Cel-Sci's Multikine - Potential 21st Century Superdrug

| About: Cel-Sci Corporation (CVM)


Multikine showed very impressive tumor shrinkage, with 2 patients showing tumor elimination, in a Phase II Head and Neck Cancer Trial.

Current Phase III progress appears to be positive with final results due Dec 2017.

Multikine could be a blockbuster drug for Cel-Sci.

At 70M market value Cel-Sci is significantly undervalued, compared to their peers.

Cel-Sci (NYSEMKT:CVM) stock has seen significant appreciation since its low of $0.53 on Dec 19, 2013. The share value now sits around $1.30, which is almost a 130% gain in a little over 2 months. What is causing this? Cel-Sci could be onto a major cancer breakthrough stemming from a common sense method of treatment.

In the late 70s, Maximilian de Clara, Cel-Sci's founder, believed strongly that the immune system played an important role in fighting cancer. He funded the early Multikine (Leukocyte Interleukin, Injection) research at the Max Plank Institute in 1978, founded Cel-Sci around the idea of Multikine in 1983, took the company public soon thereafter and located it in the Washington, D.C. area.

The company's Chief Scientific Officer, Dr. Eyal Talor - a recognized leader in the immunotherapy field - further refined Multikine to be a non-toxic treatment for cancer. Multikine seeks to reinforce the immune system before it has been compromised by radiation and chemotherapy. Cel-Sci is currently undergoing Phase III testing for Multikine. If they are successful, it will be the first non-toxic initial treatment for head and neck cancer in the world. The fact that it is non-toxic should make every reader sit up straight. A non-toxic cancer remedy for head and neck cancer?! This is unheard of in the cancer treatment world, yet Cel-Sci might have the first.

Cel-Sci chose head and neck cancer because it represents 6% of worldwide cancer diagnoses, a relatively large number considering the many cancer types, and is an unmet medical need. Unmet medical need means very little progress has been made to treat this particular ailment.

Cel-Sci's decision to enhance survivability and quality of life for these people, who have very little options since 50% of them die within 3 years of diagnosis, is admirable. Head and neck cancer is so aggressive that 60-70% of patients are dead after 5 years of initial diagnosis. Going after a tough disease is the differentiator between a company that just wants to make a profit, and a company that wants to make a real difference in people's lives. After intensive research on Cel-Sci over the past several months, the company is definitely the latter.

Multikine is a mixture of naturally derived cytokines and is part of a new class of drugs called "Immune Stimulators." The drug enhances the immune system to fight the cancer before standard of care (SOC) treatment. SOC for head and neck cancer is surgery followed by radiation and/or chemotherapy. Using Multikine is analogous to putting a turbo charger on an engine to improve performance. Multikine will be implemented before existing treatments, which classifies it as a neoadjuvant treatment. This is important because if it was replacing an existing drug, competition would be fierce leading to potentially delayed acceptance and even reduced sales.

The advantage of Multikine is that the immune system is boosted before being compromised with radiation and/or chemotherapy. While boosting the immune system is now accepted as an obvious way to help beat cancer, the notion that the immune system played an important part in defeating cancer was novel in the 80s, when the company was formed. Cel-Sci's approach has been different from the very beginning and that should be refreshing to investors.

It should be noted that immunotherapy is a rapidly growing field in cancer research. Many companies are working on immunotherapy drugs; however, the vast majority of these are designed to boost the immune system after it already has been compromised.

Virtually all existing FDA-approved cancer treatments are toxic. Chemotherapy and radiation will kill the bad cells, but also the good. While this technology can save lives, it often leaves the survivors with diminished quality of life. The most recent example of a high-profile person with head cancer is Roger Ebert. The ultimate disfigurement that can result from this disease is astonishing. Families that do lose their loved ones during treatment are left wondering if it was the cancer, or the treatment, that killed them. The world desperately needs a new approach to treating this deadly disease.

Before outlining the value of Cel-Sci, I will highlight the most common criticisms.


