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http://seekingalpha.com/article/3962308-cellceutix-still-flying-radar-innovative-biotech-tremendous-upside-potential?app=1&auth_param=5jsvp:1bfql47:fe7183302bd32eb6470bf24d80570bd4#alt1

ellceutix: Still Flying Under The Radar--An Innovative Biotech With Tremendous Upside Potential
Mar. 31, 2016 12:46 PM ET| About: Cellceutix Corp. (CTIX)
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Summary

Fighting Back: Cellceutix refuting online allegations, vigorously defending itself in a lawsuit filed by the Rosen Law Firm; company has retained an ex-U.S. Attorney as lead counsel.

Strong Science: Lead drug candidates in mid- and late-stage FDA trials, having received various FDA expedited designations—QIDP, Fast Track, Orphan Drug, Rare Pediatric Disease, 505(b)(2).

Operational Snapshot: Sufficient financing in place to fund operations; continued progress in trials, pending Nasdaq uplist—all will likely further raise company profile and prospects.

Favorable Trends: Antibiotics crisis, push for fast approvals due to emphasis on precision medicine, to benefit Cellceutix—First-in-Class antibiotic (Brilacidin), First-in-Class cancer drug (Kevetrin).

Future Outlook: Cellceutix’s diversified and advanced pipeline translates into good odds of products getting to market; accomplishments, to date, bode well for sick patients and savvy investors.

Discussion Outline

Introduction: Focusing on Facts, not Fiction
Brilacidin: Lead Candidate in New Class of Antibiotics
Kevetrin: Novel p53-Activating Oncology Drug
Prurisol: An Oral Anti-Psoriasis Compound
Conclusion: Liking the Odds, Liking the Cause

I. Introduction: Focusing on Facts, not Fiction

A Shark Attack-Short-and-Distort

For Cellceutix (OTCPK:CTIX), Inc., an emerging biotech founded in 2007 and headquartered in Beverly, Massachusetts, the last seven months has largely been rough sailing.

Following an incredibly inaccurate August 2015 article written by Mako Research--that ran on and on and on (over 12,000 words long)--the company's stock price took a precipitous and immediate nosedive. It dropped an initial 40 percent, from a high of $2.57 to a low $1.52, before recovering slightly, to $1.71. Over 4 million shares changed hands that day, 18 times more than the number traded the day before, resulting in a one-day loss in Cellceutix market cap of $100 million.

Timber--Cellceutix Stock Tumbles Following "Hit Piece"



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Rosen Law Firm Piles On--Not Surprisingly

Adding insult to injury, a class action lawsuit investigation into Cellceutix was (conveniently) announced by the Rosen Law Firm within hours of the Mako article posting, relying almost exclusively on its largely fictitious and innuendo-driven content, which elsewhere was called "fraught with inaccuracies [...] incoherent, irrelevant rambling" and described as full of "striking misleading statements."

A convincing case could be made-is being made (Cellceutix retained ex--U.S. Attorney for the state of Massachusetts, Michael Sullivan, as lead counsel; read the latest Sullivan salvo, just filed on March 24), in a federal district court, as it defends itself in the aforementioned class action lawsuit filed by Rosen (see the full docket of proceedings)--that Mako, and by extension Rosen, may have engaged in libel by attacking Cellceutix's credibility by posting false information written in an inflammatory way so as to drop share price in order to cover a short position. At least that's how many investors in Cellceutix saw it and continue to see it.

Others Chip In--Toward a More Objective Assessment of Cellceutix's Potential

A recent Seeking Alpha article--"Real Offices, Real Science: Court Docs Show Article Slamming Cellceutix Misleading and False"--written along the same lines as this one, toward presenting a more fair and balanced assessment of Cellceutix, described the situation: "No matter how cleverly the Mako article was written to make it look like it was an expert opinion, the facts now show it was misleading. The court documents plainly demonstrate this. Mako did a number on the share price of CTIX and the stock hasn't recovered… yet." Echoing this sentiment, an October 26, 2015, report by Broad Street Alerts, perhaps summarized it best: "With continued support from the FDA and Dr. Krishna Menon, the stock is almost certain to rebound from the current lows and once again become an investor favorite."

What Matters Most--A Robust and Advancing Pipeline

So is there any good news amid all the bad of late? There's plenty if one focuses on the facts, and the accomplishments, of Cellceutix, rather than the fictions, the disparagements, stirred up by Mako/Rosen. Even amid troubled waters, the company has kept focus on its True North by successfully advancing in multiple FDA trials its promising portfolio of drug candidates in infectious disease/anti-inflammatories, oncology, and dermatology. Cellceutix has a number of compounds that not only may line investor pockets but, more importantly, save patients' lives.



