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This article was amended on 9/2/2020 to include a comment on new information that was presented post-publication.
Enochian Biosciences (NASDAQ:ENOB) is a biotech company with a pre-clinical pipeline focused on the treatment and cure of HIV. Enochian has a troubled past, with a lot of management shake-ups and failed endeavors. The company has eight full-time employees. Its lead scientist and inventor of the HIV intellectual property (IP), Serhat Gumrukcu (Serhat), has very little scientific experience and no published scientific papers as far as we know. He considers himself a mystic, performs magic tricks, and was accused of identity theft, grand theft, false impersonation and plead guilty to commercial burglary in Los Angeles in 2018.
Enochian used to be a German biotech named DanDrit Biosciences. It was founded in 2001 to develop a cancer vaccine which was supposed to be an improved version of Dendreon's Provenge. In 2016, it became apparent that the vaccine was "worthless and couldn't be given away". One of DanDrit's major shareholders, Danish billionaire Rene Sindlev, took control as the Chairman and hired Serhat and bought his HIV drug IP from Weird Science, LLC for 18.08M shares of stock, shown in the latest 10-Q. Because the cancer vaccine had failed, the company was effectively a shell with worthless assets, so those shares of stock were essentially worthless. The company says on the balance sheet the IP is worth $154.5M, but in our opinion that is an artificial price set by the company.
ENOB was uplisted from the OTC to the NASDAQ on 12/10/18. We believe its market cap of over $250M is very excessive. We're not sure how exactly this company has been able to maintain such a high market cap in 2019. However, we've found that this is a common occurrence for a stock that gets uplisted from the OTC to the NASDAQ to temporarily have an extremely oversized market cap. We saw this with companies we've published bearish reports on, such as TransEnterix (TRXC), Helios Medical (HSDT), and Ominto (no longer public). ENOB was added to the Russell 3000 Index in June 2019 which also can give a stock a temporary boost.
With its current cash balance of only about $10M, we expect ENOB's share price to fall considerably when the company needs to do an equity raise to pay for its studies and trials that will get incrementally more expensive. Its second insider lockup ends in February 2020. But we believe it will fall before these events happen.
As stated in Investopedia:
As an investment, a drug that is in the discovery or pre-clinical stage is a very risky proposition, with less than a 1% chance of getting to market (according to an industry report published in 2003 by the Pharmaceutical Research and Manufacturers of America). Therefore, drugs in the pre-clinical stage are usually assigned zero value by public market investors.
Since all of Enochian's drugs are in the pre-clinical stage, we can assign a valuation of zero, or near zero, to all of its assets. Pre-clinical stage drugs are often worth zero because it costs a lot of money to test a drug that has a very high chance of failure. Sometimes pre-clinical drugs do have value, but that's only with convincing data and we haven't seen any data from Enochian. And our research regarding Serat and the company's history tells us there is likely nothing there. We emailed Enochian's investor relations rep, its CFO Luisa Puche, and asked why Serat's HIV IP was acquired but didn't receive a response. We also asked why the market cap of ENOB is so high, given that the pipeline is entirely pre-clinical. We didn't receive a response to that question either.
Enochian is also running low on cash, with about $10M right now. Many biotechs with a pipeline in its early stage only have a market cap of their cash balance.
The Company's Investor Presentation on 5/1/19 states:
Source: 5/1/19 Investor Presentation, page 7
As stated in Enochian's investor presentation above, the only completed study the company has done is proof of concept mouse studies. Suspiciously, these studies are not published anywhere. We emailed management a question about publishing the mouse studies anywhere but received no response.
Studies on mice are pre-clinical and it doesn't show any proof that it would work on a human. Biotech companies that are doing studies on mice and rats are usually nanocap stocks with a valuation of below $50M. That's why it's strange to see ENOB have a valuation of $250M+ after only allegedly accomplishing mouse studies.
For example, Hepion Pharmaceuticals (HEPA), has a valuation of about $10M. It recently published data on its study of daily dosing of its drug CRV431 in mice and rats that significantly decreased liver fibrosis by 43% compared to control. Given that chronic liver disease is widespread, if CRV431 becomes a successful drug, HEPA could become a billion dollar+ company. But since it's still in the pre-clinical stage, just doing studies on mice, then its valuation is only $10M, despite showing pre-clinical success. We don't see any reason why ENOB should have a larger market cap than HEPA. Furthermore, Hepion has published its data unlike Enochian.
