We are initiating coverage of CEL-SCI Corporation (NYSE:CVM) with a $14.00 price target based on our estimates for a 2021 US and 2022 EU launch of lead compound Multikine in squamous cell carcinoma of the head and neck (SCCHN). The clinical-stage company is developing this biological product which contains multiple cytokines to enable the body to mount an anti-tumor immune response. The biologic is being developed as a first line therapy that will be administered to newly diagnosed, but not yet treated, head and neck cancer patients prior to their receiving standard of care (SOC), which includes surgery, chemotherapy and radiotherapy. This approach aims to improve the patient’s overall survival (OS) compared to patients that receive SOC alone. Multikine is thought to bind to receptors on both cancer and immune cells, signaling the immune system to produce an anti-tumor response and possibly making the cancer cells more susceptible to radiation and chemotherapy treatment.
CEL-SCI is currently conducting a Phase III trial, which is examining the use of Multikine in combination with and given prior to SOC treatment. It has completed enrollment of 928 SCCHN patients and is expected to provide a topline readout in the first half of 2019. The company has concluded a Phase I trial for human papilloma virus (HPV) patients using Multikine in HIV/HPV co-infected patients. The company’s other technology, Ligand Epitope Antigen Presentation System (LEAPS), is currently in the preclinical stage pursuing indications in rheumatoid arthritis (RA), pandemic flu and breast cancer.
Multikine is differentiated from other cancer immunotherapy in three ways in that it is: 1) administered between diagnosis and surgery, 2) comprised of cytokines sourced from normal human donor leukocytes and 3) given to patients who are scheduled to receive “intent to cure” first line therapy. Administration occurs immediately after diagnosis allows the biologic to begin activating the immune system to eliminate micro-metastases and recognize tumor cells. It includes a broad variety of lymphoproliferative, chemotactic and necrotic cytokines that can potentially recognize and bind to multiple receptors on both immune and cancer cells. As Multikine is injected right after diagnosis in the weeks prior to normal scheduling of surgery, it does not delay subsequent treatment. A delay of surgery can negatively impact survival. Therefore, it is not ethically acceptable to delay surgery to conduct a study on another cancer product, which would be required in studies to obtain first line approval in other immuno-oncology treatments such as checkpoint inhibitors or CAR-T. Multikine is immediately available and can be administered to have its beneficial effects in the three week period routinely open to schedule and prepare for surgery. The biologic mixture is thought to overcome local immune suppression by the tumor, break tumor tolerance to tumor antigens and allow for a sustainable and effective anti-tumor immune response.
On September 30, 2018, CEL-SCI held approximately $10 million in cash on its balance sheet. Modest amounts of capital have been raised over previous years with public offerings, stock issuances and warrant exercises. The company currently holds no debt but does have required lease payments for its manufacturing facility. We expect CEL-SCI to consume slightly greater than $1 million per month as it completes its Phase III trial and pursues FDA approval. In parallel, we expect other Multikine and LEAPS programs to continue to advance.
Based on our review, we anticipate the Multikine Phase III “IT-MATTERS” trial to be completed in 1H:19 and topline data to be presented from the Phase III SCCHN trial in 2H:19. Assuming favorable data is presented, further interaction with the FDA will take place as will the preparation and submission of a biologic license application (BLA). After approximately a year for review we anticipate an approval and a concurrent search for a partner to distribute the product outside of the United States. If data from the trial are very strong and the FDA considers Multikine to provide a significant improvement in safety or effectiveness, CEL-SCI may receive a priority review designation, which would advance the drug more quickly through the application process. Multikine has also received Orphan Drug Designation from the FDA.
There are multiple legs supporting our positive thesis for CEL-SCI, including promising data in completed Phase II trials related to both safety and efficacy. CEL-SCI also operates its dedicated Multikine manufacturing facility, allowing for greater control over product quality and production. Phase III results are expected in the near term, which, if favorable, will support a BLA submission, approval, and ultimate commercialization in 2021.
