex biologic. Between the validation and our manufacturing facility we spent about $100 million.
"The facility has been inspected twice by the European Qualified Persons. We have top notch partners, National Institutes of Health, its related National Institute of Allergy and Infectious Diseases (NIAlD), U.S. Navy, Teva Pharmaceutical, Orient Europharma Co., Ltd. and Ergomed. We have published research in top notch places and presented at important scientific conferences. NOW WE JUST NEED TO PROVE OUR MULTIKINE DRUG TREATMENT WORKS BY FINISHING THE PHASE III TRIAL."
CEL-SCI's situation is not that different from other biotech companies in the past. Remember back when now leading companies could not get investors to buy into their stories? When they finally did, returns were massive because the stocks' entry points were so bargain-priced.
The U.S. Navy is using the exact same medicine in a study on Human Papilloma Virus (HPV). Multikine is not simply a head and neck cancer product. It is an immune system product that enables your body to fight a disease more effectively, not only head and neck cancer. In this case the target is HIV/HPV. Why can't the HIV infected patients fight HPV properly? (For more details please read the section Multikine can be used to treat viruses in co-infected HIV/HPV men and women later in this newsletter.)
BUY RECOMMENDATION: Undervalued turnaround CEL-SCI Corporation is trying to do something never done before. It's pioneering a revolutionary new way to activate, boost and strengthen the immune system to fight cancer and infectious diseases. It's unique. Most rival efforts come after not before the immune system is weakened or debilitated by surgery and radiation and/or chemotherapy.
Now nearly all of CEL-SCI's focus is on conducting and completing the largest Phase III head and neck cancer treatment trial in the world as its immunotherapy Multikine drug regimen is being administered to patients.
The primary endpoint for CEL-SCI's Phase III Trial results should take place sometime during 2017 when the 298th of 880 enrolled patients is expected to die.
Assuming the 10% improvement in patient survival is achieved, CEL-SCI would submit a marketing application to the FDA seeking regulatory approval for its revolutionary commercial cancer immunotherapy treatment regime.
Cancer immunotherapy is the hottest spot out there. Phase I and II drug trial companies are trading for billions while our Phase III sleeper doing a global study in 24 countries has a total stock market valuation of recently $48 million. That is even less than many pre- clinical trial bio-techs.
Bob's Best Buy Got Even Better! Last February we recommended CEL-SCI as a BUY in our Flaherty Special Situation Newsletter #38. We followed it up in Flaherty Financial News Newsletters #50 and #52 last August and November. Ironically, December tax selling drove the share price down after being de-risked by three major management moves plus significant improving new enrollment of newly diagnosed patients in its all-important global head and neck cancer trial. This cancer immunotherapy pioneer continues to be "the most undervalued Phase III biotech" even though management has turned their ship around.
The goal of this profile update and our existing Flaherty Special Situation is a gain of 50% to 100% over two years. We believe our CEL-SCI pick will surpass these usual targets and the stock should go on to become one of our biggest winners ever.
De-risking Events! After it had to fire its old original CRO running the Phase III trial, CEL-SCI has been plagued by investor doubts that it possessed the staying power to achieve its goals. In October three major de-risking events occurred. Combined these provide an extra new $19 million in financial resources. But their even greater value lies in what they are indicating to us about the underlying business.
Any doubts about CEL-SCI's staying power have been dispelled. Now CEL-SCI can complete the planned enrollment in its Phase III global head and neck cancer Multikine drug treatment trial.
De-Risking Event One: Ergomed plc (AIM: ERGO), the Contract Research Organization which is now carrying out most of the Phase III trial, is obviously best able to judge how the Phase III trial is going. No one else is closer. So it is highly positive that on Oct. 5 Ergomed decided to boost by $2 million its previously announced $10 million investment in co-funding the study up to $12 million. The deal was done under the same terms first put in place that calls for only a single digit royalty on potential sales.
