VIENNA, Va., Jan. 19 /PRNewswire-FirstCall/ -- The following letter is being released by CEL-SCI CORPORATION to its shareholders:
Dear Fellow Shareholder:
Looking back on 2005 we are pleased to say that it was a year of many achievements. We hit milestones that had been our goals for many years. Almost all of them involved review and acceptance by highly respected outside authorities and agencies, assuring you, our shareholders, that CEL-SCI’s work is meaningful, well executed and addressing a real medical need.
In May 2005 a new U.S. patent was issued on our cancer drug Multikine(R) which will give us almost 19 years of market exclusivity. In June 2005 Multikine Phase II studies were published in the Journal of Clinical Oncology, the official journal of the American Society of Clinical Oncology (ASCO). In August 2005 we received the go-ahead from the Canadian regulatory agency, the Biologics and Genetic Therapies Directorate, for testing of our cancer drug Multikine in a Phase III clinical trial. The Canadian Biologics and Genetic Therapies Directorate is highly regarded world-wide and their approval is a major step in our goal of starting a world-wide Phase III trial for head & neck cancer with our partner Orient EuroPharma. About 92% of the 500,000 annual head & neck cancer cases worldwide are outside of the U.S.
The only major delay we faced in 2005 was when this same Phase III clinical trial was proposed to the U.S. Food and Drug Administration (FDA), and they did not immediately approve it. Instead, they asked us to respond to a number of questions and to submit additional information to support our application. Late in 2005, we submitted responses to all of the remaining questions asked by the FDA and also provided the additional information they requested. We now await the FDA’s evaluation of the responses that we provided to their questions and to their requests for additional information. We believe that we have satisfactorily responded to all of the FDA’s questions and requests for additional information, but it is important to note that the FDA can request further information. However, even if further information is requested, we remain confident that ultimately the FDA will concur with the study before them.
Our other technology, L.E.A.P.S.(TM), with the peptide CEL-1000 as its lead product, also made significant progress this year. At the beginning of 2005, we were hopeful that it might hold a few surprises, and it did. In December CEL-SCI signed an agreement with the National Institute of Allergy and Infectious Diseases (NIAID) to test CEL-1000 against the avian (bird) flu virus H5N1 in animal models. The testing will be conducted to determine whether CEL-1000 could be used as a potential treatment and/or preventive agent against this virus. We also expanded our intellectual property portfolio with a new U.S. patent covering CEL-1000. In addition, the inventor of the L.E.A.P.S. technology, Dan Zimmerman, Ph.D., was given the honor this past year of presiding as Conference Chairman at the Third Annual International Conference on Vaccines entitled “Vaccines; All Things Considered.” This conference brought together a prestigious group of scientists from academia, biotech, large pharmaceutical companies and the FDA. As we move forward into 2006, CEL-1000 continues to demonstrate protection against various diseases with many investigators. We are hopeful that this year will bring additional milestones in the development of L.E.A.P.S. and CEL-1000, including government grants to follow up on the current studies and more results about ongoing studies announced through publication/presentation.
The recent agreement with the NIAID is very significant because the avian flu virus could some day become a major problem for mankind. We hope that it never will, but we also feel that if it does, our CEL-1000 drug might have application against the virus. CEL-1000 appears to activate innate (very early stage) and Th1 type (cellular) immune responses to induce a broad- spectrum protection against infection in animal models. The innate immune system is generally accepted to be the first line of defense against infectious agents. This immune response caused by CEL-1000 has protected animals from death against viruses and other diseases. We hope that CEL-1000 will also protect against the avian flu virus.
Given the fact that we achieved several very significant milestones last year, but our stock did not move up as we achieved them, one might wonder about investing in these “irrational biotech stocks.” So many of our loyal shareholders have asked me about this in the many discussions I have had with them. Let me try to explain how I see this conundrum and why I have further increased my CEL-SCI share holdings.
I could simply say that the Company is undervalued. While I clearly believe this, there is much more to it. There are several different, yet related, aspects that, in my mind, make CEL-SCI very interesting, both in the short term and the long term.