Frequent Dilution - Cel-Sci has struggled with funding almost since its inception. It has diluted investors several times with secondary offerings and recently incurred a 1:10 reverse split on Sept 25, 2013 to keep them from being delisted on AMEX. While share issuances are rightly seen as frustrating for existing shareholders, those with even minimal experience in the biotech sector understand that dilution is a fact of life with clinical stage biotech companies. If you don't like dilution, stay far away from biotechs.

ATM Machine - Some people have commented that management treats shareholders like an ATM machine. They say management is only lining their pockets with shareholders' money in the form of public offerings.

While this might be a valid criticism of a few biotech companies, management's past actions suggest this is absolutely not the case.

Geert Kersten (CEO), Maximilian de Clara (Chairman of the Board and President) and Patricia Prichep (Senior VP of Operations) were without any salary between September 2008 and June 2009 (12/27/13 10-K page 36). This is 9 months without a paycheck! Other senior members took substantial salary cuts, all geared towards helping CEL-SCI survive. In all of these cases the officers continued to work without any guarantee of payment. Also see this video link at time increment 2:00.

In addition, in 2007, they spent $25 million to build a one-of-a-kind true cold-fill manufacturing facility for Multikine. Would greedy executives divert money from their pockets to build such a facility? Absolutely not! This action only occurs if management believes in the product and believes there is a market for that product.

Lack of Information - Cel-Sci is very tight-lipped about information regarding its Phase III trials; however, due to the low enrollment numbers from their Clinical Research Organization, inVentiv, (described in more detail below), it really didn't have much to report. Investors became impatient sending the share price plummeting.

In addition Geert Kersten was originally a lawyer before he joined Cel-Sci. Lawyers are trained to be very conservative with their statements and always be factual. This personality trait does not resonate well with speculators of biotech stocks who are often only looking for a quick profit. However, I am a fan of Geert's tight-lipped stance especially when the FDA has such strict policies regarding leaking information. If Cel-Sci says the wrong thing it could potentially bias, or compromise, the current Phase III testing potentially setting it back by years.

Taking too long and ultra-low share price - It has taken Cel-Sci about 30 years to get to this point. Because of its novel non-toxic technology, Multikine has offered huge potential in the area of cancer treatment, for many years. Wall Street and retail investors became enamored with the possibilities, which are impressive, but it takes years to properly design a protocol and get through Phase III testing. People that purchased stock many years ago have now long since abandoned it because their expectations were too high and timeline too short. Shorters also jumped on the declining-share-price bandwagon, triggering stop/losses and margin calls, which ultimately pushed share prices down even more.

It is not uncommon for a new class of drug to take between 25-30 years before FDA approval. In addition, the cost for new drugs can range from $500M to $1.2B. Cel-Sci has been extremely resourceful in only spending about $200M to get to this point. There is no doubt that with more funding, they could have brought Multikine through Phase III testing at a quicker pace, but timelines like this are the norm for many small biotechs.

To be fair, there was a significant delay between the positive results of Phase II (2004) and the start of Phase III (2010). However, this was not the fault of Cel-Sci. Because Multikine is a complex biologic, the FDA essentially required Cel-Sci to build its own manufacturing facility to ensure that the Phase III testing Multikine doses would be identical to mass-produced doses should Phase III testing be positive. This required the company to raise money through dilutive financing, design and build the facility and then commence testing and validation. Most other drug companies do not need to go through these additional, time-consuming steps.

Despite all these criticisms and delays, Cel-Sci has endured. Management firmly believes Multikine will be a game-changer in the cancer treatment industry. The key to understanding the potential value of Cel-Sci is in its Phase II results.


Phase II results are outlined in the Journal of Clinical Oncology. While the testing sample was small (19 patients), the results are impressive, to say the least.

The trial encompassed 19 patients who received Multikine and 20 patients who did not. 15 Multikine injections were given once a day for 3 weeks. Injection location was around the tumor.

