SEC Form 10-Q filed by Cel-Sci Corporation

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ______________.

Commission File Number 001-11889

 8229 Boone Boulevard, Suite 802

Vienna, Virginia 22182

 Address of principal executive offices

(703) 506-9460

 Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) had been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

CEL-SCI CORPORATION

STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

See notes to condensed financial statements.

CEL-SCI CORPORATION

STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(UNAUDITED)

See notes to condensed financial statements.

CEL-SCI CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

SIX MONTHS ENDED MARCH 31, 2024 AND 2023 (UNAUDITED)

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Company Overview 

CEL-SCI Corporation is a clinical-stage biotechnology company dedicated to research and development directed at improving the treatment of cancer and other diseases by using the immune system, the body’s natural defense system. CEL-SCI is currently focused on the development of the following product candidates and technologies:

Multikine (Leukocyte Interleukin, Injection) is the full name of this investigational therapy, which, for simplicity, is referred to in this report as Multikine. Multikine is the trademark that the Company has registered for this investigational therapy, and this proprietary name is subject to FDA review under the Company’s future anticipated regulatory submission for approval. None of the Company’s product candidates have been approved for sale, barter or exchange by the Food and Drug Administration (FDA) or any other regulatory agency for any use to treat disease in humans nor has the safety or efficacy of these products been established for any use. There can be no assurance that obtaining marketing approval from the FDA in the United States and by comparable agencies in most foreign countries will be granted.

MULTIKINE AND THE PHASE III CLINICAL TRIAL RESULTS

Immunotherapy is a large, high growth market. Immunotherapies use the patient’s own immune system to fight disease. These “targeted therapies” are at the forefront of modern cancer research. A recent Bloomberg report from January 2023 asserted that:

The global cancer immunotherapy market is expected to reach USD $196.45 billion by 2030, registering CAGR of 7.2% during the forecast period, according to a new report by Grand View Research, Inc. The rising adoption of immunotherapy over other therapy options for cancer owing to its targeted action is anticipated to increase the adoption during the forecast period. Moreover, increasing regulatory approvals from authoritarian establishments for novel immunotherapy used for oncology is also expected to further fuel the market growth. (https://www.bloomberg.com/press-releases/2023-01-18/cancer-immunotherapy-market-worth-196-45-billion-by-2030-grand-view-research-inc)

CEL-SCI hopes to participate in this growing market with its lead investigational therapy Multikine® (Leukocyte Interleukin, Injection). Multikine has already been tested in approximately 750 human patients in multiple clinical trials, including a well-controlled, multicenter, global, 928 patient Phase III randomized controlled trial. Multikine is unique among approved cancer immunotherapies because it is given first, right after diagnosis and before surgery. CEL-SCI believes that the Phase III clinical trial demonstrated that Multikine caused tumors to reduce in size and/or caused the disease to “downstage” within just a few weeks of treatment before surgery. Importantly, patients with these reductions and/or downstages had their risk of death cut in half at five years of follow up. CEL-SCI is in discussions with regulators about the design of a confirmatory trial focused on the patients selected as the best responding patients in the prior study.

What is Multikine and who is it for? Multikine is a biological medicinal immunotherapy comprised of a mixture of natural cytokines and small biological molecules. Multikine is injected around the tumor and adjacent lymph nodes for three weeks as a first-line treatment before the standard of care (SOC), which is surgery followed by either radiotherapy or chemoradiotherapy. Multikine’s rationale for use is to incite a locoregional immune response against the tumor before the local immune system has been compromised by the standard of care and/or disease progression.

The Multikine target population is treatment-naïve adult patients with resectable locally advanced primary squamous cell carcinoma of the head and neck (SCCHN) in the oral cavity and who have:

PD-L1 is a protein receptor on the tumor surface that helps the tumor repel the immune system. CEL-SCI believes that patients with tumors having low PD-L1 would be more likely to respond to Multikine because their tumors have lower defenses against the patient’s immune system. CEL-SCI estimates that patients with tumors having low PD-L1 represent about 70% of locally advanced primary SCCHN patients.