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Multiple FDA Trials Underway--Under Multiple FDA Designations

One Cellceutix Phase III is about to begin (ABSSSI). Two Phase IIs are underway (psoriasis and oral mucositis). And one Phase I recently completed (advanced solid tumors). Additional Phase II trials have been announced and are in planning stages, most recently ulcerative proctictis. The company also has received numerous FDA expedited and other special designations across its entire platform, including: Qualified Infectious Disease Product (skin infections); Fast Track (oral mucositis); Orphan Drug (ovarian cancer); Orphan Drug (pancreatic cancer); Orphan Drug and Rare Pediatric Disease (retinoblastoma). Special Protocol Assessment (ABSSSI) designation may be the next feather in its cap.

Greasing the Skids--The Importance of Winning Early Favor with the FDA

Contrary, then, to the gross inaccuracies Mako/Rosen peddled, the granting of these designations by the FDA reinforces the potential of Cellceutix's drugs, as they are not handed out, first-come, first-serve. Once obtained, a clear signal that the FDA likes what they're seeing as to a drug's potential, such designations translate into tangible value (e.g., the benefits of orphan drug status), and a greater likelihood of a drug gaining approval. In fact, Cellceutix has yet to fail an FDA trial. In 2015, the percentage of FDA-approved drugs by designation broke out as follows (note: 60% of approved drugs received one or more designations):

53% Priority Review
47% Rare or "Orphan" Diseases
36% First-in-Class
31% Fast Track
22% Breakthrough
13% Accelerated Approval
Percentage of FDA-approved drugs by designation and by therapeutic category, 1987-2014:



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In other words, if you're seriously invested in Cellceutix, like we are (as in seven-figures), and can weather recent events-choppy conditions, and the, ahem, shark-infested waters-there is lots going on to be excited about.

Cellceutix largely remains an undiscovered company set to rise.

II. Brilacidin: Lead Candidate in New Class of Antibiotics

Host Defense Protein (NASDAQ:HDP)--Mimics-A New Class of Antibiotics

Cellceutix's lead compound Brilacidin--modeled on the body's innate ability to fight off infection--represents a new class of antibiotics: synthetic, polymer-based, nonpeptidic, small molecules that target bacterial but not mammalian cells and are easy-to-manufacture (inexpensive). These computationally-designed compounds mimic antimicrobial peptides, like defensins, yet are one-tenth the size, nearly 100-fold more potent and 1000-fold more selective.



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Referred to as Host Defense Protein-mimics (or defensin-mimetics), Brilacidin and its analogs mirror (and in many ways, improve on) what Mother Nature has been doing quite successfully all on her own over millions and millions of years. By replicating key aspects of antimicrobial peptides and their physiochemical and electrostatic properties, HDP-mimics quickly pierce bacterial cell wall membranes, causing invading microbes to "bleb" (or burst) from the inside-out, killing them, and in the process, making resistance less likely (effectively, no time for bacteria to adapt).



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A good visual comparison is to think of a needle stuck into a balloon. Pop!



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Brilacidin received Qualified Infectious Disease Product (QIDP) designation via the GAIN Act, qualifying it for Fast Track and Priority Review, and an extra 5 years of market exclusivity.

Given Brilacidin's unique mechanism-of-action (piercing bacterial walls), antimicrobial resistance is less likely (less quickly) to develop. Brilacidin already has performed on par with current best-in-class, Cubicin (Daptomycin), as shown in a Phase IIb trial.



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Additional discovery efforts are underway, in partnership with researchers at Fox Chase Medical Center, to design Brilacidin analogs (CC-1807) that are active against gram-negative bacteria-Pseudomonas aeruginosa, Klebsiella pneumoniae, Escherichia coli, Acinetobacter baumannii, and ndm-1-producing K. pneumoniae-as well as anti-fungals active against Candidiasis (CC-1502) common to the oral cavity.

Immunomodulatory Properties--An Even Bigger Market Opportunity

In addition to its antibacterial properties, Brilacidin facilitates an immunomodulatory response in the body, including anti-inflammatory activity, further protecting skin and mucous membranes, as well as promoting healing. Some researchers go so far as to write: "The most relevant biological role of host defense peptides is immunomodulation."