Of the 19 patients treated with Multikine, 2 patients had cancer tumors that completely disappeared; 2 patients had a tumor reduction of greater than 50%; 4 patients had a tumor reduction of 30-50%. This is a response rate of 42%, which is impressive! The fact that tumors disappeared in 2 patients after a few weeks of Multikine injections is huge. Disappearing tumors alone would be enough to make the investigators question 'what is happening and why?'.

It is also important to note the wording in the Conclusion section of the Phase II report. "LI-treated (Multikine) OSCC patients were characterized by a markedly altered composition of tumor infiltrating mononuclear cells, increased CD4+:CD8+ ratio, and increased tumor stroma to epithelial ratio, all of which were distinct from controls."

The key word here is markedly. Research reports are technical papers and devoid of emotion. They easily could have left it out, but they didn't. The fact that they choose to use this word means they saw something statistically significant with Multikine injections.

Phase II also revealed that Multikine did not produce any systemic or local toxicity at the current dosages. This has been officially validated with Phase III interim review where no toxicity was reported. Toxicity complications during Phase III testing will result in a 30% drug failure rate! The fact that Multikine is non-toxic means it can potentially be applied in higher doses for other types of cancers or ailments. In addition, if Multikine is used for other types of cancers in Phase III studies, the possibility of failure from toxicity is virtually nil.

The report also stated that Multikine appears to have made the edges of any remaining tumors more defined making it easier for surgeons to cut out. The authors believe that Multikine not only boosts the immune system but also makes the tumor more susceptible to the immune system response. If that weren't enough, the authors noted that the Multikine treated patients had higher proportions of connective (scar) tissue, possibly a consequence of an antitumor immune response.

In summary, at the end of 3.5 years after conclusion of Multikine injections, the patients in the Phase II study had increased their odds of survival by a mind-boggling 33%. This is outstanding when it comes to increasing survivability. Even a 10% improvement would be impressive. Granted, Phase II had a small population, but the dramatic improvement in longevity should make one do a double take.

The very end of the report states the following "These findings, taken together with our previous report, indicate that LI (Multikine) neoadjuvant immunotherapy regimen or OSCC (oral squamous cell carcinoma) is a clinically viable approach to the management of OSCC. The results of larger efficacy trials may promote the introduction of LI into the current treatment protocols of OSCC." This is basically the researchers (18 in all) blessing and recommendation that Multikine research continue.

The authors also point out that Multikine may have applications for melanoma, B-cell non-Hodgkin's lymphoma, renal cell carcinoma and cervical carcinoma. To really grasp the scope of the Multikine's potential, the question one should ask is not "What can Multikine do?", but instead, "What ailments can be treated with a boosted immune system?" The potential sales for Multikine is easily in the billions, if it passes Phase III trials.

Cel-Sci's Manufacturing Facility

Because Multikine is a complex biologic of multiple cytokines, it is vital that there is consistency between the doses used in the Phase III trial and eventual distribution with possible FDA approval. This posed a challenge for Cel-Sci. They could make Multikine at their facility in small batches for Phase III testing, but their small pilot plant couldn't make enough for mass production. In addition, there was no guarantee that the Multikine used during Phase III testing would be identical to a mass-produced Multikine from a 3rd party manufacturer. To make matters worse, there is no existing testing method to determine if the two are biologically identical. How did Cel-Sci handle this challenge?

They eliminated this risk by raising $25 million to build their own cold-fill manufacturing facility. This facility is certified to the rigorous pharmaceutical standards of US and European Union. Existing investors were not happy because they were diluted, but Cel-Sci couldn't take the risk of not having drug consistency. Cel-Sci made the right decision. After all, it is better to own a small part of an outstanding company that a large part of a worthless company.

The manufacturing facility is the only facility to perform cold (4-deg C) aseptic-filling of small volume parenteral drug products and sterile media products. This cold-fill process, as opposed to normal room temperature fill, significantly increases the probability of maintaining drug activity, potency and thus extends the shelf life of the products. Cel-Sci believes it can also contract out the filling service to other companies and academic institutions at a going rate of $150,000 for an 8-hour fill, thereby generating additional revenue streams.

