The
information in this preliminary prospectus supplement and the
accompanying prospectus, relating to an effective registration
statement under the Securities Act of 1933, as amended, is not
complete and may be changed. This preliminary prospectus supplement
and the accompanying prospectus are not an offer to sell these
securities and we are not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
Filed
Pursuant to Rule 424(b)(5)
Registration
No. 333-205444
PRELIMINARY PROSPECTUS SUPPLEMENT
(To
Prospectus dated October 30, 2015)
Subject to completion dated December
, 2016
CEL-SCI
CORPORATION
We are
offering up to ____________ shares of common stock and warrants to purchase up
to ____________ shares of
common stock. Each share of common stock is being sold together
with one Series CC warrant, one Series DD warrant and one Series EE
warrant for the combined purchase price of
$__________.
●
Each Series CC
warrant has an exercise price of $_____ per share, is immediately
exercisable and will expire on __________________.
●
Each Series DD
warrant has an exercise price of $____ per share, is immediately
exercisable and will expire on _______________.
●
Each Series EE
warrant has an exercise price of $_____ per share, is immediately
exercisable and will expire on _________________.
The
shares of common stock and warrants will be issued separately. This
prospectus supplement also registers the shares of common stock
issuable upon the exercise of the warrants being
offered.
Our
common stock is currently
traded on the NYSE MKT (formerly known
as the NYSE Amex) under the symbol “CVM.” On ____________, the closing price of our common stock
on the NYSE MKT was $___ per
share. There is presently no public
market for the warrants we are offering by means of this Prospectus
Supplement, and it is not anticipated that a public market for the
warrants will develop in the future. We will not apply to list the
warrants on NYSE MKT. For a more detailed description of our common
stock and warrants, see the section entitled “Description of
Securities” beginning on page S-__ of this Prospectus
Supplement.
Investing in our securities involves a high
degree of risk. See “Risk Factors” beginning on page
S-__ of this Prospectus Supplement, the Risk Factors in the
accompanying Prospectus and the risks set forth under the caption
“Item 1A. Risk Factors” included in our most recent
Annual Report on Form 10-K/A, which is incorporated by reference
herein, for a discussion of information that should be
considered in connection with an investment in our
securities..
_________________
|
Per
Share
|
Price to Public
|
Placement Agent Fees (3)
|
Proceed, Before Expenses, To
Us
|
|
Per Share
|
$-
|
$-
|
$-
|
|
Per Warrants (1)
|
$-
|
$-
|
$-
|
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Total (2)
|
$-
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$-
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$-
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(1)
$_______ is
allocated to each Series CC, DD and EE warrant.
(2)
Assumes the sale of
the maximum amount of securities being offered. Because there is no
minimum offering amount required as a condition to closing this
offering, we may sell fewer than all of the securities offered
hereby, which may significantly reduce the amount of proceeds
received by us.
(3)
In addition, we
have agreed to reimburse the placement agent for certain expenses
and to issue to the Placement Agent warrants equal to ___% of the
shares sold in this offering. See “Plan of
Distribution” on page S-XX of this prospectus supplement for
a complete description of commissions, compensation and fees
payable to the Placement Agent.
Neither
the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
We have retained
H.C. Wainwright & Co., LLC as our exclusive placement agent to
use its reasonable best efforts to solicit offers to purchase the
securities in this offering. The placement agent has no obligation
to buy any of the securities from us or to arrange for the purchase
or sale of any specific number or dollar amount of the securities.
We have agreed to pay the placement agent a placement fee equal
to __% of the aggregate gross proceeds to us from the sale of
the securities in the offering, plus additional compensation as set
forth under “Plan of Distribution.” The placement agent
may engage one or more sub-agents or selected dealers in connection
with this offering. We estimate total expenses of this offering,
excluding the placement agent fees, will be approximately
$_______.
Institutional
investors purchasing the securities offered hereby will execute a
securities purchase agreement with us, providing such investors
with certain representations, warranties and covenants from us,
which representations, warranties and covenants will not be
available to the other investors in this offering and therefore
those investors shall rely solely on this prospectus in connection
with the purchase of securities in this
offering.
We
expects to deliver the shares of common stock and warrants
against payment on or before
____________, subject to customary
closing conditions.
_________________
Exclusive
Placement Agent
Rodman
& Renshaw, a unit of H.C. Wainwright & Co.
Prospectus
Supplement dated _____________
TABLE OF CONTENTS
Prospectus Supplement
|
About this Prospectus Supplement
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S-ii
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Prospectus Supplement Summary
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S-1
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Risk Factors
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S-20
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Forward-Looking Statements
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S-46
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Use of Proceeds
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S-47
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Price Range of Common Stock
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S-47
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Dilution
|
S-48
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| Capitalization |
S-49
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Description of Securities
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S-50
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Plan of Distribution
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S-54
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Legal Matters
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S-57
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Experts.
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S-57
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Where You Can Find More Information.
|
S-57
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Incorporation by Reference
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S-58
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PROSPECTUS
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Prospectus Summary
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2
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Forward-Looking Statements
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10
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Risk Factors
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11
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Comparative Share Data
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33
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Market for CEL-SCI’s Common Stock.
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36
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Plan of Distribution
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37
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Description of Securities
|
38
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Experts
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42
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Indemnification
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42
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Additional Information
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42
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You
should rely only on the information contained in this prospectus
supplement and the accompanying prospectus, any document
incorporated or deemed to be incorporated by reference in this
prospectus supplement and the accompanying prospectus and any free
writing prospectus that we may prepare in connection with this
offering. Neither we nor the placement agent has authorized anyone
to provide you with any additional or different information. If
anyone provides you with any additional or different information,
you should not rely on it. Neither this prospectus supplement nor
the accompanying prospectus, nor such free writing prospectus, is
an offer to sell or a solicitation of an offer to buy any
securities other than the securities to which it relates, or an
offer to sell or the solicitation of an offer to buy securities in
any jurisdiction where, or to any person to whom, it is unlawful to
make an offer or solicitation. You should not assume that the
information contained in this prospectus supplement, the
accompanying prospectus, any document incorporated or deemed to be
incorporated by reference in this prospectus supplement and the
accompanying prospectus, or any free writing prospectus that we may
prepare in connection with this offering is correct on any date
after their respective dates. Our business, financial condition,
liquidity, results of operations and prospects may have changed
since those respective dates.
S-i
ABOUT THIS PROSPECTUS SUPPLEMENT
This
document forms part of a registration statement that we filed with
the Securities and Exchange Commission, or the SEC, using a
“shelf” registration process. This document is in two
parts. The first part consists of this prospectus supplement,
including the documents incorporated by reference herein, which
describes the specific terms of this offering. The second part, the
accompanying prospectus, including the documents incorporated by
reference therein, provides more general information. We urge you
to carefully read this prospectus supplement and the accompanying
prospectus, and the documents incorporated herein and therein,
before buying any of the securities being offered by this
prospectus supplement and the accompanying prospectus. This
prospectus supplement may add, update or change information
contained in the accompanying prospectus. To the extent that any
statement that we make in this prospectus supplement is
inconsistent with statements made in the accompanying prospectus or
any documents incorporated by reference therein, the statements
made in this prospectus supplement will be deemed to modify or
supersede those made in the accompanying prospectus and such
documents incorporated by reference therein. In addition, any
statement in a filing we make with the SEC that adds to, updates or
changes information contained in an earlier filing we made with the
SEC shall be deemed to modify and supersede such information in the
earlier filing.
This
prospectus supplement, the accompanying prospectus, and the
information incorporated by reference herein and therein, may
include trademarks, service marks and trade names owned by us or
other companies. All trademarks, service marks and trade names
included or incorporated by reference into this prospectus
supplement or the accompanying prospectus are the property of their
respective owners.
In this
prospectus supplement, unless otherwise specified or the context
requires otherwise, we use the terms “CEL-SCI,” the
“Company,” “we,” “us” and
“our” to refer to CEL-SCI Corporation. Our fiscal year
ends on September 30.
S-ii
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights certain information about us, this offering
and information appearing elsewhere in this prospectus supplement,
in the accompanying prospectus and in the documents we incorporate
by reference. This summary is not complete and does not contain all
of the information that you should consider before investing in
shares of our common stock. To fully understand this offering and
its consequences to you, you should read this entire prospectus
supplement and the accompanying prospectus carefully, including the
information referred to under the heading “Risk
Factors” in this prospectus supplement and the accompanying
prospectus, the financial statements and other information
incorporated by reference in this prospectus supplement and the
accompanying prospectus when making an investment
decision.
Our Company
Overview
We are
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. We are currently focused
on the development of the following product candidates and
technologies:
1)
Multikine®
(Leukocyte Interleukin, Injection), or Multikine, an
investigational immunotherapy under development for
the potential treatment of certain head and neck cancers, and anal
warts or cervical dysplasia in human immunodeficiency virus, or
HIV, and human papillomavirus, or HPV co-infected patients;
and
2)
L.E.A.P.S. (Ligand
Epitope Antigen Presentation System) technology, or LEAPS, with two
investigational therapies, LEAPS-H1N1-DC, a product candidate under
development for the potential treatment of pandemic influenza in
hospitalized patients, and CEL-2000 and CEL-4000, vaccine product
candidates under development for the potential treatment of
rheumatoid arthritis.
S-1
The following chart
depicts our product candidates, their indications and their current
stage of development:
MULTIKINE
Our
lead investigational therapy, Leukocyte Interleukin, Injection
(hereafter also referred to as Multikine), is currently being
developed as a potential therapeutic agent directed at using the
immune system to produce an anti-tumor immune response. Data from
Phase 1 and Phase 2
clinical trials suggest that Multikine simulates the activities of
a healthy person’s immune system, enabling it to use the
body’s own anti-tumor immune response. Multikine is the
trademark we have registered for this investigational therapy, and
this proprietary name is subject to review by the U.S. Food and
Drug Administration, or FDA, in connection with our future
anticipated regulatory submission for approval. Multikine has not been licensed
or approved for sale, barter or exchange by the FDA or any other
regulatory agency, such as the European Medicine Agency, or EMA.
Neither has its safety or efficacy been established for any
use.
Multikine is an
immunotherapy product candidate comprised of a patented defined
mixture of 14 human natural cytokines and is manufactured in a
proprietary manner in our manufacturing facility. We spent over 10
years and more than $80 million developing and validating the
manufacturing process for Multikine. The pro-inflammatory cytokine
mixture includes interleukins, interferons, chemokines and
colony-stimulating factors, which contain elements of the
body’s natural mix of defenses against cancer.
Multikine is
designed to be used in a different way than immune therapy is
normally used. It is designed to be administered locally to treat
local tumors before any other therapy has been
administered. For example,
in the ongoing Phase 3 clinical
trial, Multikine is injected locally at the site of the tumor and
near the adjacent draining lymph nodes as a first line of treatment
before surgery, radiation and/or chemotherapy because that is when
the immune system is thought to be strongest. The goal is to help
the intact immune system recognize and kill the micro metastases
that usually cause recurrence of the cancer. In short, we believe
that local administration and administration before weakening of
the immune system by chemotherapy and radiation will result in
better anti-tumor response than if Multikine were administered as a
second- or later-line therapy. In clinical studies of Multikine,
administration of the investigational therapy to head and neck
cancer patients has demonstrated the potential for less or no
appreciable toxicity.
S-2
Source: Adapted from Timar et al., Journal of Clinical Oncology
23(15) May 20, 2005
The
first indication CEL-SCI is pursuing for its investigational drug
product candidate Multikine is an indication for the neoadjuvant
therapy in patients with squamous cell carcinoma of the head and
neck, or SCCHN (hereafter also referred to as advanced primary head
and neck cancer). As detailed below, the Phase 3 Clinical trial of
the Multikine investigational drug as neoadjuvant therapy in SCCHN
is currently on Partial Clinical Hold by the US FDA. SCCHN is a
type of head and neck cancer, and CEL-SCI believes that, in the
aggregate, there is a large, unmet medical need among head and neck
cancer patients. We believe the last FDA approval of a therapy
indicated for the treatment of advanced primary head and neck
cancer was over 50 years ago. In the aggregate, head and neck
cancer represents about 6% of the world’s cancer cases, with
approximately over 650,000 patients diagnosed worldwide each year,
and nearly 60,000 patients diagnosed annually in the United States.
Multikine investigational immunotherapy was granted Orphan Drug
designation for neoadjuvant therapy in patients with SCCHN by the
FDA in the United States.
Status of Phase 3 Clinical Trial
Following
submissions to regulatory authorities in 24 countries around the
world, including the FDA in the United States, a global Phase 3
clinical trial of the investigational Multikine therapy as a
potential neoadjuvant therapy in patients with SCCHN was initially
commenced in late 2010. This clinical trial is currently on Partial
Clinical Hold.
This
trial is currently primarily under the management of two clinical
research organizations, or CROs: ICON Inc. (who acquired Aptiv
Solutions, Inc., one of the two CROs), or ICON, and Ergomed
Clinical Research Limited, or Ergomed. Ergomed is responsible for
new patient enrollment and the clinical study management of the
various study sites, although enrollment of new patients has been
on hold since we received verbal notice of FDA’s Partial
Clinical Hold on September 26, 2016. The following chart reflects
the number of patients enrolled per month from the point at which
the study management was transferred to the new CROs and the
enrolment since then and until the FDA put the study on Partial
Clinical Hold.
S-3
The
Phase 3 study was designed with the objective that, if the study
endpoint, which is an improvement in overall survival of the
subjects treated with the Multikine treatment regimen plus the
current standard of care (SOC) as compared to subjects treated with
the current SOC only, is satisfied, the study results are expected
to be used to support applications that we plan to submit to
regulatory agencies in order to seek commercial marketing approvals
for Multikine in major markets around the world. This assessment
can only be made when a certain number of deaths have occurred in
these two main comparator groups of the study.
The
primary endpoint for the original protocol for this Phase 3 head
and neck cancer study required that a 10% increase in overall
survival be obtained in the Multikine group which also is
administered CIZ (CIZ = low dose (non-chemotherapeutic) of
cyclophosphamide, indomethacin and Zinc-multivitamins) all of which
are thought to enhance Multikine activity), plus Standard of Care
(Surgery + Radiotherapy or Chemoradiotherapy) arm of the study over
the Control comparator (Standard of Care alone) arm. As the study
originally was designed, the final determination of whether this
endpoint had been successfully reached could only be determined
when 298 events (deaths) had occurred in the combined comparator
arms of the study. Under the original study design, the plan was to
enroll 880 patients in order to be able to have 784 evaluable
patients for the per-protocol analysis.
S-4
In
August 2016, we announced that the currently available data from
the Clinical Study reflected that the accumulation of deaths in the
study was lower than that which was anticipated based on reported
literature at the Phase 3 study’s inception. If the number of
deaths continued to be accumulated at the current rate, it had been
determined that it would take longer than originally planned to
complete the study. To minimize this eventuality, we decided it
would be necessary to enroll up to 1,273 patients to have 1,146
evaluable patients. There were also other changes in the protocol,
such as the required number of deaths (394) and the required
increase in overall survival (6.5%) in favor of the Multikine
comparator arm. With this increased patient enrollment, we expected
a corresponding increase in the number of deaths, and, if this plan
were implemented, the study could be completed in a more timely
manner. As required by law and in order to be able to implement the
plan, we submitted an amendment to the existing Phase 3 protocol
for our head and neck cancer study to multiple regulatory agencies
in the countries abroad where the Phase 3 study is being conducted
as well as to the FDA to allow for this expansion in patient
enrolment.
On September
26, 2016, we received verbal notice from the FDA that the Phase 3
clinical trial in advanced primary head and neck cancer has been
placed on clinical hold. At such time, enrollment in the Phase 3
study was 926 patients.
On
October 21, 2016, we received a Partial Clinical Hold letter from
the FDA and on November 21, 2016, we submitted a response to the
FDA’s Partial Clinical Hold letter.
We
estimate that the total remaining cost of the Phase 3 clinical
trial, excluding any costs that will be paid by our partners, would
be approximately $12.1 million. Should the FDA allow the amended
protocol filed with them to proceed, which requires an enrollment
of up to 1,273 subjects, the remaining cost of the Phase 3 clinical
trial will be higher than currently estimated. This is in addition
to the approximately $34.5 million that CEL-SCI already had spent
on the trial as of September 30, 2016. This number may be affected
by the rate of any future patient enrollment, rate of death
accumulation in the study, foreign currency exchange rates, and
many other factors, some of which cannot be foreseen today. It is
therefore possible that the cost of the Phase 3 clinical trial will
be higher than currently estimated.
Follow-Up Analysis of Overall Survival in Phase 2
Patients
Prior
to starting the Phase 3 study, we had tested Multikine in over 200
patients. The following is a summary of results from our last Phase
2 study conducted with Multikine. This study employed the same
treatment protocol as is being followed in our Phase 3
study:
●
Reported potential for improved
survival: In a follow-up analysis of the Phase 2 clinical
study population, which used the same dosage and treatment regimen
as is being used in the Phase 3 study, head and neck cancer
patients with locally advanced primary disease who received our
investigational therapy Multikine as first-line investigational
therapy, followed by surgery and radiotherapy, were reported by the
clinical investigators to have had a 63.2% overall survival, or OS,
rate at a median of 3.33 years from surgery. This percentage of OS
was arrived at as follows: of the 21 subjects enrolled in the Phase
2 study, the consent for the survival follow-up portion of the
study was received from 19 subjects. OS was calculated using the
entire treatment population that consented to the follow-up portion
of the study (19 subjects), including two subjects who, as later
determined by three pathologists blinded to the study, did not have
oral squamous cell carcinoma, or OSCC. These two subjects were thus
not evaluable per the protocol and were not included in the
pathology portion of the study for purposes of calculating the
complete response rate, as described below, but were included in
the OS calculation. The overall survival rate of subjects receiving
the investigational therapy in this study was compared to the
overall survival rate that was calculated based upon a review of 55
clinical trials conducted in the same cancer population (with a
total of 7,294 patients studied), and reported in the peer reviewed
scientific literature between 1987 and 2007. Review of this
literature showed an approximate survival rate of 47.5% at 3.5
years from treatment. Therefore, the results of our final Phase 2
study were considered to be potentially favorable in terms of
overall survival, recognizing the limitations of this early-phase
study. It should be noted that an earlier investigational therapy
Multikine study appears to lend support to the overall survival
findings described above - Feinmesser et al Arch Otolaryngol. Surg.
2003. However, no definitive conclusions can be drawn from these
data about the potential efficacy or safety profile of this
investigational therapy. Moreover, further research is required,
and these results must be confirmed in the Phase 3 clinical trial
of this investigational therapy that is currently in progress.
Subject to completion of that Phase 3 clinical trial and the
FDA’s review and acceptance of our entire data set on this
investigational therapy, we believe that these early-stage clinical
trial results indicate the potential for our Multikine product
candidate to become a treatment for advanced primary head and neck
cancer, if approved.
S-5
●
Reported average of 50% reduction in tumor
cells in Phase 2 trials (based on 19 patients evaluable by
pathology, having OSCC): The clinical investigators who
administered the three-week Multikine treatment regimen used in the
Phase 2 study reported that, as was determined in a controlled
pathology study, Multikine administration appeared to have caused,
on average, the disappearance of about half of the cancer cells
present at surgery (as determined by histopathology assessing the
area of Stroma/Tumor (Mean+/- Standard Error of the Mean of the
number of cells counted per filed)) even before the start of
standard therapy, which normally includes surgery, radiation and
chemotherapy (Timar et al JCO 2005).
●
Reported 10.5% complete response in the final
Phase 2 trial (based on 19 patients evaluable by pathology, having
OSCC): The
clinical investigators who administered the three-week Multikine
investigational treatment regimen used in the Phase 2 study
reported that, as was determined in a controlled pathology study,
the tumor apparently was no longer present (as determined by
histopathology) in approximately 10.5% of evaluable patients with
OSCC (Timar et al JCO 2005). In the original study, 21 subjects
received Multikine, two of which were later excluded, as subsequent
analysis by three pathologists blinded to the study revealed that
these two patients did not have OSCC. Two subjects in this study
had a complete response, leaving a reported complete response rate
of two out of 19 assessable subjects with OSCC (or 10.5%) (Timar et
al, JCO 2005).
●
Adverse events reported in clinical
trials: In completed clinical trials conducted to date with
the Multikine investigational therapy, adverse events which have
been reported by the clinical investigators as possibly or probably
related to Multikine administration included pain at the injection
site, local minor bleeding and edema at the injection site,
diarrhea, headache, nausea, and constipation.
S-6
Subsequently, an
analysis on the 21 subjects originally treated with Multikine in
the study to evaluate overall survival was conducted, as described
above. In connection with the follow-up portion of the study for
overall survival, we also conducted an unreported post-hoc analysis
of complete response rate in the study population, which included
subjects who provided consent for the follow-up and who also had
OSCC. Two of the 21 subjects did not re-consent for follow-up, and
two of the remaining 19 subjects were excluded from the post-hoc
complete response rate analysis as they had previously been
determined by pathology analysis to not have OSCC. The two complete
responders with OSCC both consented to the follow-up study.
Therefore, the post-hoc analysis of complete response was based on
a calculation of the two complete responders out of 17 evaluable
subjects who consented to the follow-up analysis and who also had
OSCC (or 11.8%).
Furthermore, we
reported an overall response rate of 42.1% based on the number of
evaluable patients who experienced a favorable response to the
treatment, including those who experienced minor, major and
complete responses. Out of the 19 evaluable patients, two
experienced a complete response, two experienced a major response,
and four experienced a minor response to treatment. Thus, we
calculated the number of patients experiencing a favorable response
as eight patients out of 19 (or 42.1%) (Timar et al, JCO
2005).
The
clinical significance of these and other data, to date, from the
multiple Multikine clinical trials, is not yet known. These
preliminary clinical data do suggest the potential to demonstrate a
possible improvement in the clinical outcome for patients treated
with Multikine.
Peri-Anal Warts and Cervical Dysplasia in HIV/HPV Co-Infected
Patients
HPV is
a very common sexually transmitted disease in the United States and
other parts of the world. It can lead to cancer of the cervix,
penis, anus, esophagus and head and neck. Our focus in HPV,
however, is not on developing an antiviral for the potential
treatment or prevention of HPV in the general population. Instead,
our focus is on developing an immunotherapy product candidate
designed to be administered to patients who are immune-suppressed
by other diseases, such as HIV, and who are therefore less able or
unable to control HPV and its resultant or co-morbid diseases. Such
patients have limited treatment options available to
them.
One
condition that is commonly associated with both HIV and HPV is the
occurrence of anal intraepithelial dysplasia, or AIN, and anal and
genital warts. The incidence of AIN in HIV-infected people is
estimated to be about 25%. The incidence of anal HPV infection in
HIV-infected men who have sex with men, or MSM, is estimated to be
as high as 95%. In the aggregate, the United States and Europe have
about 875,000 HIV-infected patients with AIN (assuming AIN
prevalence of approximately 25% of the aggregate HIV-infected
population). Persistent HPV infection in the anal region is thought
to be responsible for up to 80% of anal cancers, and men and women
who are HIV positive have a 30-fold increase in their risk of anal
cancer. Persistent HPV infection can
also be a precursor to cervical cancer, as well as certain head and
neck cancers.
S-7
In
October 2013, we signed a cooperative research and development
agreement, or CRADA, with the U.S. Naval Medical Center, San Diego,
or the USNMC. Pursuant to this agreement, the USNMC was to conduct
a Phase 1 study, approved by the Human Subjects Institutional
Review Board, of our investigational immunotherapy, Multikine, in
HIV/HPV co-infected men and women with peri-anal warts. The purpose
of this study was to evaluate the safety and clinical impact of
Multikine as a potential treatment of peri-anal warts and assess
its effect on AIN in HIV/HPV co-infected men and
women.
In
July 2015, CEL-SCI added a clinical site at the University of
California, San Francisco, or UCSF, and Key Opinion Leader, or KOL,
to the ongoing Phase 1 study. In August 2016, the U.S. Navy
discontinued this Phase 1 study because of difficulties in
enrolling patients. UCSF is continuing with the study.
In October 2013, we entered into a co-development
and profit sharing agreement with Ergomed for development of
Multikine as a potential treatment of HIV/HPV co-infected men and
women with peri-anal warts. This agreement is supporting the
development of Multikine with UCSF.
The
treatment regimen for this Phase 1 study of up to 15 HIV/HPV
co-infected patient volunteers with peri-anal warts, being
conducted by doctors at UCSF, is identical to the regimen that was
used in an earlier Institutional Review Board-approved Multikine
Phase 1 study in HIV/HPV co-infected patients, which was conducted
at the University of Maryland. In that study, our Multikine
investigational therapy was administered to HIV/HPV co-infected
women with cervical dysplasia, resulting in visual and histological
evidence of clearance of lesions in three out of the eight
subjects.
Furthermore, in
this earlier Phase 1 study, the number of HPV viral sub-types in
three volunteer subjects tested were reduced post-treatment with
Multikine, as opposed to pre-treatment, as determined by in situ
polymerase chain reaction performed on tissue biopsy collected
before and after Multikine treatment. As reported by the
investigators in the earlier study, the study volunteers, except
one subject volunteer, all appeared to tolerate the treatment with
no reported serious adverse events.
MANUFACTURING FACILITY
Before
starting the Phase 3 clinical trial, CEL-SCI needed to build a
dedicated manufacturing facility to produce Multikine. This
facility has been completed and validated, and has produced
multiple clinical lots for the Phase 3 clinical trial. The facility
has also passed review by a European Union Qualified Person on
several occasions.
CEL-SCI’s
lease on the manufacturing facility expires on October 31, 2028.
CEL-SCI completed validation of its new manufacturing facility in
January 2010. The state-of-the-art facility is being used to
manufacture Multikine for CEL-SCI’s Phase 3 clinical trial.
In addition to using this facility to manufacture Multikine,
CEL-SCI, only if the facility is not being used for Multikine, may
offer the use of the facility as a service to pharmaceutical
companies and others, particularly those that need to “fill
and finish” their drugs in a cold environment (4 degrees
Celsius, or approximately 39 degrees Fahrenheit). Fill and finish
is the process of filling injectable drugs in a sterile manner and
is a key part of the manufacturing process for many medicines.
However, priority will always be given to Multikine as management
considers the Multikine supply to the clinical studies and
preparation for a final marketing approval to be more important
than offering fill and finish services.
