Q&A: Cellceutix CEO Leo Ehrlich - Future Billion-Dollar Anti-Psoriasis Compound

| About: Cellceutix Corp. (CTIX)

Over the last few months, Cellceutix Corporation (OTCQB:CTIX) has been generating a steady and growing speculative buzz and an impressive stock price escalation to match. The key driver of this aggressive recent climb in share price has been the on-schedule progress of the company's flagship anti-cancer drug, Kevetrin, currently in Phase 1 clinical trials being conducted at Harvard's Dana Farber Cancer Center and partner Beth Israel Deaconess Medical Center.

With no evidence of any toxicity concerns so far, this novel and groundbreaking oncology compound has the potential to be a game changer for the next generation of cancer treatments across the globe. The successful completion of dosing for the first cohort in this trial, in addition to the approval of and beginning of dosing at elevated levels for a second cohort, have spurred investor confidence in the new drug candidate.

Kevetrin's impressive potential centers around its ability to activate the P53 gene, also known as "the guardian angel of the human genome." With this potent and revolutionary mechanism of action comes the potential to fire a powerful first salvo in the next generation war on multiple strains of advanced stage and current treatment resistant cancers. Given that nearly all cancers have p53 damaged in some manner, a drug of this caliber could have a very wide ranging and extremely lucrative financial reach that could add up to a massive 10 billion dollar (or even beyond) market cap if the human trial results are as robust as all the studies and years of extensive research have shown to date.

The majority of recent shareholder communication coming from Cellceutix has revolved around keeping investors updated with clinical trial news and any developments with the other planned trials for Kevetrin. The flurry of activity and positive developments surrounding Kevetrin has started to get more media coverage as interest and intrigue in the compound continues to grow as the clinical trial progresses. Investors are increasingly taking notice of this small biotech for the incredible potential for return on investment that their novel cancer compound can provide.

While Kevetrin has quickly started to gain notoriety and interest, there is yet another compelling compound developing in the considerably large shadow of Kevetrin that has done so relatively quietly by comparison. Cellceutix has yet another potential blockbuster compound that is currently ramping up production for FDA-approved phase 2/3 trials. Prurisol, the company's orally administered anti-psoriasis compound, is currently in production with Dr. Reddy's Labs (RDY) in India in preparation for a Proof of Concept 30-day clinical trial that will take place in Europe in early 2013.

Kevetrin's "little brother" Prurisol offers a potential billion dollar value in itself. This compound has so far in animal studies shown to be dramatically more effective for treating advanced psoriasis when compared to the standard of treatment today - methotrexate. Visually in lab testing, it eliminated all signs of psoriasis with no recurrence of symptoms. These results show great promise heading into human trials this spring, with the company clearly showing their confidence by choosing a double blind European study that consists of 30 days of dosing along with 30 days of follow-up. This strategy shows a sharp focus on advancing Prurisol through trials as rapidly as possible to help facilitate getting a potentially very lucrative licensing/acquisition valuation.

The fact that this second potential game changer has gotten relatively minor media coverage so far has perplexed me, so I contacted Cellceutix CEO Leo Ehrlich to request an interview to gain some insight regarding the potential and strategy behind Prurisol. I was fortunate enough to be able to have this opportunity to get an update on upcoming plans and future outlook for the company.

Here is the entire interview:

The Progressive: With all of the recent buzz surrounding Kevetrin, Prurisol has been advancing towards planned phase 2/3 clinical trials with relatively little fanfare. Can you provide some insight into what your strategy is for advancing Prurisol, and how it impacts the company in a broader context when taking into account all of the progress being made with Kevetrin?

Ehrlich: It's an astute observation to realize the pure value of Prurisol independent of Kevetrin when it comes to the valuation of Cellceutix. Many people overlook the value of this new drug candidate. When we saw the mice after treatment with Prurisol, there were no signs of psoriasis. Actually, it caught us a bit by surprise as Dr. Menon, our Chief Scientific Officer and co-founder, was very optimistic, but the results far surpassed anything we could have hoped for. But this is science and until you do the testing, any result is possible. There was no doubt we needed to advance this drug into human trials. A psoriasis drug with modest activity could generate $100 million in annual sales. An exceptional drug would generate many times that number. Our goal is to maximize shareholder value. That is why we are first doing a double blind Proof of Concept study. We have a high degree of expectation for this drug. It's important for our shareholders and others to understand the value of Prurisol. Should Prurisol prove itself in this trial, it will be a perfect complement to our flagship drug, Kevetrin.