Phase III

With very impressive results in Phase II and a brand new certified manufacturing facility, the FDA gave Cel-Sci approval to start Phase III testing in December 2010. Cel-Sci decided to conduct the largest head and neck cancer trial in the world. Phase III involves registration of 880 patients with the goal of having 784 evaluable patients in over 48 clinical centers in 12 countries and 3 continents. Phase III is an open-label, randomized controlled global study. The primary endpoint is a 10% overall survival advantage after 3 years. This is considered the gold standard of end points in clinical trials. The secondary endpoint is progression free survival, local regional control and quality of life. Conducting the largest head and neck cancer trial in the world means management has a great deal of confidence about Multikine's potential.

This is a massive study and investors should take notice. Cel-Sci is going for global regulatory approval of Multikine to treat head and neck cancer.

The diagram below shows the Phase III Trial Design.

The existing Standard of Care (SOC) is encompassed in the red box. Multikine will be administered at the tumor site before surgery. If all goes as planned patients receiving Multikine will see their tumors disappear or shrink from their original size with the ultimate goal of saving lives.

Initially, Cel-Sci contracted their Phase III enrollment with PharmaNet. However in 2011, PharmaNet was acquired by inVentiv Health Clinical, LLC (inVentiv). Merger problems immediately developed and several key people at PharmaNet left the company resulting in low enrollment rates for Multikine's Phase III trials. According to an article by Michael Morhamus, inVentiv only enrolled 117 patients at 39 sites in 8 countries in 3 years. At that rate, the Phase III study would have taken 15 years to complete.

Cel-Sci, specifically Geert Kersten, took heat for the low enrollment rates and lack of information regarding enrollment numbers. Their stock price suffered which made it more difficult to raise funds to cover their ongoing research expenses. Cel-Sci terminated their contract with inVentiv around April 2013. On October 31, 2013, Cel-Sci announced they initiated arbitration claims against inVentiv for breach of contract, fraud in the inducement and common law fraud, seeking at least $50 million in damages. On December 12, 2013 inVentiv filed a counterclaim in response to Cel-Sci's claims against it. The counterclaim alleges breach of contract and seeks at least $2 million in damages.

Clinical Research Organizations (CROs), like inVentiv, get paid millions of dollars for enrolling patients for bio medical companies. Cel-Sci would not be paying large sums of money to inVentiv without a tight contract outlining enrollment requirements. Based on an April 23, 2013 press release, Geert Kersten stated "This (the acquisition) had a very negative effect on study enrollment. As a result, the number of patients that have been enrolled and treated in the study fell below the level agreed to with the CRO (inVentiv)."

When companies "agree," it is with a tight contract. It appears that inVentiv is in breach of contract. Cel-Sci possibly has millions of dollars coming their way. While I don't think Cel-Sci will get the entire $50 million, if inVentiv is found guilty of all 3 claims, I think Cel-Sci will see several millions deposited into their bank account. This is because the delays would obviously cause problems for cash-strapped Cel-Sci and have pushed Phase III results back 1-2 years. The worst-case scenario here is that inVentiv is not guilty and Cel-Sci has to pay $2M, but based on what appears to be a broken contract, this is highly unlikely.

Since the lawsuit is classified as an arbitration case, a decision should come much quicker than with standard litigation trials, which can take years and are very expensive. At the same time, any decision that the arbitration court makes is binding with no room for appeal.

Cel-Sci's new CROs are Ergomed and Aptiv Solutions. They were signed on in April 2013 and enrolling patients at a rapid rate.

A Feb 27, 2014 press release stated that 146 patients have been enrolled in Phase III study to date. The full 880 patients should be enrolled by the end of 2015. To get a sense of the rate at which things are accelerating, it took 3 years to get 146 patients and should take only 20 months (~1.5 years) to get the remaining 734 patients enrolled. This is a massive ramp up of enrollment numbers. Cel-Sci and their new CROs clearly have the logistical and technical issues worked out regarding enrollment.

