Cellceutix: The Next Ten-Bagger Or Pie-In-The-Sky?

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Cellceutix (CTIX.OB) trades on the OTC Bulletin Board, with a market cap of $172M [for key stats, see yahoo] at the time of writing this. It has slightly under 100M shares outstanding and has traded in the last 3 months more or less between $1.50 and $2.30 judging by the charts [one has less confidence about the price figures for unlisted stocks]. The price, a year ago, was about 70¢/sh. What is behind such a rise is the interesting question, as well as where it is headed. Such a lofty valuation for a biotech firm that still has not published any clinical data on efficacy, has only $1M in cash, and has $2M in debt means that all of the company's valuation is based on its prospects. The stock has been in a clear uptrend and has risen ten-fold from the beginning of 2011. As a biotech speculator who is long this stock, I wrote this review for my own sake to see if I had bought into a lot of hype, or into real block-buster potential. I present the pros and cons here (without grouping them as such) for you to judge, although, having reviewed and studied the relevant information, I think its case for big-time breakthrough in cancer therapy is very strong.

Pipeline: Assessment of the potential of a development stage biotech firm has to be based on the products in development, the data pertaining to them, the potential revenue involved for the medical needs addressed, and the capacity of the company to see any viable products through clinical trials needed for approval. The company lists 8 compounds in its pipeline.

Kevetrin

Cancer

Phase 1

Prurisol

Psoriasis

Phase 2/3 505(b)(2)

KM 391

Autism

Preclinical

KM 227

Arthritis

Preclinical

KM 278

Arthritis/Asthma

Preclinical

KM 3174

Cancer

Early R&D

KM 362

MS/ALS/Park

Early R&D

KM 732

Hypertensive emergency

Early R&D

For purposes of valuation, I ignore the three which are in early R&D as well as the three in pre-clinical stages [they may amount to something, but the vast majority of potential drugs fail to become real ones for lack of efficacy or attendant toxicity when actually tried on people]. Once the company has plenty of cash on hand, these could be considered for some value because it would have the capacity to develop those that show potential. CTIX has played up the potential of its autism compound, KM 391, and the results from animal model studies are quite interesting. But the gap between animal models and something as elusive as autism in humans presents too great a risk to place a significant confidence at this point on its becoming a drug at this time. In my thinking, and based on off the cuff assessments of the valuation of biotech companies with no cash and products only in pre-clinical stages of development, all of the pre-clinical pipeline should be valued for less than 5% of the company. But the remaining two, Kevetrin [for which and related compounds the company has received patents] and Prurisol [a compound that CTIX developed, and for which patent application was filed in January of 2012 and the decision should be close to being published] are intriguing, to say the least. Unfortunately, we do not as yet have data on the efficacy of either Kevetrin against cancer or on Prurisol against psoriasis from actual trials on humans.

Prurisol and psoriasis:The data on this are likely to emerge first. 2-3% of the world's population are affected by some type of psoriasis, and its treatment is a multibillion dollar market worldwide, and there are no current therapies that offer a cure, as the following from the Mayo Clinic website reveals.

In spite of a range of options, effective treatment of psoriasis can be challenging. The disease is unpredictable, going through cycles of improvement and worsening, seemingly at random. Effects of psoriasis treatments also can be unpredictable; what works well for one person might be ineffective for someone else. Your skin also can become resistant to various treatments over time, and the most potent psoriasis treatments can have serious side effects.

The pre-clinical data for Prurisol has been set forth as showing dramatic improvement, even full cure (on the grounds that there was no recurrence during the experimental period) in the experimental model of psoriasis. This consisted of xenograft studies using mice which were grafted with human psoriatic tissue. In the pictures at the company web site, the treated mice look nice. The untreated mice look not so nice. The numerical data from this are slightly less impressive than the pictures, and there may be unanswered questions about the role of experimental procedures (such as prior irradiation) on the outcomes. A Proof of Concept clinical study involving human patients at an unidentified European Union clinical site has been expected for some time. It was originally announced to start the first quarter of 2013 but has not begun yet, because the compound is being formulated for use in clinical trials. As of last report (June 16, 2013), pharmaceutical tablets of Prurisol are undergoing stability testing by the firm contracted to manufacture it for the company. The stability testing was stated to take another 45 days from the date of report. This means the earliest that the Prurisol clinical trial in Europe will get under way is August. It is supposed to be a 30-day dosing followed by 30 day follow-up. Depending on how long it takes to get sufficient number of patients, it could be all completed very quickly and the results available without having to wait for one or several years as is the case with many clinical studies. As the CEO of Cellceutix put it, "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." CTIX is planning for an accelerated, 505(b)2, pathway toward approval, which may mean using the European data in place of Phase 1 [?]. My fingers are crossed as I keep in mind that the mice looked nice, and that the psoriasis did not recur during the study period in the Prurisol treated mice, but that often hopes raised by limited select data from pre-clinical experiments are dashed to pieces by the outcomes of the clinical studies.