Multikine leads to longer survival with no safety issues. Clinical investigations of Multikine have demonstrated in the randomized controlled Phase III trial (RCT) the following in the target population:

There were no demonstrable safety signals or toxicities observed in approximately 750 Multikine-treated subjects across multiple clinical trials. Adverse event (AE) and serious adverse event (SAE) incidences were not significantly different among treatment and control groups. There were no Multikine-related deaths and only two discontinuations. Multikine-related AEs before surgery were local and resolved after surgery. Although the literature reports that some of Multikine’s components may be toxic when administered systemically (e.g., TNFα, IFN γ, IL-1β), these toxicities did not emerge with Multikine, even at doses many times higher than those administered in the Phase III trial, primarily due to Multikine’s delivery by local injection and dosage.

CEL-SCI published its data as abstracts and posters at the annual conferences for the 2022 American Society of Clinical Oncology (ASCO), 2022 and 2023 European Society for Medical Oncology (ESMO), and the 2023 European Head and Neck Society’s (EHNS’s) annual European Conference On Head And Neck Oncology (ECHNO) and the 2023 European Society for Therapeutic Radiology and Oncology (ESTRO) and 2023 American Head and Neck Society (AHNS). These publications can be accessed at http://www.cel-sci.com.

Multikine works by inducing pre-surgical responses. CEL-SCI observed statistically significant pre-surgical responses after Multikine treatment, and therefore CEL-SCI believes in the following:

A “pre-surgical response” is a significant change in disease before surgery. CEL-SCI saw two kinds of responses in the Phase III trial. First, there were “reductions” in the size of the tumor—a reduction of 30% or more qualified as a “pre-surgical reduction” or “PSR” for short. Second, there were disease “downstages,” (e.g., the disease improved from Stage IV to Stage III) pre-surgery. CEL-SCI calls this a “pre-surgical downstaging” or “PSD” for short. CEL-SCI’s 2022 ESMO cancer conference presentation reported on PSR, and CEL-SCI’s new 2023 ESMO presentation reported on PSD.

Across the whole Phase III trial, PSRs were seen in 8.5% of Multikine patients compared to none in the control group. PSDs were seen in 22% of Multikine patients as compared to 13% in the control group. Because Multikine was the only therapy given to these patients before surgery, it is CEL-SCI’s strong belief that Multikine had to be the cause of the higher rates of PSR and PSD.  These data are presented visually below. The taller blue columns show PSR and PSD rates in all 529 Multikine-treated patients in the Phase III trial, and the gray columns show PSR and PSD rates for all 394 control patients.

It was not enough for us to show that Multikine likely leads to PSRs and PSDs as compared to a control group, CEL-SCI also had to test if PSRs and PSDs lead to improved survival. CEL-SCI’s Phase III trial demonstrated that PSR patients were 72% likely to be alive after five years, whereas control patients were only about 49% likely to be alive after five years. Patients with PSD saw similar improvement in CEL-SCI’s Phase III trial.  Their five-year chance of survival was approximately 68%. Therefore, CEL-SCI believes that the Phase III trial demonstrated that those patients who had PSR or PSD resulting from Multikine lived longer than those who were not treated with Multikine. It is important to note that these results are from the entire Phase III study population, not from a subgroup. The likelihood of living at least five years is shown in the graphic below for patients with PSR (blue), patients with PSD (orange) and patients who did not receive Multikine (gray).

CEL-SCI’s target population as presented at ESMO in October 2023 can be readily selected by doctors upon diagnoses using standard tests.  Having shown a potential causal link supported by strong statistics between Multikine and survival benefit, CEL-SCI believes that Multikine should be approved quickly. But recall that the Phase III study’s primary endpoint of 10% survival benefit was not met. How then can we say that Multikine actually benefits patients? The answer is that while Multikine has shown that it can help patients with PSR/PSD, there were not enough PSR/PSD in the Phase III study population to yield a 10% survival benefit for the whole population. In other words, the benefits from PSR/PSD were too diluted when averaged with the other patients in the study.

None of this changes the fact that CEL-SCI observed statistical significance when analyzing Multikine’s ability to cause PSR/PSD and that these PSR/PSD statistically appear to lead to a higher chance of living five years or longer—CEL-SCI simply had to define a target population who would have a larger number of PSR/PSD. To do so, CEL-SCI analyzed Multikine’s biological mechanism of action, talked to regulators and physicians who knew best, and were guided by the Phase III data, including patient-specific data down to the cellular level. All this of course took time, but CEL-SCI believes it has succeeded and is ready to move forward. 

