Cel Sci Corporation (CVM)

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ON THE MARKET: 10-bagger potential as CEL-SCI closes on final Phase III enrollment

Dr. John L. Faessel

ON THE MARKET

Commentary and Insights

Quote of the day

“The potential to control or cure even the most advanced, treatment-resistant cancers has been elusive until now.”

Drew M. Pardoll, M.D., Ph.D. *


Dr. Pardoll is Professor of Oncology, Medicine, Pathology and Molecular Biology and Genetics at the Johns Hopkins University School of Medicine. He is inaugural director of the Bloomberg ~ Kimmel Institute for Cancer Immunotherapy at Johns Hopkins. **

10-bagger potential as CEL-SCI closes on final Phase III enrollment

CEL-SCI is now over 85% of the way thru the largest Phase III head and neck cancer trial ever undertaken

CEL-SCI Corporation (CVM) NYSE MKT


Certainly, among the most advanced treatment-resistant cancers that the eminent Dr. Pardoll is referring to in the above epigraph fall within the category of head and neck cancers, where the five-year survival rate is only around 30%, a rate that unfortunately has not significantly improved across decades. Head and neck cancer is one of the most deadly classifications of cancers. Worldwide an estimated 650,000 new cases are diagnosed each year.


Enter singular and truly astonishing story about Multikine. CEL-SCI believes that it has created a fourth treatment modality—immunotherapy delivered at the site of the primary tumor before surgery, radiation, or radiation plus chemo—while the patient’s immune system is still robust, giving the patient a much increased chance of survival. It’s a known fact that after these invasive procedures the immune system is much debilitated, sometimes to a calamitous degree. No other company but CEL-SCI is pursuing this novel approach as all other cancer immunotherapy is directed at recurrent cancer in patients. This is the specific revolutionary thrust and goal of the CEL-SCI research and treatment construct. CEL-SCI hopes to use its focused immunotherapy to increase the “cure rate” and to potentially eliminate, or at least drastically reduce, the untoward and dreadful treatment modalities currently in use as the standard of care.


Let’s review the impressive progress that CEL-SCI (CVM) has made over the last several years and why in this author’s opinion the market has monumentally mispriced this company, looking also at where significant risk/reward potential exists in the company’s shares.


1.Consider:


· CEL-SCI is now over 85% of the way thru the largest Phase III head and neck cancer trial ever undertaken, with total patient enrollment now at 756 of the 880 goal, and with effectively one new patient enrolled every day

· A recent Insider Buy of 3-million shares by CEL-SCI’s CEO in addition to other buys of warrants and shares ***

· CEL-SCI has raised $75 million in the last 30 months

· CEL-SCI has received FDA Orphan Drug Status

· CEL-SCI has fortified its $50 million arbitration suit against the former CRO by securing $5 million in non-dilutive funding for litigation expenses, with the litigation now funded entirely by a third party—that is, the litigation funding firm gets NO payback unless CEL-SCI wins. A potential very large payday looms.

· Recently CEL-SCI’s CEO stated that “at stake (in the litigation) is $50 million in direct damages and over $100 million in consequential damages.” A potential very large payday looms.

· CEL-SCI received an additional $2 million in non-dilutive funding for its Phase III trial from its clinical research organization [CRO] Ergomed, whose investment now totals $12 million.

· Near-completion of an additional US NavyHPV Phase I clinical trial evaluating peri-anal wart immunotherapy in HIV/ HPV/co-infected men and women; study results due in 2016.

· CEL-SCI added a second clinical site for its Phase I clinical trial evaluating peri-anal wart immunotherapy in HIV/HPV co-infected men and women using its investigational cancer immunotherapy at the University of California, San Francisco [UCSF].

· CEL-SCI is also developing its pre-clinical L.E.A.P.S. (Ligand Epitope Antigen Presentation System) technology for the potential treatment of pandemic influenza in hospitalized patients and as a potential vaccine for the treatment of rheumatoid arthritis.

· To date (CVM) has spent over $250 million in the course of its development to achieve this “record-enrollment” milestone, currently at 756 enrollees in the Phase III trials. Note: Of these $250 million, approximately $80 million were invested in the full validation of the Multikine® manufacturing process. Plus, $25 million were invested in the Multikine® manufacturing plant near Baltimore, MD, USA.

