CEL-SCI: On The Verge Of Approval

Jul. 18, 2019 11:31 PM ETCEL-SCI Corporation (CVM)107 Comments31 Likes
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  • Multikine is a cytokine-based immunotherapeutic compound intended to cure Head and Neck Squamous-Cell Carcinoma, which is currently being tested in a large Phase III trial.
  • Patients enrolled in Phase III are living longer than they should under Standard of Care.
  • The end of Phase III study is expected to happen this year.
  • We believe that the trial has a high probability of being successful and that the stock price is deeply undervalued.

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CEL-SCI (NYSE:CVM) Phase III clinical trial is about to end soon. We believe, through extremely thorough due diligence that we have carried out, there is very little risk the Primary Endpoint shall not be met. The following lines intend to explain why.

From CEL-SCI website, it is stated : “CEL-SCI is a pioneer in cancer immunotherapy. Our Phase III clinical trial in head and neck cancer tests the idea that we should boost the immune system BEFORE the ravages of surgery, radiation and chemotherapy because that is when the immune system is strongest." CEL-SCI mentions as well that the Phase III trial is the largest ever in head and neck cancer with 928 patients enrolled and final data read-out is expected soon this year.

CEL-SCI Corporate "Scientific Multikine Presentation" states that “Multikine is administered to previously untreated, newly diagnosed head and neck cancer patients right after diagnosis for three weeks before the current standard of care treatments (surgery followed by radiation or combined radio-chemotherapy)." Then CEL-SCI explains that "No severe toxicity was reported as being associated with Multikine when it was added to the current standard of care in phase II clinical trials." In summary, what is expected from this Phase III clinical trial is efficacy - that patients in the Test Arm will survive longer than those taking the Standard of Care (“SOC”) alone.

The clinical trial is designed with three arms, two of them being used for the primary endpoint determination. 3/7th of the patients are randomized to each of the two arms. All Arms receive SOC. SOC is Surgery + Radiotherapy or Surgery + Radiochemotherapy. There is a third arm (1/7th of the patients) which is not relevant for assessing the success of the clinical trial. The clinical trial is completed when the 298th event (death) happens. The clinical trial will be considered successful if the primary endpoint for this shows 10% more survivors in the Test Arm than from the Control Arm. Efficacy of the drug will be assessed through the logrank test, a statistical method that allows to compare two survival curves.

A - An inconclusive Phase II

CEL-SCI Phase II has been the source of passionate debates between the Bulls and the Bears. Truth is that although showing encouraging results such as response rates, Phase II results did not prove anything as far as survival was concerned. Let us explain why.

CEL-SCI sponsored two main Phase II studies and were published in peer reviewed publications by Timar et al in Hungary. The first one, dated 2003, proposed various dosing and showed the optimum dosing for the drug while showing no toxicity. Subsequently, the low doses were adopted for the second Phase II which occurred in 2005. The second Phase II was performed on a test group and a control group (Link to Phase II Study)

  1. Multikine treated Oral Squamous Cell Carcinoma (“OSCC”) patients were characterized by the fact that the drug was affecting the cancer cells and improving the way the T Cells were attacking the tumour. As a consequence, from the 19 people in the test group, two pathologically complete, two major (>50%), and four minor responses (>30% but < 50%) resulted from the Multikine treatment (overall response rate, 42%). Overall tumor response was 42% (>30% reduction in size), with 10% Complete responders (2 people) whereas no such thing was observed on the control group.
  2. 3.3 years after this treatment, CEL-SCI compared the survivors to literature and inferred that 33% had survived better than they should have by literature with Standard of Care (“SOC”).

CEL-SCI proposed that #1 & #2 was indicating that the treatment could be efficient and that a further study should be run in Phase III with a larger population of patients to prove the effectiveness of the drug - for example, better survival in the test group.

Point #2 above is sometimes a controversial part of the study. Some purists say that comparing a Test Arm to literature is not a proof of efficacy. An ideal case would have been to compare two groups' survival: a Test Arm vs. a Placebo Arm. The sample size of the trial, 19 patients, is too low for statistical significance. We believe that this survival analysis is not a proof of efficacy, in scientific terms we would say that the study power is insufficient to be able to draw any conclusion as far as survival is concerned.