One of the first things we reported from the Phase III study was that Multikine was shown to work best in patients who were deemed “low risk” after surgery, about 40% of the study population. These patients saw a significant 14.1% absolute 5‑year survival benefit vs the “low risk” control group not receiving Multikine. It made sense biologically that these patients would benefit most from Multikine, because they tended to have immune systems that were not yet compromised by the disease. “High risk” patients, by contrast, typically had lymph nodes invaded by the tumor, and needed chemotherapy after surgery. Because their lymph nodes were compromised, this made it harder for their immune systems to work, and they needed surgery as soon as possible without waiting an extra three weeks to receive Multikine. CEL-SCI initially developed criteria for selecting “low-risk” patients at diagnosis—i.e., those having no lymph nodes invaded by the tumor (N0) or only one lymph node invaded by the tumor (N1) as well as no extracapsular spread as determined by PET scan. CEL-SCI published these criteria at the ASCO conference in 2022. However, after discussions with regulators and physicians, CEL-SCI saw that outcomes could be improved further if the N1 patients were excluded, and only the N0 patients were included in the target population.

CEL-SCI also saw from the Phase III data that Multikine was more effective for patients with low PD-L1 tumor expression than for patients with high PD-L1 expression. This analysis was pre-specified in the statistical analysis plan. Targeting low PD-L1 also differentiates Multikine from other immunotherapies. For example, checkpoint inhibitors like Keytruda and Opdivo appear to best serve patients having high PD-L1, because these drugs work by blocking PD1/PD-L1 receptors interaction; when this interaction (PD1/PD-L1) happens it leads to inactivation/death of the immune cells attacking the tumor. While none of these drugs are currently approved as a first-line treatment before surgery, even if such approvals were to come in the future, the large majority of patients in this group having low PD-L1 would still be expected to need Multikine.

CEL-SCI’s target population is now directed to patients who present at diagnosis with N0 nodal involvement and also with low PD-L1 tumor expression (defined as tumor proportions score (TPS) < 10). These patients can be readily identified upon diagnosis with tests that physicians routinely use in cancer screening, a crucial achievement towards Multikine becoming available for use. For instance, a PET scan should be used to determine the N0 nodal status and a screening biopsy should be used to determine the low PD-L1 expression. Doctors already routinely screen head and neck cancer patients using PET scans and biopsy.

Multikine cut the 5-year risk of death in half in the target population. CEL-SCI’s results show that Multikine can cut the risk of death in half at five years versus the control group in the finalized target population. Survival increased from 45% in the control group to 73% in the Multikine group, at five years. This means the risk of death fell to 27% in the Multikine group from 55% in the control, shown below.

Another way to see the survival benefit of Multikine in the target population is the Kaplan-Meier curve from our ESMO ’23 poster, shown below. On the vertical axis is the probability of survival and the horizontal axis is time in months. The blue Multikine line is far above the green control line, meaning the chance of survival is much higher in the Multikine group at every point in time compared to the control. These results had a low p-value of 0.0015, which is very significant as a statistical matter.

CEL-SCI’s physician consultants tell CEL-SCI that the early separation of these two survival curves (e.g., at 12 months) adds validation to the potential positive effects of Multikine.

Another measure of survival benefit is called the “hazard ratio,” which compares the chances of dying between two different groups. Here, in the Multikine target population, the hazard ratio was 0.35, which means that deaths occurred in the Multikine group about one-third as frequently as in the control group. It is also important to note that the hazard ratio’s 95% confidence interval remained far below 1.0. In the case of Multikine, statistically speaking, there is a 95% chance that the hazard ratio would fall between 0.18 and 0.66 if Multikine were tested in the target population in another study. A hazard ratio of 0.66 as the “so called worst case scenario” is still below (better) than the hazard ratio required for most drug approvals.

These positive survival outcomes—increased overall survival, reduced risk of death, widely separated Kaplan-Meier curves with early separation, low hazard ratio, low p-values, low confidence intervals—CEL-SCI believes were driven by high PSR/PSD rates in the target population, as shown in the graphic below:

CEL-SCI relies on all of these data together to support its plan to request accelerated/conditional approval in the new target population without waiting until the completion of another clinical trial. 

CEL-SCI’s regulatory strategy going forward is to seek approval of Multikine following full enrollment of its confirmatory study wherever possible.

When the Phase III trial was designed, there was no evidentiary basis for excluding either of the low-risk or high-risk patient groups before surgery. Therefore, the study had to include a large percentage of high-risk patients with immune systems already compromised by disease. These subjects generally did not respond to Multikine. CEL-SCI has narrowed its target population as compared to the overall Phase III study population to focus on patients most likely to have PSR/PSD and to exclude the rest.