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LEAPS
Our
patented T-cell Modulation Process, referred to as LEAPS (Ligand
Epitope Antigen Presentation System), uses
“heteroconjugates” to direct the body to choose a
specific immune response. LEAPS is designed to stimulate the human
immune system to more effectively fight bacterial, viral and
parasitic infections as well as autoimmune, allergies,
transplantation rejection and cancer, when it cannot do so on its
own. Administered like a vaccine, LEAPS combines T-cell binding
ligands with small, disease-associated peptide antigens, and may
provide a new method to treat and prevent certain
diseases.
The
ability to generate a specific immune response is important because
many diseases are often not combated effectively due to the
body’s selection of the “inappropriate” immune
response. The capability to specifically reprogram an immune
response may offer a more effective approach than existing vaccines
and drugs in attacking an underlying disease.
On July
15, 2014 CEL-SCI announced that it has been awarded a Phase 1 Small
Business Innovation Research (SBIR) grant in the amount of $225,000
from the National Institute of Arthritis Muscoskeletal and Skin
Diseases, which is part of the National Institutes of Health. The
grant is funding the further development of CEL-SCI’s LEAPS
technology as a potential treatment for rheumatoid arthritis, an
autoimmune disease of the joints. The work is being conducted at
Rush University Medical Center in Chicago, Illinois in the
laboratories of Tibor Glant, MD, Ph.D., The Jorge O. Galante
Professor of Orthopedic Surgery; Katalin Mikecz, MD, Ph.D.
Professor of Orthopedic Surgery & Biochemistry; and Allison
Finnegan, Ph.D. Professor of Medicine.
With
the support of the SBIR grant, CEL-SCI is developing two new drug
candidates, CEL-2000 and CEL-4000, as potential rheumatoid
arthritis therapeutic vaccines. The data from animal studies using
the CEL-2000 treatment vaccine demonstrated that it could be used
as an effective treatment against rheumatoid arthritis with fewer
administrations than those required by other anti-rheumatoid
arthritis treatments currently on the market for arthritic
conditions associated with the Th17 signature cytokine
TNF- . The data for
CEL-4000 indicates it could be effective against rheumatoid
arthritis cases where a Th1 signature cytokine (IFN-c) is dominant.
CEL-2000 and CEL-4000 have the potential to be a more
disease-specific therapy, significantly less expensive, act at an
earlier step in the disease process than current therapies and may
be useful in patients not responding to existing rheumatoid
arthritis therapies. CEL-SCI believes this represents a large unmet
medical need in the rheumatoid arthritis market.
On
November 14, 2016, CEL-SCI announced new preclinical data that
demonstrate its investigational new drug candidate CEL-4000 has the
potential for use as a therapeutic vaccine to treat rheumatoid
arthritis. This efficacy study was supported in part by the SBIR
Phase I Grant and was conducted in collaboration with Drs. Katalin
Mikecz and Tibor Glant, and their research team at Rush University
Medical Center in Chicago, IL.
In
March 2015, CEL-SCI and its collaborators published a review
article on vaccine therapies for rheumatoid arthritis based in part
on work supported by the SBIR grant. The article is entitled
“Rheumatoid arthritis vaccine therapies: perspectives and
lessons from therapeutic Ligand Epitope Antigen Presentation System
vaccines for models of rheumatoid arthritis” and was
published in Expert Rev. Vaccines 1 - 18 and can be found at
http://www.ncbi.nlm.nih.gov/ pubmed/25787143.
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In
August 2012, Dr. Zimmerman, CEL-SCI’s Senior Vice President
of Research, Cellular Immunology, gave a Keynote presentation at
the OMICS 2nd International Conference on Vaccines and Vaccinations
in Chicago. This presentation showed how the LEAPS peptides
administered altered only select cytokines specific for each
disease model, thereby improving the status of the test animals and
even preventing death and morbidity. These results support the
growing body of evidence that provides for its mode of action by a
common format in these unrelated conditions by regulation of Th1
(e.g., IL12 and IFN-c) and their action on reducing
TNF- and other
inflammatory cytokines as well as regulation of antibodies to these
disease associated antigens. This was also illustrated by a
schematic model showing how these pathways interact and result in
the overall effect of protection and regulation of cytokines in a
beneficial manner.
In
February 2010, CEL-SCI announced that its CEL-2000 vaccine
demonstrated that it was able to block the progression of
rheumatoid arthritis in a mouse model, where a Th17 signature
cytokine (TNF- ) is
dominant. The results were published in the scientific
peer-reviewed Journal of International Immunopharmacology (online
edition) in an article titled “CEL-2000: A Therapeutic
Vaccine for Rheumatoid Arthritis Arrests Disease Development and
Alters Serum Cytokine / Chemokine Patterns in the Bovine Collagen
Type II Induced Arthritis in the DBA Mouse Model” Int
Immunopharmacol. 2010 Apr; 10(4):412-21 http://www.
ncbi.nlm.nih.gov/pubmed/20074669.
Using
the LEAPS technology, CEL-SCI has created a potential peptide
treatment for H1N1 (swine flu) hospitalized patients. This LEAPS
flu treatment is designed to focus on the conserved, non-changing
epitopes of the different strains of Type A Influenza viruses
(H1N1, H5N1, H3N1, etc.), including “swine”,
“avian or bird”, and “Spanish Influenza”,
in order to minimize the chance of viral “escape by
mutations” from immune recognition. Therefore one should
think of this treatment not really as an H1N1 treatment, but as a
potential pandemic flu treatment. CEL-SCI’s LEAPS flu
treatment contains epitopes known to be associated with immune
protection against influenza in animal models.
In
September 2009, the U.S. FDA advised CEL-SCI that it could proceed
with its first clinical trial to evaluate the effect of LEAPS-H1N1
treatment on the white blood cells of hospitalized H1N1 patients.
This followed an expedited initial review of CEL-SCI's regulatory
submission for this study proposal.
In
November 2009, CEL-SCI announced that The Johns Hopkins University
School of Medicine had given clearance for CEL-SCI’s first
clinical study to proceed using LEAPS-H1N1. Soon after the start of
the study, the number of hospitalized H1N1 patients dramatically
declined and the study was unable to complete the enrollment of
patients.
Additional work on
this treatment for the pandemic flu is being pursued in
collaboration with the National Institute of Allergy and Infectious
Diseases (NIAID), part of the National Institutes of Health, USA.
In May 2011 NIAID scientists presented data at the Keystone
Conference on “Pathogenesis of Influenza: Virus-Host
Interactions” in Hong Kong, China, showing the positive
results of efficacy studies in mice of LEAPS H1N1 activated
dendritic cells (DCs) to treat the H1N1 virus. Scientists at the
NIAID found that H1N1-infected mice treated with LEAPS-H1N1 DCs
showed a survival advantage over mice treated with control DCs. The
work was performed in collaboration with scientists led by Kanta
Subbarao, M.D., Chief of the Emerging Respiratory Diseases Section
in NIAID’s Division of Intramural Research, part of the
National Institutes of Health, USA.
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In July
2013, CEL-SCI announced the publication of the results of influenza
studies by researchers from the NIAID in the Journal of Clinical
Investigation (www.jci.org/articles/view/67550). The studies
described in the publication show that when CEL-SCI’s
investigational J-LEAPS Influenza Virus treatments were used
“in vitro” to activate DCs, these activated DCs, when
injected into influenza infected mice, arrested the progression of
lethal influenza virus infection in these mice. The work was
performed in the laboratory of Dr. Subbarao.
Even
though the various LEAPS drug candidates have not yet been given to
humans, they have been tested in vitro with human cells. They have
induced similar cytokine responses that were seen in these animal
models, which may indicate that the LEAPS technology might
translate to humans. The LEAPS candidates have demonstrated
protection against lethal herpes simplex virus (HSV1) and H1N1
influenza infection, as a prophylactic or therapeutic agent in
animals. They have also shown some level of efficacy in animals in
two autoimmune conditions, curtailing and sometimes preventing
disease progression in arthritis and myocarditis animal models.
CEL-SCI’s belief is that the LEAPS technology may be a
significant alternative to the vaccines currently available on the
market for these diseases.
None of
the LEAPS investigational products have been approved for sale,
barter or exchange by the FDA or any other regulatory agency for
any use to treat disease in animals or humans. The safety or
efficacy of these products has not been established for any use.
Lastly, no definitive conclusions can be drawn from the
early-phase, preclinical-trials data involving these
investigational products. Before obtaining marketing approval from
the FDA in the United States, and by comparable agencies in most
foreign countries, these product candidates must undergo rigorous
preclinical and clinical testing which is costly and time consuming
and subject to unanticipated delays. There can be no assurance that
these approvals will be granted.
GOVERNMENT
REGULATION
The FDA
and other regulatory authorities at federal, state and local levels
and in foreign countries extensively regulate, among other things,
the research, development, testing, manufacture, quality control,
import, export, safety, effectiveness, labeling, packaging,
storage, distribution, record keeping, approval, advertising,
promotion, marketing and post-approval monitoring and reporting of
biologics such as those we are developing. We, along with third
party contractors, will be required to navigate the various
preclinical, clinical and commercial approval requirements of the
governing regulatory agencies of the countries in which we wish to
conduct studies or seek approval or licensure of our product
candidates. The process of obtaining regulatory approvals and the
subsequent compliance with appropriate federal, state, local, and
foreign statutes and regulations require the expenditure of
substantial time and financial resources.
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U.S.
Food and Drug Administration Approval
The
process required by the FDA before biologic product candidates may
be marketed in the United States generally involves the
following:
●
completion of
preclinical laboratory tests and animal studies performed in
accordance with the FDA’s Good Laboratory Practice, or GLP,
regulations;
●
submission to the
FDA of an investigational new drug application, or IND, which must
become effective before clinical trials may begin and must be
updated annually;
●
approval by an
independent Institutional Review Board, or IRB, or ethics committee
at each clinical site before the trial is initiated;
●
performance of
adequate and well-controlled human clinical trials in compliance
with Good Clinical Practice, or GCP, regulations to establish the
safety, purity and potency of the proposed biologic product
candidate for its intended purpose;
●
preparation of and
submission to the FDA of a Biologics License Application, or BLA,
after completion of clinical trials;
●
satisfactory
completion of an FDA Advisory Committee review, if
applicable;
●
a determination by
the FDA within 60 days of its receipt of a BLA to file the
application for review;
●
satisfactory
completion of an FDA pre-approval inspection of the manufacturing
facility or facilities at which the proposed product is produced to
assess compliance with current Good Manufacturing Practice, or
cGMP, requirements and to assure that the facilities, methods and
controls are adequate to preserve the biological product’s
continued safety, purity and potency, and of selected clinical
investigations to assess compliance with GCPs; and
●
FDA review and
approval of the BLA to permit commercial marketing of the product
for particular indications for use in the United
States.
Prior
to commencing the first clinical trial with a product candidate in
the U.S., we must submit an IND to the FDA. An IND is a request for
authorization from the FDA to administer an investigational product
to humans. The central focus of an IND submission is on the general
investigational plan and the protocol(s) for human studies. The IND
also includes results of animal and in vitro studies assessing the
toxicology, pharmacokinetics, pharmacology, and pharmacodynamic
characteristics of the product; chemistry, manufacturing, and
controls information; and any available human data or literature to
support the use of the investigational product. An IND must become
effective before human clinical trials may begin. The IND
automatically becomes effective 30 days after receipt by the FDA,
unless the FDA, within the 30-day time period, raises safety
concerns or questions about the proposed clinical trial. In such a
case, the IND may be placed on clinical hold and the IND sponsor
and the FDA must resolve any outstanding concerns or questions
before the clinical trial can begin. Submission of an IND therefore
may or may not result in FDA authorization to commence a clinical
trial.
Clinical trials
involve the administration of the investigational product to human
subjects under the supervision of qualified investigators in
accordance with GCPs, which include the requirement that all
research subjects provide their informed consent for their
participation in any clinical study. Clinical trials are conducted
under protocols detailing, among other things, the objectives of
the study, the parameters to be used in monitoring safety and the
effectiveness criteria to be evaluated. A separate submission to
the existing IND must be made for each successive clinical trial
conducted during product development and for any subsequent
protocol amendments. Furthermore, an independent IRB for each site
proposing to conduct the clinical trial must review and approve the
plan for any clinical trial and its informed consent form before
the clinical trial commences at that site, and must monitor the
study until completed. Regulatory authorities, the IRB or the
sponsor may suspend a clinical trial at any time on various
grounds, including a finding that the subjects are being exposed to
an unacceptable health risk. Some studies also include oversight by
an independent group of qualified experts organized by the clinical
study sponsor, known as a data safety monitoring board, which
provides a recommendation to the Company for whether or not a study
may move forward at designated check points based on access to
certain data from the study and may recommend halting the clinical
trial if it determines that there is an unacceptable safety risk
for subjects or other grounds, such as no demonstration of
efficacy. There are also requirements governing the reporting of
ongoing clinical studies and clinical study results to public
registries.
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For
purposes of approval of a Biologics License Application, or BLA,
human clinical trials are typically conducted in three or four
sequential phases that may overlap.
●
Phase 1— The
investigational product is initially introduced into healthy human
subjects or patients with the target disease or condition. These
studies are designed to test the safety, dosage tolerance,
absorption, metabolism and distribution of the investigational
product in humans, the side effects associated with increasing
doses, and, if possible, to gain early evidence on
effectiveness.
●
Phase 2— The
investigational product is administered to a limited patient
population with a specified disease or condition to evaluate the
preliminary efficacy, optimal dosages and dosing schedule and to
identify possible adverse side effects and safety risks. Multiple
Phase 2 clinical trials may be conducted to obtain information
prior to beginning larger and more expensive Phase 3 clinical
trials.
●
Phase 3— The
investigational product is administered to an expanded patient
population to further evaluate dosage, to provide statistically
significant evidence of clinical efficacy and to further test for
safety, generally at multiple geographically dispersed clinical
trial sites. These clinical trials are intended to establish the
overall risk/benefit ratio of the investigational product and to
provide an adequate basis for product approval.
●
Phase 4— In
some cases, the FDA may require, or companies may voluntarily
pursue, additional clinical trials after a product is approved to
gain more information about the product. These so-called Phase 4
studies may be made a condition to approval of the
BLA.
Phase
1, Phase 2 and Phase 3 testing may not be completed successfully
within a specified period, if at all, and there can be no assurance
that the data collected will support FDA approval of the product.
Concurrent with clinical trials, companies may complete additional
animal studies and develop additional information about the
biological characteristics of the product candidate, and must
finalize a process for manufacturing the product in commercial
quantities in accordance with cGMP requirements. The manufacturing
process must be capable of consistently producing quality batches
of the product candidate and, among other things, must develop
methods for testing the identity, strength, quality and purity of
the final product. Additionally, appropriate packaging must be
selected and tested and stability studies must be conducted to
demonstrate that the product candidate does not undergo
unacceptable deterioration over its shelf life.
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BLA Submission and Review by the FDA
Assuming successful
completion of all required testing in accordance with all
applicable regulatory requirements, the results of product
development, nonclinical studies and clinical trials are submitted
to the FDA as part of a BLA requesting approval to market the
product for one or more indications. The BLA must include all
relevant data available from pertinent preclinical and clinical
studies, including negative or ambiguous results as well as
positive findings, together with detailed information relating to
the product’s chemistry, manufacturing, controls, and
proposed labeling, among other things. Data can come from
company-sponsored clinical studies intended to test the safety and
effectiveness of a use of the product, or from a number of
alternative sources, including studies initiated by investigators.
The submission of a BLA requires payment of a substantial User Fee
to the FDA, and the
sponsor of an approved BLA is also subject to annual product and
establishment user fees. These fees are typically increased
annually. A waiver of user fees may be obtained under certain
limited circumstances.
Once a
BLA has been submitted, the FDA’s goal is to review the
application within ten months after it accepts the application for
filing, or, if the application relates to an unmet medical need in
a serious or life-threatening indication, six months after the FDA
accepts the application for filing. The review process is often
significantly extended by FDA requests for additional information
or clarification. The FDA reviews a BLA to determine, among other
things, whether a product is safe, pure and potent and the facility
in which it is manufactured, processed, packed, or held meets
standards designed to assure the product’s continued safety,
purity and potency. The FDA may convene an advisory committee to
provide clinical insight on application review questions. Before
approving a BLA, the FDA will typically inspect the facility or
facilities where the product is manufactured. The FDA will not
approve an application unless it determines that the manufacturing
processes and facilities are in compliance with cGMP requirements
and adequate to assure consistent production of the product within
required specifications. Additionally, before approving a BLA, the
FDA will typically inspect one or more clinical sites to assure
compliance with GCP. If the FDA determines that the application,
manufacturing process or manufacturing facilities are not
acceptable, it will outline the deficiencies in the submission and
often will request additional testing or information.
Notwithstanding the submission of any requested additional
information, the FDA ultimately may decide that the application
does not satisfy the regulatory criteria for approval.
After
the FDA evaluates a BLA and conducts inspections of manufacturing
facilities where the investigational product and/or its drug
substance will be produced, the FDA may issue an approval letter or
a Complete Response Letter. An approval letter authorizes
commercial marketing of the product with specific prescribing
information for specific indications. A Complete Response Letter
indicates that the review cycle of the application is complete but
the application is not ready for approval. A Complete Response
Letter may request additional information or clarification,
including new clinical studies. The FDA may delay or refuse
approval of a BLA if applicable regulatory criteria are not
satisfied, require additional testing or information and/or require
post-marketing testing and surveillance to monitor safety or
efficacy of a product.
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If
regulatory approval of a product is granted, such approval may
entail limitations on the indicated uses for which such product may
be marketed. For example, the FDA may approve the BLA with a Risk
Evaluation and Mitigation Strategy, or REMS, plan to mitigate
risks, which could include medication guides, physician
communication plans, or elements to assure safe use, such as
restricted distribution methods, patient registries and other risk
minimization tools. The FDA also may condition approval on, among
other things, changes to proposed labeling or the development of
adequate controls and specifications. Once approved, the FDA may
withdraw the product approval if compliance with pre- and
post-marketing regulatory standards is not maintained or if
problems occur after the product reaches the marketplace. In
addition, the FDA may require one or more Phase 4 post-market
studies and surveillance to further assess and monitor the
product’s safety and effectiveness after commercialization,
and may limit further marketing of the product based on the results
of these post-marketing studies. In addition, new government
requirements, including those resulting from new legislation, may
be established, or the FDA’s policies may change, which could
delay or prevent regulatory approval of products under
development.
A
sponsor may seek approval of its product candidate under programs
designed to accelerate the FDA’s review and
approval of new drugs and biological products that meet certain
criteria. Specifically, new drugs and biological products are
eligible for fast track designation if they are intended to treat a
serious or life-threatening condition and demonstrate the potential
to address unmet medical needs for the condition. For a fast track
product, the FDA may consider sections of the BLA for review on a
rolling basis before the complete application is submitted if
relevant criteria are met. A fast track designated product
candidate may also qualify for priority review, under which the FDA
sets the target date for FDA action on the BLA at six months after
the FDA accepts the application for filing. Priority review is
granted where there is evidence that the proposed product would be
a significant improvement in the safety or effectiveness of the
treatment, diagnosis, or prevention of a serious condition. If
criteria are not met for priority review, the application is
subject to the standard FDA review period of 10 months after FDA
accepts the application for filing. Priority review designation
does not change the scientific/medical standard for approval or the
quality of evidence necessary to support approval.
Under
the accelerated approval program, the FDA may approve a BLA on the
basis of either a surrogate endpoint that is reasonably likely to
predict a clinical benefit, or on a clinical endpoint that can be
measured earlier than irreversible morbidity or mortality, that is
reasonably likely to predict an effect on irreversible morbidity or
mortality or other clinical benefit, taking into account the
severity, rarity, or prevalence of the condition and the
availability or lack of alternative treatments. Post-marketing
studies or completion of ongoing studies after marketing approval
are generally required to verify the biologic’s clinical
benefit in relationship to the surrogate endpoint or ultimate
outcome in relationship to the clinical benefit. In addition, the
Food and Drug Administration Safety and Innovation Act, or FDASIA,
which was enacted and signed into law in 2012, established the new
Breakthrough Therapy designation. A sponsor may seek FDA
designation of its product candidate as a breakthrough therapy if
the product candidate is intended, alone or in combination with one
or more other drugs or biologics, to treat a serious or
life-threatening disease or condition and preliminary clinical
evidence indicates that the therapy may demonstrate substantial
improvement over existing therapies on one or more clinically
significant endpoints, such as substantial treatment effects
observed early in clinical development. Sponsors may request the
FDA to designate a breakthrough therapy at the time of, or any time
after, the submission of an IND, but ideally before an end-of-phase
2 meeting with the FDA. If the FDA designates a breakthrough
therapy, it may take actions appropriate to expedite the
development and review of the application, which may include
holding meetings with the sponsor and the review team throughout
the development of the therapy; providing timely advice to, and
interactive communication with, the sponsor regarding the
development of the drug to ensure that the development program to
gather the nonclinical and clinical data necessary for approval is
as efficient as practicable; involving senior managers and
experienced review staff, as appropriate, in a collaborative,
cross-disciplinary review; assigning a cross-disciplinary project
lead for the FDA review team to facilitate an efficient review of
the development program and to serve as a scientific liaison
between the review team and the sponsor; and considering
alternative clinical trial designs when scientifically appropriate,
which may result in smaller trials or more efficient trials that
require less time to complete and may minimize the number of
patients exposed to a potentially less efficacious
treatment.
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Fast
Track designation, priority review and breakthrough therapy
designation do not change the standards for approval but may
expedite the development or approval process.
Post-Approval
Requirements
Any
products manufactured or distributed pursuant to FDA approvals are
subject to pervasive and continuing regulation by the FDA,
including, among other things, requirements relating to
record-keeping, reporting of adverse experiences, periodic
reporting, product sampling and distribution, and advertising and
promotion of the product. After approval, most changes to the
approved product, such as adding new indications or other labeling
claims, are subject to prior FDA review and approval. There also
are continuing, annual user fee requirements for any marketed
products and the establishments at which such products are
manufactured, as well as new application fees for supplemental
applications with clinical data. Biologic manufacturers and their
subcontractors are required to register their establishments with
the FDA and certain state agencies, and are subject to periodic
unannounced inspections by the FDA and certain state agencies for
compliance with GMP, which impose certain procedural and
documentation requirements. Changes to the manufacturing process
are strictly regulated, and, depending on the significance of the
change, may require prior FDA approval before being implemented.
FDA regulations also require investigation and correction of any
deviations from cGMP and impose reporting requirements on
manufacturers. Accordingly, manufacturers must continue to expend
time, money and effort in the area of production and quality
control to maintain compliance with cGMP and other aspects of
regulatory compliance. We cannot be certain that we or our present
or future suppliers will be able to comply with the cGMP
regulations and other FDA regulatory requirements. If we are not
able to comply with these requirements, the FDA may, among other
things, halt our clinical trials, require us to recall a product
from distribution, or withdraw approval of the BLA.
The FDA
may withdraw approval if compliance with regulatory requirements
and standards is not maintained or if problems occur after the
product reaches the market. Later discovery of previously unknown
problems with a product, including adverse events of unanticipated
severity or frequency, or with manufacturing processes, or failure
to comply with regulatory requirements, may result in revisions to
the approved labeling to add new safety information; imposition of
post-market studies or clinical studies to assess new safety risks;
or imposition of distribution restrictions or other restrictions
under a REMS program. Other potential consequences include, among
other things:
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●
restrictions on the
marketing or manufacturing of the product, complete withdrawal of
the product from the market or product recalls;
●
fines, warning
letters or holds on post-approval clinical studies;
●
refusal of the FDA
to approve pending applications or supplements to approved
applications, or suspension or revocation of product license
approvals;
●
product seizure or
detention, or refusal to permit the import or export of products;
or
●
injunctions or the
imposition of civil or criminal penalties.
The FDA
closely regulates the marketing, labeling, advertising and
promotion of biologics. A company can make only those claims
relating to safety and efficacy, purity and potency that are
approved by the FDA and in accordance with the provisions of the
approved label. The FDA and other agencies actively enforce the
laws and regulations prohibiting the promotion of off-label uses.
Failure to comply with these requirements can result in, among
other things, adverse publicity, warning letters, corrective
advertising and potential civil and criminal penalties. Physicians
may prescribe legally available products for uses that are not
described in the product’s labeling and that differ from
those tested by us and approved by the FDA. Such off-label uses are
common across medical specialties. Physicians may believe that such
off-label uses are the best treatment for many patients in varied
circumstances. The FDA does not regulate the behavior of physicians
in their choice of treatments. The FDA does, however, restrict
manufacturer’s communications on the subject of off-label use
of their products.
Orphan
Drug Designation
The FDA
may grant orphan drug designation to drugs or biologics intended to
treat a rare disease or condition that affects fewer than 200,000
individuals in the United States, or if it affects more than
200,000 individuals in the United States, there is no
reasonable expectation that the cost of developing and
manufacturing the drug for this type of disease or condition will
be recovered from sales in the United States.
In the
United States, orphan drug designation entitles a party to
financial incentives such as opportunities for grant funding
towards clinical trial costs, tax advantages and user-fee waivers.
In addition, if a product receives the first FDA approval for the
indication for which it has orphan designation, the product is
entitled to orphan drug exclusivity, which means the FDA may not
approve any other application to market the same drug for the same
indication for a period of 7 years, except in limited
circumstances, such as a showing of clinical superiority over the
product with orphan exclusivity.
Orphan
drug designation must be requested before submitting an application
for marketing approval. Orphan drug designation does not convey any
advantage in, or shorten the duration of, the regulatory review and
approval process.
Other
Health Care Laws
Our
sales, promotion, medical education and other activities following
product approval will be subject to regulation by numerous
regulatory and law enforcement authorities in the United States in
addition to the FDA, including potentially the Federal Trade
Commission, the Department of Justice, the Centers for Medicare and
Medicaid Services, other divisions of the Department of Health and
Human Services and state and local governments. Our promotional and
scientific/educational programs must comply with the anti-kickback
provisions of the Social Security Act, the Foreign Corrupt
Practices Act, the False Claims Act, the Physician Payments
Sunshine Act, the Veterans Health Care Act and similar state
laws.
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Depending on the
circumstances, failure to meet these applicable regulatory
requirements can result in criminal prosecution, fines or other
penalties, exclusion from government health care programs,
injunctions, recall or seizure of products, total or partial
suspension of production, denial or withdrawal of pre-marketing
product approvals, private “qui tam” actions brought by
individual whistleblowers in the name of the government or refusal
to allow us to enter into supply contracts, including government
contracts.
Coverage
and Reimbursement
Sales
of pharmaceutical products depend significantly on the availability
of third-party coverage and reimbursement. Third-party payors
include government health administrative authorities, managed care
providers, private health insurers and other organizations. These
third-party payors are increasingly challenging the price and
examining the cost-effectiveness of medical products and services.
