|Investors Wondering Why Cel-Sci Has Quietly Amended Previously Filed Paperwork|
|Wednesday, 11 November 2009 03:00|
Is the management at CEL-SCI Corporation (AMEX:CVM) signaling that something big is coming?In mid September, on the same day that CEL-SCI Corporation (AMEX:CVM) announced that the U.S. Food and Drug Administration (FDA) had indicated that the company could proceed with its first clinical trial to evaluate the effect of its investigational LEAPS-H1N1 treatment on the white blood cells of hospitalized H1N1 patients, CEL-SCI Corporation also announced plans to raise $20 Million in Registered Direct Offering. Shares showed some resiliency after investors were told that the net proceeds from the offering would be used to commence a pivotal Phase III clinical trial with its cancer drug Multikine and that the company would rapidly take its new LEAPS - H1N1 compound into human studies for the treatment of hospitalized H1N1 patients.
After the market closed on Tuesday, investors learned that the company had filed an "amended" Form S-3 with the SEC. The form appears to be part of a $30 million bump to a previously filed "shelf offering" that had just been filed with the SEC two weeks ago, on October 30th.
In that original filing, the company had disclosed that they were looking to raise only $10 million. The total now is $40 million. Was there a miscalculation? Did something unforeseen develop at the recent vaccine conference in D.C.?
That news, coupled with a release two days earlier that an Institutional Review Board of The Johns Hopkins University School of Medicine (Johns Hopkins) had given clearance for the company's H1N1 clinical study to proceed. The news boosted credibility among investors and basically let them know that CEL-SCI had indeed been working diligently with their CRO and Johns Hopkins to actively prepare submissions to the FDA.
The aim, as explained by company officials in a released statement, is to move ahead "in the fastest and most effective way" towards clinical trials going forward for this unique investigational treatment. That sent shares up 50% during back-to-back sessions on Friday and Monday.
Like Tamiflu and Relenza, Peramavir is a neuraminidase inhibitor and the problem with neuraminidase blocking is that there are human genes that utilize neuraminidase for normal and healthy cell function (NEU1, NEU2, NEU3, NEU4). Critics of the drug argue that any neuraminidase blocking drug runs the risk of interfering with general communication needed for healthy cell function. The L.E.A.P.S. platform works completely differently and is intended to enable stimulation of the specifically-needed immune responses, while avoiding the administration of regions of H1N1, and other viruses, which may exacerbate the problem of cytokine storm, which scientists believe may be involved in the death of these H1N1 patients.
Speculation. All of it. Yet it fuels the market and particularly stocks like CVM, who have so much ammo in their trunk.
As explained so clearly in Investopedia, "sometimes current market conditions are not favorable for a specific firm to issue a public offering. For example, suppose the housing market is heading toward a dramatic decline. In this case, it may not be a good time for a home builder to come out with its second offering, as many investors will be pessimistic about companies working in that sector. By using shelf registration, the firm can fulfill all registration-related procedures beforehand and go to market quickly when conditions become more favorable."
After cruisin' the message boards, one reader sent me this comment by a poster who goes by the name xji590. Apparently, his take has attaracted quite a bit of attention from the longs.
"The shelf is an opportunistic move," he writes. "It is there in case someone comes along willing to buy a major block of shares at a price that the company thinks is reasonable. But clearly he needs to wait to utilize the shares made available through this shelf until he can minimize dilution. They are well capitalize right now, however, the H1N1 opportunity has thrust upon the company cash flow requirements, I'm sure, that were not anticipated a year ago, or even six months ago. Geert (Kersten, the CEO) knows that his cash flow model has changed, and needs to put the company in a position, through the shelf, to raise additional working capital should the company need to do that... I love seeing the company going out with a bold statement like this shelf offering... They have confidence. So what are they confident in? That's the $60 thousand dollar question... If they just need cash, Geert would go out with a shelf grabbing $2M, $5M maybe even $10M... But $40M??? That's a big shelf for CVM. That conveys management confidence."
Shares closed down only slightly for the second day in a row.
I'd venture to say that given all the drama and attention, what comes next will definitely be interesting.
Disclosure: Long CVM