CEL-SCI acknowledges that efficacy in the target population has not been tested prospectively, but CEL-SCI believes that the data generated to date already presents a compelling patient need in the target population that justifies accelerated/conditional access to Multikine. This is why the conditional approval pathways were created in the first place. CEL-SCI intends to base its request for regulatory approval, in part, on its view that patients should not have to wait many more years before gaining access to the benefits of Multikine PSRs/PSDs and increased survival, particularly given Multikine’s safety profile and data that mechanistically and empirically supports the target population definition.

The benefit-risk balance favoring immediate patient access to Multikine is described below:

An “unmet need” is a factor for approval considered by all major regulatory bodies worldwide. In the Multikine target population, there is also a tremendous unmet need for improved survival. The current standard of care provides only about a 50/50 chance of surviving five years, whereas Multikine could increase that survival rate to over 70% based on the Phase III data. Chemotherapy has improved outcomes for some head and neck patients, but chemotherapy is only indicated for high-risk patients, who are not likely to fall within the Multikine target population. Currently available immunotherapies are given after surgery or where surgery is not indicated, in contrast to Multikine, which is given before surgery to patients with resectable tumors. Available checkpoint inhibitors work best on tumors with high PD-L1 expression, whereas Multikine works best in tumors with low PD-L1 expression. Therefore, Multikine’s target population is underserved, and will continue to be underserved, by current therapies, but Multikine can meet the need for improved survival.

The major regulatory bodies with whom we are working, U.S. FDA, Health Canada, European Medicines Agency (EMA) and the Medicines and Healthcare products Regulatory Agency (MHRA) in the United Kingdom (UK) all have conditional approval pathways designed for situations where the target population has not been fully tested prospectively and there is strong data supporting clinical benefit for patients. The reason is that regulators understand that in many cases patients should not have to wait for additional data before being offered the chance to benefit from a new drug. Every situation is different and depends on the specific facts.

In May 2024, CEL-SCI announced that based on strong safety and efficacy data from CEL-SCI’s completed Phase 3 head and neck cancer study, the FDA indicated CEL-SCI may move forward with a confirmatory Registration Study of Multikine in newly diagnosed advanced primary head and neck cancer patients with no lymph node involvement (determined via PET scan) and with low PD-L1 tumor expression (determined via biopsy).

Through this discussion and agreement with the FDA, CEL-SCI has achieved a tremendous milestone for people who are newly diagnosed with head and neck cancer. The survival benefit was so strong and clear in the target patient population that the confirmatory study needs to enroll only 212 people to confirm what was already achieved in the Phase 3 study. This gives the company a clear path forward.

Liquidity and Capital Resources

Since inception, the Company has financed its operations through the issuance of equity securities, convertible notes, loans and certain research grants. The Company will likely continue to generate net operating losses as it continues the development of Multikine and brings other drug candidates into clinical trials. Until such time as the Company becomes profitable, any or all of these financing vehicles or others may be utilized to assist the Company’s capital requirements.

Capital raised by the Company has been expended primarily for patent applications, research and development, administrative costs, the construction and upgrade of the Company’s manufacturing and laboratory facilities and clinical trials. The Company does not anticipate realizing significant revenues until entering into licensing arrangements for its technology and know-how or until it receives regulatory approval to sell its products (which could take several years). Thus, the Company has been dependent upon the proceeds from the sale of its securities to meet all of the Company’s liquidity and capital requirements and anticipates having to do so in the future.

The Company will be required to raise additional capital or find additional long-term financing to continue with its research efforts. The ability to raise capital may be dependent upon market conditions that are outside the control of the Company. The ability of the Company to complete the necessary clinical trials and obtain FDA approval for the sale of products to be developed on a commercial basis is uncertain. Ultimately, the Company must complete the development of its products, obtain the appropriate regulatory approvals and obtain sufficient revenues to support its cost structure.  However, there can be no assurance that the Company will be able to raise sufficient capital to support its operations. Due to recurring losses from operations and future liquidity needs, there is substantial doubt about the Company’s ability to continue as a going concern.