In addition, significant uncertainty exists as to the reimbursement
status of newly approved healthcare products and new drug classes,
including biosimilars such as our product candidates. We may need
to conduct expensive clinical studies to demonstrate the
comparative cost-effectiveness of our products. The product
candidates that we develop may not be considered cost-effective. It
is time consuming and expensive for us to seek reimbursement from
third-party payors. Reimbursement may not be available or
sufficient to allow us to sell our products on a competitive and
profitable basis.
The
United States and some foreign jurisdictions are considering or
have enacted a number of legislative and regulatory proposals to
change the healthcare system in ways that could affect our ability
to sell our products profitably. Among policy makers and payors in
the United States and elsewhere, there is significant interest in
promoting changes in healthcare systems with the stated goals of
containing healthcare costs, improving quality and/or expanding
access. In the United States, the pharmaceutical industry has been
a particular focus of these efforts and has been significantly
affected by major legislative initiatives.
Foreign
Regulation
In
addition to regulations in the United States, we will be subject to
a variety of foreign regulations governing clinical trials and
commercial sales and distribution of our products to the extent we
choose to develop or sell any products outside of the United
States. The approval process varies from country to country and the
time may be longer or shorter than that required to obtain FDA
approval. The requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary greatly
from country to country.
Corporate Information
We were
formed as a Colorado corporation in 1983. Our principal office is
located at 8229 Boone Boulevard, Suite 802, Vienna, Virginia 22182.
Our telephone number is 703-506-9460 and our web site is
www.cel-sci.com.
The
information contained in, and that which can be accessed through,
our website is not incorporated into and does not form a part of
this prospectus supplement.
S-18
The Offering
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Issuer
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CEL-SCI
Corporation
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Securities
offered by us
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____________
shares of common stock, as well as Series CC, Series DD and Series
EE warrants. The shares of common stock and warrants are being sold
at a combined price of $____ per unit. The shares of common stock
and warrants are immediately separable and will be issued
separately. This prospectus supplement also registers the shares of
common stock issuable upon the exercise of the warrants being
offered.
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Common
stock outstanding immediately prior to this
offering.(1)
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156,200,407
shares.
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Common
stock to be outstanding immediately after
this offering.(1)
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______________shares.
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Warrants we are offering
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● Series CC warrants
to purchase up to ______ shares of our common stock. Each Series CC
warrant has an exercise price of $_____ per share, is immediately
exercisable and will expire on __________________.
● Series DD warrants
to purchase up to _____ shares of our common stock. Each Series DD
warrant has an exercise price of $____ per share, is immediately
exercisable and will expire on _______________.
● Series EE warrants
to purchase up to ______ shares of our common stock. Each Series EE
warrant has an exercise price of $_____ per share, is immediately
exercisable and will expire on _________________.
There is presently no public market for the warrants we are
offering by means of this prospectus supplement. It is not
anticipated that a public market for the warrants will develop in
the future. We will not apply to list the warrants on NYSE
MKT.
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Use of
proceeds
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We
estimate that the net proceeds from this offering will be
approximately $_________ after deducting estimated placement agent
discounts and commissions and estimated offering expenses payable
by us.
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We
intend to use the net proceeds from this offering primarily to fund
our Phase 3 clinical trial of Multikine for head and neck cancer,
to fund the Phase 1 trial of Multikine in HIV/HPV co-infected
patients with anal warts, and for general corporate purposes. See
“Use of Proceeds.”
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Dividend
policy
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We
have not declared or paid any cash or other dividends on our common
stock and do not expect to declare or pay any cash or other
dividends in the foreseeable future.
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Risk
factors
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Investing in our
common stock and warrants involves a high degree of risk, and the
purchasers of our securities may lose all or part of their
investment. Before deciding to invest in our securities, please
carefully read the section entitled “Risk Factors,”
including the risks incorporated therein from our most recent
Annual Report on Form 10-K for the year ended September 30, 2015
and our other periodic reports filed with the SEC and incorporated
by reference herein and the Risk Factors in the accompanying
prospectus.
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NYSE
MKT trading symbol
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CVM
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(1)
This number is
based on 156,200,407 shares outstanding as of November 30, 2016,
which excludes (i) 86,059,564 shares that may be issued upon the
exercise of outstanding warrants, with a weighted average exercise
price of $0.97 per share; (ii) 8,529,287 shares that may be issued
upon the exercise of outstanding options, with a weighted average
exercise price of $2.38 per share; (iii) any shares issuable upon
the exercise of the warrants which may be sold by means of this
prospectus supplement, and (iv) any shares issuable upon the
exercise of warrants we will issue to the placement agent in
connection with this offering.
S-19
RISK FACTORS
Investing in our
common stock and warrants involves a high degree of risk. You
should carefully consider the following risks, the risks described
in our Annual Report on Form 10-K for the year ended September 30,
2015, as well as the other information and data set forth in this
prospectus supplement, the accompanying prospectus and the
documents incorporated by reference herein and therein before
making an investment decision with respect to our common stock and
warrants. The risks and uncertainties we described are not the only
ones facing us. Additional risks not presently known to us, or that
we currently deem immaterial, may also impair our business
operations. If any of these risks were to occur, our business,
financial condition, result of operations and liquidity would
likely suffer. In that event, the trading price of our common stock
would decline, and you could lose all or part of your investment.
Some statements in this prospectus supplement, including statements
in the following risk factors, constitute forward-looking
statements. See “Forward-Looking
Statements.”
Risks Related to CEL-SCI
Our Phase 3 Study has been placed on partial clinical hold by the
FDA
We will
not be able to enroll any additional patients in the Phase 3
clinical trial unless FDA removes the clinical hold.
We have incurred significant losses since inception, and we
anticipate that we will continue to incur significant losses for
the foreseeable future and may never achieve or maintain
profitability.
We have
a history of net losses, expect to incur substantial losses and
have negative operating cash flow for the foreseeable future, and
may never achieve or maintain profitability. Since the date of our
formation and through June 30, 2016, we incurred net losses of
approximately $285 million. We have relied principally upon the
proceeds from the public and private sales of our securities to
finance our activities to date. To date, we have not commercialized
any products or generated any revenue from the sale of products,
and we do not expect to generate any product revenue for the
foreseeable future. We do not know whether or when we will generate
product revenue or become profitable.
We are
heavily dependent on the success of Multikine which is under
clinical development. We cannot be certain that Multikine will
receive regulatory approval or be successfully commercialized even
if we receive regulatory approval. On September 26, 2016, FDA
placed our Phase 3 clinical trial for Multikine on partial clinical
hold. We will not be able to enroll any additional patients in the
Phase 3 clinical trial unless FDA removes the clinical hold. In
addition, prior to FDA’s issuance of the partial clinical
hold, we were discussing with our Independent Data Monitoring
Committee issues related to enrollment of additional patients in
trial. Multikine is our only product candidate in late-stage
clinical development, and our business currently depends heavily on
its successful development, regulatory approval and
commercialization. We have no drug products for sale currently and
may never be able to develop approved and marketable drug
products.
S-20
Even if
we succeed in developing and commercializing one or more of our
product candidates, we expect to continue to incur significant
operating and capital expenditures as we:
●
continue to
undertake preclinical development and clinical trials for product
candidates;
●
seek regulatory
approvals for product candidates; and
●
implement
additional internal systems and infrastructure.
To
become and remain profitable, we must succeed in developing and
commercializing our product candidates, which must generate
significant revenue. This will require us to be successful in a
range of challenging activities, including completing preclinical
testing and clinical trials of our product candidates, discovering
or acquiring additional product candidates, obtaining regulatory
approval for these product candidates and manufacturing, marketing
and selling any products for which we may obtain regulatory
approval. We are only in the preliminary stages of most of these
activities. We may never succeed in these activities and, even if
we do, may never generate revenue that is significant enough to
achieve profitability.
Even if
we do achieve profitability, we may not be able to sustain or
increase profitability on a quarterly or annual basis. Our failure
to become and remain profitable could depress the value of our
company and could impair our ability to raise capital, expand our
business, maintain our research and development efforts, diversify
our product offerings or even continue our operations. A decline in
the value of our company could cause our stockholders to lose all
or part of their investment.
We will require substantial additional capital to remain in
operation. A failure to obtain this necessary capital when needed
could force us to delay, limit, reduce or terminate our product
candidates’ development or commercialization
efforts.
As of
September 30, 2016, we had cash and cash equivalents of $2.9
million. We believe that we will continue to expend substantial
resources for the foreseeable future developing Multikine, LEAPS
and any other product candidates or technologies that we may
develop or acquire. These expenditures will include costs
associated with research and development, potentially obtaining
regulatory approvals and having our products manufactured, as well
as marketing and selling products approved for sale, if any. In
addition, other unanticipated costs may arise. Because the outcome
of our current and anticipated clinical trials is highly uncertain,
we cannot reasonably estimate the actual amounts necessary to
successfully complete the development and commercialization of our
product candidates.
Our
future capital requirements depend on many factors,
including:
●
the rate of
progress of, results of and cost of completing Phase 3 clinical
development of Multikine for the treatment of certain head and neck
cancers, which trial is currently on partial clinical
hold;
●
the results of our
applications to and meetings with the FDA, the EMA and other
regulatory authorities and the consequential effect on our
operating costs;
●
assuming favorable
Phase 3 clinical results, the cost, timing and outcome of our
efforts to obtain marketing approval for Multikine in the United
States, Europe and in other jurisdictions, including the
preparation and filing of regulatory submissions for Multikine with
the FDA, the EMA and other regulatory authorities;
S-21
●
the scope,
progress, results and costs of additional preclinical, clinical, or
other studies for additional indications for Multikine, LEAPS and
other product candidates and technologies that we may develop or
acquire;
●
the timing of, and
the costs involved in, obtaining regulatory approvals for LEAPS if
clinical studies are successful;
●
the cost and timing
of future commercialization activities for our products, if any of
our product candidates are approved for marketing, including
product manufacturing, marketing, sales and distribution
costs;
●
the revenue, if
any, received from commercial sales of our product candidates for
which we receive marketing approval;
●
the cost of having
our product candidates manufactured for clinical trials and in
preparation for commercialization;
●
our ability to
establish and maintain strategic collaborations, licensing or other
arrangements and the financial terms of such
agreements;
●
the costs involved
in preparing, filing and prosecuting patent applications and
maintaining, defending and enforcing our intellectual property
rights, including litigation costs, and the outcome of such
litigation; and
●
the extent to which
we acquire or in-license other products or
technologies.
Based
on our current operating plan, and absent any future financings or
strategic partnerships, we believe that the net proceeds we receive
from this offering and our existing cash and cash equivalents and
investments will be sufficient to fund our projected operating
expenses and capital expenditure requirements
_________________________. However, our operating plan may change
as a result of many factors currently unknown to us, and we may
need additional funds sooner than planned. Additional funds may not
be available when we need them on terms that are acceptable to us,
or at all. If adequate funds are not available to us on a timely
basis, we may be required to delay, limit, reduce or terminate
preclinical studies, clinical trials or other development
activities for Multikine, LEAPS, or any other product candidates or
technologies that we develop or acquire, or delay, limit, reduce or
terminate our sales and marketing capabilities or other activities
that may be necessary to commercialize our product candidates. Due
to recurring losses from operations and future liquidity needs,
there is substantial doubt about our ability to continue as a going
concern without additional capital becoming available. The doubt
about our ability to continue as a going concern could have an
adverse impact on our ability to execute our business plan, result
in the reluctance on the part of certain suppliers to do business
with us, or adversely affect our ability to raise additional debt
or equity capital.
The costs of our product candidate development and clinical trials
are difficult to estimate and will be very high for many years,
preventing us from making a profit for the foreseeable future, if
ever.
Clinical and other
studies necessary to obtain approval of a new drug can be time
consuming and costly, especially in the United States, but also in
foreign countries. Our estimates of the costs associated with
future clinical trials and research may be substantially lower than
what we actually experience. It is impossible to predict what we
will face in the development of a product candidate, such as
Multikine. The purpose of clinical trials is to provide both us and
regulatory authorities with safety and efficacy data in humans. It
is relatively common to revise a trial or add subjects to a trial
in progress. The difficult and often complex steps necessary to
obtain regulatory approval, especially that of the FDA, and the EMA
involve significant costs and may require several years to
complete. We expect that we will need substantial additional
financing over an extended period of time in order to fund the
costs of future clinical trials, related research, and general and
administrative expenses.
S-22
The
extent of our clinical trials and research programs are primarily
based upon the amount of capital available to us and the extent to
which we receive regulatory approvals for clinical trials. We have
established estimates of the future costs of the Phase 3 clinical
trial for Multikine, but, as explained above, our estimates may not
prove correct.
An adverse determination in any current or future lawsuits or
arbitration proceedings to which we are a party could have a
material adverse effect on us.
We are
currently involved in a pending arbitration proceeding,
CEL-SCI Corporation v. inVentiv
Health Clinical, LLC (f/k/a PharmaNet LLC) and PharmaNet GmbH
(f/k/a PharmaNet AG). We initiated the proceedings against
inVentiv Health Clinical, LLC, or inVentiv, the former third-party
CRO, and are seeking payment for damages related to
inVentiv’s prior involvement in the Phase 3 clinical trial of
Multikine. The arbitration claim, initiated under the Commercial
Rules of the American Arbitration Association, alleges (i) breach
of contract, (ii) fraud in the inducement, and (iii) common law
fraud. Currently, we are seeking at least $50 million in damages in
our amended statement of claim.
In an
amended statement of claim, we asserted the claims set forth above
as well as an additional claim for professional malpractice. The
arbitrator subsequently granted inVentiv’s motion to dismiss
the professional malpractice claim based on the “economic
loss doctrine” which, under New Jersey law, is a legal
doctrine that, under certain circumstances, prohibits bringing a
negligence-based claim alongside a claim for breach of contract.
The arbitrator denied the remainder of inVentiv’s motion,
which had sought to dismiss certain other aspects of the amended
statement of claim. In particular, the arbitrator rejected
inVentiv’s argument that several aspects of the amended
statement of claim were beyond the arbitrator’s
jurisdiction.
In
connection with the pending arbitration proceedings, inVentiv has
asserted counterclaims against us for (i) breach of contract,
seeking at least $2 million in damages for services allegedly
performed by inVentiv; (ii) breach of contract, seeking at least $1
million in damages for the alleged use of inVentiv’s name in
connection with publications and promotions in violation of the
parties’ contract; (iii) opportunistic breach, restitution
and unjust enrichment, seeking at least $20 million in disgorgement
of alleged unjust profits allegedly made by us as a result of the
purported breaches referenced in subsection (ii); and (iv)
defamation, seeking at least $1 million in damages for allegedly
defamatory statements made about inVentiv. We believe
inVentiv’s counterclaims are meritless and intend to
vigorously defend against them. However, if such defense is
unsuccessful, and inVentiv successfully asserts any of its
counterclaims, such an adverse determination could have a material
adverse effect on our business, results, financial condition and
liquidity.
S-23
In
October 2015, we signed an arbitration funding agreement with a
company established by Lake Whillans Litigation Finance, LLC, a
firm specializing in funding litigation expenses. Pursuant to the
agreement, an affiliate of Lake Whillans will provide us with up to
$5 million in funding for litigation expenses to support our
arbitration claims against inVentiv. The funding is available to us
to fund the expenses of the ongoing arbitration and will only be
repaid if we receive proceeds from the arbitration.
The
arbitration hearing on the merits began on September 26,
2016.
Additionally, we
may also be the target of claims asserting violations of securities
fraud and derivative actions, or other litigation or arbitration
proceedings in the future. Any future litigation could result in
substantial costs and divert management’s attention and
resources. These lawsuits or arbitration proceedings may result in
large judgments or settlements against us, any of which could have
a material adverse effect on our business, operating results,
financial condition and liquidity.
We have received a subpoena from the Securities and Exchange
Commission.
We have
received subpoenas from the Securities and Exchange Commission,
which is conducting a non-public, private investigation relating to
certain of our private and public financings as well as reports,
articles and other publications prepared by third parties
concerning us, the pending arbitration between us and our former
CRO, inVentiv Health, and our Phase 3 clinical trial. This is the
first SEC investigation involving us. While we are confident that
we have the appropriate policies and procedures in place to ensure
compliance with all SEC rules and regulations, we cannot predict
when the SEC will conclude its investigation or the outcome of the
investigation. We are cooperating fully with the SEC in this
matter.
Compliance with changing regulations concerning corporate
governance and public disclosure may result in additional
expenses.
Changing laws,
regulations and standards relating to corporate governance and
public disclosure may create uncertainty regarding compliance
matters. New or changed laws, regulations and standards are subject
to varying interpretations in many cases. As a result, their
application in practice may evolve over time. We are committed to
maintaining high standards of corporate governance and public
disclosure. Complying with evolving interpretations of new or
changing legal requirements may cause us to incur higher costs as
we revise current practices, policies and procedures, and may
divert management time and attention from potential
revenue-generating activities to compliance matters. If our efforts
to comply with new or changed laws, regulations and standards
differ from the activities intended by regulatory or governing
bodies due to ambiguities related to practice, our reputation may
also be harmed. Further, our board members, chief executive
officer, and other executive officers could face an increased risk
of personal liability in connection with the performance of their
duties. As a result, we may have difficulty attracting and
retaining qualified board members and executive officers, which
could harm our business.
We have not established a definite plan for the marketing of
Multikine, if approved.
We have
not established a definitive plan for marketing nor have we
established a price structure for any of our product candidates, if
approved. However, we intend, if we are in a position to do so, to
sell Multikine ourselves in certain markets where it is approved,
and or to enter into written marketing agreements with various
third parties with established sales forces in such markets. The
sales forces in turn would, we believe, focus on selling Multikine
to targeted cancer centers, physicians and clinics involved in the
treatment of head and neck cancer. We have already licensed future
sales of Multikine, if approved, to three companies: Teva
Pharmaceuticals in Israel, Turkey, Serbia and Croatia; Orient
Europharma in Taiwan, Singapore, Hong Kong, Malaysia, South Korea,
the Philippines, Australia and New Zealand; and Byron BioPharma,
LLC in South Africa. We believe that these companies will have the
resources to market Multikine appropriately in their respective
territories, if approved, but there is no guarantee that they will.
There is no assurance that we will be able to find qualified
third-party partners to market our product in other areas, on terms
that are favorable to us, or at all.
S-24
We may
encounter problems, delays and additional expenses in developing
marketing plans with third parties. In addition, even if Multikine,
if approved, is cost-effective and demonstrated to increase overall
patient survival, we may experience other limitations involving the
proposed sale of Multikine, such as uncertainty of third-party
coverage and reimbursement. There is no assurance that we can
successfully market Multikine, if approved, or any other product
candidates we may develop.
We hope to expand our clinical development capabilities in the
future, and any difficulties hiring or retaining key personnel or
managing this growth could disrupt our operations.
We are
highly dependent on the principal members of our management and
development staff. If the Phase 3 Multikine clinical trial is
successful, we expect to expand our clinical development and
manufacturing capabilities, which will involve hiring additional
employees. Future growth will require us to continue to implement
and improve our managerial, operational and financial systems and
to continue to retain, recruit and train additional qualified
personnel, which may impose a strain on our administrative and
operational infrastructure. The competition for qualified personnel
in the biopharmaceutical field is intense. We are highly dependent
on our ability to attract, retain and motivate highly qualified
management and specialized personnel required for clinical
development. Due to our limited resources, we may not be able to
manage effectively the expansion of our operations or recruit and
train additional qualified personnel. If we are unable to retain
key personnel or manage our future growth effectively, we may not
be able to implement our business plan.
If product liability or patient injury lawsuits are brought against
us, we may incur substantial liabilities and may be required to
limit clinical testing or future commercialization of Multikine or
our other product candidates.
We face
an inherent risk of product liability as a result of the clinical
testing of Multikine and other product candidates, and will face an
even greater risk if we commercialize any of our product
candidates. For example, we may be sued if our Multikine or LEAPS
product candidates, or any other future product candidates,
allegedly cause injury or are found to be otherwise unsuitable
during clinical testing, manufacturing or, if approved, marketing
or sale. Any such product liability claims may include allegations
of defects in manufacturing, defects in design, a failure to warn
of dangers inherent in the product candidate, negligence, strict
liability and a breach of warranties. Claims could also be asserted
under state consumer protection acts.
S-25
Furthermore,
Multikine is made, in part, from components of human blood. There
are inherent risks associated with products that involve human
blood such as possible contamination with viruses, including
hepatitis or HIV. Any possible contamination could cause injuries
to patients who receive contaminated Multikine, or could require us
to destroy batches of Multikine, thereby subjecting us to possible
financial losses, lawsuits and harm to our business.
If we
cannot successfully defend ourselves against product liability
claims, we may incur substantial liabilities or be required to
limit or cease the clinical testing or commercialization of our
product candidates, if approved. Even a successful defense would
require significant financial and management resources. Regardless
of the merits or eventual outcome, liability claims may result
in:
●
decreased demand
for Multikine or our other product candidates, if
approved;
●
injury to our
reputation;
●
withdrawal of
existing, or failure to enroll additional, clinical trial
participants;
●
costs to defend any
related litigation;
●
a diversion of
management’s time and our resources;
●
substantial
monetary awards to trial participants or patients;
●
product candidate
recalls, withdrawals or labeling, marketing or promotional
restrictions;
●
loss of
revenue;
●
inability to
commercialize Multikine or our other product candidates;
and
●
a decline in the
price of our common stock.
Although we have
product liability insurance for Multikine in the amount of $5.0
million, the successful prosecution of a product liability case
against us could have a materially adverse effect upon our business
if the amount of any judgment exceeds our insurance coverage. Any
claim that may be brought against us could result in a court
judgment or settlement in an amount that is not covered, in whole
or in part, by our insurance or that is in excess of the limits of
our insurance coverage. Our insurance policies also have various
exclusions, and we may be subject to a claim for which we have no
coverage. We may have to pay any amounts awarded by a court or
negotiated in a settlement that exceed our coverage limitations or
that are not covered by our insurance, and we may not have, or be
able to obtain, sufficient capital to pay such amounts. We
commenced the Phase 3 clinical trial for Multikine in December
2010. Although no claims have been brought to date, participants in
our clinical trials could bring civil actions against us for any
unanticipated harmful effects allegedly arising from the use of
Multikine or any other product candidate that we may attempt to
develop.
S-26
Our commercial success depends, in part, upon attaining significant
market acceptance of our product candidates, if approved, among
physicians, patients, healthcare payors and major operators of
cancer clinics.
Even if
we obtain regulatory approval for our product candidates, any
resulting product may not gain market acceptance among physicians,
healthcare payors, patients and the medical community, which are
critical to our commercial success. Market acceptance of any
product candidate for which we receive approval depends on a number
of factors, including:
●
the efficacy and
safety as demonstrated in clinical trials;
●
the timing of
market introduction of a product candidate as well as competitive
products;
●
the clinical
indications for which the drug is approved;
●
the approval,
availability, market acceptance and reimbursement for the companion
diagnostic;
●
acceptance by
physicians, major operators of cancer clinics and patients of the
drug as a safe and effective treatment;
●
the potential and
perceived advantages of a product candidate over alternative
treatments, especially with respect to patient subsets that are
targeted with a product candidate;
●
the safety of a
product candidate seen in a broader patient group, including its
use outside the approved indications;
●
the cost of
treatment in relation to alternative treatments;
●
the availability of
adequate reimbursement and pricing by third-party payors and
government authorities;
●
relative
convenience and ease of administration;
●
the prevalence and
severity of adverse side effects; and
●
the effectiveness
of our sales and marketing efforts.
If our
product candidates are approved but fail to achieve an adequate
level of acceptance by physicians, healthcare payors and patients,
we will not be able to generate significant revenues, and we may
not become or remain profitable.
Risks
Related to Government Approvals
Our product candidates must undergo rigorous preclinical and
clinical testing and regulatory approvals, which could be costly
and time-consuming and subject us to unanticipated delays or
prevent us from marketing any products.
Our
product candidates are subject to premarket approval from the FDA
in the United States, the EMA in the European Union, and by
comparable agencies in most foreign countries before they can be
sold. Before obtaining marketing approval, these product candidates
must undergo costly and time consuming preclinical and clinical
testing which could subject us to unanticipated delays and may
prevent us from marketing our product candidates. There can be no
assurance that such approvals will be granted on a timely basis, if
at all.
S-27
Clinical testing is expensive and can take many
years to complete, and its outcome is inherently uncertain. Failure
can occur at any time during the clinical trial process. The
results of preclinical studies and early clinical trials of
our product candidates may not be
predictive of the results of later-stage clinical trials. A number
of companies in the biopharmaceutical industry have suffered
significant setbacks in advanced clinical trials due to lack of
efficacy or adverse safety profiles, notwithstanding promising
results in earlier trials. Our current and future clinical trials
may not be successful.
Although
we are involved in Phase 1 and Phase 3 clinical trials for
Multikine, we may experience delays in our clinical trials and we
do not know whether the clinical trials will need to be redesigned,
enroll patients on a timely basis or be completed on schedule, if
at all. Clinical trials can be delayed for a variety of reasons,
including delays related to:
●
the availability of
financial resources needed to commence and complete our planned
trials;
●
obtaining
regulatory approval to commence a trial;
●
suspending
enrollment in clinical trials, as in the case of the partial
clinical hold issued by FDA related to our Phase 3 clinical trial
for Multikine;
●
reaching agreement
on acceptable terms with prospective contract research
organizations, or CROs, and clinical trial sites, the terms of
which can be subject to extensive negotiation and may vary
significantly among different CROs and trial sites;
●
obtaining
Institutional Review Board, or IRB, approval at each clinical trial
site;
●
recruiting suitable
patients to participate in a trial;
●
having patients
complete a trial or return for post-treatment
follow-up;
●
clinical trial
sites deviating from trial protocol or dropping out of a
trial;
●
adding new clinical
trial sites; or
●
manufacturing
sufficient quantities of our product
candidate for use in clinical trials.
Patient
enrollment, a significant factor in the timing of clinical trials,
is affected by many factors including the competence of the CRO
running the study, size and nature of the patient population, the
proximity of patients to clinical sites, the eligibility criteria
for the trial, the design of the clinical trial, competing clinical
trials and clinicians' and patients' perceptions as to the
potential advantages of the drug being studied in relation to other
available therapies, including any new drugs that may be approved
for the indications we are investigating. Furthermore, we rely on
CROs and clinical trial sites to ensure the proper and timely
conduct of our clinical trials and while we have agreements
governing their committed activities, we have limited influence
over their actual performance.