·In development partnerships with Teva Pharmaceuticals (NYSE:TEVA), the leading generic pharmaceuticals company in North America.

2.Science Backdrop / Update


· Has passed FDA Phase I and Phase II trials.

· The successful “proof of concept” Phase II trial was identical to the current Phase III study.

· Due to Multikine’s® FDA designated Orphan Drug Status in the USA, it is currently anticipated that only one pivotal study should be necessary for Multikine’s® approval.

· Preliminary data from the ongoing clinical development program for the Multikine® investigational therapy suggests that it may have a potential role in the treatment of other cancers.

· Promising results were obtained in a Multikine® Phase I study conducted at the University of Maryland in which the investigational immunotherapy Multikine® was given to HIV/HPV co-infected women with cervical dysplasia. In these patients, visual and histological evidence of clearance of lesions was observed. Elimination of a number of HPV strains was also determined by in situ polymerase chain reaction [PCR] performed on tissue biopsy collected before and after Multikine® treatment. The study investigators reported that the study volunteers in this study all appeared to tolerate the Multikine® treatment with no reported serious adverse events.

· As regards the Phase III study end-point: for the Multikine® plus standard of care arm in the current trial, a 10% (or better) advantage in overall survival over standard of care interventions by themselves is the basis for demonstrating efficacy and establishing the use of Multikine® as a first-line therapy.

· A CEL-SCI press release from November 2015 relating to its new European patent cites as “important” a reference to Multikine’s mechanism of action, whereby the drug changes the type of T cells that enter the tumor microenvironment. This change results in the tumor becoming "visible" to the immune system, resulting in a robust and sustainable anti-tumor immune response. The ‘visible’ aspect is critical because cancer cells have the ability to ‘hide’. This ‘exposure’ of cancer cells has been the focus of the new assault on cancer in which an assortment of new drugs has proved to be successful on some cancers—a boon to the companies involved, and resulting in huge market-cap appreciations.

· The new CEL-SCI European patent describes a method for altering the CD4 / CD8 T cell ratio and the mononuclear cellular infiltrate into a tumor. The ratio of CD4 cells to CD8 cells is a measure of immune function, telling the clinician how balanced and strong one’s immune system is.

3.Epic Proportions of a ‘Mispricing’ suggest Enormous Risk / Reward Potential

· The market-cap of CEL-SCI (CVM) is a diminutive $74 million vs the hundreds of millions and billions in valuations common in the immunotherapy / immune-oncology IO sector. Detail and examples to compare just below.

4. Valuation Comparisons (as of 4-12-2016)

For an understanding of value comparisons in the bio-cancer space, consider the following:

Puma Biotechnology (PBYI) in Phase II/III trials with a market cap of $1.03 billion

Juno Therapeutics (JUNO) is in Phase I/II trials with a market cap of $4.55 billion

Celldex Therapeutics (CLDX) has a market cap of $451 million and is in Phase III

Kite Pharmaceuticals (KITE) has a market cap of $2.49 billion and is in Phase I/II

Aduro BioTech (ADRO) has a market cap of $858 million and is in Phase II

ZioPharm Oncology (ZIOP) has a market cap $1.11 billion and is Phase II

NewLnk Genetics (NLNK) has a market cap of $545 million and is in Phase III

ImmunoGen, Inc. (IMGN) in Phase I/II trials and has a market cap of $802 million

Epizyme Inc (EPZM) in Phase I/II trials and has a market-cap of $735 million

Inovio Pharmaceuticals (INO) has a market cap $670 million and is in Phase II

Northwest Biotherapeutics (NWBO) market cap of $161 million and is Phase I/II

Advaxis Inc (ADXS) has a market cap of $329 million and is in Phase II

CEL-SCI Corp (CVM)has a market cap of $74 million and is in Phase III

Evident from the number of 756 enrollees (in what is the largest head and neck cancer Phase III trial ever undertaken) is that the CEL-SCI’s Multikine® immunotherapy treatment has clear potential and that the study design meets proper medical standards and requirements. In 87 top medical facilities in 24 countries throughout the world, conceivably hundreds of physicians are suggesting to patients that they embark on CEL-SCI’s Multikine® for their head and neck cancer. The current study goal is to enroll 880 patients.