You have frequently spoken of Kevetrin as being unique and novel due to its revolutionary mechanism of action that activates the P53 gene. What unique or compelling advantage does Prurisol offer over existing treatments or competing anti-psoriasis compounds that are also currently in clinical trials?

It is too early for us to compare Prurisol to other competing compounds in clinical trials. We do know the toxicity profile of Prurisol, but we don't know the profiles of the other drugs as they are not yet publicly available. What most impressed us about Prurisol in the animal studies was not simply that the psoriasis was visually eliminated, but that the psoriasis did not recur. There are many fine drugs out there to rid psoriatic lesions, but the results are temporary. Thereafter the individual will build resistance to the drug and it will become ineffective. Additionally, the problem with the biologic drugs is the potential for serious side effects. A new drug is urgently needed to help those suffering from psoriasis, which is a very uncomfortable and sometimes debilitating disease affecting millions of people in the U.S. alone.

Dr. Krishna Menon, the intellectual powerhouse behind the development of the compound, is widely respected for his keen ability to identify successful compounds in a crowded sea of possibilities. What compelled Dr. Menon to put his energy and innovative approach into Prurisol?

The idea for a psoriasis drug actually came from others and we licensed their compound. However it wasn't achieving the results we had hoped for. Cellceutix thereafter developed Prurisol. Once the patent is published, people will have a better understanding of our thought process in the development of Prurisol and how we accomplished making this new compound. At this time, we are keeping our intellectual property close to the vest until it is properly protected.

What gives you confidence that the dramatic results shown so far in your lab studies will be achieved in human testing?

Of course, things can be different in humans as compared to animal research, but by utilizing mice with compromised immune systems and human xenograph models, we replicated the conditions as closely as possible in the laboratory studies. This is a recognized methodology in animal models for preclinical testing. Also, Dr. Menon's decades' of experience and understanding of the chemistry of the drug and his knowledge of the pathology of the lab studies lends a great deal of validation and confidence heading into human trials.

Dr Reddy's Labs was your choice to synthesize and manufacture Prurisol in preparation for the upcoming clinical trial. What was the logic behind selecting Dr Reddy's for this process?

Dr Reddy's is the second largest drug producer in India. They are a New York Stock Exchange listed company with a market cap of over five billion dollars ($5,000,000,000). They are among the world's largest manufacturers of the starting active pharmaceutical ingredient in Prurisol. Therefore, their familiarity in producing a product such as Prurisol is second to none.

How close is Dr Reddy's to having the necessary quantities required for the trial? What are the advantages of having Dr Reddy's perform this production for Cellceutix?

We are now having Dr Reddy's produce enough material for our all needs through the Proof of Concept trial and a phase II/III trial. As of our recent meeting with them, production is on schedule for us to be ready for trials in the first half of this year as we planned. As I just mentioned, they are intimately involved with the active ingredient of Prurisol, which allowed them to shave several steps off the manufacturing process, saving both time and money. Dr. Reddy's produces medicines for many of the worlds largest drug manufacturers, names we are all familiar with. Their staff resources are enormous and complete with many PhD's available to work on our project. This depth gave us a high degree of comfort that this project will be successfully completed.

With phase 2/3 clinical trials planned in Europe, what is the time frame that shareholders can expect to receive further trial details on timing, location, and protocol?

We will begin with a Proof of Concept clinical trial that we are planning to start late March to early April 2013. After this trial is completed we intend to file an application with the US FDA for advanced clinical trials; more specifically, phase II/III trials in the United States in conjunction with EU trials. As we get closer to starting the PoC trials, the trial site in Europe will be posting all the relevant information about the trial. We too will update our shareholders at that time.

If the phase 2/3 trial is successful, what are your planned next steps for Prurisol? What do you feel will offer the best value for shareholders from a licensing/acquisition standpoint?