For
example, we are currently involved in a dispute with our former CRO
relating to the conduct of our Phase 3 study where we allege (i)
breach of contract, (ii) fraud in the inducement, and (iii) fraud.
In connection with this dispute, we have alleged that our CRO
failed to properly select, monitor and supervise the study sites
and principal investigators, ensure proper enrollment of subjects,
and ensure strict compliance with the Phase 3 trial protocol and
Good Clinical Practices, or GCP, and other applicable regulatory
requirements. Should our allegation be found to be true, regulatory
authorities may rule the data collected by that former CRO unusable
in support of our marketing applications. This would result in our
having to enroll approximately 125 additional subjects in our Phase
3 study beyond our current plans, which could cause additional
delays in our clinical testing and development program. Currently
the Phase 3 study is on partial clinical hold.
S-28
We
could also encounter delays if physicians encounter unresolved
ethical issues associated with enrolling patients in clinical
trials of our product candidates in lieu of prescribing existing
treatments that have established safety and efficacy profiles.
Further, a clinical trial may be suspended or terminated by us, the
IRBs for the institutions in which such trials are being conducted,
by the Company upon a final recommendation by the Independent Data
Monitoring Committee, or IDMC, with which the company agrees for
such trial, or by the FDA or other regulatory authorities due to a
number of factors, including failure to conduct the clinical trial
in accordance with regulatory requirements or our clinical
protocols, inspection of the clinical trial operations or trial
site by the FDA or other regulatory authorities resulting in the
imposition of a clinical hold, unforeseen safety issues or adverse
side effects, failure to demonstrate a benefit from using a product
candidate, changes in governmental regulations or administrative
actions or lack of adequate funding to continue the clinical
trial.
If we
experience termination of, or delays in the completion of, any
clinical trial of our product candidates, the commercial prospects
for our product candidates will be harmed, and our ability to
generate product revenues will be delayed. In addition, any delays
in completing our clinical trials will increase our costs, slow our
product development and approval process and jeopardize our ability
to commence product sales and generate revenues. Any of these
occurrences may harm our business, prospects, financial condition
and results of operations significantly. Many of the factors that
cause, or lead to, a delay in the commencement or completion of
clinical trials may also ultimately lead to a delay or the denial
of regulatory approval for our product candidates.
We
cannot be certain when or under what conditions we will undertake
future clinical trials. A variety of issues may delay our Phase 3
clinical trial for Multikine, such as patients in the Phase 3
clinical trial dying at a slower rate than projected and the
existing partial clinical hold, or preclinical and early clinical
trials for our other product candidates. For example, early trials,
or the plans for later trials, may not satisfy the requirements of
regulatory authorities, such as the FDA. We may fail to find
subjects willing to enroll in our trials. We manufacture Multikine
in our own manufacturing facility, but rely on third-party vendors
to manage the trial process and other activities, and these vendors
may fail to meet appropriate standards. Accordingly, the clinical
trials relating to our product candidates may not be completed on
schedule, the FDA or foreign regulatory agencies may order us to
stop or modify our research, or these agencies may not ultimately
approve any of our product candidates for commercial sale. Varying
interpretations of the data obtained from pre-clinical and clinical
testing could delay, limit or prevent regulatory approval of our
product candidates. The data collected from our clinical trials may
not be sufficient to support regulatory approval of our various
product candidates, including Multikine. Our failure to adequately
demonstrate the safety and efficacy of any of our product
candidates would delay or prevent regulatory approval of our
product candidates in the United States, which could prevent us
from achieving profitability. Although we had positive results in
our Phase 2 trials for Multikine, those results were for a very
small sample set, and we will not know how Multikine will perform
in a larger set of subjects until we are well into, or complete,
our Phase 3 clinical trial.
The
development and testing of product candidates and the process of
obtaining regulatory approvals and the subsequent compliance with
appropriate federal, state, local and foreign statutes and
regulations require the expenditure of substantial time and
financial resources. Failure to comply with the applicable U.S.
requirements at any time during the product development process,
approval process or after approval, may subject an applicant to
administrative or judicial sanctions. FDA sanctions could include,
among other actions, refusal to approve pending applications,
withdrawal of an approval, a clinical hold, termination of the
Phase 3 study, warning letters, product recalls or withdrawals from
the market, product seizures, total or partial suspension of
production or distribution, injunctions, fines, refusals of
government contracts, restitution, disgorgement or civil or
criminal penalties. Any agency or judicial enforcement action could
have a material adverse effect on us.
S-29
The
requirements governing the conduct of clinical trials,
manufacturing and marketing of our product candidates, including
Multikine, outside the United States vary from country to country.
Foreign approvals may take longer to obtain than FDA approvals and
can require, among other things, additional testing and different
trial designs. Foreign regulatory approval processes include all of
the risks associated with the FDA approval process. Some of those
agencies also must approve prices for products approved for
marketing. Approval of a product by the FDA or the EMA does not
ensure approval of the same product by the health authorities of
other countries. In addition, changes in regulatory requirements
for product approval in any country during the clinical trial
process and regulatory agency review of each submitted new
application may cause delays or rejections.
We have
only limited experience in filing and pursuing applications
necessary to gain regulatory approvals. Our lack of experience may
impede our ability to obtain timely approvals from regulatory
agencies, if at all. We will not be able to commercialize Multikine
and other product candidates until we have obtained regulatory
approval. In addition, regulatory authorities may also limit the
types of patients to which we or our third-party partners may
market Multikine or our other product candidates. Any failure to
obtain or any delay in obtaining required regulatory approvals may
adversely affect our or our third-party partners’ ability to
successfully market our product candidates.
Even if we obtain regulatory approval for our investigational
products, we will be subject to stringent, ongoing government
regulation.
If our
investigational products receive regulatory approval, either in the
United States or internationally, those products will be subject to
limitations on the approved indicated uses for which the product
may be marketed or to the conditions of approval, and may contain
requirements for potentially costly post-marketing testing,
including Phase 4 clinical trials, and surveillance of the
safety and efficacy of the investigational products. We will
continue to be subject to extensive regulatory requirements. These
regulations are wide-ranging and govern, among other
things:
●
product design,
development and manufacture;
●
product application
and use
●
adverse drug
experience;
●
product advertising
and promotion;
●
product
manufacturing, including good manufacturing practices
●
record keeping
requirements;
●
registration and
listing of our establishments and products with the FDA, EMA and
other state and national agencies;
S-30
●
product storage and
shipping;
●
drug sampling and
distribution requirements;
●
electronic record
and signature requirements; and
●
labeling changes or
modifications.
We and
any of our third-party manufacturers or suppliers must continually
adhere to federal regulations setting forth requirements, known as
current, Good Manufacturing Practices, or cGMPs, and their foreign
equivalents, which are enforced by the FDA, the EMA and other
national regulatory bodies through their facilities inspection
programs. If our facilities, or the facilities of our contract
manufacturers or suppliers, cannot pass a pre-approval plant
inspection or fail such inspections in the future, the FDA, EMA or
other national regulators will not approve our marketing
applications for our product candidates, or may withdraw any prior
approval. In complying with cGMP and foreign regulatory
requirements, we and any of our potential third-party manufacturers
or suppliers will be obligated to expend time, money and effort in
production, record-keeping and quality control to ensure that our
product candidates meet applicable specifications and other
requirements.
If we
do not comply with regulatory requirements at any stage, whether
before or after marketing approval is obtained, we may be subject
to, among other things, license suspension or revocation, criminal
prosecution, seizure, injunction, fines, be forced to remove a
product from the market or experience other adverse consequences,
including restrictions or delays in obtaining regulatory marketing
approval for such products or for other product candidates for
which we seek approval. This could materially harm our financial
results, reputation and stock price. Additionally, we may not be
able to obtain the labeling claims necessary or desirable for
product promotion. If we or other parties identify adverse effects
after any of our products are on the market, or if manufacturing
problems occur, regulatory approval may be suspended or withdrawn.
We may be required to reformulate our products, conduct additional
clinical trials, make changes in product labeling or indications of
use, or submit additional marketing applications to support any
changes. If we encounter any of the foregoing problems, our
business and results of operations will be harmed and the market
price of our common stock may decline.
The FDA and other governmental authorities’
policies may change and additional government regulations may be
enacted that could prevent, limit or delay regulatory approval
of our product candidates. If
we are slow or unable to adapt to changes in existing requirements
or the adoption of new requirements or policies, or if we are not
able to maintain regulatory compliance, we may lose any marketing
approval that we may have obtained, which would adversely affect
our business, prospects and ability to achieve or sustain
profitability. We cannot predict the extent of adverse
government regulations which might arise from future legislative or
administrative action. Without government approval, we will be
unable to sell any of our product candidates.
Our product candidates may cause undesirable side effects or have
other properties that could delay or prevent their regulatory
approval, limit the commercial profile of an approved label, or
result in significant negative consequences following marketing
approval, if any.
Undesirable side
effects caused by our product candidates could cause us or
regulatory authorities to interrupt, delay or halt clinical trials
and could result in a more restrictive label or the delay or denial
of regulatory approval by the FDA or other comparable foreign
authorities. Results of our clinical trials could reveal a high and
unacceptable severity and/or prevalence of these or other side
effects. In such an event, our trials could be suspended or
terminated and the FDA or comparable foreign regulatory authorities
could order us to cease further development of, or deny approval
of, our product candidates for any or all targeted indications. The
drug-related side effects could affect patient recruitment or the
ability of enrolled patients to complete the trial or result in
potential product liability claims. Any of these occurrences may
harm our business, financial condition and prospects
significantly.
S-31
Additionally if one
or more of our product candidates receives marketing approval, and
we or others later identify undesirable side effects caused by such
products, a number of potentially significant negative consequences
could result, including:
●
regulatory
authorities may withdraw approvals of such product;
●
regulatory
authorities may require additional warnings on the
label;
●
we may be required
to create a medication guide outlining the risks of such side
effects for distribution to patients;
●
we could be sued
and held liable for harm caused to patients; and
●
our reputation may
suffer.
Any of
these events could prevent us from achieving or maintaining market
acceptance of the particular product candidate, if approved, and
could significantly harm our business, results of operations and
prospects.
We rely on third parties to conduct our preclinical and clinical
trials. If these third parties do not successfully carry out their
contractual duties and meet regulatory requirements, or meet
expected deadlines, we may not be able to obtain regulatory
approval for or commercialize our product candidates and our
business could be substantially harmed.
We have
relied upon and plan to continue to rely upon third-party CROs to
prepare for, conduct, monitor and manage data for our preclinical
and clinical programs. We rely on these parties for all aspects of
the execution of our preclinical and clinical trials, and although
we diligently oversee and carefully manage our CROs, we directly
control only certain aspects of their activities and rely upon them
to provide timely, complete, and accurate reports on their conduct
of our studies. Although such third parties provide support and
represent us for regulatory purposes in the context of our clinical
trials, ultimately we are responsible for ensuring that each of our
studies is conducted in accordance with the applicable protocol,
legal, regulatory, and scientific standards, and our reliance on
the CROs does not relieve us of our regulatory responsibilities. We
and our CROs acting on our behalf, as well as principal
investigators and trial sites, are required to comply with Good
Clinical Practice, or GCP and other applicable requirements, which
are implemented through regulations and guidelines enforced by the
FDA, the Competent Authorities of the Member States of the European
Economic Area, or EEA, and comparable foreign regulatory
authorities for all of our products in clinical development.
Regulatory authorities enforce these GCPs through periodic
inspections of trial sponsors, principal investigators, and trial
sites. If we or any of our CROs fail to comply with applicable GCPs
or other applicable regulations, the clinical data generated in our
clinical trials may be determined to be unreliable and we may
therefore need to enroll additional subjects in our clinical
trials, or the FDA, EMA or comparable foreign regulatory
authorities may require us to perform an additional clinical trial
or trials before approving our marketing applications. Moreover, if
we or any of our CROs, principal investigators, or trial sites,
fail to comply with applicable regulatory and GCP requirements,
then we, our CROs, principal investigators, or trial sites may be
subject to enforcement actions, such as fines, warning letters,
untitled letters, clinical holds, civil or criminal penalties,
and/or injunctions. We cannot assure you that upon inspection by a
given regulatory authority, such regulatory authority will
determine that any of our clinical trials comply with GCP
regulations. In addition, our clinical trials must be conducted
with product produced under GMP regulations. Our failure to comply
with these regulations may require us to delay or repeat clinical
trials, which would delay the regulatory approval
process.
S-32
For
example, we are currently involved in a dispute with our former CRO
relating to the conduct of our Phase 3 study where we allege (i)
breach of contract, (ii) fraud in the inducement, and (iii) fraud.
In connection with this dispute, we have alleged that our CRO
failed to properly select, monitor and supervise the study sites
and principal investigators, ensure proper enrollment of subjects,
and ensure strict compliance with the Phase 3 trial protocol and
GCP and other applicable regulatory requirements. Should our
allegations be found to be true regulatory authorities may rule the
data collected by that former CRO unusable in support of our
marketing applications. This would result in our having to enroll
approximately 125 additional subjects in our Phase 3 study beyond
our current plans, which could cause additional delays in our
clinical testing and development program. Currently the Phase 3
study is on partial clinical hold.
If any
of our relationships with our third-party CROs terminate, we may
not be able to enter into arrangements with alternative CROs or to
do so on commercially reasonable terms. In addition, our CROs are
not our employees, and except for remedies available to us under
our agreements with such CROs, we cannot control whether or not
they devote sufficient time and resources to our on-going clinical,
nonclinical and preclinical programs. If CROs do not successfully
fulfill their regulatory obligations, carry out their contractual
duties or obligations or meet expected deadlines, if they need to
be replaced or if the quality or accuracy of the clinical data they
obtain is compromised due to the failure to adhere to our clinical
protocols, regulatory requirements or for other reasons, our
clinical trials may be extended, delayed or terminated, and we may
not be able to obtain regulatory approval for or successfully
commercialize our product candidates. As a result, our results of
operations and the commercial prospects for our product candidates
would be harmed, our costs could increase and our ability to
generate revenues could be delayed.
Switching or adding
additional CROs involves additional cost and requires management
time and focus. In addition, there is a natural transition period
when a new CRO commences work. As a result, delays may occur, which
can materially impact our ability to meet our desired clinical
development timelines. Though we diligently oversee and carefully
manage our relationships with our CROs, there can be no assurance
that we will not encounter similar challenges or delays in our
clinical development in the future or that these delays or
challenges will not have a material adverse impact on our business,
financial condition and prospects.
S-33
We have obtained orphan drug designation from the FDA for Multikine
for neoadjuvant, or primary, therapy in patients with squamous cell
carcinoma of the head and neck, but we may be unable to maintain
the benefits associated with orphan drug designation, including the
potential for market exclusivity.
Under
the Orphan Drug Act, the FDA may grant orphan drug designation to a
drug or biologic intended to treat a rare disease or condition,
which is defined as one occurring in a patient population of fewer
than 200,000 in the United States, or a patient population greater
than 200,000 in the United States where there is no reasonable
expectation that the cost of developing the drug or biologic will
be recovered from sales in the United States. In the United States,
orphan drug designation entitles a party to financial incentives
such as opportunities for grant funding towards clinical trial
costs, tax advantages and user-fee waivers. In addition, if a
product that has orphan drug designation subsequently receives the
first FDA approval for the disease for which it has such
designation, the product is entitled to orphan drug exclusivity,
which means that the FDA may not approve any other applications,
including a full Biologics License Application, or BLA, to market
the same biologic for the same indication for seven years, except
in limited circumstances, such as a showing of clinical superiority
to the product with orphan drug exclusivity or where the
manufacturer is unable to assure sufficient product
quantity.
Even
though we have received orphan drug designation for Multikine for
the treatment of squamous cell carcinoma of the head and neck, we
may not be the first to obtain marketing approval of a product for
the orphan-designated indication due to the uncertainties
associated with developing pharmaceutical products. In addition,
exclusive marketing rights in the United States may be limited if
we seek approval for an indication broader than the
orphan-designated indication, or may be lost if the FDA later
determines that the request for designation was materially
defective or if we are unable to assure sufficient quantities of
the product to meet the needs of patients with the rare disease or
condition. Further, even if we obtain orphan drug exclusivity for a
product candidate, that exclusivity may not effectively protect the
product candidate from competition because different drugs with
different active moieties can be approved for the same condition.
Even after an orphan product is approved, the FDA can subsequently
approve another drug with the same active moiety for the same
condition if the FDA concludes that the later drug is safer, more
effective, or makes a major contribution to patient care. Orphan
drug designation neither shortens the development time or
regulatory review time of a drug nor gives the drug any advantage
in the regulatory review or approval process.
Our current and future relationships with healthcare professionals,
principal investigators, consultants, customers (actual and
potential) and third-party payors in the United States and
elsewhere may be subject, directly or indirectly, to applicable
healthcare laws and regulations.
Healthcare
providers, physicians and third-party payors in the United States
and elsewhere will play a primary role in the recommendation and
prescription of any drug candidates for which we obtain marketing
approval. Our current and future arrangements with healthcare
professionals, principal investigators, consultants, customers
(actual and potential) and third-party payors may expose us to
broadly applicable healthcare laws, including, without
limitation:
●
the federal
Anti-Kickback Statute, which prohibits, among other things, persons
from knowingly and willfully soliciting, offering, receiving or
providing remuneration, directly or indirectly, in cash or in kind,
to induce or reward, or in return for, either the referral of an
individual for, or the purchase, lease, order or recommendation of,
any good, facility, item or service, for which payment may be made,
in whole or in part, under federal and state healthcare programs
such as Medicare and Medicaid. A person or entity does not need to
have actual knowledge of the statute or specific intent to violate
it to have committed a violation. In addition, the Affordable Care
Act provides that the government may assert that a claim including
items or services resulting from a violation of the federal
Anti-Kickback Statute constitutes a false or fraudulent claim for
purposes of the False Claims Act;
S-34
●
federal civil and
criminal false claims laws, including the federal False Claims Act,
which impose criminal and civil penalties, including civil
whistleblower actions, against individuals or entities for, among
other things, knowingly presenting, or causing to be presented, to
the federal government, including the Medicare and Medicaid
programs, claims for payment that are false or fraudulent or making
a false statement to avoid, decrease or conceal an obligation to
pay money to the federal government;
●
the civil monetary
penalties statute, which imposes penalties against any person or
entity who, among other things, is determined to have presented or
caused to be presented a claim to a federal health program that the
person knows or should know is for an item or service that was not
provided as claimed or is false or fraudulent;
●
the federal Health
Insurance Portability and Accountability Act of 1996, or HIPAA,
which created new federal criminal statutes that prohibit knowingly
and willfully executing, or attempting to execute, a scheme to
defraud any healthcare benefit program or obtain, by means of false
or fraudulent pretenses, representations or promises, any of the
money or property owned by, or under the custody or control of, any
healthcare benefit program, regardless of the payor
(e.g., public or private), knowingly and willfully embezzling
or stealing from a health care benefit program, willfully
obstructing a criminal investigation of a healthcare offense and
knowingly and willfully falsifying, concealing or covering up by
any trick or device a material fact or making any materially false
statements in connection with the delivery of, or payment for,
healthcare benefits, items or services relating to healthcare
matters. A person or entity does not need to have actual knowledge
of the statute or specific intent to violate it to have committed a
violation;
●
HIPAA, as amended
by the Health Information Technology for Economic and Clinical
Health Act of 2009, or HITECH, and their respective implementing
regulations, which impose obligations on covered entities,
including healthcare providers, health plans, and healthcare
clearinghouses, as well as their respective business associates
that create, receive, maintain or transmit individually
identifiable health information for or on behalf of a covered
entity, with respect to safeguarding the privacy, security and
transmission of individually identifiable health
information;
●
the federal
Physician Payments Sunshine Act and its implementing regulations,
which imposed annual reporting requirements for certain
manufacturers of drugs, devices, biologicals and medical supplies
for payments and “transfers of value” provided to
physicians and teaching hospitals, as well as ownership and
investment interests held by physicians and their immediate family
members; and
●
analogous state and
foreign laws, such as state anti-kickback and false claims laws,
which may apply to sales or marketing arrangements and claims
involving healthcare items or services reimbursed by
non-governmental third-party payors, including private insurers;
state laws that require pharmaceutical companies to comply with the
pharmaceutical industry’s voluntary compliance guidelines and
the relevant compliance guidance promulgated by the federal
government or otherwise restrict payments that may be made to
healthcare providers; state and foreign laws that require drug
manufacturers to report information related to payments and other
transfers of value to physicians and other healthcare providers or
marketing expenditures; and state and foreign laws governing the
privacy and security of health information in certain
circumstances, many of which differ from each other in significant
ways and often are not preempted by HIPAA, thus complicating
compliance efforts.
S-35
Efforts
to ensure that our future business arrangements with third parties
will comply with applicable healthcare laws and regulations may
involve substantial costs. It is possible that governmental
authorities will conclude that our business practices may not
comply with current or future statutes, regulations or case law
involving applicable fraud and abuse or other healthcare laws. If
our operations are found to be in violation of any of these laws or
any other governmental regulations, we may be subject to
significant civil, criminal and administrative penalties,
including, without limitation, damages, fines, imprisonment,
exclusion from participation in government healthcare programs,
such as Medicare and Medicaid, and the curtailment or restructuring
of our operations, all of which could significantly harm our
business. If any of the physicians or other healthcare providers or
entities with whom we expect to do business, including our current
and future collaborators, are found not to be in compliance with
applicable laws, they may be subject to criminal, civil or
administrative sanctions, including exclusions from participation
in government healthcare programs, which could also adversely
affect our business.
Failure to obtain or maintain adequate coverage and reimbursement
for our product candidates, if approved, could limit our ability to
market those products and decrease our ability to generate
revenue.
Sales
of our product candidates will depend substantially, both
domestically and abroad, on the extent to which the costs of our
product candidates will be paid by health maintenance, managed
care, pharmacy benefit, and similar healthcare management
organizations, or reimbursed by government authorities, private
health insurers and other third-party payors. We anticipate that
government authorities and other third-party payors will continue
efforts to contain healthcare costs by limiting the coverage and
reimbursement levels for new drugs. If coverage and reimbursement
are not available, or are available only to limited levels, we may
not be able to successfully commercialize our product candidates.
Even if coverage is provided, the approved reimbursement amount may
not be high enough to allow us to establish or maintain pricing
sufficient to realize a return on our investment. It is difficult
to predict at this time what third-party payors will decide with
respect to the coverage and reimbursement for our product
candidates.
Healthcare legislative reform measures may have a material adverse
effect on our business and results of operations.
In the
United States, there have been and continue to be a number of
legislative initiatives to contain healthcare costs that may result
in more limited coverage or downward pressure on the price we may
otherwise receive for our product candidates. For example, in March
2010, the Patient Protection and Affordable Care Act, as amended by
the Health Care and Education Reconciliation Act, or collectively,
the Affordable Care Act, was passed, which substantially changes
the way health care is financed by both governmental and private
insurers, and significantly impacts the U.S. pharmaceutical
industry. The Affordable Care Act, among other things, addressed a
new methodology by which rebates owed by manufacturers under the
Medicaid Drug Rebate Program are calculated for drugs that are
inhaled, infused, instilled, implanted or injected, increased the
minimum Medicaid rebates owed by manufacturers under the Medicaid
Drug Rebate Program and extended the rebate program to individuals
enrolled in Medicaid managed care organizations, established annual
fees and taxes on manufacturers of certain branded prescription
drugs, and established the Center for Medicare and Medicaid
Innovation with broad authority to test and implement new payment
models under Medicare and Medicaid, which are designed to reduce
expenditures while preserving and enhancing quality of
care.
S-36
In
addition, other legislative changes have been proposed and adopted
in the United States since the Affordable Care Act was enacted. On
August 2, 2011, the Budget Control Act of 2011 among other things,
created measures for spending reductions by Congress. A Joint
Select Committee on Deficit Reduction, tasked with recommending a
targeted deficit reduction of at least $1.2 trillion for the years
2013 through 2021, was unable to reach required goals, thereby
triggering the legislation's automatic reduction to several
government programs. This includes aggregate reductions of Medicare
payments to providers of 2% per fiscal year, which went into effect
in April 2013 and, due to subsequent legislative amendments to the
statute, will remain in effect through 2024 unless additional
Congressional action is taken. On January 2, 2013, President Obama
signed into law the American Taxpayer Relief Act of 2012, which,
among other things, further reduced Medicare payments to several
providers, including hospitals, imaging centers and cancer
treatment centers. On April 16, 2015, President Obama signed into
law the Medicare Access and CHIP Reauthorization Act of 2015, or
MACRA. Among other things, MACRA creates incentives for physicians
to participate in alternative payment models under Medicare that
emphasize quality and value in place of the traditional,
volume-based fee-for-service program. We expect that additional
state and federal healthcare reform measures will be adopted in the
future, any of which could limit the amounts that federal and state
governments will pay for healthcare products and services, which
could result in reduced demand for our product candidates or
additional pricing pressures.
Foreign governments often impose strict price controls, which may
adversely affect our future profitability.
We
intend to seek approval to market Multikine in both the United
States and foreign jurisdictions. If we obtain approval in one or
more foreign jurisdictions, we will be subject to rules and
regulations in those jurisdictions relating to Multikine. In some
foreign countries, particularly in the European Union, prescription
drug pricing is subject to governmental control. In these
countries, pricing negotiations with governmental authorities can
take considerable time after the receipt of marketing approval for
a drug candidate. Coverage and reimbursement decisions in one
foreign jurisdiction may impact decisions in other countries. To
obtain reimbursement or pricing approval in some countries, we may
be required to conduct clinical trials that demonstrate our product
candidate is more effective than current treatments and that
compare the cost-effectiveness of Multikine to other available
therapies. If reimbursement of Multikine is unavailable or limited
in scope or amount, or if pricing is set at unsatisfactory levels,
we may be unable to achieve or sustain profitability.
S-37
Risks
Related to Intellectual Property
We may not be able to achieve or maintain a competitive position,
and other technological developments may result in our proprietary
technologies becoming uneconomical or obsolete.
We are
involved in a biomedical field that is undergoing rapid and
significant technological change. The pace of change continues to
accelerate. The successful development of product candidates from
our compounds, compositions and processes, through research
financed by us, or as a result of possible third-party licensing
arrangements with pharmaceutical or other companies, is not
assured. We may fail to apply for patents on important technologies
or product candidates in a timely fashion, or at all.
