NEW YORK, NY / ACCESSWIRE / October 21, 2015 / Cancer immunotherapy company CEL-SCI Corp. (NYSE MKT: CVM) is thriving. Ergomed, a multinational Contract Research Organization (CRO) with a pristine reputation and the confidence in CEL-SCI's lead drug Multikine to make a huge upfront $10 million investment, recently raised the ante 20% - to $12 million. The deal was done under the same terms first put in place that calls for only a single-digit royalty on potential sales. This clearly shows Ergomed's confidence not only in the likelihood of Multikine being approved, but also in the large revenue potential of the cancer immunotherapy drug.
CROs play a big part in managing everything from recruiting clinical sites and patients, to back office jobs clinical trials require like data entry and statistical analysis, but it's a rare situation when significant cash commits, and even rarer when the amount of cash goes up by a large percentage. I believe Ergomed see something very valuable in CEL-SCI's future.
Global consultants McKinsey & Company, advisors to big pharma and biotech, in their industry reports support the fact that CROs don't typically make investments in the companies they provide service for. What pharmaceutical and biotechnology companies want is an increase in how many drug programs are going on at the same time, hopefully stuffing pipelines without spending extra cash other than paying for basic services. They avoid risk with their CROs. Ergomed stands out because that's exactly what they're doing - putting big money into a project where they believe there's a big return.
Immunotherapy is quickly becoming a solid source of interest to investors as IPOs see sky-high valuations out of the box, and beyond, and Big Pharma tosses millions of dollars at the earliest of phased trials. Juno Therapeutics (NASDAQ: JUNO), public in December 2014, doubled its market cap, to $5 billion since its IPO in December 2014 even though the company is barely out of Phase I. Cellectis (NASDAQ: CLLS), trying to re-engineer the immune system in rats with prayers humans may someday benefit, hovers around a valuation of $1 billion. Aduro Bio Tech (NASDAQ: ADRO) went public last April with an almost doubling of price and now sports a market cap of $1.4 billion but like its fellows, barely out of Phase II.
Large drug companies with their sad lack of meaningful pipelines except 'me-too' drugs and tired combinations have jumped on the immuno-bandwagon with a vengeance: Bristol-Myers Squibb (NYSE: BMY) paid $1.25 billion for Flexus Biosciences; AbbVie Inc. (ABBV:NYSE) bought Pharmacyclics (NASDAQ: PCYC) for a mind-boggling $21 billion; Mallinckrodt PLC (NYSE: MNK), best known for medical imaging materials, stepped up to the immunotherapy plate with a buy-out offer of $1.3 billion for Therakos. Deals seek overseas sources: Eli Lilly (LLY:NYSE) will spend $1 billion on China-based Innovent Biologics whose current line-up in monoclonal antibodies reads like a generic pharmacists' formulary.
Ergomed, serving high-profile clients like oncology firms Synta Pharmaceuticals (NASDAQ: SNTA) and Aeterna Zentaris (NASDAQ: AEZS) has lived up to its name in helping fill clinical trial beds, bringing both companies to Phase III trials. CEL-SCI sees this benefit: since bringing Ergomed on board, enrollment has skyrocketed with a final count last month of 570 patients taking Multikine for head and neck cancer, almost two-thirds of its way to goal. Ergomed's jump in investment will aid CEL-SCI in enrolling even more quickly.
These enrollment numbers are striking, especially considering untreated head and neck cancer, the aim of the study, are a harder pool of patients to find. Thanks to Ergomed and its wide reach, this group of over 600,000 patients in total have been tapped in more than 24 countries, at top sites. CEL-SCI averages 26 patients per month since the beginning of the year.
Almost no pharma firm is tackling head and neck cancer like CEL-SCI. And those who get close trade high. Inovio Pharmaceuticals (NASDAQ: INO), does studies in head and neck cancer caused by human papilloma virus (HPV) but only in Phase II, yet boasts a valuation of $450 million. ImmunoGen, Inc. (NASDAQ: IMGN) began work in head and neck, but dropped it mysteriously in the last six months and only dabbles now in a variety of solid tumor cancers not out of Phase I. Even big firms shy away from this form of cancer probably, I believe, because they do not understand how to treat it the way CEL-SCI does, giving CEL-SCI a clear road to dominating this $3.2 billion global market.
Further testimony that CEL-SCI is on the right track to treat a disease no one else can, and backing up CEL-SCI's claim of fraud instigated by its CRO predecessor, a commitment of $5 million was made just days ago to help the fight. The company had a bad experience with their former contract research organization (CRO) InVentiv, whose incompetence enrolling patients in CEL-SCI's large and ground-breaking Phase III clinical trial for head and neck cancer caused a drop-off in the stock.
In another unprecedented move for a company wronged by corporate maleficence under the guise of helping humanity cure ills, CEO Geert Kersten struck a good deal with Lake Whillans, experts in supporting litigation, structured around settlement (if that occurs), and gives CEL-SCI breathing room to use its $11 million plus in cash to look after Phase III trials of Multikine in head and neck cancer. The take is at least $50 million from InVentiv - a small price to pay for the pain and suffering caused to CEL-SCI and those potential clinical trial patients that could have benefitted from the company's innovative immunotherapy.
Multikine marches on and so does CEL-SCI. With enrollment at all-time record highs and the trial's endpoint only a 10% improvement in overall survival versus standard of care, this is a cancer study lay-up. After approval, Multikine will likely be available in all the countries where studies are now held, giving CEL-SCI a massive global reach.
Like any biotech, there are risks and investors should be aware. CEL-SCI does not have products in the market yet, its stock is below $1.00, and news flow, as is the case with many small companies, may be light and liquidity may be low. Market capitalization is about $82 million but I believe, given the company's great potential, it is one of the most undervalued immunotherapy plays on the market.
CEL-SCI should be rewarded for rapid progress in patient enrollment, for gathering industry support, and for the money it earns from parties interested in seeking to bring this company into the spotlight of a $35 billion immunotherapy market. The time to buy is now.
About Ray Dirks
Ray Dirks came to Wall Street with Goldman, Sachs & Co. in 1963 where he was established as the leading insurance stock analyst dealing with institutional investors and high -net worth investors both in the U.S. and internationally.
In 1973 Ray uncovered the biggest Ponzi scheme of the 20th century, the Equity Funding fraud. Over the years Ray has expanded his stock market research to include Healthcare Stocks and Special Situations. Ray has written two books,"The Great Wall Street Scandal" and "Heads You Win, Tails You Win", published by McGraw-Hill and Bantam Books respectively. He continues to provide research to institutions and individuals, and he manages money for some individual investors.
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SOURCE: RAY DIRKS Research