An Oct 15, 2013 press release also needs to be dissected to understand its significance regarding the potential of Multikine. The press release stated the following: "Ergomed already has a similar co-development agreement for up to $10 million with CEL-SCI for the ongoing head and neck cancer Phase III clinical trial. Ergomed will receive its return on investment based on an agreed single digit percentage of any net income received by CEL-SCI for Multikine from sales in this and the head and neck cancer indications."

Did you catch that? Ergomed is putting $10 million of its own money into Phase III testing and will be paid from Multikine sales. Wait a minute - Multikine hasn't been approved. Could Ergomed have seen or heard something related to the Multikine results? Possibly. Ergomed has access to patients and information not available to the public. It says something when a CRO is willing to help fund research and forgo payments for a drug that is not yet approved.

Aiding in the Phase III enrollment is Teva Pharmaceuticals (NYSE:TEVA). Teva is a $45B company employing 46,000 people. They are a major player in the pharmaceutical industry. In 2008, Cel-Sci granted Teva the licensing rights to distribute Multikine in Israel and Turkey. In return Teva is funding a portion of the Phase III trial. Teva is well respected in the industry and knows how to conduct due diligence. This is a significant partnership in which Teva is now putting money into Multikine. In 2011, Teva was also granted the licensing rights for Multikine in Croatia and Serbia. In this agreement, Teva is responsible for all of the costs of registering and selling the product in these two countries. Teva appears to be getting more comfortable with Cel-Sci and is partnering with them every chance they get.

Orient Europharma from Taiwan is also aiding in enrolling patients for the Asian region. The company is also funding a portion of the Phase III trial.

While Cel-Sci has partnered with a few organizations, they have kept the marketing and sales rights for the 2 largest medical treatment markets in the world (US & Western Europe). To use Geert Kersten's words, "Cel-Sci has not sold their children to pay the mortgage."

A Hint Regarding Phase III Progress

A November 30, 2012 letter to shareholders had a section from CEO Geert Kersten that might hint at a Phase III test going well. Here is the excerpt (italics mine):

"We are well into the final, and pivotal, study with Multikine designed to definitively prove that it will increase overall survival in a disease with a clear unmet medical need, where the last drug approval was about 50 years ago and where no other drug is in late stage development. Our goal is to replicate the promising results from our Phase II studies and so far that is what we are seeing. From here on we have a clear path to potentially enormous success. Few people ever get the chance to be part of something as significant as this."

How could a conservatively speaking, lawyer-trained Geert Kersten say this unless it was actually occurring? He explicitly states that they are seeing Phase III results that are replicating Phase II. Let's hope that continues.

Phase III End is Near

Clinicaltrials.gov says the timeline for finishing Phase III is Dec 2017. On 3/12/14 I made a phone call to the company to verify the timeline and that date is still accurate. We will have to wait a few years to get final results, and more dilutive financings are possible. However, now that enrollment is progressing rapidly, Cel-Sci should be putting out occasional press releases regarding the progress.

The average time for the FDA to approve a new drug is usually 1-2 years; however, since Multikine has obtained orphan drug status, it should be given preference on the list of FDA to-be-reviewed drugs. One would hope approval would be within 1 year of positive Phase III results resulting in an FDA approval in early 2019.

Cel-Sci appears to be slowly and methodically loading the bases in bringing Multikine to market. Most biomedical companies are happy to hit a home run with their drug candidate, but Cel-Sci appears to be setting themselves up for a grand slam.

Working with the Naval Medical Center

A Feb 3, 2014 press release announced that Cel-Sci announced was starting a Phase I trial for treatment of anal warts in HIV/HPV co-infected patients with US Naval Medical Center San Diego. Anal and genital warts are commonly associated with the Human Papilloma Virus (HPV), the most common sexually transmitted disease. The CDC has named HPV the 4th largest health threat the U.S. will face in 2014. According to the CDC, 360,000 people in the U.S. get genital warts each year. Persistent HPV infection in the anal region is thought to be responsible for up to 80% of anal cancers. HPV infected patients are unable to clear HPV due to their weakened immune system.