Many
companies are working on drugs designed to cure or treat cancer or
cure and treat viruses, such as HPV or H1N1. Many of these
companies have financial, research and development, and marketing
resources which are much greater than ours and are capable of
providing significant long-term competition either by establishing
in-house research groups or by forming collaborative ventures with
other entities. In addition, smaller companies and non-profit
institutions are active in research relating to cancer and
infectious diseases. The future market share of Multikine or our
other product candidates, if approved, will be reduced or
eliminated if our competitors develop and obtain approval for
products that are safer or more effective than our product
candidates. Moreover, the patent positions of pharmaceutical
companies are highly uncertain and involve complex legal and
factual questions for which important legal principles are often
evolving and remain unresolved. As a result, the validity and
enforceability of patents cannot be predicted with certainty. In
addition, we do not know whether:
●
we were the first
to make the inventions covered by each of our issued patents and
pending patent applications;
●
we were the first
to file patent applications for these inventions;
●
others will
independently develop similar or alternative technologies or
duplicate any of our technologies;
●
any of our pending
patent applications will result in issued patents;
●
any of our patents
will be valid or enforceable;
●
any patents issued
to us or our collaboration partners will provide us with any
competitive advantages, or will be challenged by third
parties;
●
we will be able to
develop additional proprietary technologies that are
patentable;
●
the U.S. government
will exercise any of its statutory rights to our intellectual
property that was developed with government funding;
or
●
our business may
infringe the patents or other proprietary rights of
others.
S-38
Our patents might not protect our technology from competitors, in
which case we may not have any advantage over competitors in
selling any products that we may develop.
Our
commercial success will depend in part on our ability to obtain
additional patents and protect our existing patent position, as
well as our ability to maintain adequate intellectual property
protection for our technologies, product candidates, and any future
products in the United States and other countries. If we do not
adequately protect our technology, product candidates and future
products, competitors may be able to use or practice them and erode
or negate any competitive advantage we may have, which could harm
our business and ability to achieve profitability. The laws of some
foreign countries do not protect our proprietary rights to the same
extent or in the same manner as U.S. laws, and we may encounter
significant problems in protecting and defending our proprietary
rights in these countries. We will be able to protect our
proprietary rights from unauthorized use by third parties only to
the extent that our proprietary technologies, product candidates
and any future products are covered by valid and enforceable
patents or are effectively maintained as trade
secrets.
Certain
aspects of our technologies are covered by U.S. and foreign
patents. In addition, we have a number of new patent applications
pending. There is no assurance that the applications still pending
or which may be filed in the future will result in the issuance of
any patents. Furthermore, there is no assurance as to the breadth
and degree of protection any issued patents might afford us.
Disputes may arise between us and others as to the scope and
validity of these or other patents. Any defense of the patents
could prove costly and time consuming and there can be no assurance
that we will be in a position, or will deem it advisable, to carry
on such a defense. A suit for patent infringement could result in
increasing costs, delaying or halting development, or even forcing
us to abandon a product candidate. Other private and public
concerns, including universities, may have filed applications for,
may have been issued, or may obtain additional patents and other
proprietary rights to technology potentially useful or necessary to
us. We are not currently aware of any such patents, but the scope
and validity of such patents, if any, and the cost and availability
of such rights are impossible to predict.
Much of our intellectual property is protected as trade secrets or
confidential know-how, not as a patent.
We
consider proprietary trade secrets and/or confidential know-how and
unpatented know-how to be important to our business. Much of our
intellectual property pertains to our manufacturing system, certain
aspects of which may not be suitable for patent filings and must be
protected as trade secrets and/or confidential know-how. This type
of information must be protected diligently by us to protect its
disclosure to competitors, since legal protections after disclosure
may be minimal or non-existent. Accordingly, much of our value of
this intellectual property is dependent upon our ability to keep
our trade secrets and know-how confidential.
To
protect this type of information against disclosure or
appropriation by competitors, our policy is to require our
employees, consultants, contractors and advisors to enter into
confidentiality agreements with us. However, current or former
employees, consultants, contractors and advisers may
unintentionally or willfully disclose our confidential information
to competitors, and confidentiality agreements may not provide an
adequate remedy in the event of unauthorized disclosure of
confidential information. Enforcing a claim that a third party
obtained illegally, and is using, trade secrets and/or confidential
know-how is expensive, time consuming and unpredictable. The
enforceability of confidentiality agreements may vary from
jurisdiction to jurisdiction.
S-39
In
addition, in some cases a regulator considering our application for
product candidate approval may require the disclosure of some or
all of our proprietary information. In such a case, we must decide
whether to disclose the information or forego approval in a
particular country. If we are unable to market our product
candidates in key countries, our opportunities and value may
suffer.
Failure
to obtain or maintain trade secrets and/or confidential know-how
trade protection could adversely affect our competitive position.
Moreover, our competitors may independently develop substantially
equivalent proprietary information and may even apply for patent
protection in respect of the same. If successful in obtaining such
patent protection, our competitors could limit our use of such
trade secrets and/or confidential know-how.
We may be subject to claims challenging the inventorship or
ownership of our patents and other intellectual
property.
We may
also be subject to claims that former employees, collaborators or
other third parties have an ownership interest in our patents or
other intellectual property. We may be subject to ownership
disputes in the future arising, for example, from conflicting
obligations of consultants or others who are involved in developing
our product candidates. Litigation may be necessary to defend
against these and other claims challenging inventorship or
ownership. If we fail in defending any such claims, in addition to
paying monetary damages, we may lose valuable intellectual property
rights, such as exclusive ownership of, or right to use, valuable
intellectual property. Such an outcome could have a material
adverse effect on our business. Even if we are successful in
defending against such claims, litigation could result in
substantial costs and be a distraction to management and other
employees.
Risks
related to this Offering
Management will have broad discretion as to the use of the proceeds
from this offering.
We
currently intend to use the net proceeds from this offering to fund
our Phase 3 clinical trial of Multikine for neoadjuvant therapy in
patients with SCCHN, to fund the Phase 1 trial of Multikine in
HIV/HPV co-infected patients with anal warts and for general and
administrative expenses. See “Use of Proceeds” on
page S-__ of this prospectus supplement. We have not
designated the specific amount of net proceeds to us from this
offering that will be used for these purposes. Accordingly, our
management will have broad discretion as to the allocation of these
net proceeds and could use them for purposes other than those
contemplated at the time of this offering. You will be relying on
the judgment of our management with regard to the use of these net
proceeds, and you will not have the opportunity, as part of your
investment decision, to assess whether the net proceeds are being
used appropriately. It is possible that the net proceeds will be
invested in a way that does not yield a favorable, or any, return
for us. The failure of our management to use such funds effectively
could have a material adverse effect on our business, financial
condition, operating results and cash flow.
S-40
In
addition, the net proceeds from this offering will not be
sufficient to complete clinical trials and other studies required
for the approval of any product candidate, including the Phase 3
clinical trial of Multikine, by the FDA or any other regulatory
authority, and we will need significant additional funds in order
to complete the Phase 3 Multikine study.
Because there is no minimum required for the offering to close,
investors in this offering will not receive a refund in the event
that we do not sell an amount of securities sufficient to pursue
the business goals outlined in this prospectus.
We have not
specified a minimum offering amount nor have or will we establish
an escrow account in connection with this offering. Because there
is no escrow account and no minimum offering amount, investors
could be in a position where they have invested in our company, but
we are unable to fulfill our objectives due to a lack of interest
in this offering. Further, because there is no escrow account in
operation and no minimum investment amount, any proceeds from the
sale of securities offered by us will be available for our
immediate use, despite uncertainty about whether we would be able
to use such funds to effectively implement our business plan.
Investor funds will not be returned under any circumstances whether
during or after the offering.
We are selling the securities offered in this prospectus on a
“best efforts” basis and may not be able to sell any of
the securities offered herein.
We have
engaged H.C. Wainwright & Co., LLC to act as a placement agent
in connection with this offering. While H.C. Wainwright will use
its reasonable best efforts to arrange for the sale of the
securities, it is under no obligation to purchase any of the
securities. As a result, there are no firm commitments to purchase
any of the securities in this offering. Consequently, there is no
guarantee that we will be capable of selling all, or any, of the
securities being offered hereby.
You will experience immediate and substantial dilution in the net
tangible book value of the common stock you purchase in this
offering.
Since
the assumed public offering price of the securities offered
pursuant to this prospectus supplement and the accompanying
prospectus is higher than the net tangible book value per share of
our common stock, you will suffer substantial dilution in the net
tangible book value of the common stock you purchase in this
offering. After giving effect to the sale of __________ shares of
common stock and warrants, and after deducting estimated placement
agent discounts and commissions and estimated offering expenses
payable by us, if you purchase securities in this offering, you
will suffer immediate and substantial dilution of approximately
$___ per share in the net tangible book value of the common stock
you acquire based on our net tangible book value as of September
30, 2016. Furthermore, in the past, we issued options and warrants
to acquire common stock at prices below the public offering price.
To the extent these outstanding options and warrants are ultimately
exercised, investors purchasing common stock in this offering may
sustain further dilution.
In the
event that any Series CC, DD or EE warrants are exercised, you will
experience additional dilution to the extent that the exercise
price of those warrants is higher than the net tangible book value
of our common stock at the time of exercise. Furthermore, in the
past, we issued options and warrants to acquire shares of our
common stock at prices below the public offering price shown on the
cover page of this prospectus. To the extent these outstanding
options and warrants are ultimately exercised, investors purchasing
common stock in this offering may sustain further
dilution.
S-41
You may experience future dilution as a result of future equity
offerings or other equity issuances.
We
expect that significant additional capital will be needed in the
future to continue our planned operations. To raise additional
capital, we may in the future offer additional shares of our common
stock or other securities convertible into or exchangeable for our
common stock. We cannot assure you that we will be able to sell
shares or other securities in any other offering at a price per
share that is equal to or greater than the price per share paid by
investors in this offering. The price per share at which we sell
additional shares of our common stock or other securities
convertible into or exchangeable for our common stock in future
transactions may be higher or lower than the price per share in
this offering. To the extent we raise additional capital by issuing
equity securities, our stockholders may experience substantial
dilution. If we sell common stock, convertible securities or other
equity securities, your investment in our common stock will be
diluted. These sales may also result in material dilution to our
existing stockholders, and new investors could gain rights superior
to our existing stockholders.
Our outstanding options and warrants may adversely affect the
trading price of our common stock.
As of
November 30, 2016, there were outstanding warrants and options
which allow the holders to purchase 86,059,564 shares that may be
issued upon the exercise of outstanding warrants, with a weighted average exercise
price of $0.97 per share, and 8,529,287 shares that may be issued
upon the exercise of outstanding options, with a weighted average
exercise price of $2.38 per share. The outstanding options and
warrants could adversely affect our ability to obtain future
financing or engage in certain mergers or other transactions, since
the holders of options and warrants can be expected to exercise
them at a time when we may be able to obtain additional capital
through a new offering of securities on terms more favorable to us
than the terms of the outstanding options and warrants. For
the life of the options and warrants, the holders have the
opportunity to profit from a rise in the market price of our common
stock without assuming the risk of ownership. The issuance of
shares upon the exercise of outstanding options and warrants will
also dilute the ownership interests of our existing
stockholders.
There is no public market for the warrants being offered by this
prospectus supplement and the accompanying prospectus, and we do
not anticipate such a market ever developing in the
future.
There
is no established public trading market for the warrants being
offered by this prospectus supplement and the accompanying
prospectus and we do not intend to have the warrants listed on a
national securities exchange or any other recognized trading system
in the future. Without an active market, the liquidity of any
warrants sold by means of this prospectus supplement and the
accompanying prospectus will be limited.
The warrants being offered by means of this prospectus supplement
and the accompanying prospectus may not have any
value.
In the
event that the market price of our common stock does not exceed the
exercise price of the warrants sold in this offering during the
period when the warrants are exercisable, the warrants may not have
any value.
S-42
Holders of the warrants sold by means of this prospectus supplement
and the accompanying prospectus will have no rights as shareholders
until they acquire shares of our common stock, if
ever.
If you
acquire warrants to purchase shares of our common stock in this
offering, you will have no rights with respect to our common stock
until you acquire shares of such common stock upon exercise of your
warrants. Upon exercise of your warrants, you will be entitled to
exercise the rights of a common shareholder only as to matters for
which the record date occurs after the exercise date.
Our ability to utilize our net operating loss carryforwards and
certain other tax attributes may be limited.
Under
Section 382 of the Internal Revenue Code of 1986, as amended, if a
corporation undergoes an “ownership change” (generally
defined as a greater than 50% change (by value) in its equity
ownership over a three-year period), the corporation’s
ability to use its pre-change net operating loss carryforwards and
other pre-change tax attributes to offset its post-change income
may be limited. Taking into account our public offerings and other
transactions, we may have triggered an “ownership
change” limitation. In addition, we may experience ownership
changes in the future as a result of subsequent shifts in our stock
ownership, some of which are outside our control. As a result, our
ability to use our pre-change net operating loss carryforwards and
other pre-change tax attributes to offset U.S. federal taxable
income may be subject to limitations, which could result in
increased tax liability to us.
Since we do not intend to pay dividends on our common stock, any
potential return to investors will result only from any increases
in the price of our common stock.
At the
present time, we intend to use available funds to finance our
operations. Accordingly, while payment of dividends rests within
the discretion of our board of directors, no common stock dividends
have been declared or paid by us and we have no intention of paying
any common stock dividends in the foreseeable future. Additionally,
any future debt financing arrangement may contain terms prohibiting
or limiting the amount of dividends that may be declared or paid on
our common stock. Any return to our investors will therefore be
limited to appreciation in the price of our common stock, which may
never occur. If our stock price does not increase, our investors
are unlikely to receive any return on their investments in our
common stock.
The price of our common stock has been volatile and is likely to
continue to be volatile, which could result in substantial losses
for our shareholders.
Our
stock price has been, and is likely to continue to be, volatile. As
a result of this volatility, you may not be able to sell your
shares at or above its current market price. The market price for
our common stock may be influenced by many factors,
including:
●
actual or
anticipated fluctuations in our financial condition and operating
results;
●
actual or
anticipated changes in our growth rate relative to our
competitors;
●
competition from
existing products or new products or product candidates that may
emerge;
S-43
●
development of new
technologies that may address our markets and may make our
technology less attractive;
●
changes in
physician, hospital or healthcare provider practices that may make
our product candidates less useful;
●
announcements by
us, our partners or our competitors of significant acquisitions,
strategic partnerships, joint ventures, collaborations or capital
commitments;
●
developments or
disputes concerning patent applications, issued patents or other
proprietary rights;
●
the recruitment or
departure of key personnel;
●
failure to meet or
exceed financial estimates and projections of the investment
community or that we provide to the public;
●
actual or
anticipated changes in estimates as to financial results,
development timelines or recommendations by securities
analysts;
●
variations in our
financial results or those of companies that are perceived to be
similar to us;
●
changes to coverage
and reimbursement levels by commercial third-party payors and
government payors, including Medicare, and any announcements
relating to reimbursement levels;
●
general economic,
industry and market conditions; and
●
the other factors
described in this “Risk Factors” section.
Under our amended bylaws, stockholders that initiate certain
proceedings may be obligated to reimburse us and our officers and
directors for all fees, costs and expenses incurred in connection
with such proceedings if the claim proves
unsuccessful.
On
February 18, 2015, we adopted new bylaws which include a
fee-shifting provision in Article X for stockholder claims. Article
X provides that in the event any stockholder initiates or asserts a
claim against us, or any of our officers or directors, including
any derivative claim or claim purportedly filed on our behalf, and
the stockholder does not obtain a judgment on the merits that
substantially achieves, in substance and amount, the full remedy
sought, then the stockholder will be obligated to reimburse us and
any of our officers or directors named in the action, for all fees,
costs and expenses of every kind and description that we or our
officers or directors may incur in connection with the
claim. In adopting Article X, it is our intent
that:
●
all actions,
including federal securities law claims, would be subject to
Article X;
●
the phrase “a
judgment on the merits” means the determination by a court of
competent jurisdiction on the matters submitted to the
court;
●
the phrase
“substantially achieves, in both substance and amount”
means the plaintiffs in the action would be awarded at least 90% of
the relief sought;
●
only persons who
were stockholders at the time an action was brought would be
subject to Article X; and
S-44
●
only the directors
or officers named in the action would be allowed to
recover.
The
fee-shifting provision contained in Article X of our bylaws is not
limited to specific types of actions, but is rather potentially
applicable to the fullest extent permitted by law. Fee-shifting
bylaws are relatively new and untested. The case law and potential
legislative action on fee-shifting bylaws are evolving and there
exists considerable uncertainty regarding the validity of, and
potential judicial and legislative responses to, such bylaws. For
example, it is unclear whether our ability to invoke our
fee-shifting bylaw in connection with claims under the federal
securities laws, including any claims related to this
offering, would be pre-empted by federal law. Similarly, it is
unclear how courts might apply the standard that a claiming
stockholder must obtain a judgment that substantially achieves, in
substance and amount, the full remedy sought. The application of
our fee-shifting bylaw in connection with such claims, if any, will
depend in part on future developments of the law. We cannot assure
you that we will or will not invoke our fee-shifting bylaw in any
particular dispute, including any claims related to this offering.
In addition, given the unsettled state of the law related to
fee-shifting bylaws, such as ours, we may incur significant
additional costs associated with resolving disputes with respect to
such bylaw, which could adversely affect our business and financial
condition.
If a
stockholder that brings any such claim, suit, action or proceeding
is unable to obtain the required judgment, the attorneys’
fees and other litigation expenses that might be shifted to a
claiming stockholder are potentially significant. This fee-shifting
bylaw, therefore, may dissuade or discourage stockholders (and
their attorneys) from initiating lawsuits or claims against us or
our directors and officers. In addition, it may impact the
fees, contingency or otherwise, required by potential
plaintiffs’ attorneys to represent our stockholders or
otherwise discourage plaintiffs’ attorneys from representing
our stockholders at all. As a result, this bylaw may limit the
ability of stockholders to affect our management and direction,
particularly through litigation or the threat of
litigation.
The provision of our amended bylaws requiring exclusive venue in
the U.S. District Court for Delaware for certain types of lawsuits
may have the effect of discouraging lawsuits against us and our
directors and officers.
Article
X of our amended bylaws provides that stockholder claims brought
against us, or our officers or directors, including any derivative
claim or claim purportedly filed on our behalf, must be brought in
the U.S. District Court for the district of Delaware and that with
respect to any such claim, the laws of Delaware will
apply.
The
exclusive forum provision may limit a stockholder’s ability
to bring a claim in a judicial forum the stockholder finds
favorable for disputes with us or our directors or officers, and
may have the effect of discouraging lawsuits with respect to claims
that may benefit us or our stockholders.
S-45
FORWARD-LOOKING
STATEMENTS
This
prospectus supplement, the accompanying prospectus and the
documents that are incorporated or deemed to be incorporated by
reference into this prospectus supplement and the accompanying
prospectus, contain or incorporate by reference
“forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. You can generally
identify these forward-looking statements by forward-looking words
such as “anticipates,” “believes,”
“expects,” “intends,” “future,”
“could,” “estimates,” “plans,”
“would,” “should,” “potential,”
“continues” and similar words or expressions (as well
as other words or expressions referencing future events, conditions
or circumstances). These forward-looking statements involve risks,
uncertainties and other important factors that may cause our actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements, including, but not
limited to:
●
the progress and
timing of, and the amount of expenses associated with, our
research, development and commercialization activities for our
product candidates, including Multikine;
●
the expected
progress, rate, timing and success of patient enrollment in our
ongoing Phase 3 clinical trial of Multikine;
●
our expectations
regarding the timing, costs and outcome of any pending or future
litigation matters, lawsuits or arbitration proceedings, including
but not limited to the pending arbitration proceeding we initiated
against our former clinical research organization, or
CRO;
●
the success of our
clinical studies for our product candidates;
●
our ability to
obtain U.S. and foreign regulatory approval for our product
candidates and the ability of our product candidates to meet
existing or future regulatory standards;
●
our expectations
regarding federal, state and foreign regulatory
requirements;
●
the therapeutic
benefits and effectiveness of our product candidates;
●
the safety profile
and related adverse events of our product candidates;
●
our ability to
manufacture sufficient amounts of Multikine or our other product
candidates for use in our clinical studies or, if approved, for
commercialization activities following such regulatory
approvals;
●
our plans with
respect to collaborations and licenses related to the development,
manufacture or sale of our product candidates;
●
our expectations as
to future financial performance, expense levels and liquidity
sources;
●
our ability to
compete with other companies that are or may be developing or
selling products that are competitive with our product
candidates;
●
anticipated trends
and challenges in our potential markets; and
●
our ability to
attract, retain and motivate key personnel.
All
forward-looking statements contained herein are expressly qualified
in their entirety by this cautionary statement, the risk factors
set forth under the heading “Risk Factors” and
elsewhere in this prospectus supplement, in the accompanying
prospectus and in the documents incorporated or deemed to be
incorporated by reference into this prospectus supplement and the
accompanying prospectus. The forward-looking statements contained
in this prospectus supplement, the accompanying prospectus and any
document incorporated or deemed to be incorporated by reference in
this prospectus supplement and the accompanying prospectus, speak
only as of their respective dates. Except to the extent required by
applicable laws and regulations, we undertake no obligation to
update these forward-looking statements to reflect new information,
events or circumstances after the date of this prospectus
supplement or to reflect the occurrence of unanticipated events. In
light of these risks and uncertainties, the forward-looking events
and circumstances described in this prospectus supplement, the
accompanying prospectus and the documents that are incorporated by
reference into this prospectus supplement and the accompanying
prospectus may not occur and actual results could differ materially
from those anticipated or implied in such forward-looking
statements. Accordingly, you are cautioned not to place undue
reliance on these forward-looking statements.
S-46
USE
OF PROCEEDS
We
estimate that the net proceeds from this offering will be
approximately $___________ after deducting estimated placement
agent discounts and commissions and estimated offering expenses
payable by us. Because there is no minimum offering amount required
as a condition to closing this offering, we may sell fewer than all
of the securities offered hereby, which may significantly reduce
the amount of proceeds received by us.
We
intend to use the net proceeds from this offering to fund our Phase
3 clinical trial of Multikine for neoadjuvant therapy in patients
with SCCHN, to fund the Phase 1 trial in HIV/HPV co-infected
patients with anal warts and for general corporate purposes. We
have not yet determined the amount of net proceeds to be used
specifically for these purposes. The net proceeds from this
offering will not be sufficient to complete clinical trials and
other studies required for the approval of any product candidate,
including the Phase 3 clinical trial of Multikine, by the FDA or
any other regulatory authority, and we will need significant
additional funds in order to complete the Phase 3 Multikine
study.
Our
management will have broad discretion in the application of the net
proceeds from this offering, and investors will be relying on the
judgment of our management with regard to the use of the net
proceeds. Pending the use of the net proceeds from this offering as
described above, we intend to invest the net proceeds in
short-term, investment-grade, interest-bearing
instruments.
PRICE
RANGE OF COMMON STOCK
Our
common stock is publicly traded on the NYSE MKT under the symbol
“CVM”. The following table sets forth, for the periods
indicated, the high and low intraday sale prices of our common
stock as reported by the NYSE MKT.
|
|
HIGH
|
LOW
|
|
FY 2016
|
|
|
|
Fourth
Quarter (through September 30, 2016)
|
$0.54
|
$0.24
|
|
Third
Quarter (through June 30, 2016)
|
$0.60
|
$0.44
|
|
Second
Quarter (through March 31, 2016)
|
$0.66
|
$0.36
|
|
First
Quarter (through December 31, 2015)
|
$0.75
|
$0.36
|
|
|
|
|
|
FY 2015
|
|
|
|
Fourth
Quarter (through September 30, 2015)
|
$0.80
|
$0.48
|
|
Third
Quarter (through June 30, 2015)
|
$1.09
|
$0.59
|
|
Second
Quarter (through March 31, 2015)
|
$1.23
|
$0.59
|
|
First
Quarter (through December 31, 2014)
|
$0.91
|
$0.54
|
|
|
|
|
|
FY 2014
|
|
|
|
Fourth
Quarter (through September 30, 2014)
|
$1.30
|
$0.75
|
|
Third
Quarter (through June 30, 2014)
|
$1.72
|
$0.98
|
|
Second
Quarter (through March 31, 2014)
|
$1.90
|
$0.59
|
|
First
Quarter (through December 31, 2013)
|
$1.80
|
$0.53
|
S-47
On
November 30, 2016, the last reported sale price of our common stock
on the NYSE MKT was $0.21 per share. As of November 30, 2016, there
were 156,200,407 shares of our common stock outstanding held by
approximately 1,000 holders of record.
DILUTION
If you
invest in our common stock and warrants in this offering, your
interest will be immediately diluted to the extent of the
difference between the public offering price per share of our
common stock in this offering and the net tangible book value per
share of our common stock after this offering. As of June 30, 2016,
we had a negative historical net tangible book value of $(0.03) per
share of common stock. Our net tangible book value represents total
tangible assets less total liabilities, all divided by the number
of shares of common stock outstanding on June 30,
2016.
For
purposes of the dilution calculations, the public offering price of
the warrants has been allocated to the public offering price of the
shares of common stock sold in this offering. The calculations
below do not give any effect to the shares of common stock issuable
upon the exercise of the warrants sold in this offering or to the
proceeds from any exercise of the warrants.
After
giving effect to the sale of shares of common stock and warrants in
this offering, and after deducting the placement agent discounts
and commissions and estimated offering expenses, our as adjusted
net tangible book value at June 30, 2016 would have been
approximately $__________, or $___ per share. This represents an
immediate increase in as adjusted net tangible book value of $___
per share to existing stockholders and an immediate dilution of
$___ per share to new investors. The following table illustrates
this per share dilution:
|
Public
offering price per share
|
$-
|
|
Negative
net tangible book value per share as of June 30, 2016
|
$(0.03)
|
|
Increase
in net tangible book value per share attributable to this
offering
|
$-
|
|
As
adjusted net tangible book value per share after this
offering
|
$-
|
|
Dilution
per share to new investors participating in this
offering
|
$-
|
This number is
based on 145,146,097 shares outstanding as of June 30, 2016, which
excludes (i) 80,659,564 shares that may be issued upon the exercise
of outstanding warrants, with a weighted average exercise price of
$1.00 per share;(ii) 7,691,687 shares that may be issued upon the
exercise of outstanding options, with a weighted average exercise
price of $2.66 per share; (iii) any shares issuable upon the
exercise of the warrants which may be sold by means of this
prospectus supplement, and (iv) any shares issuable upon the
exercise of warrants we will issue to the placement agent in
connection with this offering.