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Brilacidin for Oral Mucositis--Opening the Door to Other Inflammatory Conditions

Reflective of Brilacidin's potential as an immunomodulatory agent, the compound currently is being evaluated in a Phase II study as an oral rinse for the prevention of oral mucositis (OM) in patients undergoing chemoradiation for head and neck cancer. The incidence of OM, referred to as "the bane of head and neck radiotherapy," in this group is at least 80 percent (if not higher), afflicting some 450,000 patients in the U.S. each year.



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Dr. Stephen Sonis, one of the foremost experts on oral mucositis who also worked on Brilacidin years earlier ("These are among the most compelling results we have ever observed in an animal model […] this compound should be rapidly moved into clinical studies […]") recently joined Cellceutix in a scientific advisory role.

Cellceutix CEO Leo Ehrlich has commented: "We are constantly exploring diverse indications for which we believe our defensin-mimetic franchise can improve clinical outcomes due to the anti-infective, anti-inflammatory and tissue healing properties of these compounds. A prime target is ulcerative proctitis […] A successful trial opens up a pathway for multiple GI diseases, which may be a far larger market for Cellceutix then even the anti-infective market for Brilacidin."



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HDP-Mimics as Antibiotics... and So Much More--From Concept to Reality

Recent comments made by Dr. Michael Zasloff, one of the world's foremost antimicrobial peptide gurus, conveys Brilacidin's potential: "Pexiganan, Plectasin, and Brilacidin. Each of these compounds has faced specific challenges in development and has a high likelihood of reaching commercialization. Antimicrobial peptides appear to be coming of age as therapeutics."

Brilacidin was mentioned in this February 2016 article--"Companies Take Aim at MRSA Infections"--as a new first-in-class antibiotic "expected to succeed." Another recent study (published in October 2015), aptly titled, "Membrane-Active Small Molecules: Designs Inspired by Antimicrobial Peptides," also highlights Brilacidin, reinforcing Zasloff's assessment: "The future of small-molecule membrane-active agents is very bright."



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Cellceutix also will be presenting two abstracts (click here and here) at an upcoming (June 2016) conference sponsored by the American Society of Microbiology.

The therapeutic potential of Cellceutix's Brilacidin and its HDP-Mimics platform is vast, with exciting developments just getting underway.



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III. Kevetrin: Novel p53-activating Oncology Drug

Kevetrin 101--Well-Tolerated and Multimodal; Entering Phase II FDA Trials

Kevetrin (or thioureidobutyronitrile), a water-soluble, small molecule, belongs to a class of compounds referred to as thioureals.

Laboratory testing in mice, rats and dogs (via carcinoma xenograft models) showed Kevetrin to be a potent anti-cancer agent, shrinking tumors among the most drug-resistant cell lines in lung, colon, and breast cancers, and in leukemias. Dr. Krishna Menon commenting back in 2009: "The more we look at Kevetrin, the more interesting it gets." And Dr. Emil Frei characterized the discovery of Kevetrin as a possible "groundbreaking moment in the world of oncology" and a "vital key to the next generation of chemotherapy."



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Additional research into Kevetrin's mechanism of action, its underlying molecular activity, revealed the compound's ability to induce cell cycle arrest and apoptosis in a non-genotoxic way in wild type p53 and mutant p53. Kevetrin also was shown to behave synergistically with conventional chemotherapies, and similarly enhanced anti-tumor activity in combination with radiation.



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A Phase 1 study evaluating Kevetrin in advanced solid tumors was approved by the FDA and the trial commenced in August 2012 under the lead of Dr. Geoffrey Shapiro, Director of Early Drug Development at the Dana-Farber Cancer Institute.

The company has presented preliminary findings from its Phase 1 trial at the American Society of Oncology (OTC:ASCO) annual meeting, most recently, in May 2015. The data showed Kevetrin to be well-tolerated (with only one Dose-Limiting Toxicity, or DLT, observed) in patients at increasingly higher dosing levels (as high as 750/m2 or 75 times greater than the starting dose) and that the drug activated p53 by inducing p21 expression. Additional efficacy data released earlier in 2016 showed two-thirds of patients, regardless of tumor type, had increases in p21 expression relative to pre-treatment levels, and that this appeared to be both a time-dependent and dose-dependent response among patients.

Cellceutix recently concluded its Phase 1 trial in solid tumors and is now moving Kevetrin into mid-stage trials, including, in the near-term, ovarian cancer. Other Phase 2 trials are planned for pancreatic cancer, acute myelogenous leukemia (AML), retinoblastoma and renal cell carcinoma.