CEL-SCI is in the final stages of its Phase III trial for SCCHN which, if approved, will be the only first line immunotherapy for this indication targeting the “intent to cure” population for which no new drug or therapy has been approved in decades. The company has secured an orphan designation for Multikine in SCCHN which can provide for a closer working relationship with the FDA and potentially allow a more efficient approval process. Multikine is a biologic therapy that is administered immediately after diagnosis and followed by surgery and other SOC. There is clinical data supporting the biologic’s efficacy, which functions by supporting the immune system to identify and fight cancer. We expect the data provided from the in-progress Phase III trial to support a BLA and subsequent commercialization in the United States and other regions.
Multikine includes pro-inflammatory cytokines that proliferate an immune response, draw immune cells to the site of the tumor and kill tumor cells. The components of the biologic can potentially recognize and bind to cancer and immune cells, thereby enhancing the body’s normal response to rogue cells. Multikine is used prior to SOC, when the immune system is still strong and when it can have the greatest impact on tumor tissue.
Current SOC is only modestly effective in SCCHN and its impact on survival of these patients has not advanced in decades exhibiting an estimated 43% five-year survival rate. Treatment can also be disfiguring and debilitating, further emphasizing the need for a new and improved approach. Based on company and American Cancer Society data, there are approximately 60,000 US cases and about 105,000 EU cases per year. The World Health Organization (WHO) estimated about 550,000 cases globally in 2014. Additionally, Multikine may be appropriate for other cancers beyond SCCHN and CEL-SCI may pursue additional indications following approval. There are no other immunotherapies in development for the advanced primary, not yet treated SCCHN patients, which suggests high market penetration if commercialized.
We anticipate pricing of the drug to be similar to other immuno-oncology agents. Many of these therapies present an average cost of above $150 thousand per course of treatment in the United States. Our forecasts maintain a conservative view, and anticipate a discount to these levels that is expected to capture market share. We make further reductions for regions ex-US to reflect relative prices in these economic areas.
While our target price is generated based solely on success in SCCHN, Multikine has also shown early positive indications in Phase I trials for cervical dysplasia in HIV/HPV co-infected patients and CEL-SCI has also made substantial progress in its LEAPS platform receiving a $1.5 million grant from the NIH. We anticipate adding a valuation component for these programs as they advance further through the pipeline.
Key reasons to own CEL-SCI shares:
‣ Compelling preclinical and clinical data supportive of Multikine’s effective mechanism of action
‣ Multkine is complementary to first line “intent to cure” SOC, in contrast to other monotherapies
‣ Multikine is administered prior to SOC, synchronizing with the preparation period prior to surgery
‣ Differentiated approach that employs multiple proteins for cancer cell identification & destruction
‣ Proprietary manufacturing process, patent protection and anticipated biologics exclusivity
‣ CEL-SCI maintains operation and control of its Multikine manufacturing facility
‣ Multikine source material is abundant human PBMCs
‣ Favorable drug safety profile with no reported drug-related adverse events
‣ Biologic eligible for 12 years of exclusivity in United States
‣ Global rights to intellectual property
‣ Pipeline includes LEAPS platform with additional indications
◦ Rheumatoid Arthritis
◦ Pandemic Flu
◦ Breast Cancer
In the following sections we review the immuno-oncology space and Multikine’s position in it. We also discuss related clinical data and the design of the Phase III trial, which we anticipate will provide topline data in 2019. SCCHN is reviewed along with market size and current SOC. We anticipate a BLA filing this year and a favorable response from the FDA in 2020. These positive catalysts will support capital raises sufficient to complete either internal or external commercialization of the biologic. Multikine may prove to be an excellent complement to current SOC, bringing to bear the power of the immune system to clear the body of this disease.