S-48
CAPITALIZATION
The
following table sets forth (i) our actual cash and cash equivalents
and consolidated capitalization as of June 30, 2016, and (ii) our
cash and cash equivalents and consolidated capitalization as of
June 30, 2016, adjusted to give effect to this offering No
adjustments have been made to reflect normal operations by us or
other developments with our business after June 30, 2016. As a
result, the as adjusted information provided below is not
indicative of our actual cash and cash equivalents position or
consolidated capitalization as of any date. You should read this
table in conjunction with “Use of Proceeds” in this
prospectus supplement and the consolidated financial statements and
related notes and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” in our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2016,
which is incorporated by reference in this prospectus
supplement.
|
|
As of June 30, 2016
|
|
|
|
Actual
|
AsAdjusted
|
|
|
|
|
|
Cash
and cash equivalents
|
$5,218,960
|
|
|
Capital
lease
|
2,309
|
|
|
Total
debt
|
|
|
|
Stockholders’
equity:
|
|
|
|
Preferred
stock, par value $0.01; 200,000 shares authorized;
-0- shares issued and outstanding, actual
and as adjusted
|
--
|
--
|
|
Common
stock, par value $0.01; 600,000,000 shares
|
|
|
|
authorized;
145,146,097 shares issued and
|
|
|
|
outstanding, actual(1);
__________ shares issued and outstanding, as adjusted(1)
|
1,451,461
|
|
|
Additional paid-in capital
|
279,328,561
|
|
|
Accumulated
deficit
|
(284,553,845)
|
|
|
Total
stockholders’ deficit
|
(3,773,823)
|
|
|
Total
capitalization
|
(3,771,514)
|
|
1
This number is
based on 145,146,097 shares outstanding as of June 30, 2016, which
excludes (i) 80,659,564 shares that may be issued upon the exercise
of outstanding warrants, with a weighted average exercise price of
$1.00 per share;(ii) 7,691,687 shares that may be issued upon the
exercise of outstanding options, with a weighted average exercise
price of $2.66 per share; (iii) any shares issuable upon the
exercise of the warrants which may be sold by means of this
prospectus supplement, and (iv) any shares issuable upon the
exercise of warrants we will issue to the placement agent in
connection with this offering.
S-49
DESCRIPTION
OF SECURITIES
Common stock
The
material terms and provisions of our common stock are described
under the caption “Description of Securities” in the
accompanying prospectus. As of _____________, we had ___________
shares of our common stock outstanding. Our common stock is listed
on the NYSE MKT under the symbol “CVM”.
Warrants
By means of this
prospectus supplement, we are offering:
●
Series CC warrants
to purchase up to ______ shares of our common stock. Each Series CC
warrant has an exercise price of $_____ per share, is immediately
exercisable and will expire on __________________;
●
Series DD warrants
to purchase up to _____ shares of our common stock. Each Series DD
warrant has an exercise price of $____ per share, is immediately
exercisable and will expire on _______________; and
●
Series EE warrants
to purchase up to ______ shares of our common stock. Each Series EE
warrant has an exercise price of $_____ per share, is immediately
exercisable and will expire on _________________.
Cashless Exercise: If, at any
time during the term of the warrants, the issuance of shares of our
common stock upon exercise of the warrants is not covered by an
effective registration statement, the holder is permitted to effect
a cashless exercise of the warrants (in whole or in part) by having
the holder deliver to us a duly executed exercise notice, canceling
a portion of the warrant in payment of the purchase price payable
in respect of the number of shares of our common stock purchased
upon such exercise.
Transferability: The warrants
may be transferred at the option of the warrant holder upon
surrender of the warrant with the appropriate instruments of
transfer. However, as of the date of this prospectus supplement
there was no public market for the warrants and it is not expected
that a public market for the warrants will develop in the
future.
Listing: We will not apply to list the warrants on NYSE
MKT.
S-50
Rights as a stockholder: Except
as set forth in the warrants, the holders of the warrants do not
have the rights or privileges of holders of our common stock,
including any voting rights, until they exercise the
warrants.
Limitations on Exercise: The exercise of the warrants may be
limited in certain circumstances if, after giving effect to such
exercise, the holder or any of its affiliates would beneficially
own (as determined pursuant to Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder) more than
4.9% of our outstanding common stock.
Fundamental Transactions: in connection with a fundamental
transaction the holder of the warrants shall be entitled to the
Black Scholes value of the warrants.
The foregoing summary of certain terms and provisions of the
warrants that are being offered hereby is not complete and is
subject to, and is qualified in its entirety by the provisions of
the warrant agreements governing the terms of the warrants, the
forms of which will be filed as exhibits to a Current Report on
Form 8-K that we will file in connection with this offering.
Prospective investors should carefully review the terms and
provisions of the warrant agreements and forms of the warrants for
a complete description of the terms and conditions of the
warrants.
Rights Agreement
In
November 2007, we declared a dividend of one Series A Right and one
Series B Right, or collectively the Rights, for each share of our
common stock which was outstanding on November 9, 2007. When the
Rights become exercisable, each Series A Right will entitle the
registered holder, subject to the terms of a Rights Agreement, to
purchase from us one share of our common stock at a price equal to
20% of the market price of our common stock on the exercise date,
although the price may be adjusted pursuant to the terms of the
Rights Agreement. If after a person or group of affiliated persons
has acquired 15% or more of our common stock or following the
commencement of a tender offer for 15% or more of our outstanding
common stock (i) we are acquired in a merger or other business
combination and we are not the surviving corporation, (ii) any
person consolidates or merges with us and all or part of our common
shares are converted or exchanged for securities, cash or property
of any other person, or (iii) 50% or more of our consolidated
assets or earning power are sold, proper provision will be made so
that each holder of a Series B Right will thereafter have the right
to receive, upon payment of the exercise price of $100 (subject to
adjustment), that number of shares of common stock of the acquiring
company which at the time of such transaction has a market value
that is twice the exercise price of the Series B
Right.
The
description and terms of the Rights are set forth in a Rights
Agreement between the Company and Computershare Trust Company,
N.A., as Rights Agent.
Distribution of Rights
Initially,
stockholders will not receive separate certificates for the Rights
as the Rights will be represented by outstanding common stock
certificates. Until the exercise date, the Rights cannot be bought,
sold or otherwise traded separately from the common stock.
Certificates for common stock carry a notation that indicates that
Rights are attached to the common stock and incorporate the terms
of the Rights Agreement.
S-51
Separate
certificates representing the Rights will be distributed as soon as
practicable after the earliest to occur of:
●
15 business days
following a public announcement that a person or group of
affiliated or associated persons has acquired beneficial ownership
of 15% or more of the outstanding common stock, or
●
15 business days
(or such later date as may be determined by action of our board of
directors prior to such time as any person or group of affiliated
persons has acquired 15% or more of our common stock) following the
commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result in
the beneficial ownership by a person or group of 15% or more of
such outstanding common stock.
The
earlier of such dates described above is called the
“distribution date.”
Until
the distribution date (or earlier redemption or expiration of the
Rights), the surrender for transfer of any certificates for common
stock outstanding as of the record date, even without such
notation, will also constitute the transfer of the Rights
associated with the common stock represented by such certificate.
As soon as practicable following the distribution date, separate
certificates evidencing the Rights will be mailed to holders of
record of the common stock as of the close of business on the
distribution date and such separate right certificates alone will
evidence the Rights.
Exercise and Expiration
The
holders of the Rights are not required to take any action until the
Rights become exercisable. The Rights are not exercisable until the
distribution date. Holders of the Rights will be notified by us
that the Rights have become exercisable. The Rights will expire on
October 30, 2020, unless the expiration date is extended or unless
the Rights are earlier redeemed by us as described
below.
Redemption
At any
time prior to the distribution date, our board of directors may
redeem the Rights in whole, but not in part, at a price of $0.0001
per Right. Subject to the foregoing, the redemption of the Rights
may be made effective at such time, on such basis and with such
conditions as our board of directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right
to exercise the Rights will terminate and the only entitlement of
the holders of Rights will be to receive the redemption
price.
Exchange Option
At any
time after a person or group of affiliated persons has acquired 15%
or more of our common stock or following the commencement of a
tender offer for 15% or more of our outstanding common stock, and
prior to the acquisition by such person of 50% or more of the
outstanding common stock, our board of directors may exchange the
Rights (other than Rights owned by such person or group which have
become void), in whole or in part, at an exchange ratio of one
share of common stock per Right (subject to
adjustment).
S-52
Other Provisions
The
terms of the Rights may be amended by our board of directors
without the consent of the holders of the Rights, except that from
and after such time a person or group of affiliated persons has
acquired 15% or more of our common stock no such amendment may
adversely affect the interests of the holders of the
Rights.
Until a
Right is exercised, the holder of the Right, as such, will not have
any rights as a stockholder, including, without limitation, the
right to vote or to receive dividends.
The
Rights may have certain anti-takeover effects. The Rights will
cause substantial dilution to a person or group that attempts to
acquire us on terms not approved by our board of directors.
However, the Rights should not interfere with any merger or other
business combination approved by a majority of our board of
directors because the Rights may be redeemed by us at any time
prior to the distribution date. Thus, the Rights are intended to
encourage persons who may seek to acquire control of us to initiate
such an acquisition through negotiations with our board of
directors. However, the effect of the Rights may be to discourage a
third party from making a partial tender offer or otherwise
attempting to obtain a substantial position in the equity
securities of, or seeking to obtain control of, us. To the extent
any potential acquisition is deterred by the Rights, the Rights may
have the effect of preserving incumbent management in
office.
Attorneys’ Fees in Stockholder Actions
Our
bylaws include a fee-shifting provision in Article X for
stockholder claims. Article X provides that in the event that any
stockholder initiates or asserts a claim against us, or any of our
officers or directors, including any derivative claim or claim
purportedly filed on our behalf, and the stockholder does not
obtain a judgment on the merits that substantially achieves, in
substance and amount, the full remedy sought, then the stockholder
will be obligated to reimburse us and any of our officers or
directors named in the action, for all fees, costs and expenses of
every kind and description, including but not limited to all
reasonable attorneys’ fees and other litigation expenses,
that we or our officers or directors who were named in the action
may incur in connection with such claim.
Our
fee-shifting provision is not limited to specific types of actions,
but is rather potentially applicable to the fullest extent
permitted by law. There are several types of remedies that a
stockholder may seek in connection with an action or proceeding
against us, including declaratory or injunctive relief, or monetary
damages. If a stockholder is not successful in obtaining a judgment
that substantially achieves in substance, such as in the case of a
claim for declaratory or injunctive relief, or amount, such as in
the case of a claim for monetary damages, our and our
officers’ and directors’ litigation expenses may be
shifted to the stockholder.
Fee-shifting
provisions are relatively new and untested. The case law and
potential legislative action on fee shifting bylaws are evolving
and there exists considerable uncertainty regarding the validity
of, and potential judicial and legislative responses to, such
bylaws. For example, it is unclear whether our ability to invoke
our fee-shifting bylaw in connection with claims under the federal
securities laws, including claims related to this offering, would
be pre-empted by federal law. Similarly, it is unclear how courts
might apply the standard that a stockholder must obtain a judgment
that substantially achieves, in substance and amount, the full
remedy sought. The application of our fee shifting bylaw in
connection with such claims, if any, will depend in part on future
developments of the law. We cannot assure you that we will or will
not invoke our fee-shifting bylaw in any particular dispute,
including any claims related to this offering.
S-53
If a
stockholder that brings any such claim is unable to obtain the
required judgment, the attorneys’ fees and other litigation
expenses that might be shifted to such a stockholder are
potentially significant. This fee-shifting bylaw, therefore, may
dissuade or discourage stockholders (and their attorneys) from
initiating lawsuits or claims against us or our directors and
officers. In addition, it may impact the fees, contingency or
otherwise, required by potential plaintiffs’ attorneys to
represent our stockholders or otherwise discourage
plaintiffs’ attorneys from representing our stockholders at
all. As a result, this bylaw may limit the ability of stockholders
to affect the management and direction of our company, particularly
through litigation or the threat of litigation.
PLAN
OF DISTRIBUTION
Pursuant to an
engagement agreement dated ________we have engaged H.C. Wainwright
& Co., LLC, or the placement agent, to act as our exclusive
placement agent in connection with this offering of our shares of
common stock and warrants pursuant to this prospectus supplement
and accompanying prospectus. We have agreed to indemnify the
placement agent against specified liabilities, including
liabilities under the Securities Act of 1933, and to contribute to
payments the Placement Agent may be required to make in respect
thereof.
Under
the terms of the engagement agreement, the placement agent has
agreed to be our exclusive placement agent, on a reasonable best
efforts basis, in connection with the issuance and sale by us of
our shares and warrants being offered pursuant to this prospectus
supplement and accompanying prospectus. The terms of this offering
were subject to market conditions and negotiations between us, the
placement agent and prospective investors. The engagement agreement
does not give rise to any commitment by the placement agent to
purchase any of our securities, and the placement agent will have
no authority to bind us by virtue of the engagement agreement.
Further, the placement agent does not guarantee that it will be
able to raise new capital in any prospective offering. The
placement agent may engage sub-agents or selected dealers to assist
with the offering.
Institutional
investors purchasing the securities offered hereby will execute a
securities purchase agreement with us, providing such investors
with certain representations, warranties and covenants from us,
which representations, warranties and covenants will not be
available to the other investors in this offering and therefore
those investors shall rely solely on this prospectus in connection
with the purchase of securities in this
offering.
We will
deliver the shares of common stock being issued to the investors
electronically and deliver the warrants upon receipt of investor
funds for the purchase of the shares of our common stock and
warrants offered pursuant to this prospectus supplement and the
accompanying prospectus. We expect to deliver the shares of our
common stock and warrants being offered pursuant to this prospectus
supplement on or about _______, 2016, subject to customary closing
conditions.
The
placement agent may be deemed to be an underwriter within the
meaning of Section 2(a)(11) of the Securities Act of 1933, as
amended, and any commissions received by it and any profit realized
on the resale of the common stock and warrants sold by it while
acting as principal might be deemed to be underwriting discounts or
commissions under the Securities Act of 1933, as amended. As
an underwriter, the placement agent would be required to comply
with the requirements of the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended, including,
without limitation, Rule 415(a)(4) under the Securities Act of
1933, as amended, and Rule 10b-5 and Regulation M under the
Securities Exchange Act of 1934, as amended. These rules and
regulations may limit the timing of purchases and sales of shares
of common stock and warrants by the placement agent acting as
principal. Under these rules and regulations, the placement
agent:
S-54
●
may not engage in
any stabilization activity in connection with our securities;
and
●
may not bid for or
purchase any of our securities or attempt to induce any person to
purchase any of our securities, other than as permitted under the
Securities Exchange Act of 1934, as amended, until it has completed
its participation in this offering.
Commissions and Offering Expenses
The
placement agent proposes to offer the common stock and warrants to
the public at the combined public offering price shown on the cover
of this prospectus supplement. The placement agent may offer the
common stock and warrants to securities dealers at the price to the
public less a concession.
The
following table shows the public offering price, placement agent
commissions and proceeds, before expenses, to us.
|
|
Per Share of
|
|
|
|
Common Stock
|
|
|
|
and Warrants
|
Total (1)
|
|
|
|
|
|
Public
offering price
|
$-
|
$-
|
|
Placement
agent discounts and commissions
|
$-
|
$-
|
|
Proceeds,
before expenses, to us
|
$-
|
$-
|
(1)
Assumes the sale of
the maximum amount of securities being offered. Because there is no
minimum offering amount required as a condition to closing this
offering, we may sell fewer than all of the securities offered
hereby, which may significantly reduce the amount of proceeds
received by us.
We have
agreed to pay the placement agent a total cash fee equal to __% of
the gross proceeds of this offering and management fee of __% of
the gross proceeds of this offering. In addition, we have agreed to
reimburse the placement agent for accountable expenses and
out-of-pocket expenses, including aggregate legal fees and
expenses, in the amount of $________.
We
estimate our total expenses
associated with the offering, excluding placement agent discounts,
commissions and expenses, will be approximately
$_______.
S-55
Placement Agent Warrants
In
addition, we have agreed to issue to the placement agent warrants
to purchase up to _______ shares (5% of the aggregate number of
shares of common stock sold in this offering). The placement agent
warrants will have substantially the same terms as the Series CC
Warrants being sold to the investors in this offering, except that
the termination date of the placement agent warrants will be no
more than five (5) years from the effective date of this offering
and the exercise price will equal to ________% of the public
offering price. Pursuant to FINRA Rule 5110(g), the placement
agent warrants and any shares issued upon exercise of the placement
agent warrants shall not be sold, transferred, assigned, pledged,
or hypothecated, or be the subject of any hedging, short sale,
derivative, put or call transaction that would result in the
effective economic disposition of the securities by any person for
a period of 180 days immediately following the date of
effectiveness or commencement of sales of this offering, except the
transfer of any security: (i) by operation of law or by reason
of our reorganization; (ii) to any FINRA member firm
participating in the offering and the officers or partners thereof,
if all securities so transferred remain subject to the lock-up
restriction set forth above for the remainder of the time period;
(iii) if the aggregate amount of our securities held by the
placement agent or related persons do not exceed 1% of the
securities being offered; or (iv) that is beneficially owned
on a pro-rata basis by all equity owners of an investment fund,
provided that no participating member manages or otherwise directs
investments by the fund and the participating members in the
aggregate do not own more than 10% of the equity in the fund. In
addition, notwithstanding such restrictions, the exercise or
conversion of any security will not be prohibited, if all
securities remain subject to the lock-up restriction set forth
above for the remainder of the time period.
Right of First Refusal
Until
the twelve month anniversary following the closing of this
offering, if we, or any of our subsidiaries, decide to (a) dispose
of or acquire business units, or acquire any of our outstanding
securities, or make any exchange or tender offer, or enter into a
merger, consolidation or other business combination, or any
recapitalization, reorganization, restructuring or other similar
transaction, including without limitation, an extraordinary
dividend or distribution or a spin-off or split-off, and we decide
to retain a financial advisor for such a transaction, the Placement
Agent will have the right of first refusal to act as our exclusive
financial advisor for any such transaction, (b) finance or
refinance any indebtedness using a manager or agent, the Placement
Agent will have the right to act as lead manager, lead placement
agent or lead agent with respect to such financing or refinancing;
or (c) raise funds by means of a public offering or a private
placement of equity or debt securities using an underwriter or
placement agent, the placement agent will have the right to act as
the lead underwriter or placement agent for such
financing.
Discretionary Accounts
The
Placement Agent does not intend to confirm sales of the securities
offered hereby to any accounts over which it has discretionary
authority.
Electronic
Prospectus
This
prospectus supplement and the accompanying prospectus may be made
available in electronic format on Internet sites or through other
online services maintained by the Placement Agent or its
affiliates. In those cases, prospective investors may view offering
terms online and may be allowed to place orders online. Other than
this prospectus supplement and the accompanying prospectus in
electronic format, any information on the Placement Agent or its
affiliates’ websites and any information contained in any
other website maintained by the Placement Agent or any affiliate of
the Placement Agent is not part of this prospectus supplement and
the accompanying prospectus or the registration statement of which
this prospectus supplement and the accompanying prospectus forms a
part, has not been approved and/or endorsed by us or the Placement
Agent and should not be relied upon by investors.
S-56
Other relationships
The
placement agent and its affiliates have provided us and our
affiliates in the past, and may provide from time to time in the
future, certain commercial banking, financial advisory, investment
banking and other services for us and our affiliates in the
ordinary course of their business, for which they have received and
may continue to receive customary fees and commissions. The
placement agent in this offering served as our placement agent in
our registered direct offering consummated in August 2016 and May
2016. In addition, from time to time, the placement agent and their
affiliates may effect transactions for their own account or the
account of customers, and hold on behalf of themselves or their
customers, long or short positions in our debt or equity securities
or loans, and may do so in the future.
Listing
Our
common stock is listed on The NYSE MKT under the symbol
“CVM.”
LEGAL
MATTERS
The
validity of the issuance of the securities offered hereby will be
passed upon for us by Hart & Hart LLC, Denver, Colorado.
Certain legal matters will be passed upon for the placement agent
by Lowenstein Sandler LLP. .
EXPERTS
The
financial statements as of September 30, 2015 and 2014 and for each
of the three years in the period ended September 30, 2015 and
management’s assessment of the effectiveness of internal
control over financial reporting as of September 30, 2015
incorporated by reference in this prospectus supplement and the
accompanying prospectus have been so incorporated in reliance on
the reports of BDO USA, LLP, an independent registered public
accounting firm, incorporated herein by reference, given on the
authority of said firm as experts in auditing and
accounting.
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus supplement and the accompanying prospectus are part of
the registration statement on Form S-3 we filed with the SEC
under the Securities Act of 1933, as amended, and do not contain
all the information set forth in the registration statement.
Whenever a reference is made in this prospectus supplement or the
accompanying prospectus to any of our contracts, agreements or
other documents, the reference may not be complete, and you should
refer to the exhibits that are a part of the registration statement
or the exhibits to the reports or other documents incorporated by
reference into this prospectus supplement and the accompanying
prospectus for a copy of such contract, agreement or other
document. You may inspect a copy of the registration statement,
including the exhibits and schedules, without charge, at the
SEC’s public reference room mentioned below, or obtain a copy
from the SEC upon payment of the fees prescribed by the
SEC.
S-57
We are
subject to the requirements of the Securities Exchange Act of l934,
as amended, and are required to file reports, proxy statements and
other information with the Securities and Exchange Commission.
Copies of any such reports, proxy statements and other information
filed by us can be read and copied at the Commission’s Public
Reference Room at 100 F. Street, N.E., Washington, D.C. 20549. The
public may obtain information on the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0330. The
Commission maintains an Internet site that contains reports, proxy
and information statements, and other information regarding us. The
address of that site is http://www.sec.gov. Our reference to
the SEC’s Internet site is intended to be an inactive textual
reference only.
You can
find information about us on our website at http://www.cel-sci.com. Information
found on our website is not part of this prospectus supplement or
the accompanying prospectus.
INCORPORATION
OF DOCUMENTS BY REFERENCE
We
incorporate by reference the filed documents listed below, except
as superseded, supplemented or modified by this prospectus
supplement or the accompanying prospectus, and any future filings
we will make with the SEC under Sections 13, 14 or 15 of the
Exchange Act:
●
our Annual Report on Forms 10-K for the
fiscal year ended September 30, 2015;
●
our Quarterly
Reports on Form 10-Q for the periods ended December 31, 2015, March
31, 2016 and June 30, 2016;
●
our Current Reports
on Form 8-K and 8-K/A filed with the SEC on January 13, 2016,
January 15, 2016, February 17, 2016, May 19, 2016, July 22, 2016,
August 24, 2016, September 2, 2016 and September 28,
2016;
●
our
Definitive Proxy
Statement, which was filed with the SEC on June 9,
2016;
●
the description of
our common stock contained in our Registration Statement on Form
8-A filed with the SEC on July 2, 1996 and all amendments and
reports updating that description; and
●
the description of
our Series S warrants contained in our Registration Statement on
Form 8-A filed with the SEC on January 3, 2014 and all amendments
and reports updating that description.
To the
extent that any information contained in any current report on Form
8-K, or any exhibit thereto, was furnished to, rather than filed
with, the SEC, such information or exhibit is specifically not
incorporated by reference in this prospectus supplement or the
accompanying prospectus.
All
documents filed with the Commission by us pursuant to Sections 13,
14 or 15 of the Exchange Act subsequent to the date of this
prospectus supplement and prior to the termination of this offering
shall be deemed to be incorporated by reference into this
prospectus supplement and the accompanying prospectus and to be a
part of this prospectus supplement and the accompanying prospectus
from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated
by reference shall be deemed to be modified or superseded for the
purposes of this prospectus supplement and the accompanying
prospectus to the extent that a statement contained in this
prospectus supplement or the accompanying prospectus or in any
subsequently filed document that also is or is deemed to be
incorporated by reference into this prospectus supplement and the
accompanying prospectus modifies or supersedes such statement. Such
statement so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this prospectus
supplement and the accompanying prospectus.
S-58
We will
provide, without charge, to each person to whom a copy of this
prospectus supplement and the accompanying prospectus is delivered,
including any beneficial owner, upon the written or oral request of
such person, a copy of any or all of the documents incorporated by
reference above (other than exhibits to these documents, unless the
exhibits are specifically incorporated by reference into this
prospectus). Requests should be directed to:
CEL-SCI
Corporation
8229
Boone Blvd., #802
Vienna,
Virginia 22182
(703)
506-9460
S-59
CEL-SCI
CORPORATION
Common
Stock
and
Warrants
____________________
Prospectus
Supplement
____________________
CEL-SCI
CORPORATION
Common
Stock
CEL-SCI Corporation
may offer from time to time shares of common stock, preferred
stock, convertible preferred stock, rights, warrants, units
consisting of one or more of these securities, as well as any of
these securities
issuable upon the exercise of warrants, at an initial offering price not
to exceed $75,000,000, at prices and on terms to be determined at
or prior to the time of sale in light of market conditions at the
time of sale.
Specific terms
pertaining to the securities offered by this prospectus will be set
forth in one or more accompanying prospectus supplements, together
with the terms of the offering and the initial price and the net
proceeds to CEL-SCI from the sale. The prospectus
supplement will set forth, without limitation, the terms of the
offering and sale of such securities.
CEL-SCI may sell
the securities offered by this prospectus directly, through agents
designated from time to time, or through underwriters or dealers.
If any agents of CEL-SCI or any underwriters or dealers are
involved in the sale of the securities, the names of the agents,
underwriters or dealers, any applicable commissions and discounts,
and the net proceeds to CEL-SCI will be set forth in the applicable
prospectus supplement.
CEL-SCI may not use
this prospectus to complete sales of its securities unless this
prospectus is accompanied by a prospectus supplement.
The securities
offered by this prospectus are speculative and involve a high
degree of risk and should be purchased only by persons who can
afford to lose their entire investment. For a
description of certain important factors that should be considered
by prospective investors, see "Risk Factors" beginning on page 16
of this prospectus.
Neither the
Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or has
passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a
criminal offense.
CEL-SCI's common
stock is traded on the NYSE MKT under the symbol
“CVM”. On June 30, 2015 the closing price of
CEL-SCI’s common stock on the NYSE MKT was
$0.66.
The date of this
Prospectus is October 30, 2015
1
PROSPECTUS
SUMMARY
THIS
SUMMARY IS QUALIFIED BY THE OTHER INFORMATION APPEARING ELSEWHERE
IN THIS PROSPECTUS.
CEL-SCI is focused
on finding the best way to activate the immune system to fight
cancer and infectious diseases. Its lead investigational therapy
Multikine® (Leukocyte Interleukin, Injection) is currently in
a pivotal Phase III clinical trial against head and neck cancer,
for which CEL-SCI has received Orphan Drug Status from the U.S.