In the program accomplishments shown above, it states:
Planning for Interact meeting request end Q3 2019/meeting end of 2019"
ENOB-HV-11-12: pre-clinical studies begun. Non-human primate studies to begin mid-2019
Both of the above company targets don't appear to be hit yet. Q3 2019 is over, yet the company hasn't had the Interact meeting with the FDA for its ENOB-HV-01 drug. In the latest 10-K, it states that the Interact meeting request with the FDA will be in the early part of 2020. Interestingly, this is right around when insiders have their lockup expiry in February 2020.
We're also past mid-2019, and the company hasn't reported starting any non-human primate studies. As far as we know, Enochian is still in the pre-clinical stage doing studies on mice. It still needs to test its drugs on non-human primates, then advance to clinical trials on humans. We asked the CFO when the company will do non-human primate studies but didn't receive a response. Phase I to III clinical trials can take over five years to complete. If it takes the company over a year to get through pre-clinical studies, then investors will go through a long wait before FDA approval, if it ever gets that far.
Every step of studies will also be very expensive, as Enochian will burn through its current $10M of cash and have to do many raises afterwards. Non-human primate testing won't cost very much in itself. But the overhead costs of running the company adds up over time. Additionally, human testing is expensive and the costs will become incrementally higher if it goes to phase III. As estimated by the US Department of Health & Human Services, to take a drug through all three phase trials usually costs in the hundreds of millions of dollars.
Looking at the management of Enochian, we conclude that these are very questionable people. Let's take a look at the primary employees and shareholders:
Serhat Gumrukcu - Enochian's Senior Scientific Advisor
Serhat Gumrukcu is the head scientist of Enochian. His former company in which he developed the HIV drug IP for, Weird Science, LLC, sold the IP for 18.08M shares of stock to Enochian. As stated in the merger agreement between DanDrit Bio, Enochian, and Weird Science:
"Serhat Gumrukcu is the sole inventor of all Company IP Rights and Company Technology and did not acquire or derive any portion of Company IP Rights or Company Technology from any other Person".
Therefore, we believe Serhat is the most important employee at Enochian and we did extensive research on him. In fact, Rene Sindlev had this to say to his shareholders about Serhat:
Hold your shares well. Our researcher and inventor is the biotech world's response to Zuckerberg, Bill Gates and Larry Page. People close to him compare him to Leonardo Da Vinci, Nicolas Tesla and Einstein in one and the same person. We will be presenting data on exciting science over the next 4-12 months. Greetings Rene.
Wow! What a glowing review by ENOB's largest shareholder of the inventor of its IP. A person described as a combination of Da Vinci, Tesla, and Einstein all in one person must be someone extraordinary! In fact, our research found that Gumrukcu is in fact very extraordinary, but not in the way that Sindlev says he is, but the opposite.
Serhat Gumrukcu Plead Guilty To Commercial Burglary At Wells Fargo Bank
People who break the law are usually not the type that you can trust to tell the truth or do good work. From a Google search, we found that Serhat was arrested in 2017. As shown below:
As shown above, Serhat was arrested and held on a $625K bail. That is a large bail amount. Usually, the larger the bail amount, the more serious the crime.
To learn more about Serhat's crimes, we purchased the court case details from the Superior Court of California County of Los Angeles. One cannot find this information online. Go here to see the Serhat Criminal Charges Document and the Serhat Criminal Sentencing Transcript that we uploaded to our website.
Serhat Gumrukcu has been arrested for the serious crimes of Grand Theft, False Personation, Identity theft, Commercial Burglary and more in Los Angeles from 2014 through 2016. He pleaded No Contest (guilty) to Commercial Burglary in January 2018. He was sentenced to five years of probation.
The following are some of the counts that were accused by the State of California against the Defendant, Serhat Daniel Gumrukcu:
Source: Serhat Criminal Charges Document
Looking at the above clips of the criminal charges filed against Serhat, one can see that he's a serial white collar criminal. Being accused of committing theft in 2014, and continuing his crimes in 2016.
The following is the part of the sentencing where Serhat pleads No Contest, which is Guilty, to commercial burglary. The Defendant is Serhat.
Source: Serhat Criminal Sentencing Transcript
Around the same time Serhat was burglarizing Wells Fargo, he was being sued in a civil complaint. In 2016, Serhat was involved in a property case. As shown in Beverly Hills weekly:
Source: Beverly Hills Weekly
See more details on this property case here.