A detailed description of the study can be found here at ClinicalTrials.gov

CEL-SCI’s management believes that the Multikine® science / technology would be applicable to many cancers, however they have chosen head and neck cancer due it its pernicious and grim prognosis in which there has been so little progress over decades. Again, this is the first trial in which immunotherapy is being administered before any other traditional means of care are attempted.


I believe that the market is clearly not factoring in the very many positive developments and / or the company’s continuing and significant advancements of the Multikine® science. In sum, CEL-SCI’s (CVM) news flow and real progress has been nothing short of spectacular. Add that, given FDA approval, the market sales potential of Multikine® is clearly in the $billions when 650,000 patients annually are victims of this horrid cancer. Hence my epigraph: A ‘MisPricing’ of Epic Proportions with Enormous Risk / Reward Potential

It’s my opinion that CEL-SCI has 10-bagger potential as it closes on final Phase III enrollment.

Notable news today re Head and Neck Cancer:

The Houston Chronicle reports that the M.D. Anderson Cancer Center has found a link between Head and Neck cancer and hepatitis C.

Recall that mighty Gilead Sciences (GILD) NASDAQ $97.19, the developer of the leading medicines for viral hepatitis, with sales of $32 billion and a market-cap of $131 billion was once a penny stock selling for $0.20 …

* Dr. Pardoll is perhaps best known for discoveries related to three types of white blood cells—two kinds of T cells, the foreign substance-fighting soldiers of the immune system; and a type of dendritic cell, which acts as a messenger service for the immune system.

** The Bloomberg–Kimmel Institute for Cancer Immunotherapy was founded with two $50 million gifts—one from Michael R. Bloomberg, philanthropist, entrepreneur, and three-term mayor of New York City; the other from philanthropist Sidney Kimmel, founder of Jones Apparel Group. Notably, Michael Bloomberg has given more than $1.2 billion to the university and the Johns Hopkins Health System since graduating in 1964. An additional $25 million for the center was contributed by more than a dozen additional supporters.

*** On January 13, 2016 CEL-SCI sold 3,000,000 shares of its common stock and 3,000,000 warrants to the de Clara Trust for $1,110,000. The de Clara Trust is controlled by Geert Kersten, CEL-SCI’s CEO and a director. This acquisition by Kersten brings his total share count to almost 12 million shares.Each warrant allows Kersten to purchase one share of the Company's common stock at a price of $0.37 per share at any time on or before January 13, 2021

I have bought shares and warrants of CEL-SCI Corporation (CVM) on the open market and it is my intention to buy additional shares.

For further information see (CVM)’s web site: www.cel-sci.com

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Multikine®is the trademark that CEL-SCI has registered for this investigational therapy, and this proprietary name is subject to FDA review in connection with (CVM)’s future anticipated regulatory submission for approval. Multikine® has not been licensed or approved for sale, barter or exchange by the FDA or any other regulatory agency. Similarly, its safety or efficacy has not been established for any use. Moreover, no definitive conclusions can be drawn from the early-phase, clinical-trials data summarized in this report or elsewhere on the company’s website involving the investigational therapy Multikine® (Leukocyte Interleukin, Injection). Further research is required, and early-phase clinical trial results must be confirmed in the well-controlled, Phase III clinical trial of this investigational therapy that is currently in progress.

Investment risks

·CEL-SCI is far along in its Phase III trial, although to date it does not yet have a product approved for marketing.

·There is the inherent risk associated with all micro-cap biotech companies of the need for additional dilutive financings to fund operations.

·The cost of conducting this Phase III clinical trial and the time required to meet regulatory approval could take additional years.

·CEL-SCI may need to raise additional capital to fund these trials.

·CEL-SCI may not prevail in the upcoming arbitration and there may not be a settlement.

·CEL-SCI’s outcome as company is heavily dependent on the results of its large Phase III trial.

·CEL-SCI has other indications in early stage trials, unfavorable data in the Phase III trial could be damaging to the company.

·A new class of immune-therapies is meeting with success in clinical trials. Yet, should one of these immune-based therapies not succeed, it may cast a negative shadow on all, or similar, immune technologies, in the eyes of regulators including the FDA.

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