CEL-SCI ($CVM): Smaller Market, Still Big Upside
My opinion, no investment advice
A. Dear Reader,
As predicted in my previous article, the Big Day has come in June, before the shareholder meeting.
CEL-SCI reported that Multikine works well for the population which did not receive chemotherapy, with robust, durable and increasing survival benefit over time, and Multikine does not work for the population which received chemotherapy.
The story of Multikine and KEYTRUDA might suggest a bigger truth: cancer immunotherapy might work best before surgery and radiotherapy, but only after chemotherapy.
Despite a smaller market, Multikine will likely receive FDA approval and be a blockbuster. Updated buy-out valuation to $100-200/share.
B. Understanding the Results
CEL-SCI announced its landmark Phase 3 results on June 28, 2021. In a nutshell, Multikine works well before surgery and radiotherapy (“non-chemo“), but does not provide additional benefits when used before chemotherapy.
The result for the non-chemo population is robust with a 5-year survival rate of 62.7% vs. 48.6% for Standard of Care (“SOC”). Broadly speaking, for every 6 patients, at 5-year time, 3 are still alive with SOC alone while 4 are still alive with Multikine + SOC. At year 5, Multikine saves 1 additional human life out of 6 who cannot take the toxic chemotherapy. That’s a huge benefit.
The result is robust with a p-value of 0.0236, much below the 0.05 threshold which is considered to be statistically significant, i.e. not driven by chance. Many question about the size of non-chemo population but the p-value already accounts for the population size. All we need to care about is a p-value below 0.05. Full stop.
The hazard ratio is 0.68, meaning that 5 years after the treatment, a patient treated with Multikine + SOC has 32% (1-0.68) lower risk of death compared to SOC .
In addition, the survival benefit of Multikine is durable and increases overtime, showing the potential of cure. It is also confirmed that Multikine has excellent safety profile over the entire population.
Now if you ask the FDA if they would approve a non-toxic treatment which can be used in combination with surgery and radiotherapy to save 1 additional human life out of 6 in year-5, I guess the answer is obvious.
Multikine does not provide additional benefit when used before chemo, but this may suggest a bigger truth.
C. The Bigger Truth: Cancer Immunotherapy Might Work Best Before Surgery and Radiotherapy, but After Chemotherapy
A big disclaimer, this is my pure speculation based on recent facts. There has been no scientific proof for this.
Remember KEYTRUDA, the blockbuster immunotherapy biologic of Merck? KEYTRUDA is used after (or at same time as) chemotherapy and reports good results and brings $14B of sales to Merck in 2020.
Multikine does not work pre-chemo. Dr. Talor explains:
These data, combined with what we know of Multikine’s mechanism of action, demonstrate Multikine’s potential to impart long term overall survival advantage and a beneficial effect on the anti-tumor immune response in patients who have not been treated with chemotherapy (cisplatin) which is known to be highly toxic.
As anyone knows, chemo is highly toxic. It may kill patients before the cancer acutally kills them. Hence, adding something before the chemo might not help because chemo can kill everything anyway, in contrast to surgery and radiotherapy. However, if the patients are still alive after chemo, boosting their immune system might provide some modest benefits as KEYTRUDA does.
To understand this, let’s take a simple analogy.
Let’s say you are sleeping on the third floor of your house. A fire suddenly breaks out. The smoke is everywhere. The fire and the smoke are the cancer which will kill you if you do not do anything. Now, you have 2 choices:
Go through the stairway and get out of your house. This is surgery and radiotherapy.
Directly jump through the windows of your room, hoping to survive when you land on the ground. This is chemotherapy. The jump can kill you before the fire and smoke kill you.
Fortunately, you have an oxygen mask in your house. If you take it and go through the stairway. It will help you avoid the toxic smoke. Once you are out of your house, the oxygen mask is less useful because you can breathe the normal air. Immunotherapy is like the oxygen mask, it works well if you put it before going through the stairway, or before surgery and radiotherapy, but it is less useful when you are out of the fire and smoke, i.e. cured.
Now if you jump through the windows, putting an oxygen mask before does not help that much. It does not change the risk of dying caused by the jump. Then, you land on the ground and hopefully are alive with your legs broken. Since you cannot move quickly and the fire and smoke are still very close to you, an oxygen mask can be helpful to save you until you can crawl far enough from the fire, and hence can breathe the normal air. Immunotherapy is like the oxygen mask, it does not work if you put it before jumping, but might help when you land on the ground with your legs broken, and a fire nearby. Immunotherapy might work best after chemotherapy rather than before. The same thing happens with Multikine and Keytruda.
D. Limited Risk to FDA Approval & Updated Buy-Out Valuation
Limited Risk for FDA Approval
To understand whether the FDA would approve Multikine for non-chemo patients, let’s ask a simple question. What’s the objective of the FDA?
Simply, they want to bring safe and effective drugs to the market, especially for diseases with unmet medical needs. Now let’s see the full package that CEL-SCI proposes with Multikine:
An excellent safety profile
Robust, durable and increasing survival benefit of Multikine for advanced Head & Neck (“H&N“) cancer patients who did not receive chemotherapy
Potential secondary benefits (e.g. tumor reduction, quality of life) to come
There has been no new treatment for H&N cancer in decades
In addition to favorable FDA support, we all know the political support is also favorable for cancer treatment. Geert will overdo everything to get Multikine to the market. So do not be surprised if he will leverage political lobbying as well.
Many longs have doubts on survival benefit on a “separate group”. But just take a look at slide 32 of this presentation. It shows that the group RTx (radiotherapy after surgery) and CRTx (radiochemotherapy after surgery) were separated in the design from the beginning. All shorts’ arguments about data-mining are nonsense. This separation is part of the clinical trial design. Nothing is new here.
Remember that Multikine works in a combined therapy so it’s absolutely normal that different therapies are separated to test the interaction between therapies. Think about it simply as “drug-to-drug” interaction. If drug A works well with drug B, but not very well with drug C or even has adverse interaction with drug C, there is no reason disapprove A in the combined used with B.
Updated Buy-Out Valuation
FrugalNorwegian has done a good job here to conservatively estimate the low end of annual sales of $4.3B, and a high end being the double of this amount, before further development to other indications. Taking a low price to sales multiple of 1.5x, we are speaking about roughly $6-12bn valuation or $100-200/share. Although the market for Multikine is smaller, this valuation still suggests material upside vs. current share price.
E. Conclusion
CEL-SCI’s Phase 3 result is not the best as it could be but is still extremely encouraging as Multikine works very well for the non-chemo population.
The story of Multikine and Keytruda may suggest a bigger truth: cancer immunotherapy might work best before surgery and radiotherapy, but after chemotherapy.
Based on CEL-SCI’s results in a favorable regulatory and political context , I see a great chance of FDA approval. Even with a smaller market, CEL-SCI can be conservatively valued at $100-200/share on a buy-out basis.
Disclaimer: I’m long CVM. Investing in biotech is risky, please do your due diligence before making your decision. All I write is my own opinion.
Andy I'm asking your opinion on one query. If multikane only works on those who had not received chemo wouldn't that mean that those, who today, had recieved chemo cannot receive multikane. However, in the future all those who plan on recieving chemo will, instead, just use multikane. Effectively bringing that 60% endpoint in the same category as the current 40% endpoint that passed? I hope I worded that in a way that makese sense.
You left out the minor detail that the trial failed its only primary endpoint. The company disclosed no actual data on its data-dredging exercise. CEO hilariously (and falsely) claiming that they can't disclose data due to "journals" lol!