CVM - Cel-Sci: Stuck On Its First Next Step

2023-03-21 07:15:07 ET

Summary

• All good cons require great stories; without suggesting that CEL-SCI is a con, its great story has led investors far astray.
• CEL-SCI's financial metrics are problematic with its constrained liquidity.
• CEL-SCI's most pressing existential issue revolves around how long it will take to file its head and neck cancer BLA.
• Once its BLA gets submitted in the approvable form, the FDA will decide whether or not to approve Multikine.

I have written a handful of CEL-SCI ( CVM ) articles in recent years, my last was 12/2022's "CEL-SCI: More Shareholder Pain Likely Ahead" ("Pain"). In this article I will update the situation at this much beleaguered biotech whose market cap languishes at $100 million.

CEL-SCI has attracted investors with the beguiling appeal of its Multikine therapy

Athersys' Multikine (Leukocyte Interleukin) therapy provides an intuitively attractive, cancer treatment idiom. Its latest (01/2023) Presentation (the " Presentation "), slide 9 describes it as follows:

Despite the appeal of its therapeutic concept, CEL-SCI has disappointed its investors over the years. It has had a particularly distressing run of share losses following CEO Kersten's enigmatic tweet on 01/27/2021. The notion that big changes were coming was just the spark that long downtrodden shareholders needed.

Shares closed on 01/26/2021 at ~$14.50. Following the tweet, shares rose to high of ~$40.91 intraday, quickly falling back to $25.00 on market close. They loitered in the 20's over the next several months until 06/28/2021. They fell back to close 06/28/2021 at $13.69 as the market reacted to Multikine's head and neck cancer phase 3 primary endpoint miss .

That unfortunate miss has really poleaxed the stock as one might well expect. Since that time the shares have bounced a bit but with a longer term downward bias. Their last close as I write on 03/19/2023 was at $2.22.

In Pain, I described its longer term loss which has been truly epic. At the time its shareholders who had been in since its earliest public days in 1991, were facing split adjusted losses of 99.947%.

Every indication points to the fact that CEL-SCI has been cursed by bad luck and dubious business decisions, rather than by any sinister ulterior motives. However, that is no solace for shareholders; a horrific loss is no less horrific for lack of intentional malfeasance.

CEL-SCI's finances are concerning

CEL-SCI's 10-K for 2022 provides the following overview of its financial operations for 2022 compared to 2021:

The losses are typical of clinical stage biotechs. They are less than is the case for companies with more varied pipelines. As reflected by CEL-SCI's "Product Candidates" Presentation slide 8, CEL-SCI's pipeline is limited to Multikine trials in head and neck cancer and HPV. It also has preclinical investigations in its so-called L.E.A.P.S. Technology.

On 02/15/2023 CEL-SCI released its latest financial information (the "Release") for fiscal Q1, 2023 its quarter ending 12/31/2022. The Release also contained selected clinical and corporate developments. CEL-SCI offers no earnings conference calls, so the information presented in the Release remains unvetted by analyst questions.

The Release provided the following report on its quarterly losses for its first fiscal 2022 quarter:

Its latest quarterly operations reflect a modest reduction in its expenses. This is appropriate given its liquidity with close of fiscal Q1, cash and equivalents of ~$18 million. According to the Release its net cash expenditures for the quarter were ~$4.7 million. If it can maintain its cash burn at that level it has a cash runway just short of a year.

In its 10-Q, the company cited its need to raise capital. As its lawyers no doubt insisted, it acknowledged substantial doubt as to its ability to continue as a going concern. However it softened the impact with its later advice (p. 10), that, giving no assurances, it believes:

...there is a high likelihood that it will continue to receive funds from private and public offerings and warrant exercises similar to the way it has funded operations in the past.

The big unanswered question for CEL-SCI is when will it be able to submit its head and neck cancer BLA

The road to an essential FDA approval that authorizes marketing of a drug is complex. In CEL-SCI's case, its Multikine therapy in treatment of head and neck cancer has endured an exceptionally lengthy gestation. On its website CEL-SCI traces Multikine's development all the way back to the late 1970's.

In "CEL-SCI: Enduring Challenges" (Challenges"), I describe CEL-SCI's current dilemma. It is working to present its Multikine phase 3 head and neck cancer results to the FDA in the form of a BLA. The challenge for CEL-SCI in this regard is that its pivotal phase 3 trial ( NCT01265849 ) in head and neck cancer was first posted on clinical trials.com in 2010.

The trial was magisterial in scope and in size; as CEL-SCI is fond of noting it is the largest phase 3 trial for head and neck cancer in the world. There is downside to having such a large trial that has taken place at sundry locations around the world. It has had no fewer than 54 amendments.

CEL-SCI is facing the downside as I write. Pain describes the four steps that CEL-SCI must complete to get its data in shape to present to the FDA so that it can file its BLA. Once it does so the next step will be for the FDA to review the application for sufficiency.

The Release quotes CEO Kersten on the BLA application:

We are hyper-focused on readying the vast body of data required to achieve a BLA approval from the FDA. Due to the unprecedented size, scope, length of study and nature of our Phase 3 study and the fact that Multikine is intended as a first-line treatment for primary, advanced head and neck cancer, the BLA submission has required tremendous time and effort, including expansion of the team to include independent medical and regulatory experts.

Once the BLA can be assembled and massaged into acceptable form, CEL-SCI will face its real challenge. The real challenge is to get the FDA on board that Multikine's immunotherapy given before surgery shows a head and neck cancer survival benefit, despite its failure to achieve its primary endpoint.

CEL-SCI's BLA submission is just its first next step

While Multikine's therapeutic approach can be readily synthesized on paper, its clinical development has proven arduous, lengthy and expensive. When it comes to getting marketing approval for, Multikine, its failure to achieve its primary endpoint of a 10% improvement in overall survival complicates matters.

CEL-SCI makes the following argument in support of approval despite its miss:

...the OS benefit of 14.1% at 5 years for the lower risk subgroup (no chemotherapy) exceeded the 10% OS benefit set out for the study population as a whole. In addition, as the OS results for the lower risk of recurrence patients (no chemotherapy) are significant (two-sided p=0.0236, HR=0.68) and the effect is robust, durable and increasing over time...

CEL-SCI contends that its subgroup analysis is compliant with FDA procedures based upon:

...the protocol and Statistical Analysis Plan, which were prospectively concluded before database lock and unblinding.

CEL-SCI bulls can also point to the following in support of approval:

1. the subgroup showed a statistically significant (ITT; p =0.0236, HR=0.68) overall survival benefit of 14.1% at 5 years which exceeded the pre-defined 10% overall survival benefit set out for the study population as a whole;

2. the benefit was) robust and durable, its effect exceeding 5 years;

3. overall survival increased over time from the inception of the study participation for this group of patients through the end of the follow up period; and

4. Multikine showed no safety issues during or as a result of its administration, including no late effects, in the overall treated patient population.

Conclusion

I am a bystander on CEL-SCI at the moment. It has failed to provide any timeline for its BLA submission. I am unsure as to whether it can file an approvable BLA within a reasonable time, at least by the end of 2023. Once it accomplishes this very basic step and the BLA is approved, it will be appropriate to evaluate CEL-SCI's investment merits.

Until then, not so much.

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