Immuno-oncology (IO), or cancer immunotherapy is an approach to fighting cancer that uses the body’s own immune system to attack the disease. Normally, the body’s immune system can eliminate cancer cells, but in some cases, these cells can adapt to hide. When IO drugs or biologics are administered, they allow the immune system to recognize harmful cells and destroy them, in many cases with fewer and short-lived side effects compared to surgery, chemotherapy and radiotherapy. Immunotherapy is preferred because it is frequently associated with fewer adverse events, maintains its potency, works well in conjunction with other therapies and is also able to better target the disease. Several classes of immunotherapy exist including therapeutic vaccines, checkpoint inhibitors, immune modulators, adoptive cell therapy (CAR-T), oncolytic viruses and antibody drug conjugates among others. IO can be either active or passive. Active approaches direct the immune system to kill cancer cells by targeting tumor antigens. Passive approaches augment existing tumor responses and use a variety of proteins, lymphocytes and cytokines to enhance their activity.
Multikine, also known as Leukocyte Interleukin, Injection, can be used as an anti-cancer neo-adjuvant therapy with a broad-spectrum application for cancer, infectious disease, possibly as anti-viral therapy, or may be used in other disease states responding to immunomodulation. The biologic is CEL-SCI’s lead candidate and is now in a late Phase III trial for SCCHN. It takes both an active and passive approach to boosting the immune system, which enhances its ability to mount an effective and sustainable anti-cancer response. Multikine has also completed a Phase I study for cervical dysplasia and peri-anal warts for patients co-infected with human immunodeficiency virus (HIV) and human papilloma virus (HPV). Multikine is a biological agent primarily consisting of 14 natural cytokines prepared from healthy donors’ peripheral blood mononuclear cells (PBMCs). Cytokines are proteins that have abundant control over the body’s immune response to an antigen. This mixture includes many of the body’s natural defenses against cancer and consists of interleukins, interferons, chemokines and colony-stimulating factors. The product is mass produced, allogenic and allows the recipient’s immune system to acquire specificity against their own tumor antigens when injected proximate to the tumor and draining lymph nodes of the cancer patient.
Administration of Multikine is provided prior to other cancer therapy in order to take advantage of a stronger immune system and the synergistic ability of Multikine to work with the body’s innate response to cancer. Radiation, chemotherapy and surgery weaken the immune system, and leave the body less able to mount an anti-tumor response, highlighting the importance of using the biologic prior to these approaches.
Immunotherapies can be autologous or allogenic with the former using the patient’s own cells and the latter using cells or therapies taken from other donors. Autologous therapies can be costly and time consuming to prepare. These approaches withdraw, modify, then re-administer a patient’s own cells as the treatment and are very expensive, but present less risk of rejection. Allogenic approaches are “off-the-shelf,” ready to use and can be administered rapidly and efficiently. Multikine is an allogenic approach that is being developed having both active and passive attributes, eliminating the need for external antigens as it is injected around the tumors of patients. Multikine lends itself to an allogenic approach as the isolated human cytokines do not carry any allogenic signature; therefore, they can be taken from any donor and the patient’s immune system will not mount an immune response against them.
The investigational biologic has a novel administration protocol compared to other single and combination therapies. It is given between diagnosis and surgery as the first component of current SOC treatment and does not delay surgery. It is administered peritumorally (around the tumor) and perilymphatically (to drain into the lymph nodes) for a three week period, five days per week. The goal of Multikine’s early administration is to enlist the body’s immune system to eliminate the micro-metastases that are associated with its recurrence and if possible, also the tumor. In the simplest terms, Multikine enables the body’s immune system to see the tumor and kill it when the immune system is strongest, prior to surgery, radiation and chemotherapy. At present, no other therapy is able to be administered in that short window of opportunity1 and exhibit measurable anti-tumor effect. It will also be difficult for a competing product to displace SOC, as studies to prove superior efficacy would require a delay in treatment and delay in treatment initiation reduces OS. Therefore, any treatment that delays the SOC will not be able to be administered before SOC since it will worsen the patient’s clinical outcome2. Many of the IO drugs and therapies approved for use or in development require a much longer administration period than the three to four week window between diagnosis and surgery for newly diagnosed patients with SCCHN. No other known treatment besides Multikine can adapt to the SOC treatment protocol in this patient population.
