An Interview With Leo Ehrlich, Cellceutix CEO

Cellceutix Corp (CTIX.OB) is based in Beverly, Massachusetts and is a clinical stage biotech company. The product pipeline includes eight drugs.

As an investor in Cellceutix Corporation , I recognize that the company does an outstanding job at keeping shareholders current on corporate developments. But, with two drugs actively in development and a host of other happenings surrounding those drugs, I had a series of questions for which I wanted to know the "up-to-the-minute" status. So, I contacted Leo Ehrlich, the Chief Executive Officer at Cellceutix, who provided me with the information that I was looking for.

Q: First, would you give us a quick status update on the clinical trials at Dana-Farber Cancer Center and Beth Israel Deaconess Medical Center?

A: Sure. On the whole, the trial is moving forward basically as expected with the dose of Kevetrin increasing, which is good news. I believe all who are associated with the trial are pleased with its progression. Of course, we always wish things to progress more quickly than they really can, but that's simply our eagerness for results. The fact is that we have a clinical protocol that only accepts Phase IV, terminal cancer patients with metastasized tumors that have become resistant to all other treatments and with that comes challenges. I will say that we experienced a bit of a delay as the trials were slowed through the December holidays and didn't get back to speed until some time in January. Other than that, I am not really free to divulge any additional information at this time, but will gladly update shareholders as permitted.

Q: Cellceutix has identified p21 as a biomarker as a barometer of p53 expression for the clinical trial. Seeing activity of p53 without toxic side effects could be the Holy Grail for developing a new cancer treatment. When do you expect results from testing of the p21 biomarker? What are your expectations?

A: We are anticipating the tests to be run in mid-March and the results to follow shortly thereafter. Honestly, we were extremely pleased that the Dana-Farber laboratory is running these tests so early in the trial. It is a "no lose" situation for us as we did not anticipate biomarker testing, nor did we expect to see any activity, at this early stage and low dosing levels. If p21 activity is shown, we think that we have hit a home run, but if activity is not demonstrated, we will not be the least bit disappointed at this juncture in the trial. We will simply then wait for the testing at higher doses as we expected, where we are very optimistic that we will see p21 expression at that time.

Q: Cellceutix has recently disclosed data and images showing Kevetrin could potentially be developed as a new treatment for retinoblastoma, a devastating and rare disease primarily effecting very young children. What made you decide to try Kevetrin against retinoblastoma?

A: We have regularly researched Kevetrin against different forms of cancer as part of our business model to demonstrate the power of restoring p53 function. Any company can say, "We think it will work against this indication," but to provide concrete evidence is our goal and that's what we're doing. With the addition of retinoblastoma, we have shown Kevetrin to produce activity such as tumor growth delay and/or reduction in tumor volumes in many different cancer lines. Let's also not forget outside testing including the recent research by Beth Israel Deaconess Medical Center that showed in vivo tumor shrinkage in renal cancer with Kevetrin, and testing at the University of Bologna that showed reduction of blood tumors with Kevetrin. We made the decision to test retinoblastoma because of the very limited number of options for children suffering from the disease and the great need for a new treatment. The indication was a logical choice from a humanitarian standpoint and from a business perspective.

Q: That leads me to my next question. In your latest press release, Cellceutix Chief Scientific Officer Dr. Krishna Menon provided some commentary on your plans to pursue drugs that could qualify as a "breakthrough" technology. Would you elaborate on this part of your business plan?

