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In 2011 Peter Epstein, CFA, left a $3 billion hedge fund where he was a senior natural resources analyst to help increase awareness of a number of natural resource and select other small cap companies in which he's invested in. Please see: On TWITTER: @peterepstein2 Mr.... More
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  • Is CEL-SCI The Cheapest Company In Phase III Trial?

    Peter Epstein, CFA March 10, 2015 Twitter: @peterepstein2

    CEO Geert Kersten of CEL-SCI (NYSEMKT:CVM) believes his company's valuation is significantly lower than warranted. In the following interview by Peter Epstein, Mr. Kersten candidly addresses important questions about CEL-SCI. This interview was conducted by phone and email in the first week of March. Peter Epstein has no existing or prior relationship with CEI-SCI, but he does own shares of the company.

    Please give an overview of CEL-SCI for readers who don't know the story.

    CEL-SCI's work is focused on finding the best way to activate the immune system to fight cancer and infectious diseases. CEL-SCI believes that the best way may be to activate the immune system of patients before they have received surgery, radiation and/or chemotherapy. Its lead investigational therapy Multikine (Leukocyte Interleukin, Injection) is currently being studied in a pivotal Phase III clinical trial against head and neck cancer.

    If the study endpoint, which is a 10% improvement in overall survival of the subjects treated with Multikine as compared to subjects treated with the current standard of care only is satisfied, the study results will be used to support applications which will be submitted to regulatory agencies in order to receive from these agencies commercial marketing approvals for Multikine in major markets around the world. Additional clinical indications for Multikine which are being investigated include cervical dysplasia in HIV/HPV co-infected women, and the treatment of peri-anal warts in HIV/HPV co-infected men and women. A Phase I trial of the former indication has been completed at the University of Maryland. The latter indication is now in a Phase I trial in conjunction with the U.S. Navy under a CRADA (Cooperative Research and Development Agreement).

    If your team believes that Multikine is so important, why is it taking CEL-SCI so long to get Multikine to market?

    Beta blockers, Erbitux and Copaxone took about 30 years to come to the market. In our case the largest factor was lack of money. Other reasons were 1) doing something that has never been done before, 2) the product is very complex and 3) sometimes you have to wait until the time is ripe. Still, it was mostly lack of funding that slowed us down. We also had to switch our Clinical Research Organization, "CRO" in 2013, which was a significant set back as enrollment was essentially stalled and investors lost patience. The reputational impact was as bad as the decline in our stock price.

    Who among your Management & Board has relevant experience with this class of drugs and/or the process of getting through Phase III trials?

    This class of drugs is either a complex biologic or an immunotherapy drug. Complex biologics are very few and they were developed 20 plus years ago. Immunotherapy is a completely new field. Dr. Talor and John Cipriano have expertise in both. What they did not know before coming here, they learned on the job. My team has been with me for 20 years and we are now the world's foremost experts in our specific area. We are cleared for a pivotal Phase III trial, in 21 countries, in cancer patients who are not terminal. That does not happen to people who do not have a clue.

    Who, if anyone, outside the company has performed substantial due diligence on the possible efficacy of Multikine?

    Our various partners for Multikine and all of the financial institutions who underwrote our financings. Also, the FDA and 20 other regulators have seen all of our detailed clinical data. Partners include the U.S. Navy, under a Cooperative Research and Development Agreement (CRADA). A co-development and profit sharing agreement with Ergomed for Multikine in HIV/HPV co-infected men and women. The National Institute of Arthritis Musculoskeletal and Skin Diseases, Rush University Medical Center in Chicago, Teva Pharmaceuticals, Orient Biopharma of Taiwan and the U.S. National Cancer Institute. We've had a remarkable amount of due diligence performed on Multikine over the years.

    Intuitively it makes sense to use one's immune system to fight cancers and other diseases. What's the main pushback you get from investors?

    Until 2 years ago, most investors did not believe that the immune system could be used to fight cancer. Now they all do. That means that the last two years should have been great for us since all that we had predicted had actually come true. Yet, when the company running our Phase III clinical trial could barely enroll patients, investors bailed from our stock. It looked as if there was something wrong with our product.

    This horrible event caused us to simply disappear from investor's radar screens. Amazingly, once we hired a new group to run our Phase III trial, enrollment rapidly picked up again and now we are enrolling record numbers month over month. We now have 372 patients enrolled (42% of 880 needed) as of the end of February. If the investors thought that the minimal enrollment was due to the drug not working, it certainly is working well now. The reality is that the drug was never broken. The only thing broken in our case is the stock price, and that can be fixed with hard work. We expect to have full enrollment by about the end of 2015 and to complete the study in 2017.

