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CEL-SCI CEO Defends Lead Drug's Lengthy Development Timeline, Hints At "Big" Upcoming Catalyst

From Thomson Reuters ONE (October 8, 2012)

Data missing from clinical trials can undermine the credibility of those trials, and little attention has been focused on this issue until recently, experts say. Findings from a new panel were published last week as a special report in the Oct. 4 issue of the New England Journal of Medicine.

In May, a study published in the Journal of the American Medical Association also took clinical trials to task, finding that many are small and of poor quality. That study found that cancer treatment trials often failed to follow the highest standards.

The reports resonate, particularly following the videotaped interview with Geert Kersten, longtime CEO of CEL-SCI Corporation (CVM) who is adamant that his firm refuses to take shortcuts- thus arguing the point as one of the main reasons why his firm has taken so long in the drug development process.

Kersten hints clearly that an important catalyst for the stock is coming, in relation to CEL-SCI's whose lead product, Multikine, is undergoing Phase III clinical trials as a treatment for head and neck cancer. But just as the drug candidate is an immunotherapeutic agent consisting of a mixture of cytokines that produces an anti-tumor immune response, Kersten has a knack for creating a strong response of his own from both loyal followers and loud critics.

Question: Geert, when you started this journey 20 years ago, you were one of the youngest biotech CEOs, some people who say, oh, this has just gone on and on too long. Tell us about Cel-Sci and where you guys are?

Geert Kersten, CEO of CEL-SCI: Well everything we do is polarizing. There has never been a cancer drug that works with the body. Ours works with the body. We believe we will have a cancer drug that will have minimal to no toxicities. That doesn't exist today. This is the first cancer drug being developed as a true first line therapy. Meaning before you get surgery, radiation, chemotherapy, we would boost your immune system because everybody to date boosts your immune system after having destroyed it. It doesn't make much logical sense, right? So everything we do is different because we set this one up not from historical precedent, we set it up from data and logic hence, you know, so that's polarizing.

Q: It is. But, you know, on the one hand you've got one group that says, oh, Cel-Sci they've been working at this for 20 years, they're not real, and they're just an ATM machine making money. On the other side, you've got people say well, you know, it if were an ATM machine then why build a $25M cold-fill lab and run these big Phase III trials that are going on around the world. Tell us a little bit about that. What's going on with these Phase III trials?

Kersten: By the way this is very funny, the ATM analogy.

Q: Yeah?

Kersten: At times, I put money into the company, the president of the company we often saved the company by putting our own money in. During times of crises, the first thing I do is put myself on zero salary and then I go and negotiate with suppliers telling them I'm on zero salary. Trust me, my negotiation position as someone who takes zero salary is a lot better. So it's because of that, the company has been saved many times.

Our premise is very simple. If you create, successfully bring to market the cancer drug that we envision then you have changed probably the practice of medicine in oncology because you will be adding our immunotherapy drug first to head and neck cancer, but we think to many solid tumors later on. Think of it is as the addition of a turbo to an engine. The idea is to make something existing, better in terms of survival and that is the goal. This is a lifetime goal. You say, oh my gosh, it's taken so long. It shouldn't take this long but historically new, the first in the new class drugs take 28 to 30 years. Teva's big cancer drug took I think it was 28 or 30 years, ImClone's ERBITUX took the same kind of time period. So why does it take so long? Because there's no money early on, people don't believe in it, regulatory this, regulatory that. It's the reality.

Q: And to that point, you know, one of the things that jumps out as we look at you- a small biotech that has grown to where you are now- and this is by the way your big shot on goal, right, this drug? You've been at this for 20 years. Phase III small biotechs usually don't go at it alone. Now I know that you partnered with Teva (TEVA) and that Teva recently has expanded the territories. They must have seen I would imagine some good data you're not going to give me a hint I know. But, you know, the point is this is expensive and you've decided this entire step of the way, every step of the way to basically go at it alone. But you're still in the ballgame. You've had some good clinical data results. That's a lot of different pieces of information but what are your thoughts on those subjects?