Ergomed believes the Phase III study is going well. It wouldn't be putting extra millions of non-recourse money otherwise. Its return can only come from a successful drug gone commercial.
De-Risking Event Two: A lawyer who is also married to a lawyer who is a former crime-fighting Assistant U.S. Attorney, CEO Kersten has dedicated over two years to CEL-SCI's $50 million arbitration suit against the original CRO in charge of its Phase III study. This arbitration is scheduled to go to the final hearing (trial) in spring 2016.
Skeptics questioned if CEL-SCI could afford to fight the suit and also continue with its Phase III. Kersten felt that the big company he was suing simply wanted to grind little CEL-SCI down. Therefore, he got help from a litigation funding firm.
On Oct. 14 CEL-SCI received a commitment of up to $5 million for litigation expenses against its former CRO with a company set up by Lake Whillans litigation funding experts. This non-dilutive funding will only be paid back from proceeds of the arbitration. Any return of funds in the agreement is repayment of capital actually disbursed by Lake Whillans plus $5 million plus 15% of the net proceeds.
What if the costs go beyond $5 million? Good question! CEL-SCI's law firm has agreed to cap its costs and expenses at $5 million. That means whether it settles soon or goes to trial as scheduled this spring CEL-SCI is paying $0 in legal fees.
The best news for investors is that an expert litigation funding firm which spent months of review decided CEL-SCI had a winning case and put up to $5 million to participate in a piece of the pie.
De-Risking Event Three: Besides the above described two new sources of non-dilutive funding, CEL-SCI dispelled any remaining doubts about its financial ability to reach full enrollment of the planned Phase III study. On Oct. 28 Dawson James Securities completed a secondary offering with CEL-SCI for about $11.5 million before fees. Units comprised 17.2 million new shares and 17.2 million immediately detachable five year warrants exercisable at $0.67. Short term this new funding caused dilution. Long term it enhanced the ability to complete the Phase III trial.
Phase III Partners: If the trial is successful, positive results will be used to support applications which will be submitted to regulatory agencies in order to receive commercial marketing approvals around the world. CEL-SCI has retained key rights in lucrative North America and Europe where the biggest profits are typically booked. Teva Pharmaceuticals has marketing rights in Israel, Turkey, Serbia and Croatia and is enrolling Phase III patients in Israel. Taiwan-based Orient Europharma has nine centers in Taiwan and is setting up centers for Malaysia, Philippines and Thailand.
Ergomed, U.K. is performing spectacularly enrolling new Phase III patients. National Institutes of Health is trying to figure out what patients are most likely to benefit from Multikine therapy. Many other top medical research institutes, universities and hospitals around the world are also participating.
Orphan Drug Status: CEL-SCI's Multikine treatment regime has been granted Orphan Drug Status by the FDA. Statistically speaking, the chance of being successful with an orphan drug is somewhere around 75%. If successful then it could become standard of care first treatment for what is about 6% of the world's cancer patients. That's about 650,000 cases annually. Treatment of other solid tumors could follow.
CEL-SCI has composition of matter patents in the key countries until 2024. The FDA designated Multikine with Orphan Drug Status in the U.S. so that by law CEL-SCI only has to conduct one Phase III clinical trial.
This qualifies CEL-SCI for seven years marketing exclusivity from the date Multikine is approved or licensed. Other benefits include the possibility that the approval time could be expedited; opportunity to apply for an Orphan Grant which would provide up to $350,000 per year for up to three years and tax incentives of up to 50% of clinical investigational costs associated with Multikine's development. Historically, Orphan Drugs also have much higher chances of being approved for sale.
Multikine can be used to treat viruses in co-infected HIV/HPV men and women. Being located in the Washington, D. C. area is beneficial. Vienna, VA-based CEL-SCI has lots of government collaborations. A number of preclinical technologies have been mostly developed with government funds. "We are also working with the U.S. Navy on Multikine in a completely different disease, "says CEO Kersten. "Multikine is immunotherapy that can potentially be used against different cancer tumors as well as a virus. So the exact same product that we are using against head and neck cancers is also being used by the U.S. Navy at the San Diego Naval Base in the treatment of peri-anal warts in HIV/HPV co-infected men and women. These co-infected patients have about a 30-fold increased risk of developing anal cancer because of their compromised immune systems."