While CEL-SCI claimed that they observed a 63% Overall Survival ("OS") at year 3.3 which is 33% better than literature, we could not easily find a benchmark from the Hungarian cancer database to be able to perfectly compare. To build a benchmark, one important point to consider is that you need the same population, same cancer types and the same inclusion criteria (Inclusion criteria was Stage II tumors in this study). Also, the same country/region is required as well as you have homogeneous smoking and drinking habits and strong discrepancies between regions. We did find a Hungarian Study which was published in 2008.

Stage II Overall Survival is stated to be of 32.5% at year 5, which should correspond to less than 50% OS at year 3.3. This would imply a benefit of more than 30% in survival in the Multikine group. Again, this kind of benchmark, while interesting to do, is not conclusive. We heard some bearish voices claiming that literature for such staging in Phase II inclusion criteria shows equal survival as the Hungarian study and therefore “Phase III has already failed as it has failed in Phase II.” We wonder how these voices could find Stage II Cancer survival stats in Hungary. Again, the fact is that nobody can prove effectiveness nor non-effectiveness in survival from this Phase II trial with such a low number of patients.

A Phase III was needed. There was no other way a drug cancer company, with patients living so long, could avoid doing a long Phase III. A larger population of patients was needed to prove improvement in survival.

Our conclusion on Phase II results:

    1. Drug is non-toxic and has to be injected with low doses for max efficacy
    2. Drug seems to stimulate natural defenses on the microscopic level
    3. Drug seems to induce significant tumour size reduction and total response that is not due to SOC or CIZ alone (Low doses of CIZ being used)
    4. Little can be said about long-term survival improvement at this point and further analysis on wider population is needed to prove efficacy
    5. A Phase III was needed to further assess the drug
    6. And on a personal note we would add that saying “Phase III has already failed as it has failed in Phase II” is at least as much erroneous as saying “Phase III will be a success because Phase II had improved survival significantly”

B - A never-ending Phase III

CEL-SCI has faced a number of setbacks during Phase III - from CRO slow enrollment to FDA hold. This has led to a series of conspiracy-like theories that knocked the share price down and ruined shareholders' confidence. Still CEL-SCI was able to survive from it and we believe this is only due to the drug efficacy.

Phase III started enrollment in 2011. In 2013, CEL-SCI figured out that recruitment by the initial CRO was stalling. CEL-SCI decided to switch CROs and contracted with Ergomed. In October 2013, CEL-SCI sued the previous CRO for damages. As soon as CEL-SCI sued the CRO, a cascade of negative events took place. The timing of the events is important:

  1. In the Spring of 2014, the IDMC recommended the trial be shut down because of safety and futility concerns. CEL-SCI responded to IDMC and based on CEL-SCI responses the IDMC then recommended the trial to continue. This same recommendation was also given in every subsequent meeting until the Spring of 2016.
  2. In the Spring of 2016, the IDMC recommended the trial stop accruing patients, 800 had already been recruited, citing safety concerns. CEL-SCI responded that more patients were needed to complete the study in a timely manner.
  3. In August 2016, concerned by the pace of events which was too low, CEL-SCI proposed to the IDMC an amendment of the protocol to include more patients.
  4. In September 2016, the FDA put the trial on partial clinical hold based on the fact that CEL-SCI had not responded thoroughly to all of the IDMC concerns. In its letter, the FDA wanted CEL-SCI to review its doctors' brochures and provide an action plan for protocol deviations. CEL-SCI subsequently addressed these issues and formally responded.
  5. In August 2017 the FDA removed the hold.
  6. Just a few months later in December 2017, the IDMC again recommended the trial to continue. Furthermore, the IDMC, unblinded to the data, and meeting from March 2018, December 2018 and March 2019, also stated CEL-SCI should continue with trial.

This cascade of events was the opportunity for investors to build various scenarios of what they imagined happened, some showing great efforts of imagination.

Some bearish investors conjectured that the IDMC and FDA realized early on in the Multikine trial was useless, potentially harmful to patients and wanted to shut it down until the enrollment was neutralized.