A: As I just touched-on, we have always believed that because of Kevetrin's mechanism of action to re-activate p53 that it could potentially work on many different types of cancer. Our research so far has supported that contention. Our plan has always been to establish a safety - and hopefully efficacy - profile through a clinical trial at a preeminent cancer center to align for subsequent trials for a wide array of indications to open the door for partnering opportunities. We feel that we are well on our way to those goals. The latest Congressional mandates for the FDA to take a more active role in expediting "breakthrough" technologies happens to be a perfect fit for our business because of the novelty of Kevetrin as a new class of chemistry. There's nothing else like it. It doesn't get much more "breakthrough" than that, in my opinion. We are a publicly-owned biotechnology company and that means that we have both a scientific and fiduciary responsibility to our shareholders to explore the quickest path to bring a new drug to market leveraging every resource possible, including the new FDA initiatives. While the Dana-Farber trial is ongoing and the leukemia clinical trial is being prepared in Europe, we have decided to strengthen the Kevetrin portfolio by pursuing some rare cancers that have the potential to lead to FDA approval in as little as one clinical trial. For starters, it can save lives. It also saves valuable time and money and could make us a very attractive partner to big pharma that are also looking to find a drug to rapidly bring to market. Companies like Genzyme, who was bought by Sanofi (SNY) for more than $20 billion in 2011, built their business by commercializing drugs for rare diseases. It is certainly part of our business model as well.

Q: Speaking of the clinical trial in Europe of testing Kevetrin against Acute Myelogenous Leukemia or AML, what is the status of that study?

A: That clinical trial is being sponsored by the University of Bologna in Italy and The Italian Cooperative Study Group on Chronic Myeloid Leukemia and Acute Leukemia. Their pre-clinical research produced very optimistic data combining Kevetrin with Cytarabine for AML. We have been advised that all regulatory submissions have been made and that everything is still on schedule at this point for the trial to begin before the end of June.

Q: Cellceutix also has a Phase II/III clinical trial on tap for its psoriasis drug, Prurisol. When is that starting?

A: Last month, Dr. Menon and I met with Dr. Reddy's Laboratories (RDY) at their headquarters in Hyderabad, India. Let me first say what a top-notch and impressive company Dr. Reddy's is. Their dedicated team potentially saved us millions of dollars in future manufacturing costs with their knowledge of the active moiety in Prurisol. That being said, they are working on manufacturing and we expect the drug to be ready by the end of June. We have provided the clinical site with the current manufacturing schedule. The hospital will now fit the start of the trials into their schedule based upon receipt of the drug and stability studies. It will be a quick, proof-of-concept study that will only take two months. We are optimistic that the results from that trial will pave the way for a large, multi-center Phase III clinical trial for Prurisol in 2014.

Q: Shares of Celgene (CELG) have risen above $110 per share with the latest Phase III data showing that treatment with its psoriasis (and other indications) drug Apremilast reduced the symptoms of psoriasis by 75 percent in one-third of the patients in the trial. Celgene believes Apremilast, could generate between $1 billion to $1.75 billion in annual sales if it makes it to market. Do you feel that Prurisol has the same potential?

A: Celgene is testing Apremilast for several indications, including a rare inflammatory disease with orphan drug status in the U.S., but I believe that any new oral drug that can effectively treat psoriasis and co-morbidities has billion-dollar potential, whether it is Apremilast, Prurisol or another. From a developmental standpoint, because psoriasis is an autoimmune disease, it is hard telling what else the drug may actually work for as a new treatment. As Celgene is demonstrating with Apremilast, it could be commercialized for several indications. The most commonly used drugs for psoriasis/psoriatic arthritis today are Amgen (AMGN) Enbrel and AbbVie (ABBV) Humira, which are also used for other conditions. A key to capturing additional market from drugs like Enbrel and Humira is going to be improving on the number and severity of side effects, which could result in more doctor's prescriptions. Prurisol's PoC clinical trial should be completed in the third quarter and we are hopeful that the top-line data will show strong efficacy and a premium safety profile. (note: Enbrel and Humira, cumulatively topped $13 billion in sales in 2012.)

Q: With most small biotechs, investors speculate about partnering or becoming an acquisition target. Now that trials are advancing, have you been contacted by any big pharma and, if so, in what capacity?

A: As we have disclosed in the past, we have a number of confidentiality agreements already in place with some of the world's largest pharmaceutical companies that are interested in following our drugs in development. We regularly respond to calls or emails from large pharma, so we know that they are watching us. Let's face it, Kevetrin is a very unique drug because of the p53 connection and it is in clinical trials at one of the most prestigious cancer institutes in the world. It's high-profile, so big pharma has heard of it and recognizes the revenue potential. We'll simply have to see what happens when clinical data arrives. Understand that partnering or becoming an acquisition target is on our minds as well, but because of the potential of Kevetrin and the rest of our pipeline, we need to manage these assets prudently. We prefer building a dominant position that we can later leverage should everything go well. I will add that it is ironic that you mentioned Celgene, as they have recently contacted us, but only requesting information that is publicly available. That is generally how the process starts and we'll just have to see where it leads.