    Please describe the Navy's testing of Multikine and the importance of this trial?

    Key to the collaboration with the Navy is that another clinical indications for Multikine is being investigated, the treatment of peri-anal warts in HIV/HPV co-infected men and women. This disease does not have effective treatment. If Multikine works, with the same formulation as that used in our Phase III trial, it may become very important very quickly. Further, we could have results from the Navy's studies by the end of this year.

    Please describe CEL-SCI's capital structure?

    Straight common stock, 91.3 million outstanding, 36 million warrants and options, almost all of them with strike prices between $1.25 and $20.

    What percentage of shares are owned by insiders including the Management & Board?

    About 18% (for full disclosure I bought a lot of shares last year and now own about 10%). Shareholders tell me that they think institutions are looking at our company once again. Trading volume has been well above normal. I continue to remain focused on operating the company and trying to get the story out.

    How will you fund your company through Phase III ?

    As part of our needing to replace our CRO in 2013, we filed for an Arbitration to recover damages. We continue to believe that we have a strong position in the Arbitration case scheduled for May, 4th of this year. We are seeking $50 million, but the amount could be higher or lower than $50 million, including the possibility of us getting nothing. However, I continue to believe that we will win. If we don't prevail in the Arbitration, we will have to do additional capital raises and/or pursue partnering alternatives.

    What are the near term catalysts for CEL-SCI in 2015?

    Continued progress on Phase III leading to full enrollment by year-end, arbitration finalization and data from the Navy's work on the treatment of peri-anal warts in HIV/HPV co-infected men and women. 2015 should be a very interesting year for us.

    Can you describe the key takeaways from the successful Phase I & II trials?

    No safety problems, 12% of patients had no remaining cancer cells at all after 3 weeks of injections 5 times per week. The remaining patients had 50% less cancer cells and Phase II results showed an increase in survival. Our Phase III trial requires an increased survival rate of 10%. We obviously believe that Multikine can achieve that in our Phase III trial.

    Assuming successful Phase III trials, how long might it take Multikine to hit the market?

    It has orphan drug status. Therefore, we should get fast review. Head and neck cancer is an unmet medical need. The tumor hides from the immune system. Our drug helps the immune system fight the tumor while the patient's immune system is still healthy. Multikine is the only experimental treatment to be used before the standard of care, surgery to remove the tumor, then radiation or radiation plus chemo treatments.

    Although Multikine has successfully reached Phase III, there's still considerable risk. What factors make you confident about Phase III?

    The fact that enrollment is accelerating at hospitals that have already treated several patients suggests that surgeons are seeing Multikine responses that they deem to be promising.

    CEL-SCI stock was at $9.10 per share in December, 2010. Now it's at $1.06. Briefly, what caused this major decline?

    The prior CRO's enrollment was so slow that we could show little to no progress. Investors lost patience, believing the drug was no good (due again to the lack of enrollment of patients). That caused us to switch CROs and investors feared that we would never finish the study and go out of business. We seem to have fallen off investor's radar screens.

    Are there any misconceptions about CEL-SCI that you would like to address?

    Let us focus on the misconception that the lack of enrollment suggested that the drug would not "work." By that logic, the drug now appears to "work" as enrollment is up 2,000%, so the stock should be back at $9 again! There are many companies with less advanced drugs in Phase I and Phase II trials with valuations that are multiples of ours. Many of them will never make it into a Phase III trial. We believe our drug could be a game-changer in that it could represent a 4th modularity to be used before surgery, radiation and chemo.

    Further, we believe that the possible applications for Multikine are broader than some of our peers' drugs. Merck & Co. (NYSE:MRK) and Bristol-Myers Sqibb (NYSE:BMY) are studying immunotherapy applications as well. Yet, our stock trades at a market cap of roughly $100 million while several peers trade at valuations in the hundreds of millions to billions. Pre-clinical cancer immunotherapy companies trade at those levels. We don't suggest that our peers are necessary overvalued, we think that CEL-SCI is demonstrably undervalued. When we have the Phase III study fully enrolled, do you think that we will still be at a valuation of $100 million? I bet that it will not and I have put a lot of money behind that bet.

    Tags: BMY, MRK, CVM, long-ideas
    Mar 10 9:33 AM | Link | Comment!
  • CEO Chat Like CEO.CA On Steroids, Fast High Quality Market Commentary

    I, Peter Epstein, have no financial interest of any kind with CEO Chat.