The latter indication is now a Phase I trial in conjunction with the U.S. Navy under a CRADA (Cooperative Research and Development Agreement). Under the CRADA the government pays for the clinical trials, but does not take any rights or royalties. CEL-SCI, which is responsible for the manufacturing and contributing of Multikine will retain all rights to any currently owned technology and will have the right to exclusively license any new technology development from this collaboration.
Additional clinical indications for Multikine are being investigated. A Phase I trial has been completed at the University of Maryland relating to pre-cancerous cervical (the area of the uterus that joins the vagina) dysplasia in HIV/HPV co-infected women. The disease was not a big deal 10 years ago because patients tended to die before slow growing HPV caused problems. Now with new treatment extending lives many are going to catch HPV in their lifetimes.
This is a huge problem in the HIV population because their immune systems are not strong enough to kill the HPV causing all kinds of HPV related diseases including cancer. It affects about 25% of the HIV infected population, 300,000 in the U.S. and 500,000 in Europe. There are no current effective approved therapies and CEL-SCI appears to be the only company that can deal with HPV in an HIV infected patient.
About 2% to 3% of women cannot control HPV. It requires continued cutting, scrapping or burning. It can affect ability to have children and can lead to cancer. People mistakenly think that with the new HPV vaccine HPV is no longer a problem. Alas only 32% of U.S. girls actually receive the three required shots that protect against all strains. Most guys don't get the vaccine. So HPV, the #1 sexually transmitted disease, will continue to be a serious national problem.
A Rheumatoid Arthritis Vaccine? CEL-SCI is developing its Ligand Epitope Antigen Presentation System (LEAPS). This patented T-Cell modulation process stimulates the immune system to fight bacterial, viral and parasitic infections, as well as autoimmune, allergies, transplant rejection and cancer. One program aims at developing a treatment of pandemic influenza. A $225,000 Phase I Small Business Innovation Research Grant from the National Institutes of Health is being used to develop a potential vaccine for rheumatoid arthritis with researchers from Rush University Medical Center. CEL-SCI is very interested in taking this effort into human studies.
Additionally, this rheumatoid arthritis vaccine candidate has just been accepted for a new program of technology commercialization and niche analysis managed by Foresight Science & Technology for the U.S. National Institutes of Health. This analysis will include interviews with experts and end users, recommendations for a market entry, launch tactics and revenue projections.
This LEAPS technology allows determining in advance the kind of immune response the body will make to the antigen, which is any substance foreign to the body that evokes an immune response.
Essentially LEAPS tries to redirect a person's faulty immune response into a correct one. The theory is the body would no longer attack itself. Some of the diseases where LEAPS showed animal challenge protection are H1N1, malaria, herpes, tuberculosis and breast cancer.
The odds of success favor CEL-SCI! The Immunotherapy pioneer's ongoing global Phase III head and neck cancer study is going very well and picking up momentum. The odds for success have shifted in CEL-SCI's favor. Its Phase III study will be completed. If the study results show a 10% improvement in patient survival the stock could sell in the billions. It also will be more than a stock coup. New cancer patients will benefit too. - RJF
RISKS
CEL-SCI's current momentum is riding on completing its global Phase III trial head and neck cancer test. Any unexpected toxicity or negative clinical results, especially a disappointing extension of overall survival of Multikine treatment trial patients by fewer than 10%, would be a major setback. If CEL-SCI completes patient enrollment for its Phase III in 2016 and then completes the study successfully in 2017 the future looks very bright.
COMPANY CONTACT INFORMATION
CEL-SCI Corporation
Gavin de Windt