1) As the biotechnology industry has matured, investors have started to differentiate between the profitable biotech companies and those that are still in the development stage. Further differentiation needs to be made between companies in Phase III clinical trials and those that are early stage. Most investment funds are focused on the profitable biotech companies and those companies have done very well in the last year. When the gains in that group are harder to come by, the money generally starts trickling down to the Phase III companies and finally to the early stage companies.
2) Small and medium sized biotech companies trade in cycles that are determined by flow of money into the sector. How else do you explain that small biotech stocks, as a group, suddenly take off and increase several hundred percent. Unless you are invested at that time, you will miss it. For example, look at March 2003. Our stock traded all the way down to $0.15 and by June it had reached $1.10, by October $1.60. That is a 10.5-fold increase in a few months. The same thing happened in 2000. In the beginning of January our stock was trading at about $2.25 and by the middle of February it had hit $12.00. An over 5-fold increase in less than 2 months! In September 1997 our stock was at about $3.25 and by October it hit $10.00. You can go further back in time for more examples of this. Is this a 3-year cycle? Is 2006 the next one?
3) These cycles come out of the blue and surprise everyone. The periods preceding them are characterized by lack luster trading, numerous unsuccessful attempts of the stock to break out of its trading pattern and generally a lack of interest.
4) There are specific events in the life of a biotech company that carry significant risk. In between these events biotech stocks can be held with less risk than is commonly thought. While there is always the financial risk as with any biotech stock, and since we already have a Phase III go-ahead from the Canadian Biologics and Genetic Therapies Directorate, for CEL-SCI the biggest risk of going forward appears to be that our Phase III clinical trial will not be successful. That is a risk against which CEL-SCI cannot protect itself completely. However, that event is some time off. Given the fact that the Phase III indication focuses on a first line head and neck cancer indication, a multi billion market, one would assume that the value of CEL-SCI shares will approach a value of at least several hundred million dollars during some time of the Phase III study. Further given that the current valuation is $40 million, I find an increase from $40 million to several hundred million in a few years to be a very attractive return.
5) I remember the early days of Multikine. There was hardly any data, yet the stock valuation was much higher. Now, when the technology is ready to go into Phase III clinical trials, the valuation is much lower. I believe that it was Warren Buffett who said that if you can buy a dollar for 40 cents, you should buy as much as you can. Many successful biotech companies went through this same phase and that was the best time to invest in them.
6) CEL-SCI has not yet partnered Multikine in the major markets of the US, Europe and Japan. This significantly increases the upside of the shares.
7) Multikine has real home run potential as a way to make the first cancer treatment more successful and CEL-1000 may become very important against a number of diseases as well. Our CEL-1000 work with the U.S. Army, the U.S. Navy and the NIH may lead to something significant that we cannot even project today.
In closing I want to assure you that you have one of the most dedicated teams in the world working on Multikine and CEL-1000. All of us have stuck with CEL-SCI for many years because we believe that our drugs will some day make a very big difference in people’s lives. Our ultimate goal is to add Multikine to the first line cancer therapy to make the first treatment more successful. The bottom line is simple: If the cancer does not recur, you will survive. That is our goal. We thank you for your support.
Sincerely, Geert Kersten Chief Executive Officer
When used in this report, the words “intends,” “believes,” “anticipated” and “expects” and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties which could cause actual results to differ materially from those projected. Factors that could cause or contribute to such differences include, an inability to duplicate the clinical results demonstrated in clinical studies, timely development of any potential products that can be shown to be safe and effective, receiving necessary regulatory approvals, difficulties in manufacturing any of the Company’s potential products, inability to raise the necessary capital and the risk factors set forth from time to time in CEL-SCI Corporation’s SEC filings, including but not limited to its report on Form 10- K/A for the year ended September 30, 2004. The Company undertakes no obligation to publicly release the result of any revision to these forward- looking statements which may be made to reflect the events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
CEL-SCI Corporation
CONTACT: Gavin de Windt of CEL-SCI Corporation, +1-703-506-9460; InvestorRelations, Mike Lucci, Lucci Financial Group, LLC, +1-248-723-3330, forCEL-SCI Corporation
Web site: http://www.cel-sci.com//