Aprea-246 vs. Kevetrin--Pointing Out Some Differences

One p53-focused company, which has succeeded in separating from others, garnering the most attention is Aprea AB, privately held and based out of Stockholm, Sweden, and it's lead compound, Aprea-246.

While not as high-profile, and nowhere near as established in the literature, Kevetrin may emerge as the better p53 drug candidate as to safety and efficacy given its non-genotoxic profile and multimodal mechanism of action (MOA).

Kevetrin has advantages that likely will help it advance through FDA trials:

Non-Genotoxic-induces cell cycle arrest and apoptosis in tumor cells at concentrations that do not damage the DNA of normal cells.
Well-Tolerated-as noted earlier, only 1 DLT was observed in the Phase 1 trial, with no serious side-effects impacting other functional health measures of treated patients.
Multimodal MOA-targets heterogenous states of wild type, mutant and null (deleted) p53 cancers by affecting multiple molecular proteins and signaling pathways.
Of course, as Kevetrin moves into mid- and later-stage FDA trials, with more frequent dosing regimens (three times weekly) at consistently higher doses, tolerability will once again have to be assessed.

In comparison, and unlike Kevetrin, Aprea-246 does not activate wtp53. A different compound has been identified by Aprea researchers, called RITA, to serve in this role. Also unlike Kevetrin, Aprea-246 functions in a more limited way by conforming to a smaller number of p53 mutations. Issues have also surfaced in the literature concerning Prima-1, which again is the parent- or pro-drug of Aprea-246-questions as to efficacy, the likelihood of resistance, and potentially harmful side effects as it breaks down in the body into formaldehyde, a known carcinogen.

IV. Prurisol: An Oral Anti-Psoriasis Compound

Treating Mild-to-Moderate Cases--A Great Unmet Patient Need

For people experiencing mild to moderate symptoms of psoriasis, or 80 percent of cases, treatment is dominated by topicals, steroids and light therapy, as preferred first-line treatments. Primary care docs and dermatologists largely reserve traditional systemics (Cyclosporine, Methotextrate) and newer biologic treatments for moderate-to-severe cases.

According to data from Vitae Pharmaceuticals (NASDAQ:VTAE), less than 15 percent of treating physicians in the U.S. consider injectable therapies. Though they can be effective, they come with downsides-quite costly, and associated with higher toxicities. Common side effects can include: respiratory infections, liver damage, nervous system problems, new or worsening heart failure, blood disorders, and lupus-like syndrome, among others.

Almost as burdensome to patients, beyond requiring administration by subcutaneous or intravenous injection, newer psoriasis drugs can require close monitoring by a health care professional.

Given Celgene's 2014 approval of Otezla (apremilast)-the first oral anti-psoriasis drug to have been approved in almost two decades-it's not surprising a number of oral psoriasis drugs are in the pipeline.



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Switching Therapy, or Going Off Therapy Altogether--Unfortunately Commonplace

Given complexities in managing psoriasis, many patients, particularly those with mild or moderate forms, choose to forego care altogether at great risk to themselves, as the disorder tends to worsen over time. National Psoriasis Foundation Surveys, for example, have found that close to 75 percent of people with mild or moderate psoriasis are not receiving treatment. Another large survey of psoriasis patients revealed fewer than 60 percent of psoriasis patients had visited a health care provider within the last year.



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Enter Prurisol--Compelling Results in Animal Models, Suggestive of Efficacy in Humans

As described on Cellceutix's website, Prurisol, an ester of abacavir, is a small molecule that acts through immune modulation. The compound proved effective in the treatment of psoriasis based on preclinical studies in animals-both in induced psoriasis and in xenograft models with human psoriatic tissue.



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In early 2014, Cellceutix submitted an IND application to the FDA, which was approved, and led to the start of a Phase 1 bioequivalent cross-over study. Completed in late 2014, it successfully demonstrated that Prurisol converts to abacavir sulfate (Ziagen, abacavir) in humans.

Eagerly Awaiting Phase 2 Results--From Dark Horse to Seabiscuit?

In August 2015, Cellceutix started its Phase 2 trial of Prurisol for the treatment of psoriasis, and recently announced that the last patient visit had been completed, with topline results expected sometime in May. With the data release only a month or so away, and Cellceutix already having indicated safety is a non-issue ("there were no safety items of concern"), the downfall of many clinical trials, to that "first do no harm" mantra, many investors, and probably a few speculators, are anticipating that Cellceutix likely has run a successful trial.