Serhat Does Not Appear To Be A Doctor
In our research on Serhat, it's our opinion that he's not really a studious scientist. Aside from being convicted of theft, he is a performer, and describes himself as a physician, healer, with a "spiritual and mystical background".
Reading Serhat's profile on Enochian's management team page raises some questions. First, it says that his title is "inventor", which is an uncommon title for a lead scientist. His profile states:
Dr. Serhat Gumrukcu has been at the forefront of cell, gene and immunotherapy for more than a decade. After his medical training at Dokuz Eylul University (2004) and Istanbul Marmara University (2006), he continued his clinical training and practice in different centers around Europe including University of Edinburgh United Kingdom, Pierre & Marie Curie University Saint Antoine Teaching Hospital, France and Institute of Bioregulation St Petersburg, Russia.
The above passage illustrates his medical training has been in many different centers, but it doesn't say that he graduated from anywhere. Where did he earn the suffix MD, PhD after his name as shown in Enochian's latest investor presentation, as shown below:
Source: ENOB Investor Presentation
We emailed the CFO asking where Serat earned his MD and PhD, and we didn't receive a response. It says that he did medical training at Dokuz Eylul University in 2004. Here it lists all of the University's graduates in the Faculty of Medicine. We searched for Serhat Gumrukcu between the years 2003 and 2009 and didn't find him listed. Looking at Serhat's LinkedIn profile, there's no "Dr." prefix in front of his name, and under education, it just lists some Universities, there's no statement of him earning an MD or PhD anywhere. Serhat has worked in hospitals, but he doesn't appear to have any biochemistry training.
Compare Serhat to another employee at Enochian, Dr. Wenshi Wang, the SVP of Operations. Dr. Wang has a legitimate PhD, and it says this specifically in her profile on Enochian's management team page. It says:
"Dr. Wang completed her clinical medicine and her immunology PhD training in China and at Heidelberg University in Germany."
Why doesn't it say where Serhat completed his training? Or did he not complete any?
Also on Dr. Wang's LinkedIn page, it states specifically that she earned a PhD in Microbiology and Immunology at the Huazhong University of Science and Technology.
Our research concluded Serhat has not published his studies of HIV/AIDS in a peer-reviewed journal. Nor has he published on any other hypothesis or study. A PubMed search shows he was a co-writer of two random case reports back in the early 2000s.
This newsletter from a LASIK surgery office says that Serhat is a "Nobel Prize Candidate". As shown below:
Source: LAZIK Surgery newsletter
Where did the newsletter get this information from? Clearly, Gumrukcu's invention of a hypothesis for an HIV cure that has only been tested on mice is nowhere near worthy of a Nobel Prize award. And Serhat isn't on the Nobel Prize nomination database, you can check here.
Here is a photo album of a magician named Rory Raven. He did some performances with Serhat and has a few pictures of him. Below is Raven's description of Serhat:
The following picture is Serhat with Uri Geller, the "Spoon Bender." It was found on urigeller.com.
I asked Serhat why he had approached me before my series launched in Istanbul - after all, few Turks had ever heard of me until recently.
There are two people I have always wanted to meet," he told me. "I've known about both of you since I was a teenager. I saw your life story, the movie Mindbender, on TV and I was transfixed by the bending spoons - it was a life-changing moment, to realise that the mind is more powerful than metal.
Crimes, lies, deception, and "magic" have come from our research on Serhat. Our conclusion from all of this evidence is that Serhat's hypothetical HIV cure "invention" likely has absolutely nothing to offer.
Weird Science, LLC
Enochian licensed the HIV IP from Weird Science, LLC for 18.08M shares of stock. Weird Science is managed by two employees: Carl Sandler and William Wittekind.
Carl Sandler is a serial entrepreneur and has been successful with businesses that aren't science related. He has been the manager of Weird Science since 2017 and the Founder/CEO of Enochian Biosciences. To get a sense of his background, before Enochian, he was the CEO of Kleptomaniac.com (sold for $5M), and he created gay men dating apps Mister and Daddyhunt. He is currently the CEO of a hair dye company.
Together through Weird Science, LLC, Wittekind and Sandler own a whopping 17,545,283 shares of ENOB.
Serhat and Wittekind appear to have had another type of relationship. They bought a house together in 2014, as shown on blockshopper.com:
The above property purchase was a house in Los Angeles. We believe the fact that Serhat appears to have had another association with Wittekind and created the HIV vaccine IP for Weird Science, LLC is a potential conflict of interest.