The fact that Cel-Sci has partnered with the Navy is telling. The Navy knows how to conduct due diligence. The Navy is providing the funding and Cel-Sci will be providing the drug, Multikine. According to an article by Medical Research Analyst Sharon di Stefano, results are expected later this year.

Since HPV infected patients have a weakened immune system, Multikine is undergoing a dose escalation study. The purpose of a dose escalation study is to establish the recommended does and/or schedule of new drugs for Phase II trials.

The press release went on to say that patients with anal warts who are co-infected with HIV/HPV have a 30-fold increase risk in developing anal cancer because of their compromised immune system. Geert Kersten added "Though this disease (anal warts) appears to be completely unrelated to head and neck cancer, our current Phase III lead indication, HPV has been implicated as a potential causative agent in both diseases. The virus is now thought to be a cause of many head and neck cancers, particularly in younger people in the U.S. In the anal warts study being conducted we hope to repeat the promising results seen in the study with HIV infected women with cervical dysplasia where we saw the elimination of many HPV strains following Multikine treatment".

In case you didn't catch it, HPV might be the cause of anal warts, which can lead to anal cancer. The HPV virus is also thought to be the cause of head and neck cancer. Therefore if Multikine can show an elimination of the HPV virus in patients with anal warts, it might show positive results in patients with head and neck cancer - which is currently in a massive Phase III study. Positive results from the Navy's test could be a hint as to how successful the Phase III testing might be.

Significant Insider Purchases

Nothing says "I believe" like an insider purchasing a lot of shares on the open market. On Dec 5, 2013, Geert Kersten invested $180,000 to purchase 300,000 shares at $0.60 each. Throughout 2013, insiders were making purchases even though the stock price declined. Here is the insider trading chart from GuruFocus.com.

Such a large purchase is rare, especially with a microcap and it begs the question 'What does management know that I don't?'. Maybe, just maybe, Multikine works.

The Secret Formula

Cel-Sci has a patent on Multikine, but that expires in 2024. In 2007, they obtained orphan-drug designation, which gives them 7-year market exclusivity. However, the real value behind Multikine is that it is a proprietary and complex mixture of 14 cytokines that must be manufactured in a cold-fill facility that only Cel-Sci owns. The chances of a competitor copying Multikine and reproducing it are virtually zero. Cel-Sci will be the only provider of Multikine for many, many years.

Multikine Pricing

Geert Kersten put a price for Multikine of around $50,000 per treatment regimen in a June 27, 2012 eHealth Radio interview (time increment 4:20). $50,000 for saving someone's life seems low. Taglich Brothers wrote an excellent report outlining the rational for strong pricing flexibility with Multikine. I do expect the price of Multikine to increase. My reasoning is that Dendreon's (NASDAQ:DNDN) prostate cancer drug Provenge was more expensive, $93,000 to be exact, and it only extended median survival by 4.1 months. The flip-side is that Cel-Sci also has revenue sharing agreements in place with Teva, Orient Europharma and Ergomed. Despite an unknown final price, I will use $50,000 as a conservative number for calculations below.

Cel-Sci Potential Market Valuation

If Phase III results are positive and the FDA approves it in the US with similar approval in the EU, Multikine will explode onto the market as a neoadjuvant treatment for head and neck cancer. There are 650,000 new cases annually worldwide. 150,000 of these are in the US and EU with 2/3rd of these patients (~100,000) having advanced stages of the disease making them ideal candidates for Multikine. It is easy to see that the existing 60,000 dosage regimen manufacturing facility will have a hard time keeping up with demand.

Assuming a fully expanded manufacturing facility, doing the math gives us $50,000 x 60,000 = $3 Billion in sales just for head and neck cancer. Assuming an average market capitalization value of 4-5X sales, this would put Cel-Sci at a $12B-$15B market cap. This value is only based on the treatment of head and neck cancer. Cel-Sci is confident it can be applied to many other types of solid tumors.

Positive Phase III results also potentially mean that Multikine will be part of the Standard of Care. Standard of Care means doctors are supposed to use it. The ultimate market for this drug, if successful, is astronomical.

