|CEL-SCI's Insider Warrant Buy; May Underscore Value of Shares|
|By David Ibrahim|
|Tuesday, 08 April 2014 03:41|
Chief Executive Officer, Geert Kersten of Phase III drug developer CEL-SCI (AMEX:CVM) made a notable insider purchase of 170,000 Series S Warrants confirmed by a Form 4 filing reported on Monday with the Commission.
Mr. Kersten’s latest purchase, coupled with his other publicly filed insider purchases brings his buying total to 300,000 shares and 300,000 warrants during the last few months alone.
Tracking Mr. Kersten’s trading behavior as well as those of other CEL-SCI company executives, directors and registered "insiders" has proven to be profitable. In fact, immediately following Kersten’s last stock purchase, registered on 12-30-2013, CEl-SCI shares began to climb and have returned a 160% return on his investment to date on that trade alone, and significantly more for others.
One would think that this BUY sentiment might reinforce Bullish investors in the stock, given that insiders usually buy their own shares for one reason: They believe the stock is a priced to low and has tremendous upside. Large institutional money managers and savvy stock operators often look more closely at these types of buys to see if they agree with these organic insider buys.
Like other stocks in the biotechnology sector, we note that CEL-SCI has been providing nice profits for traders on news catalysts. Shares jumped over 12% as recently as last week on news that the company has expanded its Phase III Head and Neck Cancer clinical trial of its investigational cancer immunotherapy treatment Multikine (Leukocyte Interleukin, Injection) in the U.S. with the addition of a new site in Scottsdale, Arizona.
Our experience tells us that one might not wish to be caught on the short side of this trade for a number of reasons. Still, we also notice that Short Interest in the stock has inexplicably jumped to over 12.59% of the available trading float in the last few days. Why would anyone pull against such a strong upward trending stock slated with multiple catalysts that could send shares higher in the short term? Do the bears know something that the CEO doesn’t?
Recently, biotech analysts like Sharon di Stefano have noted that Cel-Sci is now enrolling patients for its Phase III with Multikine in head and neck cancer at a much faster pace than in the past, with the aid of two prominent contract research organizations. As recently as last month, Kersten disclosed publicly that his firm’s “goal is to have between 10 and 15 U.S. clinical centers participating in our Phase III trial. We should be there by this summer.” In our view, that statement clearly points to positive trade opportunities each time a new center and milestone is reached.
In April of last year (2013), the Company replaced the clinical research organization (CRO) running its Phase III clinical trial. This was necessary since the patient enrollment in the study dropped off substantially following a takeover of the CRO which caused most of the members of the CRO’s study team to leave the CRO.
That development, and other negative findings along the way, have become the subject of a major lawsuit filed by CEL-SCI. The possibility that CEL-SCI's market cap could be greatly impacted if they are awarded even half of the $50 million+ they seek in damages is also worthy of attention from traders and speculators who seek to walk away with profits.
CEl-SCI has now hired two CRO’s who will manage the global Phase III study; Aptiv Solutions and Ergomed who are both international leaders in managing oncology trials. Both CRO’s will help the Company expand the trial by 60-80 clinical sites globally.
That brings us back to Kersten’s new round of bullish insider buying. Could it be that one of the CRO’s has seen something in the current clinical studies that no one else has been able to yet? Is that what prompted them to place their own multi-million dollar bet on CEL-SCI’s Multikine?
Under a co-development agreement, we know that Ergomed will contribute up to $10 million towards the study where it will perform clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specified maximum amount, only from sales for head and neck cancer. Ergomed, a privately-held firm headquartered in Europe with global operations, has entered into five similar co-development agreements, including one with Genzyme (purchased by Sanofi in 2011 for over $20 billion). Ergomed is responsible for the majority of the new patient enrollment since it has a novel model for clinical site management to accelerate patient recruitment and retention.
Perhaps Kersten is anticipating positive news regarding the previously announced Cooperative Research and Development Agreement (CRADA) with the Naval Medical Center in San Diego, CA? We heard that the US Navy had fast tracked Multikine and was set to begin a dose escalation Phase I study using the company's proprietary version of small proteins that regulate immune response and inflammation, in men and women suffering from both HIV and human papilloma virus (HPV) that have developed unsightly and potentially dangerous warts around the anus. HPV is particularly insidious because of the lack of overt symptomology, making it the commonest of sexually-transmitted diseases.
With shares currently trading near support levels at which a lot of buyers tend to enter the stock, we are anticipating that any of these potential catalysts might push share prices higher and even cause a major short-squeeze. As the price of this stock falls towards this support level it becomes a test during which the support will either be reconfirmed or wiped out. The rising trend in share price for CEL-SCI’s shares also points to a bullish “Golden Cross” involving the security's short-term 50-day moving average breaking above its longer-term 200-day moving average (both of which also represent strong support levels for these share prices).