The cytokines included in Multikine fall into three broad families: lymphoproliferative, to help produce and proliferate an immune response specific to the existing tumor, chemotactic, to draw the immune system cells to the site of the tumor and necrotic, to kill the tumor. These efforts combine in a concerted effort to mount an anti-tumor specific immune response to eradicate the cancerous neoplasm. Thus, this biologic consists of a broad variety of cytokines that can potentially recognize and bind to multiple receptors on both immune and cancer cells.
View Exhibit I – Tumor Reduction with Multikine Administration3
Multikine is a collection of cytokines sourced from normal human donor leukocytes. CEL-SCI hypothesizes that the unique cytokine mixture in Multikine may signal the immune system to produce an anti-tumor response. The biologic is also thought to upregulate the production of certain lymphocytes. Prior clinical studies suggest that Multikine could augment CD4+ immune cells’ ability to recognize and respond to tumor antigens present on the surface of tumor cells. The CD4+ action would increase CD8+ activity. Under normal circumstances, CD8+ T cells may be less effective against tumors within the tumor microenvironment, as tumor cells are able to both block CD8+ cytotoxic cells and evade detection through various escape mechanisms including active checkpoints.
Secondary Indications for Multikine
CEL-SCI maintains a second indication for Multikine that it is developing to treat human papilloma virus (HPV) in human immunodeficiency virus (HIV) co-infected patients. HIV patients are immune-suppressed and have difficulty mounting an immune response against HPV and resultant diseases. CEL-SCI conducted a Phase I trial and demonstrated that Multikine was able to eradicate a number of HPV strains in infected women with cervical dysplasia.
Multikine In A Class By Itself
Multikine is not a direct competitor to other immuno-oncology agents that are focused on the SCCHN market. Other IO agents in development are focused on the metastatic and recurrent populations that have exhausted other options. The biologic occupies an enviable position in the treatment paradigm because it is able to be administered and produce its beneficial effect in the short period between diagnosis and surgery. This prevents a delay in surgery and delay is associated with lower OS4. When a patient is diagnosed with advanced primary SCCHN, a team of physicians are assembled and surgery is scheduled. The preparation and scheduling process takes approximately four weeks providing an opening for Multikine to engage the immune system. Multikine’s unique mechanism of action can potentially eliminate micro-metastases and shrink the tumor in this month long period, improving the chance for surgery and other standard of care to be effective for the “intent-to-cure” population.
Ligand Epitope Antigen Presentation System (LEAPS)
Ligand Epitope Antigen Presentation System (LEAPS) is a T cell modulation, peptide epitope delivery system and is CEL-SCI’s second therapeutic platform. The technology allows CEL-SCI to attach a disease-associated peptide immunogen to a small T cell binding peptide ligand and create a vaccine. LEAPS converts small peptides into immunogens by chemical conjugation to an immune cell binding ligand. It allows the body to develop the appropriate immune response and the peptide immunogen is key for specifically reprogramming the correct immune response.
View Exhibit II – Representation of T-cell Activation by LEAPS
Head and Neck Cancer
Squamous cell carcinoma of the head & neck (SCCHN) is found in the tongue, mouth, soft palate, pharynx5 or other oral cavity. According to the American Cancer Society, this will represent approximately 52,000 new cases for the US in 2018. CEL-SCI has found similar prevalence with about 60,000 cases per annum in the US and 105,000 new cases per year in Europe. The World Health Organization estimates 550,0006 cases developed worldwide in 2014. It is estimated that about 4% – 6% of all cancers are in the head and neck7 and more than 90% of tumors in the head and neck are squamous cell carcinomas. It is the seventh most common cancer worldwide. The majority of current therapy for this cancer is surgery in combination with radiotherapy or surgery followed by radiation with concurrent chemotherapy. While there have been significant advances in immunotherapy made for lung cancer, melanoma, breast cancer and others common carcinomas, head and neck cancer has been left behind, creating an unmet medical need that is well aligned with Multikine’s abilities.