FDA. If the primary endpoint of the FDA study is achieved, the
results will be used to support applications to regulatory agencies
around the world for worldwide commercial marketing approvals as a
first line cancer therapy. Additional clinical indications for
Multikine include cervical dysplasia in HIV/HPV co-infected women,
for which a Phase I study was successfully concluded; and the
treatment of peri-anal warts in HIV/HPV co-infected men and women,
for which a Phase I trial is now underway in conjunction with the
U.S. Navy under a Cooperative Research and Development
Agreement.
CEL-SCI’s
immune therapy, Multikine, is being used in a different way than
immune therapy is usually used. It is administered
locally to treat local tumors or infections and it is given before
any other therapy has been administered. For example, in
the ongoing Phase III clinical trial, Multikine is given locally at
the site of the tumor as a first line of treatment before surgery,
radiation and/or chemotherapy because that is when the immune
system is thought to be strongest. The goal is to help the intact
immune system kill the micro metastases that usually cause
recurrence of the cancer. In short, CEL-SCI believes
that local administration and administration before weakening of
the immune system by chemotherapy and radiation will result in
higher efficacy with less or no toxicity.
CEL-SCI’s
focus on HPV is not the development of an antiviral against HPV in
the general population. Instead it is the development of
an immunotherapy to be used in patients who are immune suppressed
by diseases such as HIV and are therefore less able or unable to
control HPV and its resultant diseases. This group of
patients has no viable treatments available to them and there are,
to CEL-SCI’s knowledge, no competitors at the current
time. HPV is also relevant to the head and neck cancer
Phase III study since it is now known that HPV is a cause of head
and neck cancer. Multikine was shown to kill HPV in an
earlier study of HIV infected women with cervical
dysplasia.
CEL-SCI is also
investigating a different peptide-based immunotherapy
(LEAPS-H1N1-DC) as a possible treatment for H1N1 hospitalized
patients and as a vaccine (CEL-2000) for Rheumatoid Arthritis
(currently in preclinical testing) using its LEAPS technology
platform. The investigational immunotherapy LEAPS-H1N1-DC treatment
involves non-changing regions of H1N1 Pandemic Flu
(www.jci.org/articles/view/67550), Avian Flu (H5N1), and the
Spanish Flu, as CEL-SCI scientists are very concerned about the
possible emergence of a new more virulent hybrid virus through the
combination of H1N1 and Avian Flu, or possibly Spanish
Flu.
CEL-SCI Corporation
was formed as a Colorado corporation in 1983. CEL-SCI’s
principal office is located at 8229 Boone Boulevard, Suite 802,
Vienna, VA 22182. CEL-SCI’s telephone number is
703-506-9460 and its web site is
www.cel-sci.com. CEL-SCI does not incorporate the
information on its website into this prospectus, and you should not
consider it part of this prospectus.
2
CEL-SCI makes its
electronic filings with the Securities and Exchange Commission
(SEC), including its annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K and amendments to these
reports available on its website free of charge as soon as
practicable after they are filed or furnished to the
SEC.
In this prospectus,
unless otherwise specified or the context requires otherwise, the
terms “CEL-SCI,” the “Company,”
“we,” “us” and “our” to refer
to CEL-SCI Corporation. Our fiscal year ends on September
30.
CEL-SCI’S
PRODUCTS
CEL-SCI is
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:
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1)
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Multikine
(Leukocyte Interleukin, Injection), or Multikine, an
investigational immunotherapy under development for the potential
treatment of certain head and neck cancers, and anal warts or
cervical dysplasia in human immunodeficiency virus, or HIV, and
human papillomavirus, or HPV co-infected patients;
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2)
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L.E.A.P.S. (Ligand
Epitope Antigen Presentation System) technology, or LEAPS, with two
investigational therapies, LEAPS-H1N1-DC, a product candidate under
development for the potential treatment of pandemic influenza in
hospitalized patients, and CEL-2000, a vaccine product candidate
under development for the potential treatment of rheumatoid
arthritis.
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MULTIKINE
Our lead
investigational therapy, Multikine, is currently being developed as
a potential therapeutic agent directed at using the immune system
to produce an anti-tumor immune response. Data from
Phase 1 and Phase 2 clinical trials suggest that Multikine
simulates the activities of a healthy person’s immune system,
enabling it to use the body’s own anti-tumor immune response.
Multikine is the trademark we have registered for this
investigational therapy, and this proprietary name is subject to
review by the U.S. Food and Drug Administration, or FDA, in
connection with our future anticipated regulatory submission for
approval. Multikine has not been licensed or approved
for sale, barter or exchange by the FDA or any other regulatory
agency. Neither has its safety or efficacy been established for any
use.
Multikine is an
immunotherapy product candidate comprised of a patented defined
mixture of 14 human natural cytokines and is manufactured in a
proprietary manner in our manufacturing facility. We spent over 10
years and more than $80 million developing and validating the
manufacturing process. The pro-inflammatory cytokine mixture
includes interleukins, interferons, chemokines and
colony-stimulating factors, which contain elements of the
body’s natural mix of defenses against cancer.
Multikine is
designed to be used in a different way than immune therapy is
usually used. It is designed to be administered locally
to treat local tumors before any other therapy has been
administered. For example, in the ongoing Phase 3
clinical trial, Multikine is injected locally at the site of the
tumor and near the adjacent draining lymph nodes as a first line of
treatment before surgery, radiation and/or chemotherapy because
that is when the immune system is thought to be strongest. The goal
is to help the intact immune system recognize and kill the micro
metastases that usually cause recurrence of the
cancer. In short, we believe that local administration
and administration before weakening of the immune system by
chemotherapy and radiation will result in better anti-tumor
response than if Multikine were administered as a second- or
later-line therapy. In clinical studies of Multikine,
administration of the investigational therapy to head and neck
cancer patients has demonstrated the potential for less or limited
to no appreciable toxicity.
3
The first
indication we are pursuing for our Multikine product candidate is
an indication for neoadjuvant therapy in patients with squamous
cell carcinoma of the head and neck, or SCCHN. Multikine
investigational immunotherapy was granted Orphan Drug designation
for neoadjuvant therapy in patients with SCCHN by the FDA in the
United States. SCCHN is a type of head and neck cancer, and we
believe that the head and neck cancer market, in the aggregate,
represents a large, unmet medical need. The last FDA approval of a
therapy for the treatment of advanced primary head and neck cancer
was over 50 years ago. In the aggregate, head and neck cancer
represents about 6% of the world’s cancer cases, with over
650,000 patients diagnosed worldwide each year, and nearly 60,000
patients diagnosed annually in the United States.
Current Status of
Ongoing Phase 3 Clinical Trial
Regulatory
authorities in 24 countries around the world, including the FDA in
the United States, have allowed Multikine to be studied in a global
Phase 3 clinical trial as a potential neoadjuvant therapy in
patients with SCCHN. This trial is currently primarily under the
management of two clinical research organizations, or CROs, Aptiv
Solutions, Inc., or Aptiv, and Ergomed Clinical Research Limited,
or Ergomed, which are adding clinical centers in an effort to
increase the speed of patient enrollment.
Pursuant to the
co-development agreement we entered into with Ergomed in April
2013, Ergomed is responsible for the majority of the new patient
enrollment. Enrollment in 2014 increased approximately 800% over
2013, and the following chart depicts the number of patients
enrolled per month since our transfer to the new CROs.
Although we are
aiming to enroll 880 patients, our Phase 3 study requires a total
of 784 evaluable patients. We are estimating that such
enrollment will be completed in March 2016. Following full
enrollment of the study, we have to wait for 298 events (deaths) in
the two comparator arms combined to determine if we have met our
primary endpoint, which is a 10% increase in overall survival in
the Multikine arm over the comparator arm. We estimate that the
final data read-out of this Phase 3 clinical trial could occur by
the second half of 2017 based on our enrollment projections and
estimated survival curves provided in scientific
literature.
Of
the 488 patients that have been enrolled in the study as of June
30, 2015, uncertainty remains as to whether up to 117 patients
enrolled during our former CRO’s tenure as the global manager
of the Phase 3 clinical trial will be considered to be evaluable
subjects at the close of the study. We are currently
engaged in a contract dispute alleging that the former CRO failed
to comply with the protocol for the Phase 3 clinical trial and
applicable regulatory requirements. We do not believe
that we will need to replace all 117 of these patients, but
assuming that all of these patients must be replaced, we estimate
that it could take an additional two to three months to do so based
on our current expectations of enrolling approximately 50 patients
per month at the end of the scheduled enrollment
period. However, the Phase 3 study design anticipates
enrollment of a total of 880 patients, while the statistical
analysis requires a total of 784 evaluable
patients. Therefore, the actual number of patients
enrolled by our former CRO that will need to be replaced and the
time needed to do so cannot be determined at this
time.
4
We estimate that
the total remaining cost of the Phase 3 trial, excluding any costs
that will be paid by our partners, will be approximately $22.1
million after June 30, 2015. This is in addition to the
approximately $22.5 million that we have spent on the trial as
of June 30, 2015. This estimate is based on
information currently available under our contracts with the CROs
responsible for managing the Phase 3 trial. This number may be
affected by the rate of patient enrollment, foreign currency
exchange rates and many other factors, some of which cannot be
foreseen today. It is therefore possible that the cost of the Phase
3 trial will be higher than currently estimated.
The current
standard of care, or SOC, treatment regimen for advanced primary
head and neck cancer patients consists of surgical resection of the
tumor and involved lymph nodes, followed by either radiotherapy
alone or radiotherapy and concurrent chemotherapy. Our ongoing
Phase 3 trial is testing the hypothesis that Multikine treatment,
administered prior to such SOC treatment regimen, will extend
overall survival, enhance the local/regional control of the disease
and reduce the rate of disease progression in patients with
squamous cell carcinoma of the head and neck.
The primary
clinical endpoint in our ongoing Phase 3 clinical trial is the
achievement of a 10% improvement in overall survival in the
Multikine plus SOC treatment arm over that which is achieved in the
SOC treatment arm alone (all subjects in the Phase 3 study will
receive SOC). Based on what is presently known about the
current survival statistics for this population, we believe that
achievement of this endpoint should enable us, subject to further
consultations with the FDA, to move forward, prepare and submit a
Biologic License Application, or BLA, to the FDA for Multikine as
neoadjuvant therapy in patients with SCCHN.
In our Phase 3
clinical trial, Multikine is administered to cancer patients prior
to their receiving any conventional treatment for cancer, including
surgery, radiation and/or chemotherapy. This could be
shown to be important because conventional therapy may weaken the
immune system, and may compromise the potential effect of
immunotherapy. Because Multikine is given before conventional
cancer therapy, when the immune system may be more intact, we
believe the possibility exists for it to have a greater likelihood
of activating an anti-tumor immune response under these conditions.
This likelihood is one of the clinical aspects being evaluated in
the ongoing global Phase 3 clinical trial.
Throughout
the course of the Phase 3 study thus far, an Independent Data
Monitoring Committee, or IDMC, has met periodically to review
safety data from the Phase 3 study, and the IDMC is expected to
continue doing so throughout the remainder of the Phase 3
study. At the various points in the study thus far at
which the IDMC has completed review of the safety data it has
indicated that safety signals have not been identified thus far in
the Phase 3 study that would call into question the benefit/risk of
continuing the study and has recommended that the Phase 3 study may
continue. Ultimately, the decision as to whether a drug is safe
(and whether it is effective) is made by the FDA and other
regulatory authorities based upon an assessment of all of the data
from an entire drug development program submitted in an application
for marketing approval.
Follow-Up Analysis of Overall Survival in Phase 2
Patients
The following is a
summary of results from our last Phase 2 study conducted with
Multikine. This study employed the same treatment protocol as is
being followed in our Phase 3 study:
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In a follow-up
analysis of the Phase 2 clinical study population, which used the
same dosage and treatment regimen as is being used in the Phase 3
study, head and neck cancer patients with locally advanced primary
disease who received our investigational therapy Multikine as
first-line investigational therapy, followed by surgery and
radiotherapy, were reported by the clinical investigators to have
had a 63.2% overall survival, or OS, rate at a median of 3.33 years
from surgery. This percentage of OS was arrived at as follows: of
the 21 subjects enrolled in the Phase 2 study, the consent for the
survival follow-up portion of the study was received from 19
subjects. OS was calculated using the entire treatment population
that consented to the follow-up portion of the study (19 subjects),
including two subjects who, as later determined by three
pathologists blinded to the study, did not have oral squamous cell
carcinoma, or OSCC. These two subjects were thus not evaluable per
the protocol and were not included in the pathology portion of the
study for purposes of calculating complete response rate, as
described below, but were included in the OS calculation. The
overall survival rate of subjects receiving the investigational
therapy in this study was compared to the overall survival rate
that was calculated based upon a review of 55 clinical trials
conducted in the same cancer population (with a total of 7,294
patients studied), and reported in the peer reviewed scientific
literature between 1987 and 2007. Review of this literature showed
an approximate survival rate of 47.5% at 3.5 years from treatment.
Therefore, the results of our final Phase 2 study were considered
to be potentially favorable in terms of overall survival,
recognizing the limitations of this early-phase study. It should be
noted that an earlier investigational therapy Multikine study
appears to lend support to the overall survival findings described
above - Feinmesser et al Arch Otolaryngol. Surg. 2003. However, no
definitive conclusions can be drawn from these data about the
potential efficacy or safety profile of this investigational
therapy. Moreover, further research is required, and these results
must be confirmed in the Phase 3 clinical trial of this
investigational therapy that is currently in progress. Subject to
completion of that Phase 3 trial, and the FDA’s review and
acceptance of our entire data set on this investigational therapy,
we believe that these early-stage clinical trial results indicate
the potential for our Multikine product candidate to become a
treatment for advanced primary head and neck cancer, if
approved.
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5
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Reported average of
50% reduction in tumor cells in Phase 2 trials (based on 19
patients evaluable by pathology, having OSCC): The clinical
investigators who administered the three-week Multikine treatment
regimen used in the Phase 2 study reported that, as was determined
in a controlled pathology study, Multikine administration appeared
to have caused, on average, the disappearance of about half of the
cancer cells present at surgery (as determined by histopathology
assessing the area of Stroma/Tumor (Mean+/- Standard Error of the
Mean of the number of cells counted per filed)) even before the
start of standard therapy, which normally includes surgery,
radiation and chemotherapy (Timar et al JCO 2005).
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Reported 10.5%
complete response in the Phase 2 trial (based on 19 patients
evaluable by pathology, having OSCC): The clinical investigators
who administered the three-week Multikine investigational treatment
regimen used in the Phase 2 study reported that, as was determined
in a controlled pathology study, the tumor apparently was no longer
present (as determined by histopathology) in approximately 10.5% of
evaluable patients with OSCC (Timar et al JCO 2005). In
the original study, 21 subjects received Multikine, two of which
were later excluded, as subsequent analysis by three pathologists
blinded to the study revealed that these two patients did not have
OSCC. Two subjects in this study had a complete response, leaving a
reported complete response rate of two out of 19 assessable
subjects with OSCC (or 10.5%) (Timar et al, JCO 2005).
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Subsequently, an
analysis on the 21 subjects originally treated with Multikine in
the study to evaluate overall survival was conducted, as described
above. In connection with the follow-up portion of the
study for overall survival, we also conducted an unreported
post-hoc analysis of complete response rate in the study
population, which included subjects who provided consent for the
follow-up and who also had OSCC. Two out of the 21 subjects did not
re-consent for follow-up, and two of the remaining 19 subjects were
excluded from the post-hoc complete response rate analysis as they
had previously been determined by pathology analysis to not have
OSCC. The two complete responders with OSCC both
consented to the follow-up study. Therefore, the
post-hoc analysis of complete response was based on a calculation
of the two complete responders out of 17 evaluable subjects who
consented to the follow-up analysis and who also had OSCC (or
11.8%).
6
Furthermore, we
reported an overall response rate of 42.1% based on the number of
evaluable patients who experienced a favorable response to the
treatment, including those who experienced minor, major and
complete responses. Out of the 19 evaluable patients, two
experienced a complete response, two experienced a major response,
and four experienced a minor response to treatment. Thus, we
calculated the number of patients experiencing a favorable response
as eight patients out of 19 (or 42.1%) (Timar et al, JCO
2005).
Peri-Anal Warts and Cervical Dysplasia in HIV/HPV Co-Infected
Patients
HPV is a very
common sexually transmitted disease in the United States and also
other parts of the world. It can lead to cancer of the cervix,
penis, anus, esophagus and head and neck. Our focus in HPV,
however, is not on developing an antiviral for the potential
treatment or prevention of HPV in the general population. Instead,
our focus is on developing an immunotherapy product candidate
designed to be administered to patients who are immune-suppressed
by other diseases, such as HIV, and who are therefore less able or
unable to control HPV and its resultant or co-morbid
diseases. Such patients have limited treatment options
available to them.
One condition that
is commonly associated with both HIV and HPV is the occurrence of
anal intraepithelial dysplasia, or AIN, and anal and genital warts.
The incidence of AIN in HIV-infected people is estimated to be
about 25%. The incidence of anal HPV infection in
HIV-infected men who have sex with men, or MSM, is estimated to be
as high as 95%. In the aggregate, the United States and Europe have
about 875,000 HIV-infected patients with AIN (assuming AIN
prevalence of approximately 25% of the aggregate HIV-infected
population). Persistent HPV infection in the anal region is thought
to be responsible for up to 80% of anal cancers, and men and women
who are HIV positive have a 30-fold increase in their risk of anal
cancer. Persistent HPV infection can also be a precursor
to cervical cancer, as well as certain head and neck
cancers.
On October 7, 2013,
we announced a cooperative research and development agreement, or
CRADA, with the U.S. Naval Medical Center, San Diego, or the
USNMC. Pursuant to this agreement, the USNMC will
conduct a Phase 1 study, approved by the Human Subjects
Institutional Review Board, of our investigational immunotherapy,
Multikine, in HIV/HPV co-infected men and women with peri-anal
warts. The purpose of this study is to evaluate the
safety and clinical impact of Multikine as a potential treatment of
peri-anal warts and assess its effect on AIN in HIV/HPV co-infected
men and women.
Pursuant to the
CRADA, we are contributing the investigational study drug Multikine
for use in this Phase 1 study, and we will retain all rights to any
currently-owned technology and will have the right to exclusively
license any new technology developed from the collaboration. In
October 2013, we also entered into a co-development and profit
sharing agreement with Ergomed for development of Multikine as a
potential treatment of HIV/HPV co-infected men and women with
peri-anal warts. This agreement will initially be in
support of the development with the USNMC.
On September 29,
2014, we announced that the first volunteer patient had been
enrolled and administered Multikine in this Phase 1 study, which is
currently ongoing. If we are able to add an additional
Key Opinion Leader, or KOL, we believe that we will complete
patient enrollment by the second half of 2015, and that the Phase 1
results will occur in the first half of 2016.
7
The treatment
regimen for this Phase 1 study of up to 15 HIV/HPV co-infected
patient volunteers with peri-anal warts, being conducted by the
USNMC, is identical to the regimen that was used in an earlier
Institutional Review Board-approved Multikine Phase 1 study in
HIV/HPV co-infected patients, which was conducted at the University
of Maryland. In that study, our Multikine investigational therapy
was administered to HIV/HPV co-infected women with cervical
dysplasia, resulting in visual and histological evidence of
clearance of lesions in three out of the eight
subjects.
Furthermore, in
this earlier Phase 1 study, the number of HPV viral
sub-types in three volunteer subjects tested were reduced
post-treatment with Multikine, as opposed to pre-treatment, as
determined by in situ polymerase chain reaction performed on tissue
biopsy collected before and after Multikine treatment. As reported
by the investigators in the earlier study, the study volunteers all
appeared to tolerate the treatment with no reported serious adverse
events.
In October 2013, we
entered into a co-development and profit sharing agreement with
Ergomed for to continue the development of Multikine in HIV/HPV
co-infected women with cervical dysplasia.
Manufacturing Facility
Before starting the
Phase 3 trial, we needed a dedicated manufacturing facility to
produce Multikine. In 2007, the build out of a facility near
Baltimore, Maryland commenced in accordance with our
specifications. We took delivery of this facility in the fall of
2008 and validated it in 2009 and 2010. The aggregate construction
cost was approximately $25 million, of which we funded
approximately $10 million. The facility has been subject to
inspection by a European Union Qualified Person on two different
occasions with no major observations, and we have produced multiple
clinical lots for the Phase 3 clinical trial at this facility. In
addition to using this facility to manufacture Multikine, we may,
but only if the facility is not being used to manufacture
Multikine, offer the use of the facility as a service to
pharmaceutical companies and others, particularly those that need
to “fill and finish” their drugs in a cold environment
(4 degrees Celsius, or approximately 39 degrees Fahrenheit).
However, we intend to give priority to Multikine as management
considers the Multikine supply to the clinical studies and
preparation for a marketing approval application to be more
important than offering fill and finish services. Fill and finish
is the process of filling injectable drugs in a sterile manner and
is a key part of the manufacturing process for many medicines. Our
lease on the manufacturing facility expires on October 31, 2028,
and we may, at our election, extend the lease for two ten-year
periods or purchase the building at the end of the initial lease
term.
LEAPS
Our patented T-cell
Modulation Process, referred to as LEAPS (Ligand Epitope Antigen
Presentation System), is designed to use
“heteroconjugates” to direct the body to choose a
specific immune response. LEAPS is designed to stimulate the
human immune system to more effectively fight bacterial, viral and
parasitic infections as well as autoimmune, allergies,
transplantation rejection and cancer, when it cannot do so on its
own. Designed to be administered like a vaccine, LEAPS combines
T-cell binding ligands with small, disease-associated peptide
antigens, and has the potential to provide a new method to treat
and prevent certain diseases.
The ability to
generate a specific immune response is important because many
diseases are often not combated effectively due to the body’s
selection of the “inappropriate” immune response. The
capability to specifically reprogram an immune response may offer a
more effective approach than existing vaccines and drugs in
attacking an underlying disease.
8
Using the LEAPS
technology, we are developing LEAPS-H1N1-DC, a potential peptide
treatment for H1N1 influenza in hospitalized
patients. This LEAPS influenza product candidate is
designed to focus on the conserved, non-changing epitopes of the
different strains of Type A influenza viruses in order to minimize
the chance of viral “escape by mutations” from immune
recognition. Type A influenza viruses include strains such as H1N1,
H5N1 and H3N1, which are also known as “swine
influenza,” “avian or bird influenza,” and
“Spanish influenza,” respectively. Therefore, we think
of this product candidate as targeting not only an H1N1 indication,
but also a pandemic influenza indication. Our LEAPS
influenza product candidate contains epitopes known to be
associated with immune protection against influenza in animal
models.
Additional work on
this product candidate for the potential treatment of pandemic
influenza is being pursued in collaboration with the National
Institute of Allergy and Infectious Diseases, or NIAID, part of the
National Institutes of Health, USA. In May 2011, NIAID
scientists presented data at the Keystone Conference on
“Pathogenesis of Influenza: Virus-Host Interactions” in
Hong Kong, China, showing the positive results of studies in mice
of LEAPS. Infection with the H1N1 virus activated dendritic cells,
or DCs, to treat the H1N1 virus. Scientists at the NIAID
found that H1N1-infected mice treated with LEAPS-H1N1 DCs showed a
survival advantage over mice treated with control DCs. The work was
performed in collaboration with scientists led by Kanta Subbarao,
M.D., Chief of the Emerging Respiratory Diseases Section in the
NIAID’s Division of Intramural Research, part of the U.S.
National Institutes of Health, or NIH.
In July 2013, we
announced the publication of the results of additional influenza
studies by researchers from the NIAID in the Journal of Clinical
Investigation. The studies described in the publication
demonstrate that when investigational LEAPS candidate was used
“in vitro” to activate immune cells called dendritic
cells, or DCs, these activated dendritic cells, when injected into
influenza infected mice, arrested the progression of lethal
influenza virus infection in these mice. The work was
performed in the laboratory of Dr. Subbarao.
With our LEAPS
technology, we have also developed a second peptide named CEL-2000,
a vaccine product candidate under development for rheumatoid
arthritis. In animal studies of rheumatoid arthritis,
CEL-2000 therapy demonstrated both a reduction in several
parameters of tissue damage and destruction upon histological
examination and joint swelling (investigational parameter in this
animal study) with fewer administrations than those required by
currently-marketed anti-rheumatoid arthritis treatments, including
Enbrel®. We believe that CEL-2000 has the potential to be a
more disease type-specific therapy, and we plan to price it so
that, if successfully developed and approved, it is significantly
less expensive than currently marketed rheumatoid arthritis
treatments. Further, we believe it has the potential for
use in patients unable to tolerate or who may not be responsive to
existing anti-arthritis therapies.
In July 2014, we
were awarded a Phase 1 Small Business Innovation Research, or SBIR,
grant from the National Institute of Arthritis Muscoskeletal and
Skin Disease, which is part of the NIH, in the amount of $225,000,
of which we have received approximately $176,000 as of June 30,
2015. The grant is to fund the further development of vaccines for
rheumatoid arthritis and the work is being conducted in
collaboration with scientists at Rush University Medical Center in
Chicago, Illinois.
THE
OFFERING
Securities
Offered:
CEL-SCI may offer
from time to time shares of common stock, preferred
stock, convertible
preferred stock rights, warrants, units consisting of one or more
of the foregoing securities, as well as any of these securities
issuable upon the exercise of the warrants, at an initial offering
price not to exceed $75,000,000, at prices and on terms to be
determined at or prior to the time of sale in light of market
conditions at the time of sale. CEL-SCI may not use this
prospectus to complete sales of its securities unless this
prospectus is accompanied by a prospectus
supplement. See the “Plan of Distribution”
section of this prospectus for additional information concerning
the manner in which CEL-SCI’s securities may be
offered.
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Common Stock
Outstanding:
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As of June 30, 2015
CEL-SCI had 112,027,058 outstanding shares of common
stock. The number of outstanding shares does not give
effect to shares which may be issued upon the exercise and/or
conversion of options, warrants or other convertible
securities. See "Comparative Share Data" for more
information.
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Risk
Factors:
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The purchase of the
securities offered by this prospectus involves a high degree of
risk. Risk factors include the lack of revenues and
history of loss, need for additional capital and need for FDA
approval. See the “Risk Factors" section of this
prospectus for additional Risk Factors.
