NEW YORK, NY / ACCESSWIRE / July 28, 2015 / Advancing promising clinical research past government funded trials is big milestone for biotechs and often comes with a corresponding move in the company’s inherent value. This is especially so when the top researcher in the field comes on board to expand a clinical trial. Such is the case with CEL-SCI Corp. (NYSE MKT: CVM), who recently announced expansion of a Phase I study for treating anal warts in a select population of those succumbed to human papilloma virus (HPV) with co-morbidity of human immunodeficiency virus (HIV). This suggests a global market opportunity in excess of $2.6 billion according to recent revenue figures of two leading HPV vaccine makers, as discussed below.
CEL-SCI started this task in late 2013, under the auspices of a Cooperative Research and Development Agreement (CRADA) with the Naval Medical Center in San Diego, CA, known for its advanced work in both HIV and HPV. The Navy’s study will apply CEL-SCI’s same Multikine Phase I protocol that produced positive results with high patient tolerance from an earlier study at the University of Maryland. The Navy’s trial continues to enroll patients.
The new trial Phase I will be initiated at the University of California, San Francisco (UCSF), led by heavily-published, prominent anal cancer investigator Joel Palefsky. Dr. Palefsky’s pedigree is stunning: head of the HPV/AIDS Group and HPV virology lab at UCSF, founder of the International Anal Neoplasia Society and current president of the Human Papillomavirus Society, his work comprises 20 years of AIDS-related cancers, making a perfect fit with CEL-SCI. Even better for CEL-SCI, Dr. Palefsky’s highly efficient lab at UCSF covers 37 clinical sites around the globe that provide comprehensive support for clinical trial functions like statistical analysis, operations, and data management. This can only help CEL-SCI enroll patients faster and process results quickly, possibly shortening its path through regulators to bring Multikine to market.
Dr. Palefsky is also principal investigator of the ANCHOR study, funded with $89 million by the National Institutes of Health to examine anal warts and their prevention and treatment. On his website, he notes that half of all HIV positive men experience abnormal cell changes in their anus that traces back to HPV infection. Roughly 25% of HIV positive women also have aberrant cell changes, and those with unusual PAP smears are at higher risk for anal cancer; engaging in anal sex is not a factor in contraction of this potentially fatal disease.
Incidence of anal cancer in the US is on the rise. There are at present 7,270 new cases each year, carrying a 13% death rate. The Agency for Research and Cancer pegs growth of 40% for HPV related cancer in the near future. Dr. Palefsky’s seminal work in 2009, “Update on HPV: Beyond Cervical Cancer” found that HIV positive men who have sex with men (MSM) are 40 times more likely to be diagnosed with anal cancer. Anal HPV was seen in 65% of HIV negative MSM and 95% of HIV positive MSM. Left untreated, anal HPV is the culprit in 80% of anal cancers. Truly an epidemic without a viable cure, growing as HIV positive men live longer with better medication and compromised immune systems, making them more susceptible to anal cancer.
Approximately 20 million Americans are infected with HPV, and six million people contract HPV every year. The HPV virus, of which there are 120 strains, is especially treacherous because of lack of symptoms, compromising timely medical intervention. About 75% of sexually active adults will acquire HPV (the most common form of sexually transmitted disease) in their lifetime with no awareness, leading to the potential for advanced wart development, and cancer.
Only one HPV diagnostic tool has been approved by the FDA – in 2014, Roche Holding AG began marketing its cobas HPV Test that also screens for cervical cancer. Lured by an HPV testing market forecasted to grow at a compound annual rate of 16% over the next four years, driven by the need for early detection, and global projections for HPV testing expected to reach $511.8 million by 2020, many of the majors are stepping up efforts to develop HPV screens. These include worldwide giants Abbott Laboratories (ABT:NYSE), Becton Dickinson and Co. and Seimens Healthcare, along with dozens of others. In women, PAP smears have been used historically to detect cervical cell abnormality that could lead to warts, but with low test sensitivity and a high rate of false-negatives (where the disease exists but the screen fails to show its presence), the diagnostic industry is shifting focus on HPV testing. Adequate and early screening is likely to show a greater number infected, prompting sooner treatment that would only benefit CEL-SCI as its target market grows.