While we do not know the exact details and reasons why those events occurred, some facts can be asserted with certainty:

  1. In early 2014, very few patients had been recruited, around 135. It was very unlikely that the IDMC could have assessed the whole 928 study efficacy based only on 135 patients enrolled with very few events, likely around 20. Most likely the IDMC had been deeply concerned about the protocol deviations shown by the previous CRO.
  2. All IDMC meetings had been going well until 2013. It was only when CEL-SCI “sued” the previous CRO claiming at least $50M in damages that the IDMC, based on the data provided by the CRO, gave a negative recommendation. The reader shall make his own conclusion from this.
  3. Back in the Spring of 2016, the FDA gave a clue to the 2016 concern. It appears the concern was related to safety, not efficacy, as it was asking for “updated investigator’s brochures and a list of major protocol deviations that could affect the study.” From which CEL-SCI tried various time to address until they finally got the hold removed in 2017.
  4. The IDMC did not want to accrue more patients for safety concerns due to protocol deviations. What could have been those deviations? We do not know for sure. However, what we know is that these were not protocol violations which would have been much more of a concern. It could have been a delay in treating with SOC after Multikine treatment (3 weeks are recommended) which could have appeared as a protocol deviation and a safety concern to the IDMC.

The Bottom Line on Phase III hurdles

  1. The FDA removed the hold in 2017 likely because they had no more safety concerns and made an assessment on "the likelihood that the investigations will yield data capable of meeting statutory standards for marketing approval”
  2. The IDMC has met 4 times since clinical hold was removed and recommended trial to continue until the primary end point, 298 events, is completed.
  3. IDMC never recommended the study to stop for futility, as it is being done on various clinical trials (for instance the IDMC lately stated that Biogen’s Aducanumab was unlikely to meet primary endpoints). In addition, the IDMC has never expressed efficacy concerns since the Spring of 2014 when little data was available to draw any conclusion on efficacy.

We believe that the bottom line is what matters most. We do not think such recommendations would have been made if they had found some figures in the data that would have proven that trial is not effective. Remember that the IDMC has access to all the unblinded data. Furthermore, in the last meeting in March 2019, the IDMC had access to about 90% of the required data. This is enough to stop a trial if a drug is not efficient but not enough to get the statistical significance required for the study. We believe that the latest actions from the FDA and the IDMC are good indications that the drug might have shown efficacy which was starting to being noticed in 2017.

C - Survival Analysis : critical to understand why trial can be successful

Until July 2, 2019, CEL-SCI management has stated on regular basis that the 298th event has not occurred. The statement “the longer we wait for the 298th to occur, the more likely it shows Multikine is effective” has been used by investors and CEL-SCI management on a regular basis. A scientific mind is entitled to run more deeply into the details to be able to draw that conclusion.

As the trial is blinded, there is no way to know if the people surviving longer than expected are in the Test Arm or the Control Arm. However, given the patient population and cancer type resulting from inclusion criteria, we have a variety of powerful tools that allow to estimate survival in the group treated by SOC alone. Comparing SOC alone survival to the behavior of current patients in this clinical trial can be a way to assess if Multikine is efficient.

In survival analysis, you need to know how Overall Observed Survival is for SOC in order to compare to observed survival for this group of Patients from CEL-SCI clinical trial. One important factor in survival analysis is to understand the inclusion criteria in terms of tumor size and lymph nodes.

Inclusion criteria is untreated SCCHN of oral cavity/soft palate, categories T1N1-2M0, T2N1-2M0,T3N0-2M0,T4N0-2M0 (T4 allowed only if invasion of mandible is negligible).

Which can be summarized by the following graphic:

A screenshot of a video game Description automatically generated

This corresponds to Stage III and IVa.

Another important point to consider, which is often neglected by people running survival analysis for CEL-SCI, is the exact tumor location for the Trial. CEL-SCI’s Scientific Presentation provides clues in p 13. Oral cavity includes Lip, Buccal mucosa, Alveol Ridge and Retromolar trigone, Floor of the Mouth, Hard Palate, Oral Tongue (anterior two-thirds). In particular, it excludes Base of Tongue (“BoT”), Oropharynx, Hypopharynx, etc. The study is also about Soft Palate so you need to add Soft Palate in the inclusion criteria.

