Disclaimer: VFC has no affiliation with Cel-Sci Corporation (CVM). VFC does not offer advice or investment services and nothing you read here should be construed as such. VFC is just a guy with an opinion and access to a computer and a keyboard. Each investor must conduct his or her own DD before investing. VFC enjoys exchanging ideas and strategies with others in the investing community. VFC currently holds a core long position in CVM and has a handful of trading shares to play the volatility.
Cel-Sci (CVM) shares are trading at roughly $4.40 at the time of this writing, down from a high of $8.47 reached on 9 May. Until mid-March, shares were trading for under the three dollar mark, making CVM a multi-bagger on the year. Market cap is currently just over 151 million. All information provided by the Nasdaq and Yahoo! Finance websites.
Why the interest?
Cel-Sci is in the late stages of a robust Phase III trial testing Multikine, the company's lead developmental product, for the treatment of head and neck cancer. Multikine is one of the newer breed of cancer immunotherapy treatments, which are designed to harness the body's own immune system to fight and possibly defeat cancer cells. What is unique about Multikine, tho, is that the treatment is administered before the Standard of Care (SOC) treatment.
Why is this significant?
A patient's immune system is at its strongest prior to the commencement of SOC treatment, which includes surgery along with radiation and chemotherapy treatments. Such treatments weaken the body and therefor weaken the body's immune system, too. The vision of Multikine is to harness the patient's own immune system before it is ravaged by radiation and chemotherapy to provide the best chance for the immune system to to fight the cancer itself. In this sense, the company has eyes on moving towards a cure for cancer, rather than a treatment. (Not the words of VFC, rather ideas set forth in the most recent Cel-Sci power point presentation and some recent interviews by CEO Geert Kersten on YouTube).
Yes, using the word "cure" in association with a cancer treatment can lead to some skepticism and shock therapy, but this idea - again, according to the presentations and interviews linked above - is the goal towards which Cel-Sci wishes to march. Regardless, if successful, Multikine is likely to be considered a breakthrough cancer treatment, should it work, and the speculative investment community is keying in on this.
Why the recent stock run?
In early March shares of CVM were trading for well below three bucks per. In late March, CEO Kersten issued Letter to Shareholders with a pretty in-depth synopsis of the Multikine journey thus far. In the letter he lays out the case, too, that the longer the trial goes, it may be viewed as positive for the effectiveness of Multikine because it is taking longer than expected for the death events to occur. The magic number for which the trial is designed is 298 deaths (events). At that point the trial will be stopped, data compiled, and the next magic number for success is 10%. Cel-Sci's goal is to prove that Multikine keeps people alive at least ten percent longer than just the standard of care alone. VFC's Note: Basic math and common sense says that the longer the trial goes before those events occur could be deemed as positive because it means patients are living longer, which bodes well for the effectiveness of Multikine. Although, it can also be noted that it is possible SOC treatment is working pretty good, too. I've noticed through my own research in regards to how long patients survive on SOC varies from site to site. Some say about 55% still alive at the five year mark, others I've seen are closer to 70%. That makes it tough to estimate success at this point and we won't know anything for sure until the trial concludes.
Following the Letter to Shareholders, the company issued another press release (PR) four days later stating that the Independent Data Monitoring Committee (IDMC) overseeing the trial had conducted an analysis and recommended that the trial continue until the requisite number of events (that magic 298) are reached. This was also deemed as a positive sign for the trial because it is not uncommon for an IDMC to halt a clinical trial for futility if it looks like the trial is going to fail in meeting its endpoint.
Those releases coupled with the revelation that insiders have been buying up shares on the open market, may have provided the catalysts needed to get the momentum moving for the CVM stock price, which essentially tripled into May. Another unaffiliated Cel-Sci website (killCVMshorts.com) also monitored an increase in institutional interest, providing more ammunition to keep the price spike in effect.
Lastly, CEO Kersten was on a dog and pony show all spring bringing attention to the company and to the Multikine trial, which is in its last stages. Nothing wrong with that, this is the nature of our developmental biotech game in America. It's advertising - and all companies, large and small, have to do it to survive. It always gives me a chuckle when people get on small companies for paying for advertising. Lol. it's the American way of life. It especially makes me laugh when those getting on the small companies for advertising receive their livelihood from advertising money by people clicking on their links. But I digress, back to the Cel-Sci recap...
So why the pullback?