    Rarely do I write about an informative, helpful, free, easy to use investment focused application. Why? Because I'm usually disappointed with how important company developments, industry commentary and articles/interviews get disseminated. The time it takes me to stumble upon high quality content I seek is getting ever longer. Who still visits company message boards? Anyone? There was a short window where, for example, Stockhouse's message boards were pretty good, but now they are almost unreadable. Arguments and rivalries develop and soon there's name calling and so forth.

    Other sincere users feel obligated to jump in and implore the bad actors to shut up and move along. Before long, the string of worthless messages means that one has to crawl through dozens to come across that one good one. Not only that, but each new post has to be loaded. God help those who's computer is running a bit slowly. Everyone is branded a pumper or a short. It's not just Stockhouse but a number of message boards like investorshub,, (an Australian investment blog) and others.

    What about Twitter as a medium to obtain quick, relevant, actionable information? Well, Twitter is certainly better than the message boards, but it too has its challenges. Promotional posts, SPAM-like tweets and too much information of marginal value comes through the pipe. Therefore, even a prolific Tweeter who sometimes has good content to share can rapidly dilute his/her Twitter feed by posting and re-posting and re-posting posts, only a few of which are worth reading. Don't get me wrong, I use Twitter and think that it has a meaningful place to occupy online, but for pure investment discussions, it comes up short.

    That's why I want to point out Tommy Humphreys' new investment focused offering called Readers may recognize Tommy's name as the founder of CEO.CA, an investment blog that effectively screens out the noise and posts only a handful of articles per day. These articles are not puff pieces or merely summarized press releases- they are strong, actionable investment pieces.

    Importantly, in speaking with Tommy, he reminded me that CEO Chat is in its early days, a "soft launch" as he calls it. He said that many enhancements are planned. I asked him for a description of CEO Chat….

    " was created to fill a void in connecting dedicated natural resources investors. I want to bring back the water cooler, so buzz can spread about new discoveries, and professionals, geologists, engineers and retail investors alike can discuss the news in real time. We have discussed every major junior mining story in CEO chat minutes if not hours ahead of everybody else since we soft launched the thing four weeks ago. We are adding stock charts, notifications and a mobile app in the next few weeks. Mobile user experience is the focus. Many newsletter writers and mining journalists are already using the service. Over 1,000 messages a day have been posted recently. The search function works great. To me it's like a quality junior mining conference in your pocket."

    CEO Chat is like CEO.CA on steroids, it moves fast, but key to the action is that virtually all of the posts are on point, i.e. no spam, no fighting, no wasted space, no wasted time. The reason why Humphrey's CEO Chat is able to bypass the faults of message boards and Twitter is that its users are largely investment professionals, focused on investment ideas and intelligent discussion. Links posted on CEO Chat are never spam, they direct users to valuable and timely content.

    Perhaps best of all, I can browse several hours worth of posts in a few minutes. On Twitter, I browse for 10-15 minutes and I've only scanned the last 45 minutes worth of posts. Both Twitter and the message boards contain search engines. However, how does one search those vehicles for all the stocks one owns as well as the companies that one is keeping a close eye on? It's impossible. has an excellent search function, and since all of the content is investment-focused, the search results don't come back with unrelated information.

    I recommend that readers take CEO Chat for a test ride. It's incredibly easy to sign on, and if you don't like it, feel free to go back the message boards!

    Also, for those investors attending PDAC in Toronto this year,, along with Eric Coffin of Hard Rock Advisory and Keith Schaefer of Oil and Gas Investments Bulletin are hosting a one day exclusive conference in Toronto on February 28th with 15 of their top CEOs. This will be a great event because of the quality of presenters. Seating is limited so if you're in the area and a serious natural resources investor, you should register now (here's the link).


    Feb 09 4:37 PM | Link | Comment!
  • Skeena Resources Has Serious Geologist Talent To Find 1 Million Oz Of Gold Within A Year

    Skeena Resources Has Serious Geologist Talent To Find 1 Million Oz Of Gold Within A Year

    By Peter Epstein, CFA - @peterepstein2

    Skeena Resources (SKE.V) (SKREF) is one of a number junior gold companies in Canada, but one with a secret weapon.

    Its Chairman, Ron Netolitzky, happens to be one of the foremost geologists in the world, especially so in the Golden Triangle of northwest British Columbia. Mr. Netolitzky is one of the primary developers behind the Snip Mine and Eskay Creek mines. For these achievements, among many others, Mr. Netolitzky received the Prospector of the Year award from the PDAC, and Developer of the Year award from the BC & Yukon Chamber of Mines. Add to the list Netolitzky's induction into the Canadian Mining Hall of Fame just a few weeks ago.