Kevetrin and Cancer: The Prurisol story is interesting; however, most of the excitement about Cellceutix has to do with its lead product Kevetrin, with the chemical name, thioureidobutyronitrile or the IUPAC name, 3-cyanopropyl carbamimidothioate [for more, see medkoo], reportedly invented by Dr. Menon, the scientist behind Cellceutix. The company holds extensive patent rights.

On December 25, 2012 the United States Patent and Trademark Office (USPTO) awarded the Company U.S. Patent No. 8,338,454 B2, titled "Nitrile Derivatives and their Pharmaceutical Use and Compositions." The patent covers pharmaceutical compositions comprising Kevetrin™, the Company's novel anti-cancer compound currently being evaluated in clinical trials against advanced solid tumors. The patent also covers related compounds and compositions [emphasis added].

From my perspective there are two things about this that are particularly interesting. One is the broadness of this patent in what is a totally new type of molecule being tried for cancer treatment. Once Kevetrin's effects become clearer, other possibilities with related compounds could be explored although this would be well down the road. The other fact that has roused so much excitement about Kevetrin has to do with its mechanism of action, observed through laboratory studies [cancer cell lines and animal models]. It has to do with a protein labeled p53, which has a very complicated set of functions in the cell, but has a dominant role as a tumor suppressor. Kevetrin activates p53 in the cells. The company's page on Kevetrin while it conveys its great excitement in this regard, also states the current understanding about p53 and cancer. The p53 protein keeps cells from uncontrolled division [cancer] by killing them [apoptosis].

p53 has been shown to play critical roles in the homeostatic health of the human body by activating proteins required to repair DNA and plays a major role in the life cycle of cells by inducing cell cycle arrest and apoptosis to maintain cellular and genetic stability… In more than 50% of cancers, p53 gene has a mutation that impedes its function… Kevetrin activates both transcription-dependent and transcription-independent pathways to promote apoptosis through p53 activation.

Let us look at an unbiased source. The following is the abstract of a review article in Nature Reviews Cancer from 2009. It was entitled, "Awakening guardian angels: drugging the p53 pathway" [Nature Reviews Cancer 9, 862-873 (December 2009)].

Currently, around 11 million people are living with a tumour that contains an inactivating mutation of TP53 (the human gene that encodes p53) and another 11 million have tumours in which the p53 pathway is partially abrogated through the inactivation of other signalling or effector components. The p53 pathway is therefore a prime target for new cancer drug development, and several original approaches to drug discovery that could have wide applications to drug development are being used. In one approach, molecules that activate p53 by blocking protein-protein interactions with MDM2 are in early clinical development. Remarkable progress has also been made in the development of p53-binding molecules that can rescue the function of certain p53 mutants. Finally, cell-based assays are being used to discover compounds that exploit the p53 pathway by either seeking targets and compounds that show synthetic lethality with TP53 mutations or by looking for non-genotoxic activators of the p53 response.

It is interesting that the above review concludes by referring to non-genotoxic activators of p53. So here is something positive about Kevetrin compared to other drugs that have been tried for similar mechanism against tumors.

"Kevetrin was shown to be non-genotoxic. Most currently available chemotherapeutic are genotoxic in nature and damage DNA. Our results showed that Kevetrin, in a non-genotoxic way, induces p53 leading to apoptosis."

The following statements about Kevetrin are taken from the June 3 poster presentation at the American Society for Clinical Oncology ["wild type" refers to non-mutated, or "normal"]:

Kevetrin induces cell cycle arrest and apoptosis through activation and stabilization of wild type p53, resulting in increased expression of target genes p21 and PUMA.

Mutant p53 is an array of mutant proteins with oncogenic properties varying among patients. Mutant p53 proteins increase proliferation and chemoresistance in cancer cells. Depletion of mutant p53 in tumors induces apoptosis. A drug that activates wild type p53 and degrades mutant p53 is an excellent candidate for cancer treatment. Kevetrin induces degradation of oncogenic mutant p53 and induces apoptosis. [emphases added]

What is the significance of Kevetrin increasing expression of the p21 gene and PUMA? Here is wikipedia on p21.

The expression of this gene is tightly controlled by the tumor suppressor protein p53, through which this protein mediates the p53-dependent cell cycle G1 phase arrest in response to a variety of stress stimuli. This was a major discovery in the early 1990s that revealed how cells stop dividing after being exposed to damaging agents such as radiation.

PUMA stands for p53 Upregulated Modulator of Apoptosis. In short, it has been verified that in cell lines in culture, Kevetrin does activate the normal functions of p53 without damaging the DNA.

As for the potential of Kevetrin as an anti-cancer drug, the preliminary data reported does not at all suggest that Kevetrin is a silver bullet aimed at cancers. It may not eradicate them. According to the graphs of the study showing "Kevetrin has potent anti-tumor activity in xenograft models with varied p53 status," the tumors begin to grow again after a delay following the end of the treatment cycles. On the other hand, in the present day, total cure of cancer is hardly the standard to meet for any new cancer drug. Tens or even hundreds of millions are spent just to show that the experimental drug outdoes the standard of care treatment by extending life by a few months, in order to get FDA approval! In the animal model study shown, with mutant p53 breast cancer tumor, Kevetrin clearly outdoes paclitaxel at the doses employed.