Just look to Vitae Pharmaceuticals to see how quickly the market can respond to positive mid-stage trial results. Even flailing Xenoport (OTCPK:XENO) recently struck a sweet deal.

Well-tolerated treatments that are orally-administered, like Prurisol-competing with Otezla (a clinical review of), Celgene's blockbuster ($472 million in sales in its first full year, 2015)-arguably hold the most potential of all. Such drugs would likely yield the highest premium should any partnership be struck. By 2023, the psoriasis market is expected to be worth $3.7 billion.

Regardless how it all shakes out, it's not like Cellceutix's prospects will be "made" or "broken" based on Prurisol's results alone. Far from it. Prurisol may prove to be the thoroughbred, first out of the gates, given its 505(b)(2) status.

But don't forget Cellceutix has other workhorses, slower, and steadier, in the stable-Kevetrin and Brilacidin-compounds with true blockbuster potential.

V. Conclusion: Liking the Odds, Liking the Cause

Better Times on the Horizon--The Science Is Strong; FDA Trials Continue to Progress

Mako's "short-and-distort" tactics aside, though damaging they've been-no doubt about it. Painful the wallet and to morale. As long-term investors in Cellceutix, we take confidence in knowing the science in this company is strong. That the quality of its pipeline ultimately will see the company through to a time when its true potential will be recognized for what it is: tremendous.

And such a re-valuation might be coming sooner than some might expect, the tipping point numbered in months, not years. A persuasive argument could be made that the company, significantly undervalued, should be trading double, even triple, its present price, closer to its all-time high of $4.93, achieved back in December 2014.

Based on historical data, hard statistics, not to mention in light of prevailing regulatory winds blowing in Cellceutix's favor (the need for newer-better antibiotics; precision medicine trends in oncology), it's looking more and more like at least one of Cellceutix's Big Three compounds, which are progressing through mid- and later-stage trials, has good odds of gaining FDA approval.



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Cellceutix has made a few management missteps in the eyes of some investors--for example, last year setting expectations that an uplist to Nasdaq was imminent, and selecting a Board of Director's that some saw as too rushed. The recent departure of Chief Medical Officer Dan Jorgensen similarly has caused some concern regarding management's leadership style (staff turnover). Where it matters most, though, the pipeline, the company's performance in getting drugs into trials, what can be a real gauntlet, has been nothing short of impressive.

A First Partnership/Licensing Deal-More a Question of When, not If

Cellceutix's finances are in order. Adequate funds are in place-cash on hand, a friendly stock purchase agreement with Aspire Capital Fund, plus the company has access to a healthy shelf registration-to see the company's operations through for at least the next 12 to 18 months. And should the company find a partner, say, for Prurisol (likely first-up), which can generate tens, even hundreds, of millions of dollars, there would be plenty of money to fund many trials.

Just what a company like Cellceutix needs to really blow the lids of its compounds.



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A Risky Investment… Sure, but Upcoming Catalysts Should Drive Share Price Upward

Every investment bears inherent risks, especially when it comes to early stage biotech companies. Cellceutix may fail its first trial, or eventually multiple trials. The Rosen lawsuit may not be dismissed. Competitors may grab more and more market share. Trial activity may outpace the balance sheet.

All that said, we like the odds, and have put our money (again, shares numbered in the seven-figures) behind our analysis of Cellceutix's prospects. We're buying more, and plan on holding for the long haul.

A number of medium-term (within the next 3 to 6 months) catalysts are likely to increase, substantially, the company's valuation, including:

Clinical Developments

Topline Results of Phase 2 Prurisol trial for Psoriasis
Interim Results of Phase 2 Brilacidin trial for Oral Mucositis
Additional Data on Phase 1 Kevetrin trial for Advanced Solid Tumors
Launch of Phase 3 Brilacidin trial for ABSSSI
Launch of Phase 2 Brilacidin trial for Ulcerative Proctitis
Operational Developments

Resolution of Class-Action Lawsuit
Nasdaq Uplisting
Potential First Licensing/Partnering Deal
Bottom-line. All three of Cellceutix's lead drug candidates, Brilacidin, Kevetrin, and Prurisol, just might make for a Triple Crown of winning compounds.

That's at least the bet we're willing to make.

We're banking on a company with compounds that not only may rake in bucks but, more importantly, may help treat patients with debilitating conditions and deadly conditions.

Disclosure: I am/we are long CTIX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.