Cel-Sci Current Market Valuation

At $70M, the current market capitalization of Cel-Sci is irrationally low. Cel-Sci is approximately half-way through their Phase III trial, had tremendous success with their Phase II trial, have a non-toxic cancer drug, will most likely have cash coming to them from their arbitration case with inVentiv, have a significant partnership with TEVA (who is putting their own money into Multikine research), and are working with the Navy on eliminating the HPV virus. In addition, Cel-Sci is addressing several other, hard to treat, indications, which are outlined in the graphic below. The only reason I can ascertain for the low value is Mr. Market has its head in the sand, big time!

Looking at Cel-Sci's Peers to Determine Fair Market Value

While determining fair market value is more of an art than a science, it is helpful to look at Cel-Sci's peers. Note: I am taking a 10,000-foot view on the peer analysis.

Inovio Pharmaceuticals (NYSEMKT:INO) is also researching immunotherapy and has a market value of $800M. Their pipeline chart is shown below. While they do have more partnerships and drugs in the pipeline, they have zero Phase III tests. INO has more cash but also a higher burn rate. They are still years away from FDA approval and yet they have market value 11X that of Cel-Sci. This is not about the market value of INO as it may be fairly valued, but the fact that Cel-Sci is 1/11th of INO suggests that Cel-Sci's market cap has significant upside.

The story of Dendreon Corporation is worth noting and probably bears the most similar resemblance to where Cel-Sci is now. Dendreon is now certified to use their drug Provenge as an immunotherapy agent before treatment of prostate cancer. The FDA concluded Phase III testing in April of 2009. Before positive Phase III test results, the market value of Dendreon was around 450M one month before approval (March 2009). The market cap was a lot higher months and years before positive Phase III results. (For example, in March 2008 Dendreon's market cap was 600M.) Here is the peculiar thing regarding Provenge.

For Provenge to work, it must be mixed with the patient's blood. Every batch is specifically made for each patient. This is incredibly laborious and makes the treatment very costly to manufacture. Despite this, Dendreon's market cap was a minimum 6-9X higher than Cel-Sci's current market cap. Multikine is a non-toxic, mass producible, high profit margin immune system booster for head and neck cancer, and possibly many other cancers, yet Cel-Sci's market value is still well below the 100M level.

Peregrine Pharmaceuticals (NASDAQ:PPHM) is also in the immunotherapy field. Their drug, Bavituximab, is just starting the Sunrise Phase III Trial. The primary endpoint is overall survivability, which is similar to the Cel-Sci's Phase III trial. This means that Phase III results for the Sunrise Trial are a long way off. Bavituximab's market, lung cancer, is much larger than head and neck cancer but the drug still has to undergo a safety evaluation. Their clinical pipeline, which is similar to Cel-Sci's when looking at the number and current stage of trials, looks like this:

Peregrine has market cap of $400M+. Again, the argument is not that Peregrine is overvalued. However, heads are scratching as to why Cel-Sci, which is further along its Phase III trial, and has passed its safety review with Multikine, results in only a fraction (1/6th) of Peregrine's market cap.

Putting a Number on a Fair Valuation for Cel-Sci

I would estimate the current fair market value of Cel-Sci should be in the range of $400-$700M. Due to the significant, dare I say irrational, undervaluation of Cel-Sci, I believe the share price will see a gradual appreciation from now until Phase III testing results. There will be the occasional sell-off but overall, long-term investors should be handsomely rewarded.


Cel-Sci's Multikine just might be the blockbuster that investors, company management and humanity is waiting for. The company is significantly undervalued compared to their peers and will see a gradual share price appreciation up until announcement of Phase III test results. Should Phase III results be positive, the resulting share price explosion will make the Intercept Pharmaceuticals' (NASDAQ:ICPT) recent 500% share price spike look like a molehill.

Disclosure: I am long CVM. 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.

Editor's Note: This article covers a stock trading at less than $1 per share and/or has less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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