Dr. Mark Dybul Replaces Eric Leire
On Enochian's website, there is a January 2019 news release which announces the appointment of Dr. Mark Dybul as executive vice-chair. Dybul took over the leadership of Enochian as the company released Eric Leire, the Company's former CEO.
On 11/1/19, Enochian filed a PRE 14C filing which shows executive compensation. Both the top executives and the Directors are getting paid excessively in our opinion for a pre-clinical stage company. The following is the executive pay:
Source: SEC filing
As shown above, considerably more money is being paid to executives in 2019 compared to 2018. It also says in the PR 14C filing, that starting next year, Dybul will receive cash compensation of a base salary of $850K per year. Plus, he is eligible for a bonus of 60% of this base salary. This is an excessive salary for the CEO of a company without an FDA approved product or anywhere near one.
The following is the 2019 Director compensation:
Source: SEC filing
As shown above, annual Director compensation seems excessive as well. The average annual director compensation is over $100K.
On page 4 of the latest 10-K, it shows that Enochian's only patents are for its failed cancer vaccines. The company doesn't have any for its HIV drugs. It says on that same page that Enochian has licensed technology from Weird Science. On page 7 of Enochian's recent Investor Presentation shows that its HIV drug patent was converted from provisional to non-provisional in November 2018. A non-provisional patent is still a work in progress and needs to be approved by the USPTO. It takes about a year for a patent to go from provisional to non-provisional. This means that during the merger of Enochian and Weird Science, the patent was still provisional.
Over 30 anti-retroviral (ART) drugs are already approved to treat HIV. They are good at suppressing the virus, but the patient has to be on them their whole lives, otherwise, it comes back. 50% of HIV patients are on ART and the current market is ~$18.5B, growing at 3% annually (~20M people). The virus remains hidden in reservoirs (dendritic cells, macrophages, and CD4 T-lymphocytes) and comes back as soon as ART treatment is stopped.
Source: Enochian's Website
As shown above, all of Enochian's active pipeline is in the pre-clinical stage. The MCV Vaccine Technology shown above is in Phase 2 but is a legacy DanDrit product candidate that has already failed. DanDrit then started researching a treatment for HIV when it acquired Enochian. This is told in this Danish article:
Source: Danish article
From the article:
The cancer vaccine itself, which had otherwise been worked on for several years, could not even be 'given away' and so he contacted the researcher Serhat Gümrükcü, who according to Sindlev has invented a cure for AIDS and HIV. The plan is for it to be on the market within three to four years.
But if you ask a professor at the University of Copenhagen, Jens Lundgren, he will see it before he believes it.
"We have been trying for 30 years to find a vaccine that works and it has not succeeded yet. Many have said it over the years, but it has always proved to be wrong."
The "London patient" was "cured" of HIV in 2017, and so was the "Berlin patient", Timothy Brown in 2009. They both underwent a bone marrow transplantation of cells from healthy donors with a naturally occurring mutation in the CCR5 gene which makes T cells immune to HIV. Anti-Retroviral medications are very good at managing HIV, so HSC (hematopoietic stem cell) transplants are only performed if it is required for another condition such as cancer. These transplants need myo-ablative chemo, so a lot of groups are trying to modify a patient's own T cells with this mutation. However, even this requires extensive Chemo. Enochian plans to modify the CCR5 gene to a del32-CCR5 which makes the HSCs highly resistant to HIV. Enochian's technology claims to increase the engraftment of these CCR5 gene-modified cells and hopes to be able to deliver the therapy in an outpatient setting with a single 250 ml blood draw, without need for extensive chemo. There are other companies that have used the CCR5 mechanism for HIV. Viiv Healthcare, a joint venture between Pfizer and GSK, markets Selzentry, a drug that prevents HIV from using CCR5 for entry. However, it needs to be taken every day just like the retroviral medications. Sangamo is in pre-clinical trials to make CCR5-edited Tcells and stem cells. However, not every virus uses CCR5 for entry. Also, some scientists believe that even though the virus doesn't enter the new cells, it can still linger in old cells and could come back several years later.
Creating an HIV vaccine has been a challenge. Only 4 vaccines have entered trials and have failed. Reasons include:
(1) Extreme genetic heterogeneity and structural plasticity of the virus;
(2) the ability of the virus to persist as integrated pro- viral DNA in an immunologically silent form; and (3) HIV's preferential targeting of activated memory CD4+ T cells, which creates the possibility that any vaccine-induced immune response to HIV will paradoxically favor its transmission.
(4) Non-transferability from pre-clinical animal models to humans.