    Please see this video clip describing Netolitzky's prolific achievements.

    In addition, on January 11, 2015, the Northern Miner profiled Mr. Netolitzky in this two page article. Not only is Mr. Netolitzky the Chairman, but he's also the second largest shareholder, having invested $2 million of hard cash over the years. Make no mistake, with Netolitzky as Chairman, Skeena Resources is as well placed to find additional resources suitable for an economically viable mine as any junior in Canada.

    Skeena Resources is lucky to have a strong team around Netolitzky, including Rupert Allan B. Sc., P. Geol., Vice-President, Exploration & Director, Walter Coles, Jr., President & CEO, Wendy T. Chan, B. Sc., MBA and Michael Cathro, M. Sc.,P. Geo. Skeena therefore has not one, but three very accomplished geologists on board, virtually unheard of for a company of this size.

    The Company's Spectrum project already has an historical, non NI 43-101 compliant, resource of high grade (12.3g/t) material containing an estimated 243,600 ounces of gold. In addition, Skeena has an extensive and valuable database of historic data including geological mapping, geochemical sampling, trenching and more than 100 diamond drill holes (>12,000 m). With a highly experienced team and armed with ample historical data, Skeena hopes to delineate 1 million ounces of NI 43-101 compliant Indicated & Inferred gold resources within 12 months and subsequently up to 2-3 million ounces. A key takeaway is the results of the company's first 9 drill holes, drilled in 2014, which are discussed below.

    The following interview of Mr. Netolitzky took place by phone and email between January 30th and February 2nd. I, Peter Epstein, interviewed Mr. Netolitzky and I own shares in the company that I paid for myself. I have no prior or existing business relationship with Skeena or any company named in this interview. Skeena is a highly speculative investment opportunity. Readers should conduct their own due diligence and consult with their own investment advisors.

    Mr. Netolitzky, thank you for taking the time with me for this interview, can we please start with a description of Skeena Resources?

    Skeena Resources is most focused on advancing its Spectrum gold & copper exploration property located in the, "Golden Triangle" in northwest British Columbia. Our 3,580 hectare property is approximately 37 km west of Imperial Metals' Red Chris mine and 16 km west-northwest of the NGEx/Teck GJ deposit.

    The Spectrum resource appears to be a high-grade deposit that has extensive historical data, including geological mapping, geochemical sampling, trenching, more than 100 diamond drill holes (>12,000 m), and one small underground adit (278m of drift and crosscuts). The majority of this valuable data dates back to Columbia Gold Mines work from 1990-1992. At the time, an 'inferred' non NI 43-101 compliant resource of 614,000 tonnes grading 12.3 g/t Au containing 243,600 oz. was estimated to a projected depth of approximately 150 meters. Given our recent successful drill campaign, and ample historical data, we hope to establish a NI 43-101 resource of 1 million ounces of gold within the next 12 months.

    Skeena has put out two press releases regarding drill results on a total of 9 holes, were the results as good as hoped for?

    We are very pleased with the results of our 9 hole drill campaign last year. Highlights can be found in the two press releases, first 5 holes last 4 holes [NOTE: For convenience, highlights from the two press releases are reprinted here] 23.84 g/t over 6.5 m, including 40.43 g/t over 3.5 m in 14-SP-003; 10.63 g/t over 27.0 m, including 66.00 g/t over 2.0 m and 20.4 g/t over 2.0 m, 9.2 g/t over 2.0 m; 8.0 g/t over 2.0 m; and 22.7 g/t over 2.0 m in 14-SP-004; 18.60 g/t over 2.0 m, 3.19 g/t over 4.0 m, 7.32 g/t over 2.0 m, and 6.88 g/t over 2.0 m in 14-SP-005; 43.80 g/t over 2.0 m in 14-SP-006; 9.50 g/t over 2.0m in 14-SP-007; 4.58 g/t over 9.0 m in 14-SP-008; 13.70 g/t over 4.0 m and 254.50 g/t over 2.0 m in hole 14-SP-009. Importantly, this last intercept represents the deepest intersection of significant mineralization obtained to date (from 285 m to 287 m) and the deposit remains open on strike and at depth. Intercepts averaged 50 m beneath historic intersections, and exhibited excellent vertical continuity, suggesting high-grade mineralization may extend to significant depths.

    Why do you think that you might be successful in finding an economic deposit in a basin that's been actively explored for decades?