View Exhibit III – Locus of Head and Neck Cancer8
Contributing factors for the disease include excessive drinking, excessive smoking and a poor diet. Outside of western patient populations, other factors such as chewing betel or areca nuts, smoking bidis, and inhaling snuff are contributors. Epstein-Barr virus, one of eight known human herpesvirus types, has been implicated in nasopharyngeal carcinoma. Certain strains of HPV have also been associated with the disease and are a more common cause in young people.
The majority of current therapy for this cancer is surgery in combination with radiotherapy or surgery followed by radiation with concurrent chemotherapy. According to cancer.net, there were 65,000 individuals who developed head and neck cancer in 2017 and just under 14,000 who died from the disease that year, with about three-quarters of them men. The long term survival rate for SCCHN is poor, especially in Stage III and IV advanced disease. The 3.5 year average survival rate for advanced (Stage III & IV) head and neck cancer is approximately 47.5%, as indicated in a survey of 55 clinical trials in primary advanced head and neck cancer9. CEL-SCI notes in its clinicaltrials.gov record a three year OS rate of between 52% and 55% and a five year OS of 43% for SOC therapy. Another set of studies that examined site specific head and neck cancer found the five year survival rate for the disease ranged from 42%10 to 72%11, depending on tumor site location and disease stage. Disease Stages I and II have a better survival rate than Stages III and IV. Advanced primary, not yet treated, Stage III and IV SCCHN is the more difficult advanced primary population that CEL-SCI is targeting with Multikine.
Multikine Phase III Trial
In 2011, CEL-SCI launched its Phase III trial for patients with advanced primary squamous cell carcinoma of the oral cavity and soft palate. The pivotal Phase III trial is being conducted in the US, Canada, UK, France and 20 other countries globally. The 93-site trial is designated IT-MATTERS and is listed on the clnicaltrials.gov site under NCT01265849. The primary endpoint for IT-MATTERS is overall survival of 10% greater than SOC alone in the defined anatomical areas of oral cavity including oral portion of the tongue, floor of mouth, cheek and soft palate.
The trial has completed enrollment of 928 newly diagnosed advanced primary, Stage III and IV patients, with the final patient enrolled in September 2016. The trial seeks to demonstrate that the local/regional injection of mixed interleukins (Multikine) with a prescribed non-chemotherapeutic regimen of cyclophosphamide, indomethacin and zinc-multivitamins (CIZ) for only three weeks prior to SOC will overcome local immunosuppression, break tumor tolerance to tumor antigens and allow for a sustainable and effective anti-tumor immune response and improve OS. The agent is injected around the tumor and near the lymph nodes prior to SOC therapy.
There are three arms examining squamous cell carcinoma of the oral cavity and of the soft palate; however, the CIZ-exclusion arm will be omitted for survival comparison:
1) Multikine plus CIZ followed by SOC
2) Multikine (CIZ-exclusion) followed by SOC
3) SOC therapy as the active comparator
The trial design calls for a 3:1:3 randomization among three groups, and the OS comparison will be made between groups one and three. The purpose of group two is to obtain information on toxicity and drug mechanism of action.
View Exhibit IV – Multikine Phase III Study Design
The primary endpoint for the trial requires a 10% increase in OS for the Multikine plus CIZ and SOC compared to SOC only. The trial is event driven and will measure 298 deaths in the combined comparison arms prior to completion. Secondary endpoints include Local Regional Control (LRC), which measures the spread of metastases and spread of the disease outside the head and neck area, Progression Free Survival (PFS) and Quality of Life (QoL), based on the European Organization for Research and Treatment of Cancer (EORTC) QoL questionnaire.
