January 23, 2017
By Mark Terry, BioSpace.com Breaking News Staff
Late last week, a short seller writing under the pseudonym Mako Research on Seeking Alpha, slammed Cellceutix , more or less accusing the company of presenting fraudulent data and being a Ponzi scheme with its investors. Cellceutix issued a vehement statement calling Mako a “non-credible criminal author.”
Adam Feuerstein, writing for The Street, thought that the company’s chief executive officer, Leo Ehrlich, “got a bit unhinged last week railing against Mako Research.” And so he decided to dig into Cellceutix and try to get a better grip on whether Mako Research, even though it was hiding behind a pseudonym, might have a justifiable argument.
Cellceutix has three drugs in its pipeline, but Prurisol is its lead compound, for psoriasis. Feuerstein spent most of a day trying to analyze the data. “What I found was a cavernous disparity between how Cellceutix describes the Prurisol efficacy and safety data collected to date in psoriasis patients and what the actual data show,” he writes.
1. Press Releases Versus Regulatory Filings.
Feuerstein notes that Cellceutix promotes its Phase II trial of Prurisol in psoriasis as a success and that it hit its primary endpoint. However, he writes, “The actual data show Prurisol study failed, unless your threshold for success is met by throwing a dart against a wall and then drawing the bullseye around it.”
The company compared Prurisol to Celgene ’s Otezla, for psoriasis, which is projected to bring in $1 billion in sales this year. The company also spent some time telling shareholders that Prurisol was comparable to Vitae Pharmaceuticals ’ VTP-43742 for psoriasis, which Allergan liked enough to buy the company for $639 million.
Feuerstein writes, “What Ehrlich fails to mention, naturally, is that Vitae collected mid-stage efficacy and safety data on its oral psoriasis drug that blows the doors off everything Cellceutix has on Prurisol.”
2. Selective Data.
Feuerstein indicates that, as his own due diligence, he likes to evaluate how a company characterizes its clinical trial results. “What I’m looking for are discrepancies between what a company says in its press release and its SEC filings. I also make sure companies aren’t playing games with the trial design…. Cellceutix set off alarm bells almost immediately.”
In a May 24, 2016 press release, Cellceutix indicates that its Phase II trial of Prurisol in mild to moderate psoriasis met its primary endpoint. But only at a 200 mg dose. Which is where the alarm bells went off, because the study design had three doses, 50 mg, 100 mg and 200 mg, all compared to placebo. The company’s press release also started with an oddly phrased sentence: “The Phase II Prurisol trial, while not powered to demonstrate statistical significance, was conducted to inform any future fully-powered Phase III trial(s) that might be merited.”
Feuerstein writes, “Notice how Cellceutix is spinning the Prurisol data right off the top. The study was not powered for statistical significance? That’s the excuse offered by companies that want to declare victory with data that fails to reach statistical significance. Cellceutix also provides response rate data for the 200 mg arm versus placebo but omits the comparable data for the 50 mg and 100 mg prurisol arms.”
3. Distorted Presentation.
Feuerstein then compared the company’s 8-K filing on the Prurisol Phase II data on the U.S. Securities and Exchange Commission (SEC) website … and didn’t find one. “That’s a concern,” he writes. “If the results were material to the company, an 8-K should have been file.”
It had filed earlier 8-Ks and later a 10-K on September 13, 2016. Again, there were discrepancies on how the data was presented. In the 10-K, the company said the primary endpoint for the 200 mg arm was met, but the actual data came from a subset of those patients.
4. Study Design.
Feuerstein then went to ClinicalTrials.gov to look at the trial design. The trial was designed to compare Prurisol’s efficacy, pooling all three doses, in comparison to placebo. But the company didn’t report that result, it only showed data from the 200 mg arm.
Feuerstein requested the data from both the company’s CEO, Ehrlich, and CMO, Arthur Bertolino. Both responded but didn’t provide the information.
Feuerstein writes, “At this point, I’m pretty sure Cellceutix has been caught blowing smoke to cover up bad Prurisol trial results, but it would be helpful to have the actual data from the study to confirm.” Which he did eventually find, in a slide deck from a presentation at a medical conference in Boston on September 19, 2016. Feuerstein concludes, “I believe Cellceutix withheld important, negative data from the Prurisol Phase II study from investors. And the data the company did report was exaggerated, in my opinion.”