Please note that it is critical to exclude BoT, because the BoT has a lot of occurrences in the US and many oral HPV cases are located in BoT. BoT cancer is highly curable and if you do not exclude it, the whole overall survival numbers will be skewed and exaggerated.

Most of the cumulative statistics shown by doing simple internet searches in publications and websites, like this one, include BoT cancer and provide "relative survival figures." One needs to really dig into the detailed database to remove BoT cancer from the survival analysis and search for "Observed survival" which differs from "Relative survival" by 5-6% at year 5 (see for example in the table below).

We accessed the ultimate tool for the survival analysis: the SEER online database (SEER*Stat Software). The SEER database compiles survival for many sites and spans many years. We applied inclusion criteria for the Oral Cavity, excluding BoT. We included years from 2010 until 2016 which corresponds to the years patients were recruited for CEL-SCI clinical trial.

The SEER database query retrieved the following survival data:


Stages III + IVa Observed Survival is worse than the one assumed by CEL-SCI for the clinical trial (55% at Year 3 and 43% at Year 5): Observed OS is 47.5% at Year 3 and 38.6% at Year 5 (n=5 524, number of patients considered).

For Stage III patients, survival is 57.8% at Year 3 and 49.3% at Year 5.

There are great differences between Stage III and Stage IVa patients but there are also many more patients in Stage IVa than in Stage III. This is a global pattern that will be seen in this international clinical trial as well.

In terms of randomization, the investigator will take any patient which matches the inclusion criteria and randomize in one group or the other. In order not to have too many discrepancies between the Control Arm and the Test Arm, the investigator will have to take homogeneous pathology and Stages, same location of cancer, same ages, sex, etc.

We have to assume that the randomization process has produced a set of patients in one arm and the other arm which are a reflection of what is found in the real world. An equal blend is what is reflected in this database. Therefore, the overall survival should not be any better than the one indicated in this table for Stage III + IVa, which is pretty bad.

Calculation will show that with an Overall Survival close to 50% at year 3, the endpoint should have been reached many months ago: at least 350 of the evaluable patients from the original study arms should have passed away by now, but still Cel-SCI communicates that the 298th event has not happened yet.

We can already conclude that patients are living much longer than they should.

But being very conservative, we will consider only the Stage III figures. For the needs of our analysis tool, let me match a Logarithmic log regression to the survival numbers. The curve does stay between the lower and upper numbers as per the table above from Observed Survival so it is a pretty good approximation of the survival behaviour of the population treated by SOC.

We obtain the following results and survival curve for Stage III Standard of Care:


We computed this SOC in our Google Sheet - CVM Clinical Trial Survival Analysis

These analyses consider the maximum possible dropouts allowed for the study, 11% (or about 700 evaluable patients in the two comparative arms of the study), the SOC survival curve, and then computes a number of events for a given date.

Here are the outputs this analysis has given based on all the very conservative assumptions:

  • If the 298th event happens July 15, 2019, then Multikine should show more than 19% effectiveness on SOC alone (e.g. there are at least 19% more patients surviving in Test Arm)
  • If the 298th event happens by October 2019 then Multikine efficacy should be above the 22% mark

Therefore, given the conservative assumptions that we have used, this analysis is indicating that Multikine has a high probability of being effective, even very effective.

D-This Phase III trial has a great probability of success

Assessing the risk of this trial has been a challenge for years.

Arguments stating that Phase II results were bad do not stand up to scrutiny. Fancy scenarios built around the Clinical Hold story do not stand up to scrutiny.

Above all, what closes the door to extreme negativism around the Multikine treatment is the simple fact that current Phase III patients live much longer than they should if treated with Standard of Care alone by any metrics of Standard of Care survival which we could extract from the US cancer database, a country where patients have better hopes of survival than any of the other regions where this clinical trial was performed.

Therefore, we believe, given all the above and the thorough due diligence we have carried out, that at this point in time, there is very little risk that Primary Endpoint will not be met by this Trial.

E - Company is Deeply Undervalued

In the last 12 months, CEL-SCI stock price has witnessed an impressive come back from less than $1 in July 2018 to more than $8 in July 2019. This is mainly due to the Independent Data Monitoring Committee (“IDMC”) and FDA removing all the holds and the successful end of the arbitration with the previous Contract Research Organization (“CRO”). While the stock has been in bearish territory for years, it looks like the bulls have come back to support the price. Still the market cap is not on par with similar Biotech companies who have promising compounds also in Phase III.