The biotech sector is highly volatile. Just about every price run is followed by a pullback, especially in the absence of material events, imminent catalysts, or earnings to maintain higher prices. For these reasons, it's always smart, in my opinion, to have some trading shares on hand to play into any spikes and dips in order to end up on house money over the long term. Cel-Sci has been a great one for trading over the years for those that were willing to trade in and out while still maybe holding on to a core position. In the event of this pullback, there are a few factors to consider. The fact that the price spiked so quickly attracted the day, swing, and momentum traders. This group doesn't care about imminent events, trial catalysts, or 298 events. These guys swoop in and take advantage of momentum then swoop out, which plays right into the drastic volatility of the stock. Even many of the hard core longs of CVM likely sold shares into the price run (and in my opinion it was very smart to). When the short-sellers smell the weakness in a fizzled run (in this case, the volume died down pretty quickly), then they jump on board and apply downward pressure. Happens all the time in this sector, that's why ya gotta be on your game to play and be able to stomach the moves. Have a strategy and stick to it, regardless.
Aside from just the trading aspect, tho, there are other factors to consider. Although the company touts its LEAPS platform as another product candidate, Cel-Sci is essentially a one-trick pony right now and investors (long and short) know that. That makes the buy/sell trigger fingers more itchy than they normally would be because this stock will either skyrocket or tank big time on results. Traders and longs hope for 'skyrocket,' but are still wary of 'tank big time'. That will add to the volatility. Others will note that the company's long history of what they deem as failure is a sign that the trial is doomed, while the trial halt a few years ago also gives the bears ammunition to boost the short argument for CVM (although the trial was restarted and allowed to move forward by the FDA). Investors are wise to consider all arguments before playing, and it's likely that they are in regards to CVM - and all this adds to volatility.
One more factor - although institutional and investor interest has trickled higher over the past months, most serious investors are going to, for the most part, hang out on the sidelines waiting for results. And that is the bottom line. The results are all that matter right now. All the action in between is nice for trading, but the Cel-Sci story will be written by the trial results - so this is a waiting game.
Results. It's always nice, in my opinion, to trade enough in and out enough to go into the Endgame on house money, but CVM is a 'Phase III trial results' play right now. Longs and shorts are battling it out, and today the shorts look to have the advantage, but as we saw in the previous months, that could change essentially overnight. Unless your outlook is very, very long term, it would be my opinion to not be distracted with anything LEAPS. This is a Multikine play for now.
Insider buying is always good, and as outlined above, there have been quite a few insider buys of late. Is it huge money? Not really for Wall Street, but it is healthy. CEO has over a million shares, according to the Nasdaq stats.
If the trial fails, this stock will bottom out big time. LEAPS is nowhere near far enough along in the trial pipeline to support the CVM share price in the event of a Multikine miss.
Over the short term and in the absence of news, the shorts have the momentum to keep pushing lower. Longs and catalyst traders will see this as a speculative buying opportunity.
Another risk is the possibility of a 'successful trial, but...' scenario. A 'successful trial, but...' scenario would be the endpoint is not hit overall, but Multikine was successful on a specific subset of patients. Such a scenario would likely be treated by the investment community the same as an overall failure.
Cel-Sci is being treated, as far as we can tell by market cap and share price right now, with extreme skepticism. Does someone know something that the small investor doesn't? Hmmm, that's definitely on the minds of some and will likely keep those without iron stomachs away. But then again, people said the same thing about Dendreon and the stock price exploded when they were all wrong.
For those who were around for Dendreon when its own cancer immunotherapy treatment, Provenge, was ridiculed by the investing and blogging community, you've seen how quickly a stock price can spike on positive results and FDA support. A CVM spike on positive results would, in my opinion, make the Dendreon spike look soft.
Cel-Sci's market cap for a company with a late-stage, potentially groundbreaking new immunotherapeutic treatment, is pretty minuscule, even in a speculative sense. This may reflect a lack of faith in the company and the treatment and/or a lack of interest in the investing community to play what they consider to be a 'gamble' on trial results. If results did come in positive, we should be looking at a ten-bagger, at least. There have been some very enthusiastic expectations thrown around for share price in the event of trial success, but regardless. a nice run should ensue.
Adding to the prospects of reward, should Multikine work, the off-label potential is pretty significant, too. An approval for head and neck cancer indications would free the medical professionals up to treat other cancer types with Multikine. The bullishness of the long investors and the company officials who are buying up shares on the open market is understandable - as they are believers in trial success. And again - the current market cap for a late-stage cancer immunotherapy company is pretty depressed, which just means higher percentage gains for believers, should the trial be a success. CVM isn't necessarily priced for failure, either, because there is a long way to drop if the trial fails, it's my view that shares are in a holding pattern, priced for 'wait and see' more than anything.
That magic 298 number could come at any time. It's my opinion that we will know something by the fall, mainly because previous releases have stated first half of 2019 as a reasonable expectation of trial closure. That's strictly my opinion, tho, based on my summation of all I've digested. My own DD into the effectiveness of SOC treatment for head and neck cancer has brought me quite a bit of levity in regards to not getting too excited that the trial is taking longer than expected. I do have some cautious optimism heading into the results and regardless, it's house money at this point. If Multikine hits, then this one could be a big winner. But it's always good to maintain levity in the speculative biotech sector.
Disclosure: Long CVM.