Competition for HPV treatment is shockingly scant; available now are often-ineffectual topicals containing a form of acid, painful cryotherapy (freezing of warts), and expensive surgery. Merck & Co. dominates the HPV vaccine market with Gardasil, approved in 2006, which went on to become a blockbuster with 2014 sales of $1.7 billion. GlaxoSmithKline plc offers Cervarix, an HPV vaccine with much lower annual sales of $9 million; together they define a market of approximately $2.6 billion.
Both vaccines only address between four to nine of the 120 HPV strains, and effectiveness is debatable. Gardasil has been under a cloud of controversy as critics claim it can produce side effects such as multiple sclerosis, brain inflammation and Guillain-Barre Syndrome that results in muscle weakness from damage to the peripheral nervous system. These effects can be seen in as little as two weeks after treatment. Not much better, Cervarix has been criticized for onset of several autoimmune disorders. Most sad is that Merck and GlaxoSmithKline conduct marketing campaigns for administration of their HPV vaccines in children as young as 11 years old. Unfortunately, due to legislation, vaccine makers are immune to litigation; hence much of the consuming public remains unaware of these product’s potential dangers.
Recognizing a strong medical need, other, smaller firms seek solutions in early trials. Kite Pharma, Inc. (KITE:NASDAQ) recently struck a deal with bluebird bio Inc. (BLUE:NASDAQ) to develop candidates for HPV (only one strain, however) using immunotherapy, ostensibly to treat HPV cancers. This joint venture will not interfere with Kite’s ongoing Phase I and preclinical work using T cell targeting for HPV. Note the disparity in market capitalization between CEL-SCI, also embarking on Phase I for HPV-related illnesses – their $66 million versus Kite’s and Blue’s of $3.1 billion and $5.8 billion, respectively. Given this, I view current pricing of CEL-SCI shares as a strong opportunity.
CEL-SCI is a pre-revenue company. For the six-month period ended March 31, 2015, CEL-SCI reported a substantial increase in grant income, from $180,301 last year to $334,458. Research and development costs jumped 21%, to $9.9 million, given the sharp acceleration in clinical trial enrollment for its head and neck cancer study where a total of 880 patients are sought for recruitment. Operating expense subsequently increased, and operating loss widened from $12.1 million in the comparable period in 2014, to $17.7 million. Last May, CEL-SCI closed on financing of stock and warrants, resulting in aggregate gross proceeds of $16 million. There is no long-term debt.
Risks can be significant for companies trading in the micro-capitalization range and CEL-SCI is no exception. However, different than other biotechs its size, the company trades actively – over 628,000 shares in an average three-month period. Moreover, news flow is active, particularly in reporting the rapid pace of enrollment in head and neck cancer trials, although it’s too early to tell how fast the HIV/HPV trials will fill up. CEL-SCI seems to draw investor skepticism with a “show me” attitude, likely due to troubles with its former contract research organization (CRO). That has resolved as new CRO partners are on board with investments in the company, a testament of confidence, and I believe results will be dramatic.
CEL-SCI has achieved what biotech companies working with government agencies want: a big move forward with the world’s leading expert in its field, at one of the top U.S. medical institutions, where the study of a drug can be done more efficiently, hastening time to market. Multikine can come to market fast as a treatment for HIV/HPV related conditions such as anal warts, and show promise in the treatment of anal cancer. All of this, combined with a Phase III trial in head and neck cancer that is close to completing enrollment, highlights CEL-SCI’s very low valuation compared to its multi-billion dollar peers.
About Small Cap Forecasting, Inc.
Sharon di Stefano has spent 20 years as an analyst, beginning her career at Smith Barney, Harris Upham & Co. specializing in medical devices, pharmaceuticals, healthcare information technology, and bio-pharmacology. Ms. di Stefano had also served as Senior Venture Officer for the Edison Innovation Fund, implemented through the New Jersey Economic Development Authority that provided funding for early-stage life sciences companies. Industry experience includes laboratory research for Johns Hopkins Hospital and the Department of Defense. Ms. di Stefano received a Master’s of Science degree, in Business, from Johns Hopkins University in 1986, and a Bachelor of Arts from the University of Delaware in 1984 with a minor in biology.
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Jackie Rodriguez
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SOURCE: Small Cap Forecasting, Inc.
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