Kersten: There's only one way to be successful for something big like this and that is to do it perfectly, okay. Why do you partner? Anyone if you partner for money, it's like a marriage for money. Generally, they don't work. So you partner because of manufacturing so your partner can manufacture the drug for you. In our case that made no sense because the manufacturing facility we needed was not available at any big pharma. You partner in order to sell. Well we don't approach primary care physicians. We have about, I think it's about 1600 head and neck cancer surgeons. I think we could be able to sell to them directly plus we don't need a sales force today. None of big pharma has any experience in running head and neck cancer studies dealing with surgeons. Why surgeons? Because surgeons are the first people to see patients who have not yet been treated in head and neck cancer. They're a different world as Madagascar is to the rest of the world. The animals there are animals there but they look differently. Well head and neck surgeons are somewhat akin to that. So no one has the expertise for us to seek out to run the study any better than we can. So really quite honestly it is our attention and money that drives it forward.

Q: And this is a big undertaking, this Phase III study. Now obviously we've seen some results in Phase I and Phase II that have passed muster and the FDA said 'go on' and then, I'm sure giving you feedback. But this Phase III study some people feel is not going fast enough. What is your position on that? What's going on there?

Kersten: The funny thing is I'm probably the most impatient person in the completely wrong business. This is slower than watching paint dry and I can't even sit still for five minutes. So why am I doing this? Because I believe. I believe this can truly change the lives of many people. So we are doing everything in our power to move the study forward as quickly as possible. We've signed up 36 centers in 8 countries on 3 continents. Already, it's probably the biggest head and neck study ever done. We're expanding the study. The goal was 48; we're probably going to go to 60 centers. We have negotiations ongoing right now with probably 40 centers around the world. New ones are contacting us to join us.

Clinical trials never go as fast as you think they should. You think that every head and neck cancer patient should be allowed in the study but that's like going to a movie theater that has screaming babies, sirens, people talking the whole time, every noise that you can think of and you can't hear anything from the movie. So you need to eliminate those noises. A clinical trial is the same thing. In order to see a statistical difference, the betterment, in our case a 10% increase in overall survival, you must make your study population very homogeneous and you do that by having many inclusion, exclusion criteria, which now takes what is a wide number of cancer patients and narrows it down to a very small number of cancer patients. That is why clinical trials always take longer to enroll than one would expect.

Q: Now speaking of innovation and taking longer and so forth Dendreon took investors from $2.50 a share up to $55 a share back down to $5 a share, part of being an innovator. How does that story sort of play in your mind and work into the business model that you're working on?

Kersten: Well first of all, I mean Dendreon achieved something tremendous. Dendreon's problem has always been its form of manufacture and probably its cost. I don't know their cost structure but it has to be more expensive. Every patient essentially is his or in this case his own manufacturing facility. So they also cannot employ the normal sales model. We have a mass produced drug. We already have by the way a full-scale manufacturing facility that can make 20,000 treatments per year as it stands today.

Q: And (the cold fill lab facility) it's making it for the current drug tirals?

Kersten: Correct. It's made multiple lots for the clinical trial. It's passed inspection by the European qualified person so you know we have a functional facility, $25M facility. It's very unusual for a company of our size to make that. But, you know, there is no short -- you have to do things right. There are no shortcuts.

Q: And the position that you're in obviously that takes time, money investors look at the stock price and say well it fluctuates sometimes, pretty much it's flat. One of the things that would change that in my mind as we present this to the investment community is catalysts. Are there any upcoming catalysts? Is there anything that you think may cause a fluctuation in the stock price as you are looking at the clinical, the Phase III as you're in the middle of these Phase III clinical trials?

Kersten: I get that question about five times a day.

Q: I'm sure you do.

Kersten: And I can think of at least one big one that's coming up but, you know, I really can't disseminate that information. Just so you know our study is an open label study for overall survival so that means we will see how many people are alive and how many people are dead in each group. That is the primary endpoint as dictated to us by the FDA. Everything else in the study is done in a blinded manner so we don't see the data. We can't even report on it.