In 3 Phase 2b trials, vaccinated individuals were more likely to acquire HIV than placebo. Enochian's candidate 2001 aims to test in infected individuals and hopes to improve on previous vaccines. It's a hail mary, especially when Enochian hasn't even published its studies on mice yet.
2001: Enochian was originally called DanDrit Biotech. DanDrit was started in Copenhagen, Denmark. It was developing MelcancerVac (MCV), a dendritic cell vaccine spun out from a lab at the Danish Cancer Society in Denmark. The vaccine was supposed to be the next generation to Dendreon's Provenge, with advantages of using only 250 ml of blood draw to make an allogeneic vaccine and a process that can be completed in 2 days. MCV was evaluated in three single-arm Phase II clinical trials.
2015: In June 2015, Dandrit Biotech got listed on the OTC with the symbol DDRT. An Equity Research Report valued the company at $171M when the market cap was only $38M.
2016: After the cancer vaccine didn't go anywhere for several years, the investors in Dandrit started to get worried and look for a way out. DDRT share price had fallen by 70% since the June 2015 OTC listing. In 2016 alone it dropped 50%. As of June 2016, the share price had dropped to $1.50 for about a $14M market cap.
This article published on 10/24/16 in a Danish finance publication tells the story of how many Danish business people made multi-million dollar investments in DDRT only to have it fail. From the article:
We have been very uncertain about what happened to DanDrit. Even when looking for information, the management was sparse with information. This made us skeptical in the past, but within the last few months we have felt that DanDrit is heading towards a safe harbor. We are sure there will be an increase in capital and strengthening operations, after a US investor reportedly wants to add $ 15.6 million dollars to the company. So now we no longer have sleepless nights over it", says Torben Bjørn Christensen, who is part of the investment company from which the Spangsberg family owns Dandrit shares.
A glimmer of hope came when DanDrit announced that it had bought SF-based UCSF spinout, OncoSynergy, that was working on a cure for Glioblastoma. OncoSynergy's CEO, Shawn Carbonell, MD, PHD, is a neurosurgery dropout and calls himself a rogue physician scientist. The merger was contingent on the company being able to raise $16.5M. However, they were not able to raise any cash, and the deal never closed.
Here are some OncoSynergy investors' comments during the merger period. Notice they are first excited about being acquired by DanDrit, then they lose hope over time.
According to Carbonell in a comment below:
Although the Dandrit deal fell through, OncoSynergy ended up subsequently closing millions in additional financing and grants on its own. Their lead program is now clinical stage and currently enrolling a Phase I trial at Moffitt Cancer Center for recurrent malignant glioma including glioblastoma.
Inventor Although the Dandrit deal fell through, OncoSynergy ended up subsequently closing millions in additional financing and grants on its own. Their lead program is now clinical stage and currently enrolling a Phase I trial at Moffitt Cancer Center for recurrent malignant glioma including glioblastoma.
2/2018: DanDrit biotech completed the reverse merger with Enochian. Under the purchase, DanDrit Biotech, Weird Science LLC and RS Group ApS (Rene Sindlev), a stockholder of DanDrit, entered into an Investor Rights Agreement, and a Standstill & Lock-Up Agreement with a term of two years (expires 2/2020). DanDrit raised $19,000,000 cash in new equity financing from Sindlev and his 220 Danish celebrity friends, of which $1M was used towards the acquisition. $14M of the stock was sold to the celebrities at $8/share while Sindlev had bought at $1.3-$2 in 6/2017.
Danish Economic Weekly probed Sindlev on the valuation of the company, and whether the celebrity investors were scammed.
Enochian's valuation is nonsensical. It seems possible that the investment by the Danish celebrities, who may be less savvy investors, is part of the reason for the relatively stable stock price. The company doesn't seem to do much stock promotion. Evidence suggests that the company's lead scientist who has little to no biochemistry experience and a questionable history of crime and deception won't be the one to find the elusive HIV cure. The company is already behind in their pre-clinical targets. As time goes on, the board and employees will continue to receive their high salaries. If and when insiders begin to sell their millions of shares, then we believe ENOB could swiftly fall 90%+ to its fair value of what we believe to be at best a $10M market cap, or around $0.25 per share.
(Update 11/21/2019: We have amended the discussion of the carrying value of the company's IP to clearly distinguish the author's opinion from fact. We added the phrase "in our opinion.")
This article was written by
Disclosure: I am/we are short ENOB. 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.
Additional disclosure: https://whitediamondresearch.com/disclaimer/