Since the Company launched its Phase 3 clinical trial for Multikine, the Company has incurred expenses of approximately $64.6 million as of March 31, 2024 on direct costs for the Phase 3 clinical trial and the filing of the clinical study report to the FDA. The Company estimates it will incur additional expenses of approximately $0.6 million for the remainder of the Phase 3 clinical trial and the filing of the clinical study report to the FDA. It should be noted that this estimate is based only on the information currently available from the CROs responsible for managing the Phase 3 clinical trial and does not include other related costs, e.g., the manufacturing of the drug.

The Company uses two CROs to manage the global Phase 3 study; ICON and Ergomed, who are both international leaders in managing oncology trials.

Under a co-development agreement, Ergomed agreed to contribute up to $12 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.  Approximately $11.9 million of the committed $12 million contribution has been realized as of March 31, 2024.

During the six months ended March 31, 2024, the Company’s cash increased by approximately $1.2 million. Significant components of this increase included net proceeds from the November 2023 and February 2024 financing of $11.5 million offset by cash used to fund the Company’s regular operations of approximately $9.4 million and approximately $0.9 million in payments on their finance lease obligations. 

During the six months ended March 31, 2023, the Company’s cash decreased by approximately $12.6 million.  The significant component of this decrease included cash used to fund the Company’s regular operations of approximately $12.1 million, which includes the approximate  $2.3 million deposit made to the Company’s landlord as a result of falling below certain cash requirements per the San Tomas lease.  Other components of this decrease include approximately $0.2 million used to make leasehold improvements and acquire research and development equipment, and approximately $0.8 million in payments on the Company’s finance leases.  

During the six months ended March 31, 2024, no warrants were exercised. During the six months ended March 31, 2023, 217,752 warrants were exercised at a weighted average exercise price of $2.05 for total proceeds of approximately $0.5 million.

Results of Operations and Financial Condition

The Company incurred a net operating loss of approximately $13.6 million for the six months ended March 31, 2024. This net operating loss consists of significant non-cash expenses including approximately $3.2 million in share-based compensation to employees and non-employees, and approximately $2.0 million in depreciation and amortization expense.  The Company incurred a net operating loss of approximately $7.1 million for the three months ended March 31, 2024.  This net operating loss consists of significant non-cash expenses including approximately $1.6 million in share-based compensation to employees and non-employees, and approximately $1.0 million in depreciation and amortization expense.

During the six months ended March 31, 2024, research and development expenses decreased by approximately $2.5 million, or 22%, compared to the six months ended March 31, 2023.  Major components of this decrease include an approximately $0.2 million decrease in costs incurred to prepare for the potential commercial sale of Multikine, an approximately $1.6 million decrease in expenses related to the Phase 3 study, a decrease of approximately $0.6 million of employee stock compensation expense and an approximately $0.1 million decrease in other research and development costs.

During the three months ended March 31, 2024, research and development expenses decreased by approximately $1.5 million, or 24%, compared to the three months ended March 31, 2023.  Major components of this decrease include  an approximately $1.0 million decrease in expenses related to the Phase 3 study, a decrease of approximately $0.4 million of employee stock compensation expense and an approximately $0.1 million decrease in other research and development costs.

During the six months ended March 31, 2024, general and administrative expenses increased by approximately $0.2 million, or 5%, compared to the six months ended March 31, 2023. This increase is primarily due to an approximately $0.1 million increase in consulting fees and an increase of approximately $0.1 million in other general and administrative costs.

During the three months ended March 31, 2024, general and administrative expenses increased by approximately $0.4 million, or 17%, compared to the three months ended March 31, 2023. This increase is primarily due to an approximately $0.2 million increase in consulting fees, an increase of approximately $0.1 million of employee stock compensation expense related to the accelerated vesting of options for directors, and a net  increase of approximately $0.1 million in other general and administrative expenses.

During the six months ended March 31, 2024, net interest expense increased by approximately $0.1 million compared to the six months ended March 31, 2023. While the amount of interest paid on the Company’s lease liabilities remained relatively constant at approximately $0.5 million for the six months ended March 31, 2024 and 2023, the Company earned approximately $0.1 million less in interest income during the six months ended March 31, 2024 compared to the six months ended March 31, 2023. Net interest expense, which consists primarily of interest paid on lease liabilities, remained relatively constant at approximately $0.2 million for the three months ended March 31, 2024 and March 31, 2023.

Research and Development Expenses

The Company’s research and development efforts involve Multikine and LEAPS. The table below shows the research and development expenses associated with each project.