CEL-SCI is currently conducting Phase III trials and is expected to complete the IT-MATTERS trial in the first half of 2019. If results are favorable, we anticipate a biologic license application (BLA) to be filed with the FDA in 2020. Below we list key milestones that have occurred in the last year and anticipated events until the commercialization of Multikine.
‣ Multikine Phase III (IT-MATTERS) trial fully enrolled – September 2016
‣ Clinical hold lifted on IT-MATTERS trial – August 2017
‣ Arbitrator rules in favor of CEL-SCI against former CRO inVentiv – June 2018
‣ Anticipated completion of IT-MATTERS trial – 1H:19
‣ Topline readout for IT-MATTERS trial – 2H:19
‣ Submission of BLA to FDA – 2020
‣ PDUFA date for BLA submission – 2H:20
‣ Commercialization of Multikine – 2021
Multikine has shown efficacy and impressive safety in a number of clinical trials including several Phase II studies. The cytokine mixture has shown early efficacy helping the immune system recognize tumor cells and improve the body’s immune profile before the patient receives SOC. In contrast to other immunotherapies in development, Multikine does not require the delay of SOC and is complementary to it. With a substantial unmet need in a debilitating and disfiguring indication and a product that has a strong record of safety in over 200 patients that have been treated in completed trials, Multikine maintains an enviable position for market entry. Despite a number of other IO products in the clinic, none of them are targeting the advanced primary “intent-to-cure” population, which comprises two-thirds of initially diagnosed SCCHN patients. Based on historical event rates in SCCHN and the timing of enrollments, we anticipate the end of the Phase III trial to occur in 1H:19, following by a topline readout and subsequent filing of a BLA. SCCHN is the seventh most common cancer in the United States and Multikine has potential efficacy in additional indications as well, providing a material and potentially large market to penetrate. Based on the lack of alternative therapies and the unmet need, Multikine is in a strong position with physicians to become part of a new standard of care and with payors to be properly reimbursed.
In summary, we believe that if Multikine is able to achieve its primary endpoint of 10% improvement in overall survival, the shares are undervalued relative to their potential. While our valution only accounts for sales of Multikine for an indication in advanced primary SCCHN, the biologic may address other cancer and immunodeficient diseases as well. CEL-SCI also is developing its LEAPS technology which provides another platform for creating value which we expect will enter the clinic following initial commercialization of Multikine. We provide an in depth discussion of our valuation approach in our initiation piece published on January 31, 2019. Based on our analysis and forecasts, we initiate CEL-SCI with a target price of $14.00.
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1 Checkpoint inhibitor therapy can last up to one year and CAR-T can take several months including cell processing and required recovery time.
2 Murphy, C. et al. Survival Impact of Increasing Time to Treatment Initiation for Patients With Head and Neck Cancer in the United States. Journal of Clinical Oncology, Volume 34, no. 2. January 10, 2016.
3 Source: CEL-SCI slide deck, August 20, 2018
4 Murphy, C. et al. Survival Impact of Increasing Time to Treatment Initiation for Patients With Head and Neck Cancer in the United States. Journal of Clinical Oncology, Volume 34, no. 2. January 10, 2016.
5 CEL-SCI’s target does not include the pharynx given the difficulties of peritumoral injections in these sites.
8 Source: NCCN Guidelines / CEL-SCI Multikine Scientific Presentation
9 Inclusive dates of 55 clinical trials was from 1987 to 2007 as compiled by CEL-SCI.
10 Data compiled by Seattle Cancer Care Alliance from National Cancer Data Base (NCDB) including all reported cases between 2003 and 2006 for Stage IV Head & Neck Cancer.
11 cancer.net – https://www.cancer.net/cancer-types/head-and-neck-cancer/statistics