Q: Cellceutix said earlier this month that it has signed an agreement to license a novel compound with a cancer treatment center in NYC. Could you tell us a bit more about this?

A: Obviously, I cannot go into great detail, but it is safe to say that when a scientist the caliber of Dr. Danishefsky calls to say, "We need to take a close look at this compound;" we are listening closely to him. Now that the confidentiality agreement is in place, the next step is a material transfer agreement. Thereafter, Dr. Menon and the rest of the team will be conducting experiments to evaluate the compound and only then we will consider acquisition or partnering possibilities, if appropriate. That's is all I may disclose at this time.

Q: Now that CTIX trades actively and is close to, or meeting requirements to move to a higher exchange, are there any intentions to uplist to the Nasdaq or NYSE MKT?

A: We are very focused on what we are working to accomplish in the near term with the development of Kevetrin and Prurisol, but moving to a senior exchange is definitely part of our overall plan to maximize exposure and shareholder value. Making some preliminary plans, I had a meeting with the NYSE earlier this month to discuss the process and was pleasantly surprised that they knew who we were already. As I'm sure you can tell, we don't let the moss grow under our feet at Cellceutix. We are always planning for the future, but we still recognize that there is work to be done in the here and now. As we meet our milestones, we will move forward. I am confident of that.

As always, Leo was very informative. Reflecting upon our conversation, I gleaned several bits of information above and beyond the status updates of Kevetrin and Prurisol. Mostly, my thoughts were underscored by the position the company is putting itself into by taking Kevetrin through so many channels. They truly have a forward-thinking business model that can make the company extremely attractive to a number of companies.

Celgene is of immediate thought because of the recent outreach to Cellceutix that Leo mentioned. Celgene has some lofty earnings per share goals in the coming years, demonstrating its aggressive growth strategies that could certainly entail acquisitions to meet future goals. The company is surely going to seek FDA approval for Apremilast for psoriasis, but the recent Phase III efficacy data coming in shy of the previous Phase II data, appears to have dampened sentiment of blockbuster status for the drug. Perhaps they are looking to still expand their psoriasis portfolio in addition to their cancer drug franchise. Celgene also recently garnered FDA approval for Pomalyst as a new drug for specific multiple myeloma patients, which will deliver extra cash to the company that can be reinvested into their pipeline.

Pfizer (NYSE:PFE) is also a logical candidate to be eyeing Cellceutix and I always wonder if there is more here than can be revealed. There is already a connection between the two companies with Beth Israel Deaconess sponsoring independent trials on Kevetrin in combination with two of Pfizer's multikinase inhibitor drugs as possible new drug candidates for renal cancer and melanoma. Pfizer has been stung by the so-called patent cliff, including the loss of exclusivity of Lipitor in November 2011 and Geodon in March 2012 and it is also losing revenue with the ending of its co-promotional agreement with Amgen related to Enbrel in October 2013. Pfizer has got a stack of cash, about $32 billion, and CEO Ian Read says, that the company will continue, "pursuing the most attractive opportunities for deployment of our shareholders' capital." Without the Enbrel sales, a different psoriasis drug may be enticing, especially as an added bonus if the combination therapies mentioned above produce results.

The list can easily continue with possible acquirer/partner candidates for Cellceutix. Merck (NYSE:MRK) just appointed ex-Amgen research executive Roger Perlmutter to head its research labs division. Merck has been struggling to develop a blockbuster drug and is hungry for a winner. As Leo said, Cellceutix has confidentiality agreements with several companies, which one is impossible to discern as there are so many that would seem logical and educated guesses and seem a good fit for both parties.

Disclosure: I am long CTIX.OB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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