CEL-SCI hopes that this drug will be part of Standard of Care. If effective, it will allow some patients to live many more years. If Phase II results are replicated in this Phase III - in particular total response rates - some patients might witness a total disappearance of the tumor, a total cure. If shrunk significantly, other patients will be able to avoid a painful and disfiguring surgery. If survival improvement is proven as good as it seems to be, it will dwarf results obtained by other immunotherapy drugs such as Merck’s (MRK) Keytruda or Bristol-Myers Squibb’s (BMY) Opdivo which are very toxic drugs and relatively not so effective (median overall survival being only improved by a few months). Those are billion-dollar blockbusters.

Therefore, if survival benefit is confirmed, we firmly believe that this drug will be part of Standard of Care.

There are 165,000 new HNSCC cases each year in the U.S., Canada and Europe. Of these, 110,000 are "advanced" Stage III or IV, and are Multikine-eligible. The average new oncology drug cost is between $200K and $400K. Let us assume a market penetration between 20,000 and 50,000 a year and Multikine only receives $50K per treatment. Annual sales would be between $1B and $2.5B.

Assume a multiple of 4x sales, which is extremely conservative, value of the company would be between $4B and $7.5B. Fully diluted by all possible shares plus future potential dilutions (50M shares) this equals around $80 to $150 per share.

We are suggesting a fair valuation between $80 and $150 per share, if Multikine is successful. We believe this drug will be a blockbuster.

Currently, market capitalization stands below $300M, around $8 per share. It looks like the market is giving a very high-risk score to this drug. We strongly believe that the reason for this disconnect between current price per share and our fair price valuation is mainly due to the high suspicion raised from Phase II results and to what happened in Phase III as explained above. As of today, all these hurdles are behind. We strongly believe there is room for this stock to soar prior to Phase III results and even more after, and if the compound is proven efficient through the survival outcome.

As primary endpoint is the open door to approval by the FDA, we believe there is a very high probability of success for this drug and that CEL-SCI is currently deeply undervalued given the potential of the drug and the probability of success.

F - Company is fully funded until Q1 2020

In its Fiscal Q2 report, CEL-SCI stated having "received approximately $7.6 million through the exercise of warrants to purchase shares of the Company's common stock" and having $5.5M in cash as of March 31, 2019. Thus, CEL-SCI had over $13.1M in cash to work with and no debt.

Based on this SEC filing, it seems CEL-SCI is already preparing to preserve cash through a stock compensation program. To conserve cash, CEL-SCI expects that it will offer its officers, directors, and employees the opportunity to receive shares of CEL-SCI’s common stock in lieu of amounts owed.

We have assumed a conservative monthly burn rate of approximately $1.1M. Therefore, CEL-SCI shall have enough cash to continue with current operations well into Q1 2020. As Phase III results are expected before the end of the year, the company is fully funded until final results decide the fate of the company and its Multikine.

We expect a cash raise in early 2020 of about $10M and at the current high share price, it will not be too dilutive.

G - Risks: Warning, this is Biotech!

While we strongly believe that this trial should be a tremendous success in terms of survival, there are many aspects of a clinical trial that we did not factor in and could be the cause of failure.

Failure could be due to many factors, such as, but not limited to:

  • SOC showing an extraordinary capacity to heal patients
  • High level of dropouts during the study (well above 20%)
  • Violations of the protocol not detected or reported properly by the investigator
  • Considerations due to the fact that the trial happened in many countries outside of the USA.

Even if phase III is successful, delays in the New Drugs Applications (NDAs) or Biologic License Application (BLA) processes could cause the need for the company to raise additional capital through dilution and affect the price per share.

All those risks do remain and a wise investor will consider them before making an investment decision. If the trial fails, we would expect the share price to be close to $1.

This article was written by

Fosco Research profile picture
Fosco manages the 100+ employees consulting business that he founded in the IT sector. Fosco enjoys sharing investment opinions and likes Biotech and Technology because the former saves lives and the latter makes the world progress.

Disclosure: I am/we are 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.

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