It seems to me that certain investors feel that I ought to be giving them updates every single day on the clinical study. It doesn't work that way. I don't make the rules. They are internationally established, FDA watches everything we say. We cannot bias the study because if we do, then we put the whole study in peril. This is not about some short-term stock play. This is about creating something of value that we believe will end up affecting thousands upon thousands of cancer patients positively. From that comes the true value of creation.

Q: Speaking of value creation, let me interrupt you there. You guys have held on to many of - you haven't given up a lot so far. Even though this journey has been long, really the price and the burden has been placed on the investment community not on partners and big pharma and so on like other players. So with that in mind, I would think that if you do have some positive Phase III results (investors) they're also going to reap the benefits?

Kersten: That's correct. Then, you know, we still have all of our children, grandchildren whereas other have basically sold them okay. That's the bottom line. So the inflection point for us is the end of this Phase III or that's called approval of this drug. If we are approved, then our upside is going to be multiples higher than if we have licensed this drug out. Big pharma does not become rich as it is today by giving great deals to small companies.

Q: You don't give interviews very often, Geert. Is there any point or any type of issue that stands out in your mind that you would like to address perhaps to the investment community?

Kersten: There are no shortcuts. If anyone of you has met Dr. Talor our head scientists, John Cipriano our regulatory affairs man (who held positions at the FDA), they don't accept shortcuts and you'll be happy to hear and you should be happy to hear that even if I were to push them for shortcuts, they tell me to go and fly a kite. It's that simple. Because in the end, shortcuts kill companies, they don't allow them to get to market. It may take a little longer sometimes but we have taken, we've built in many additional safety steps.

For example the manufacturing facilities, why do you build a $25M manufacturing facility for a drug that's not even on the market yet? Well we determined that the kind of drug if we had done contract manufacturing, it would have represented a huge regulatory risk and then we might not have been able to cover the market in any case. But it was mainly the regulatory risk. Because you must not just have a successful study, you must have a manufacturing facility that meets FDA specifications and both of those constitute a drug approval together.

Q: And to be fair, that's about the time we found your company and covered it and I say this partly for you, partly for me. We saw a company that had been stuck in Phase II studies or the end of Phase II, ready to go into Phase III and you basically were stalled there, right? Suddenly then you were able to raise enough money to build this facility and move on to Phase III. But it speaks to the fact that you were saying there are no compromises. You weren't interested in taking a shortcut. You were going to wait until you had enough money to move to Phase III and in the meantime I saw you putting in your own money and so forth to keep the company alive. But, you know, at the end of the day we're a financial portal and we are interested in short term stock plays, catalysts and so forth.

I would think that being a Phase III company that one of the things that might perhaps increase your value as we move forward is the fact that we haven't seen any of bad safety information so far. In fact, we have spoken to doctors. This is, you know, the information age, you can easily get a hold of people and so forth that are investigators in the study and I can say that these people are conservative, they're very clinical, but and I'm looking for hint here, I know I probably won't get it but I'm going to ask it anyway. These guys have seen something. They're seeing something here. Teva for example has decided all of a sudden to expand the number of territories in the clinical trial within their realm and their territories. That's got to feel pretty good the fact that you haven't seen adverse effects, the fact that you've got doctors sort of reacting. I don't know if you ever get a chance to speak to any of them or if you can even talk about this but I know I have to ask this because investors are looking for hints.

Kersten: Again, I'm not allowed to bias the study. When the DSMV makes certain determinations, we can announce those. No shortcuts. Thank you.

Q: All right. we appreciate that. Thank you so much, Geert, for taking time with us. We appreciate your time.

Kersten: Thank you too.


Disclosure: Long CVM with no plan to sell shares until after Phase III results or later.


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Source: BioMedReports via Thomson Reuters ONE [HUG#1647261]




Posted: October 2012