What is interesting about Kevetrin is that it could be an agent against all kinds of cancers. If the results from clinical [i.e., human] studies come anywhere near the pre-clinical results, the potential is, uhm…. far-reaching. It has shown efficacy even in drug-resistant cell lines for lung cancer, breast cancer, and colon cancer. In addition, positive results have been found against cancer cell lines for head and neck cancer, colon cancer, prostate cancer and retinoblastoma. In January of this year the company reported the following:

Research by BIDMC [Beth Israel Deaconess Medical Center] combined Kevetrin™ with sunitinib on cell line 786, a drug-resistant renal cancer. Cellceutix was advised by the researchers that "the Kevetrin/sunitinib combination is the first we've used in which actual tumor shrinkage is noted."

The current status of Kevetrin's clinical development. Kevetrin is still in a Phase 1 study that focuses on safety, determination of maximum tolerated dose, drug distribution in the body, etc. The goal is to enroll about 40 patients with an additional 12 after the maximum tolerated dose is determined. This study began in November 2012, and according to the June ASCO report, only 10 patients had been enrolled to date and nothing was mentioned about "evidence of anti-tumor activity following administration of Kevetrin." Not talking about this at this early stage of the study is understandable. But it does mean that investors will be waiting for a while to find out about efficacy against cancer in humans. What was interesting in the data reported was the wide variety of tumors represented in the ten who were enrolled.

The company acknowledges that the required process for trials in the US is cumbersome. It is going to rely on European trials as a pathway to expedite FDA application for approval both for Prurisol and for Kevetrin, even as the Dana-Farber Phase 1 study progresses. It had been previously reported that a "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, … 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."

More recently, the company entered into an agreement with M.D. Anderson Cancer Center, "for laboratory research of Kevetrin as a potential new treatment for Lymphoma and Multiple Myeloma." The positive side of this for CTIX is that they don't have to spend money on doing this research. They merely supply the Kevetrin. On the other hand this is still not a clinical trial. The company does not yet have the Phase 1 safety data needed to begin Phase 2/3 trials for specific diseases.

If you want to read more about p53 skip to the end of this article.

Connections: I began to look at Cellceutix as a story stock. The CEO has been promoting it aggressively [I don't blame him] and I, as an investor, need to tell what is hype and what is substance. The personal and institutional connections mean a lot in this regard. One might ignore the name and greatness of the recently late Dr. Emil Frei, erstwhile mentor of Dr. Menon, and his exuberance over Kevetrin, as owed in part to personal loyalties. But there are other names as well as top-tier institutions in cancer research involved: Harvard Cancer Center's Dana-Farber Cancer Institute, Beth Israel Deaconess Medical Center, a teaching hospital of Harvard Medical School, and now, M.D. Anderson Cancer Center. It appears from my reading that a good deal of the pre-clinical trials have been conducted by top name institutions at their own expense, as will be the case with recently announced series of studies to be undertaken at The University of Texas M.D. Anderson Cancer Center. Cellceutix just supplies the product. A company with 2 full time employees and no cash must have acquired the current market cap because its intellectual property has merit, as recognized by those who can tell. This is significant.

Investment Prospect: [These are personal musings, not advice, since I am neither qualified to advise nor intend to do so]. One really needs the efficacy data from the Dana-Farber Phase 1 study on Kevetrin or the results from European proof of concept study on Prurisol, for the next level of confidence in this as an investment. At the present moment this is a bet for me, with the attendant risk of loss, though a far better bet than any other biotech out there with only pre-clinical data. However, the pre-clinical data for Kevetrin is extremely impressive. The surprise would be for nothing to come out of it. If the Prurisol study for effectiveness in treating psoriasis flops (and we hope to find out by the end of the year, although these dates have a tendency of getting revised), then the stock is likely to pull back significantly. That would be good for those who want to get on board for Kevetrin's sake. If the Prurisol study is positive then a march toward the billion market cap will begin. I would hope that the stock will then become listed on an exchange, and perhaps re-capitalize, although it has at present a common stock purchase agreement with Aspire Capital Fund, LLC, to raise ten million dollars, at the initiative of CTIX. This is good enough for being able to launch any quick initiatives. If and when positive clinical data on Kevetrin appear, there will still be significant upside with less risk. That would be when risk intolerant investment capital gets aboard.

For those interested in knowing more about p53:

basic information can be found here.

For more technical reviews see the following:

p53: Structure, Function and Therapeutic Applications.

Tumor Suppressive Functions of p53.

The Growing Complexity of p53.

Resistance and gain-of-resistance phenotypes in cancers harboring wild-type p53.

The last of the above discusses how loss of function of p53 is also correlated to resistance to anti-tumor drugs. This is particularly important if you consider the future potential of Kevetrin in combination therapy, if it is able to restore the function of p53 in cells.

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.