Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Is Ergomed's Stock A "Tell"?

|About: CEL-SCI Corporation (CVM)
Summary

Ergomed is the CRO for the PHIII Trial of Multikine.

Ergomed's stock conitnues to soar, reaching new 52 Week Highs.

CFO and COO have bought over $480K in the past weeks.

CEL-SCI's stock has been trending up as well.

About CEL-SCI 

CEL-SCI Corporation ("CVM") is a small-cap market ($250M) clinical stage cancer bio-pharmaceutical company. Multikine, a cocktail combination of cytokines and chemokines, is a prospective neoadjuvant treatment and an investigational drug candidate in clinical development for newly diagnosed advanced primary head and neck cancer ("HNC"). While CEL-SCI has another promising drug, L.E.A.P.S, that provides immense value of its own, we will not be discussing it.

I recently wrote an article about CEL-SCI here: SeekingAlpha-CEL-SCI. One noteworthy news not included in the aforementioned article is CEL-SCI's inclusion into the Russell 3000 Index effective Friday, June 28th.  Membership in the Russell 3000® Index, which remains in place for one year, means automatic inclusion in the large-cap Russell 1000® Index OR the small-cap Russell 2000® Index as well as the appropriate growth and value style indexes. 

Friday, June 28th is one of the BUSIEST trading days of the year.

EGROMED HAS A CO-DEVELOPMENT AGREEMENT WITH CEL-SCI

Ergomed is the Contract Research Organization ("CRO") for CEL-SCI's PHIII Trial for Mulitikine. 

A handful of Ergomed's employees are the ONLY people that have UNBLINDED data. Ergomed stands to benefit significantly from a successful trial.

Ergomed has a Co-Development agreement with CEL-SCI to help fund the Trial. Ergomed’s contribution to the PHIII Trial is up to $12M. Their CEO said:

At this point in the clinical trial we have decided to increase our investment in the development of Multikine, as we believe that it holds the potential to treat head and neck cancer in a new way. Our potential returns from this agreement will increase in line with our investment.”

Ergomed stands to make up to 4X their investment, or $48M.  Does that sound like a lot? It Should.... I'll explain in the next section.

HOW IMPORTANT IS CEL-SCI TO ERGOMED?

Market & Growth

Ergomed had 4 Co-Development Agreements where they share in the potential revenues with small biotechs, like CEL-SCI. At least 2 failed and then they cancelled their other "sharing" deals. To the best of our knowledge CEL-SCI is the only one left standing and the saving grace for Ergomed. A successful trial will be huge, not just financially, but will prove to the market that despite all the obstacles, Ergomed was able to run a successful PHIII Trial.

Financially

Ergomed's 2018 Revenues were roughly $68M USD with an EBITDA of $2.9M USD. Yes, Just under $3M USD.

What do you think their EBITDA will look like when you drop $48M USD into their P & L? Almost all of this $48M USD will fall to the bottom line! Thus, their EBITDA will EXPLODE and will have a massive cash infusion to fund their growth without dilution.

So yes, this is big for Ergomed

WHO KNOWS WHAT?

As I noted above, there are a handful of Ergomed's employees that have UNBLINDED data. 

While the CFO/COO/CEO may not have the unblinded info, they have at least 2 things: 1) Analytical spreadsheets just like FOSCO's and 2) Anecdotal stories from the Trial.

They know how the trial is going, in our opinion.

THE STOCK AND INSIDER TRADES

Now I need you to pay attention here.

In early April, Ergomed's (ERGO.L traded on the London Stock Exchange) stock was trading around 170GBP. Then news of the IDMC hit. This news, coupled with the market believing Multikine is working, has propelled their stock to a new 52 Week high of 302GBP. That's a 78% gain in 2 months!!! WHY?

But there is something even more telling than a 78% gain.

What's exciting and TELLING is that the CFO and COO have purchased over $480K USD of Ergomed's stock the last 2 months. That's a shit load of stock!

While they are most likely blinded to the data, they likely are aware of various analysis and anecdotal information. The CFO and COO are betting big on something!

SUMMARY

The trial was expected to end in late 2018 or earlier this year. We believe that the fact that the trial has yet to reach the last event, it suggests that Multikine is working.

Furthermore, we believe that the Phase III trial would be deemed successful if the study ended today. The longer the endpoint is delayed, the more effective Multikine becomes in terms of prolonging death.

If Multikine is successful for HNC, then it will be studied for many more types of cancer such as breast and cervical. The market potential is enormous.

We reiterate our $250 per share.

A buyout is always a possibility. Recent buyouts of similar bios have been in the $2B to $12B range, as noted above. Even at $2B, the share price would be about $50 a share...a multi-multi bagger.

 

Disclosure: I am/we are long CVM.