I believe you are referencing the initial Proof of Concept clinical trial, which we anticipate will be completed relatively soon. There are many possible scenarios based on the results of the trial. If the data is positive as we hope it will be, it's foreseeable that we should have any number of possibilities to take Prurisol further down the regulatory pathway. We could develop it on our own or entertain licensing agreements if the terms are acceptable to the company and our shareholders. If the results of the initial trial are unfavorable, we of course would have some decisions to make in that regard as well. Obviously, we have a high degree of expectations as we will have produced all of the drug needed for a phase II/III trial, but we are aware of all possibilities. It is simply a bridge that we will cross when we get there.

The recent announcement of the 10 million dollar financing arrangement negotiated with Aspire Capital was met with a positive reaction in the market. How does this additional financing impact your plans and strategy for moving Prurisol forward through clinical trials? Does this financing provide any advantages or leverage in later stage potential licensing/acquisition negotiations?

It certainly helps with advancing Prurisol, as well as Kevetrin in clinical trials. For any young company, arranging financing without giving away or heavily diluting the company is one the single, biggest obstacles to overcome. I could not be more pleased with the terms and the commitment from Aspire in our arrangement. It does give us some leverage in later clinical trials because we know that we have the capital to move forward on our own, meaning that we don't have to feel pressured to accept any potential partnering opportunities should they arise in the future.

With the new line of financing available, can you clarify for investors which of all of the ongoing and planned trials that will NOT have to be paid for by Cellceutix?

Well we are having numerous discussions at this time with several parties including university hospitals and the National Cancer Institute. There is no assurance that these discussions will result in clinical trials. That being said, I will give you the complete rundown as I am asked frequently to comment on this topic.

We have previously announced that we supplied Kevetrin to Beth Israel Deaconess Hospital for research in combination with Pfizer (PFE) drugs for melanoma and renal cancers. Currently, that research is undergoing laboratory testing and the results that have been shown to us have been very promising. I believe the researchers there will replicate the experiments to confirm the earlier results. Understand that Beth Israel Deaconess and their funding sources will be paying for any clinical trials and it is their decision to initiate those trials. Our responsibility was only to supply Kevetrin. On that point, it would seem likely that they would move forward with human trials based on promising preclinical research and the need for new drug candidates for those cancers, but I cannot speak for the hospital or its partners in that regard.

Regarding the clinical trials that are being hosted at the University of Bologna testing Kevetrin against Acute Myelogenous Leukemia, the hospital will be sponsoring the trials. Again, our obligation is only to provide Kevetrin for the trials.

We have signed a Non-Disclosure Agreement and plan to execute a Material Transfer Agreement shortly with one of the world's most prominent cancer research centers, located in the Southwest United States. The center approached us to test Kevetrin as a possible new therapeutic for myeloma. They have advised us that funding is in place and if Kevetrin meets their expectations that they will sponsor a clinical trial with our responsibility only to provide Kevetrin.

Finally, initial discussions with the National Cancer Institute and other university hospitals are underway, but these are still in the very early stages and I have no further details that I can disclose.

When considering both the rapid trial advancement and subsequent potential value of Kevetrin and Prurisol, do you see Cellceutix as a potential buyout target in 2013?

Of course as a major shareholder and CEO of Cellceutix I am hopeful to receive significant offers, but I won't speculate on that. As a company, we have our focus on advancing the clinical trials of Kevetrin and Prurisol. Only then we will know the true value of Cellceutix. I have been asked if I have sold any shares given the recent appreciation in share value. That information is readily available in our public filings, but the answer is, "No, I have not." What is appropriate for me and how I value my shares, may not be appropriate for others. This is biotech with an enormous amount of risk to one's investment, including mine, but I wanted to make that clear and take this opportunity to answer questions that I have been asked recently.

Thank you for your time during this busy time for Cellceutix. Do you have anything else you would like to share with shareholders as we prepare for 2013?

Cellceutix is determined to increase shareholder value and the most important component of that plan is our flagship anti cancer compound Kevetrin, which is unlike any other drug. However the importance of its sibling, Prurisol, should not be underestimated. I'd like to thank you for your time and for the commitment of all the shareholders of Cellceutix. I'd also encourage interested parties to visit our website to perform their due diligence on our company, including reading our recent recap of 2012 and expectations for 2013. Thank you.

Disclosure: I am long OTCQB: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.