    That's an excellent question. The simple answer is that our 3,580 hectare property hasn't been systematically explored, (except directly on the Central Zone), especially using modern techniques. The property was inactive for 22 years due to government issued right-of way restrictions, recently resolved, allowing the project to move forward. Further, the vendor of the property to Skeena was difficult to deal with. I spent years trying to cut a deal with him before he relented. This opportunity is in my sweet spot, a high-grade zone(s) occurring within a broader halo of low-grade porphyry-style Au-Cu mineralization about 50 m wide and about 600 m strike length. The kind of high-grade, low cap-ex prospect that, if it reaches 1.0 million ounces with good continuity, will very likely become a mine.

    Please tell us about the East Creek Zone and its potential importance?

    The East Creek Zone, some 1.5 kilometers further to the north of the Central Zone, is a north-trending, 5 m wide silicified zone with gold, pyrite, arsenopyrite, chalcopyrite and sphalerite, traced at surface for a 600 m strike length. A trench sample yielded 58.4 g/t Au over 2.6 m. The East Creek Zone has only been tested with 3 drill holes to date. Two of those drill holes yielded 1 to 2 g/t over less than 2 m, while the third hole yielded 34.45 g/t over 2.6 m. Apart from a single drill hole to the north of the Central Zone Fault, most of the intervening 1.5 km section between the Central and East Creek Zones has not been drill tested and provides an attractive exploration target. If we find continuity between the Central Zone and the East Creek Zone, we could have a very significant deposit with multiple millions of ounces.

    Can we get a snapshot of your capital structure? Is there any debt?

    As of February 2nd, Skeena has 163 million shares outstanding [89,102,207 shares are subject to Exchange escrow, 360,000 options are escrowed, and 180,000 warrants are escrowed]. Additionally, 80,000,000 of the escrowed shares are further subject to a Pooling Agreement, managed by Mr. Netolitzky, Chairman of Skeena], plus approximate 42 million warrants at $0.10 (essentially at-the-money) and 16 million at-the-money $0.10 stock options. Fully diluted, including at-the-money shares = 221 million. Currently we have no debt. We will probably raise $3-$4 million for the 2015 drilling and for general corporate purposes.

    After raising new capital, how long will that fund the company for?

    This important capital raise will largely fund us for 2015 and into 2016. Interest in the project has been high. We raised $3 million in Q4 of 2014, which in this particularly inhospitable financing environment is a strong vote of confidence in the technical merit of the Spectrum project and the strong management team. Frankly, the drill results from our first 9 holes were better than we expected. As such, we are optimistic that we will continue to be able to raise capital to advance this very rare high grade gold project. Nevertheless, we plan on maintaining at least $1.0 million of cash on our balance sheet to withstand market uncertainties.

    Do you have contact with any First Nations groups, if so, how are your relations with them?

    An Archaeological Impact Assessment was undertaken on the in September, 2012 in conjunction with Rescan and a JV company of the Tahltan First Nation, without any significant archaeological issues being uncovered. Skeena looks forward to working with the Tahltan First Nation and other local stakeholders in order to advance a profitable, financially stable, project that the Company hopes will create value for all stakeholders and lasting economic and social benefits for the region.

    Please describe in what ways Skeena's property is like and is different from other Golden Triangle operating mines and/or exploration projects.

    The property contains more than 10 different showings of high-grade sulphide-gold mineralization, spatially associated with steeply-dipping fracture zones contained within a broad area. This is the same type of geological setting as many of the major copper-gold deposits in the Golden Triangle area of northwest British Columbia except that Spectrum has demonstrated much higher gold grades.

    Skeena's corporate presentation says that your property is near critical infrastructure and resources, please explain.

    First and foremost we have excellent access to roads [paved Highway No. 37] and power [the new hydro line into the Red Chris Mine], each built or upgraded in the past decade. Furthermore, an experienced labor force is available in the region. The port of Stewart is also available to us. We're not shipping a bulk commodity like coal, so the overall logistics aren't particularly onerous.

    What's Skeena's exit plan, will you go into production or advance the Spectrum property enough to try to sell it?

    We strongly believe that a great deal of the upside in a junior exploration company comes from discoveries, followed by resource reports, followed by infill drilling to better delineate the resource, followed by building a detailed model of what might be there, followed by more drilling and modeling to compile a Preliminary Economic Assessment, "PEA." At that stage, my experience has been that suitors start to take a serious look sometime after 1.0 million ounces have been defined in a NI-43-101 compliant resource and/or after the subsequent PEA. If Skeena has what I think it does, namely high-grade gold with relatively low cap-ex and operating costs, then it will be an attractive takeover target.

    Feb 04 1:44 PM | Link | Comment!
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