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Common Stock
NYSE
MKT Symbol:
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CVM
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Series S
Warrants NYSE MKT
Symbol:
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CVM WS
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FORWARD
LOOKING STATEMENTS
This prospectus and
the documents that are incorporated or deemed to be incorporated by
reference into this prospectus, contain or incorporate by reference
“forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. You can generally
identify these forward-looking statements by forward-looking words
such as “anticipates,” “believes,”
“expects,” “intends,” “future,”
“could,” “estimates,” “plans,”
“would,” “should,” “potential,”
“continues” and similar words or expressions (as well
as other words or expressions referencing future events, conditions
or circumstances). These forward-looking statements involve risks,
uncertainties and other important factors that may cause our actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements, including, but not
limited to:
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the progress and
timing of, and the amount of expenses associated with, our
research, development and commercialization activities for our
product candidates, including Multikine;
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the expected
progress, rate, timing and success of patient enrollment in our
ongoing Phase 3 clinical trial of Multikine;
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our expectations
regarding the timing, costs and outcome of any pending or future
litigation matters, lawsuits or arbitration proceedings, including
but not limited to the pending arbitration proceeding we initiated
against our former clinical research organization, or
CRO;
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the success of our
clinical studies for our product candidates;
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our ability to
obtain U.S. and foreign regulatory approval for our product
candidates and the ability of our product candidates to meet
existing or future regulatory standards;
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our expectations
regarding federal, state and foreign regulatory
requirements;
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the therapeutic
benefits and effectiveness of our product candidates;
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the safety profile
and related adverse events of our product candidates;
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our ability to
manufacture sufficient amounts of Multikine or our other product
candidates for use in our clinical studies or, if approved, for
commercialization activities following such regulatory
approvals;
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our plans with
respect to collaborations and licenses related to the development,
manufacture or sale of our product candidates;
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our expectations as
to future financial performance, expense levels and liquidity
sources;
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our ability to
compete with other companies that are or may be developing or
selling products that are competitive with our product
candidates;
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anticipated trends
and challenges in our potential markets; and
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our ability to
attract, retain and motivate key personnel.
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All forward-looking
statements contained herein are expressly qualified in their
entirety by this cautionary statement, the risk factors set forth
under the heading “Risk Factors” and elsewhere in this
prospectus and in the documents incorporated or deemed to be
incorporated by reference into this prospectus. The forward-looking
statements contained in this prospectus and any document
incorporated or deemed to be incorporated by reference in this
prospectus, speak only as of their respective
dates. Except to the extent required by applicable laws
and regulations, we undertake no obligation to update these
forward-looking statements to reflect new information, events or
circumstances after the date of this prospectus or to reflect the occurrence of
unanticipated events. In light of these risks and uncertainties,
the forward-looking events and circumstances described in this
prospectus and the documents that are incorporated by reference
into this prospectus supplement and the accompanying prospectus may
not occur and actual results could differ materially from those
anticipated or implied in such forward-looking statements.
Accordingly, you are cautioned not to place undue reliance on these
forward-looking statements.
RISK
FACTORS
Investors should be
aware that this offering involves the risks described below, which
could adversely affect the price of CEL-SCI’s common
stock. In addition to the other information contained in
this prospectus, the following factors should be considered
carefully in evaluating an investment in the securities offered by
this prospectus. The risks and uncertainties we
described are not the only ones facing us. Additional
risks not presently known to us, or that we currently deem
immaterial, may also impair our business operations. If
any of these risks were to occur, our business, financial
condition, result of operations and liquidity would likely
suffer. In that event, the trading price of our common
stock would decline, and you could lose all or part of your
investment. Some statements in this Prospectus,
including statements in the following risk factors, constitute
forward-looking statements. See “Forward-Looking
Statements.”
Risks Related to CEL-SCI
We have incurred significant losses since inception, and we
anticipate that we will continue to incur significant losses for
the foreseeable future and may never achieve or maintain
profitability.
We have a history
of net losses and expect to incur substantial losses and have
negative operating cash flow for the foreseeable future, and may
never achieve or maintain profitability. Since the date
of our formation and through March 31, 2015, we incurred net losses
of approximately $260 million. We have relied principally upon the
proceeds of the public and private sales of our securities to
finance our activities to date. To date, we have not commercialized
any products or generated any revenue from the sale of products,
and we do not expect to generate any product revenue for the
foreseeable future. We do not know whether or when we will generate
product revenue or become profitable.
11
We are heavily
dependent on the success of Multikine which is under clinical
development. We cannot be certain that Multikine will receive
regulatory approval or be successfully commercialized even if we
receive regulatory approval. Multikine is our only product
candidate in late-stage clinical development, and our business
currently depends heavily on its successful development, regulatory
approval and commercialization. We have no drug products for sale
currently and may never be able to develop approved and marketable
drug products.
Even if we succeed
in developing and commercializing one or more of our product
candidates, we expect to incur substantial losses for the
foreseeable future and may never become profitable. We also expect
to continue to incur significant operating and capital expenditures
and anticipate that our expenses will increase substantially in the
foreseeable future as we:
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continue to
undertake preclinical development and clinical trials for product
candidates;
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seek regulatory
approvals for product candidates;
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implement
additional internal systems and infrastructure; and
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hire additional
personnel.
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To become and
remain profitable, we must succeed in developing and
commercializing our product candidates, which must generate
significant revenue. This will require us to be successful in a
range of challenging activities, including completing preclinical
testing and clinical trials of our product candidates, discovering
or acquiring additional product candidates, obtaining regulatory
approval for these product candidates and manufacturing, marketing
and selling any products for which we may obtain regulatory
approval. We are only in the preliminary stages of most of these
activities. We may never succeed in these activities and, even if
we do, may never generate revenue that is significant enough to
achieve profitability.
Even if we do
achieve profitability, we may not be able to sustain or increase
profitability on a quarterly or annual basis. Our failure to become
and remain profitable could depress the value of our company and
could impair our ability to raise capital, expand our business,
maintain our research and development efforts, diversify our
product offerings or even continue our operations. A decline in the
value of our company could cause our stockholders to lose all or
part of their investment.
We will require substantial additional capital to remain in
operation. A failure to obtain this necessary capital when needed
could force us to delay, limit, reduce or terminate our product
candidates’ development or commercialization
efforts.
As of June 30,
2015, we had cash and cash equivalents of $11.2
million. We believe that we will continue to expend
substantial resources for the foreseeable future developing
Multikine, LEAPS and any other product candidates or technologies
that we may develop or acquire. These expenditures will include
costs associated with research and development, potentially
obtaining regulatory approvals and having our products
manufactured, as well as marketing and selling products approved
for sale, if any. In addition, other unanticipated costs may arise.
Because the outcome of our current and anticipated clinical trials
is highly uncertain, we cannot reasonably estimate the actual
amounts necessary to successfully complete the development and
commercialization of our product candidates.
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Our future capital
requirements depend on many factors, including:
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the rate of
progress of, results of and cost of completing Phase 3 clinical
development of Multikine for the treatment of certain head and neck
cancers;
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the results of our
applications to and meetings with the FDA, the EMA and other
regulatory authorities and the consequential effect on our
operating costs;
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assuming favorable
Phase 3 clinical results, the cost, timing and outcome of our
efforts to obtain marketing approval for Multikine in the United
States, Europe and in other jurisdictions, including the
preparation and filing of regulatory submissions for Multikine with
the FDA, the EMA and other regulatory authorities;
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the scope,
progress, results and costs of additional preclinical, clinical, or
other studies for additional indications for Multikine, LEAPS and
other product candidates and technologies that we may develop or
acquire;
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the timing of, and
the costs involved in, obtaining regulatory approvals for LEAPS if
clinical studies are successful;
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the cost and timing
of future commercialization activities for our products, if any of
our product candidates are approved for marketing, including
product manufacturing, marketing, sales and distribution
costs;
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the revenue, if
any, received from commercial sales of our product candidates for
which we receive marketing approval;
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the cost of having
our product candidates manufactured for clinical trials and in
preparation for commercialization;
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our ability to
establish and maintain strategic collaborations, licensing or other
arrangements and the financial terms of such
agreements;
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the costs involved
in preparing, filing and prosecuting patent applications and
maintaining, defending and enforcing our intellectual property
rights, including litigation costs, and the outcome of such
litigation; and
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the extent to which
we acquire or in-license other products or
technologies.
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Based on our
current operating plan, and absent any future financings or
strategic partnerships, we believe that our existing cash and cash
equivalents and investments will be sufficient to fund our
projected operating expenses and capital expenditure requirements
into the fourth quarter of 2015. However, our operating plan may
change as a result of many factors currently unknown to us, and we
may need additional funds sooner than planned. Additional funds may
not be available when we need them on terms that are acceptable to
us, or at all. If adequate funds are not available to us on a
timely basis, we may be required to delay, limit, reduce or
terminate preclinical studies, clinical trials or other development
activities for Multikine, LEAPS, or any other product candidates or
technologies that we develop or acquire, or delay, limit, reduce or
terminate our establishment of sales and marketing capabilities or
other activities that may be necessary to commercialize our product
candidates.
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The costs of our product candidate development and clinical trials
are difficult to estimate and will be very high for many years,
preventing us from making a profit for the foreseeable future, if
ever.
Clinical and other
studies necessary to obtain approval of a new drug can be time
consuming and costly, especially in the United States, but also in
foreign countries. Our estimates of the costs associated with
future clinical trials and research may be substantially lower than
what we actually experience. It is impossible to predict what we
will face in the development of a product candidate, such as
Multikine. The purpose of clinical trials is to provide both us and
regulatory authorities with safety and efficacy data in humans. It
is relatively common to revise a trial or add subjects to a trial
in progress. These examples of common variances in product
development and clinical investigations demonstrate how predicted
costs may exceed reasonable expectations. The difficult
and often complex steps necessary to obtain regulatory approval,
especially that of the FDA, and the European Union’s European
Medicine’s Agency, or EMA, involve significant costs and may
require several years to complete. We expect that we will need
substantial additional financing over an extended period of time in
order to fund the costs of future clinical trials, related
research, and general and administrative expenses.
The extent of our
clinical trials and research programs are primarily based upon the
amount of capital available to us and the extent to which we
receives regulatory approvals for clinical trials. We have
established estimates of the future costs of the Phase 3 clinical
trial for Multikine, but, as explained above, our estimates may not
prove correct.
An adverse determination in any current or future lawsuits or
arbitration proceedings to which we are a party could have a
material adverse effect on us.
We are currently
involved in a pending arbitration proceeding, CEL-SCI Corporation v. inVentiv Health
Clinical, LLC (f/k/a PharmaNet LLC) and PharmaNet GmbH (f/k/a
PharmaNet AG). We initiated the proceedings against inVentiv
Health Clinical, LLC, or inVentiv, our former third-party CRO,
seeking at least $50 million in damages related to inVentiv’s
prior involvement in our ongoing Phase 3 clinical trial of
Multikine.
The arbitration
claim, initiated under the Commercial Rules of the American
Arbitration Association, alleges (i) breach of contract, (ii) fraud
in the inducement, and (iii) common law
fraud.
In an amended
statement of claim, we asserted the claims set forth above, as well
as an additional claim for professional malpractice. The
arbitrator subsequently granted inVentiv’s motion to dismiss
the professional malpractice claim based on the “economic
loss doctrine” which is a legal doctrine in New Jersey that,
under certain circumstances, prohibits bringing a negligence-based
claim alongside a claim for breach of contract. The
arbitrator denied the remainder of inVentiv’s motion, which
had sought to dismiss certain other aspects of our amended
statement of claim. In particular, the arbitrator rejected
inVentiv’s argument that several aspects of the amended
statement of claim were beyond the arbitrator’s jurisdiction.
inVentiv has
asserted counterclaims against us in the arbitration proceeding for
(i) breach of contract, seeking at least $2 million in damages for
services allegedly performed by inVentiv; (ii) breach of contract,
seeking at least $1 million in damages for our alleged use of
inVentiv’s name in connection with publications and
promotions in violation of the parties’ contract; (iii)
opportunistic breach, restitution and unjust enrichment, seeking at
least $20 million in disgorgement of alleged unjust profits
allegedly made by us as a result of the purported breaches
referenced in subsection (ii); and (iv) defamation, seeking at
least $1 million in damages for allegedly defamatory statements
made about inVentiv. We believe inVentiv’s counterclaims are
meritless and intend to vigorously defend against them. However, if
such defense is unsuccessful, and inVentiv successfully asserts any
of its counterclaims, such an adverse determination could have a
material adverse effect on our business, results, financial
condition and liquidity. The arbitration hearing on the
merits has been tentatively rescheduled for October 27, 2015
through November 17, 2015.
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We filed this
arbitration claim, by which we are seeking at least $50 million in
damages, since, among other reasons, the number of patients
enrolled and treated in the study fell below the level agreed to
with inVentiv.
Additionally, we
may also be the target of claims asserting violations of securities
fraud and derivative actions, or other litigation or arbitration
proceedings in the future. Any future litigation could result in
substantial costs and divert our management’s attention and
resources. These lawsuits or arbitration proceedings may result in
large judgments or settlements against us, any of which could have
a material adverse effect on our business, operating results,
financial condition and liquidity.
Compliance with changing regulations concerning corporate
governance and public disclosure may result in additional
expenses.
Changing laws,
regulations and standards relating to corporate governance and
public disclosure may create uncertainty regarding compliance
matters. New or changed laws, regulations and standards are subject
to varying interpretations in many cases. As a result, their
application in practice may evolve over time. We are committed to
maintaining high standards of corporate governance and public
disclosure. Complying with evolving interpretations of new or
changing legal requirements may cause us to incur higher costs as
we revises current practices, policies and procedures, and may
divert management time and attention from potential
revenue-generating activities to compliance matters. If our efforts
to comply with new or changed laws, regulations and standards
differ from the activities intended by regulatory or governing
bodies due to ambiguities related to practice, our reputation may
also be harmed. Further, our board members, chief executive
officer, president and other executive officers could face an
increased risk of personal liability in connection with the
performance of their duties. As a result, we may have difficulty
attracting and retaining qualified board members and executive
officers, which could harm our business.
We have not established a definite plan for the marketing of
Multikine, if approved.
We have not
established a definitive plan for marketing nor have we established
a price structure for any of our product candidates, if approved.
However, we intend, if we are in a position to do so, to sell
Multikine ourselves in certain markets where it is approved, or to
enter into written marketing agreements with various third parties
with established sales forces in such markets. The sales
forces in turn would, we believe, focus on selling Multikine to
targeted cancer centers, physicians and clinics involved in the
treatment of head and neck cancer. We have already licensed future
sales of Multikine, if approved, to three companies: Teva
Pharmaceuticals in Israel, Turkey, Serbia and Croatia; Orient
Europharma in Taiwan, Singapore, Hong Kong, Malaysia, South Korea,
the Philippines,
Australia and New
Zealand; and Byron BioPharma, LLC in South Africa. We
believe that these companies will have the resources to market
Multikine appropriately in their respective territories, if
approved, but there is no guarantee that they
will. There is no assurance that we will be able to find
qualified third-party partners to market our product in other
areas, on terms that are favorable to us, or at all.
We may encounter
problems, delays and additional expenses in developing marketing
plans with third parties. In addition, even if Multikine, if
approved, is cost-effective and demonstrated to increase overall
patient survival, we may experience other limitations involving the
proposed sale of Multikine, such as uncertainty of third-party
coverage and reimbursement. There is no assurance that we can
successfully market Multikine, if approved, or any other product
candidates we may develop.
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We hope to expand our
clinical development capabilities in the future, and any
difficulties hiring or retaining key personnel or managing this
growth could disrupt our operations.
We are highly
dependent on the principal members of our management and
development staff. If the ongoing Phase 3 Multikine clinical trial
is successful, we expect to expand our clinical development and
manufacturing capabilities, which will involve hiring additional
employees. Future growth will require us to continue to implement
and improve our managerial, operational and financial systems and
to continue to retain, recruit and train additional qualified
personnel, which may impose a strain on our administrative and
operational infrastructure. The competition for qualified personnel
in the biopharmaceutical field is intense. We are highly dependent
on our ability to attract, retain and motivate highly qualified
management and specialized personnel required for clinical
development. Due to our limited resources, we may not be able to
manage effectively the expansion of our operations or recruit and
train additional qualified personnel. If we are unable
to retain key personnel or manage our future growth effectively, we
may not be able to implement our business plan.
If product liability or patient injury lawsuits are brought against
us, we may incur substantial liabilities and may be required to
limit clinical testing or future commercialization of Multikine or
our other product candidates.
We face an inherent
risk of product liability as a result of the ongoing clinical
testing of Multikine and other product candidates, and will face an
even greater risk if we commercialize any of our product
candidates. For example, we may be sued if our Multikine or LEAPS
product candidates, or any other future product candidates,
allegedly cause injury or are found to be otherwise unsuitable
during clinical testing, manufacturing or, if approved, marketing
or sale. Any such product liability claims may include allegations
of defects in manufacturing, defects in design, a failure to warn
of dangers inherent in the product candidate, negligence, strict
liability and a breach of warranties. Claims could also be asserted
under state consumer protection acts.
Furthermore,
Multikine is made, in part, from components of human blood. There
are inherent risks associated with products that involve human
blood such as possible contamination with viruses, including
hepatitis or HIV. Any possible contamination could cause injuries
to patients who receive such contaminated Multikine, or could
require us to destroy batches of Multikine, thereby subjecting us
to possible financial losses, lawsuits and harm to our
business.
If we cannot
successfully defend ourselves against product liability claims, we
may incur substantial liabilities or be required to limit or cease
the clinical testing or commercialization of our product
candidates, if approved. Even a successful defense would require
significant financial and management resources. Regardless of the
merits or eventual outcome, liability claims may result
in:
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decreased demand
for Multikine or our other product candidates, if
approved;
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injury to our
reputation;
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withdrawal of
existing, or failure to enroll additional, clinical trial
participants;
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costs to defend any
related litigation;
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a diversion of
management’s time and our resources;
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substantial
monetary awards to trial participants or patients;
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product candidate
recalls, withdrawals or labeling, marketing or promotional
restrictions;
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loss of
revenue;
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inability to
commercialize Multikine or our other product candidates;
and
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a decline in the
price of our common stock.
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Although we have
product liability insurance for Multikine in the amount of $5.0
million, the successful prosecution of a product liability case
against us could have a materially adverse effect upon our business
if the amount of any judgment exceeds our insurance coverage. Any
claim that may be brought against us could result in a court
judgment or settlement in an amount that is not covered, in whole
or in part, by our insurance or that is in excess of the limits of
our insurance coverage. Our insurance policies also have various
exclusions, and we may be subject to a claim for which we have no
coverage. We may have to pay any amounts awarded by a court or
negotiated in a settlement that exceed our coverage limitations or
that are not covered by our insurance, and we may not have, or be
able to obtain, sufficient capital to pay such
amounts. We commenced the Phase 3 clinical trial for
Multikine in December 2010. Although no claims have been brought to
date, participants in our clinical trials could bring civil actions
against us for any unanticipated harmful effects allegedly arising
from the use of Multikine or any other product candidate that we
may attempt to develop.
Our commercial success depends, in part, upon attaining significant
market acceptance of our product candidates, if approved, among
physicians, patients, healthcare payors and major operators of
cancer clinics.
Even if we obtain
regulatory approval for our product candidates, any resulting
product may not gain market acceptance among physicians, healthcare
payors, patients and the medical community, which are critical to
commercial success. Market acceptance of any product candidate for
which we receive approval depends on a number of factors,
including:
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the
efficacy and safety as demonstrated in clinical
trials;
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the
timing of market introduction of such product candidate as well as
competitive products;
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the
clinical indications for which the drug is approved;
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the
approval, availability, market acceptance and reimbursement for the
companion diagnostic;
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acceptance
by physicians, major operators of cancer clinics and patients of
the drug as a safe and effective treatment;
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the
potential and perceived advantages of such product candidate over
alternative treatments, especially with respect to patient subsets
that are targeted with such product candidate;
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the
safety of such product candidate seen in a broader patient group,
including its use outside the approved indications;
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the
cost of treatment in relation to alternative
treatments;
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the
availability of adequate reimbursement and pricing by third-party
payors and government authorities;
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relative
convenience and ease of administration;
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the
prevalence and severity of adverse side effects; and
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the
effectiveness of our sales and marketing efforts.
If our product
candidates are approved but fail to achieve an adequate level of
acceptance by physicians, healthcare payors and patients, we will
not be able to generate significant revenues, and we may not become
or remain profitable.
Risks Related to Government Approvals
Our product candidates must undergo rigorous preclinical and
clinical testing and regulatory approvals, which could be costly
and time-consuming and subject us to unanticipated delays or
prevent us from marketing any products.
Our product
candidates are subject to premarket approval from the FDA in the
United States, the EMA in the European Union, and by comparable
agencies in most foreign countries before they can be sold. Before
obtaining marketing approval, these product candidates must undergo
costly and time consuming preclinical and clinical testing which
could subject us to unanticipated delays and may prevent us from
marketing our product candidates. There can be no assurance that
such approvals will be granted on a timely basis, if at
all.
Clinical testing is
expensive and can take many years to complete, and its outcome is
inherently uncertain. Failure can occur at any time during the
clinical trial process. The results of preclinical studies and
early clinical trials of our product candidates may not be
predictive of the results of later-stage clinical trials. A number
of companies in the biopharmaceutical industry have suffered
significant setbacks in advanced clinical trials due to lack of
efficacy or adverse safety profiles, notwithstanding promising
results in earlier trials. Our current and future clinical trials
may not be successful.
Although we have a
Phase 3 clinical trial ongoing for Multikine, we may experience
delays in our ongoing clinical trials and we do not know whether
planned clinical trials will begin on time, need to be redesigned,
enroll patients on time or be completed on schedule, if at all.
Clinical trials can be delayed for a variety of reasons, including
delays related to:
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the
availability of financial resources needed to commence and complete
our planned trials;
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obtaining
regulatory approval to commence a trial;
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reaching
agreement on acceptable terms with prospective contract research
organizations, or CROs, and clinical trial sites, the terms of
which can be subject to extensive negotiation and may vary
significantly among different CROs and trial sites;
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obtaining
Institutional Review Board, or IRB, approval at each clinical trial
site;
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recruiting
suitable patients to participate in a trial;
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having
patients complete a trial or return for post-treatment
follow-up;
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clinical
trial sites deviating from trial protocol or dropping out of a
trial;
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adding
new clinical trial sites; or
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●
manufacturing
sufficient quantities of our product candidate for use in clinical
trials.
Patient enrollment,
a significant factor in the timing of clinical trials, is affected
by many factors including the size and nature of the patient
population, the proximity of patients to clinical sites, the
eligibility criteria for the trial, the design of the clinical
trial, competing clinical trials and clinicians' and patients'
perceptions as to the potential advantages of the drug being
studied in relation to other available therapies, including any new
drugs that may be approved for the indications we are
investigating. Furthermore, we rely on CROs and clinical trial
sites to ensure the proper and timely conduct of our clinical
trials and while we have agreements governing their committed
activities, we have limited influence over their actual
performance.
For example, we are
currently involved in a dispute with our former CRO relating to the
conduct of our Phase 3 study where we allege (i) breach of
contract, (ii) fraud in the inducement, and (iii) fraud. In
connection with this dispute, we have alleged that our CRO failed
to properly select, monitor and supervise the study sites and
principal investigators, ensure proper enrollment of subjects, and
ensure strict compliance with the Phase 3 trial protocol and Good
Clinical Practices, or GCP, and other applicable regulatory
requirements. If we or regulatory authorities determine that our
former CRO did not comply with GCP or other applicable regulatory
requirements, data collected by that former CRO may be rendered
unusable in support of our marketing applications, and we may be
required to enroll additional subjects in our Phase 3 study beyond
our current plans, which could cause additional delays in our
clinical testing and development program.
We could also
encounter delays if physicians encounter unresolved ethical issues
associated with enrolling patients in clinical trials of our
product candidates in lieu of prescribing existing treatments that
have established safety and efficacy profiles. Further, a clinical
trial may be suspended or terminated by us, the IRBs for the
institutions in which such trials are being conducted, the
Independent Data Monitoring Committee, or IDMC, for such trial, or
by the FDA or other regulatory authorities due to a number of
factors, including failure to conduct the clinical trial in
accordance with regulatory requirements or our clinical protocols,
inspection of the clinical trial operations or trial site by the
FDA or other regulatory authorities resulting in the imposition of
a clinical hold, unforeseen safety issues or adverse side effects,
failure to demonstrate a benefit from using a product candidate,
changes in governmental regulations or administrative actions or
lack of adequate funding to continue the clinical
trial.
If we experience
termination of, or delays in the completion of, any clinical trial
of our product candidates, the commercial prospects for our product
candidates will be harmed, and our ability to generate product
revenues will be delayed. In addition, any delays in completing our
clinical trials will increase our costs, slow our product
development and approval process and jeopardize our ability to
commence product sales and generate revenues.
Any of these
occurrences may harm our business, prospects, financial condition
and results of operations significantly. Many of the factors that
cause, or lead to, a delay in the commencement or completion of
clinical trials may also ultimately lead to the denial of
regulatory approval for our product candidates.
We cannot be
certain when or under what conditions we will undertake future
clinical trials. A variety of issues may delay our Phase
3 clinical trial for Multikine or preclinical and early clinical
trials for our other product candidates. For example,
early trials, or the plans for later trials, may not satisfy the
requirements of regulatory authorities, such as the FDA. We may
fail to find subjects willing to enroll in our trials. We
manufacture Multikine in our own manufacturing facility, but rely
on third-party vendors to manage the trial process and other
activities, and these vendors may fail to meet appropriate
standards. Accordingly, the clinical trials relating to
our product candidates may not be completed on schedule, the FDA or
foreign regulatory agencies may order us to stop or modify our
research, or these agencies may not ultimately approve any of our
product candidates for commercial sale. Varying interpretations of
the data obtained from pre-clinical and clinical testing could
delay, limit or prevent regulatory approval of our product
candidates. The data collected from our clinical trials may not be
sufficient to support regulatory approval of our various product
candidates, including Multikine. Our failure to adequately
demonstrate the safety and efficacy of any of our product
candidates would delay or prevent regulatory approval of our
product candidates in the United States, which could prevent us
from achieving profitability. Although we had positive results in
our Phase 2 trials for Multikine, those results were for a very
small sample set, and we will not know how Multikine will perform
in a larger set of subjects until we are well into, or complete,
our Phase 3 clinical trial.
19
The development and
testing of product candidates and the process of obtaining
regulatory approvals and the subsequent compliance with appropriate
federal, state, local and foreign statutes and regulations require
the expenditure of substantial time and financial
resources. Failure to comply with the applicable U.S.
requirements at any time during the product development process,
approval process or after approval, may subject an applicant to
administrative or judicial sanctions. FDA sanctions could include,
among other actions, refusal to approve pending applications,
withdrawal of an approval, a clinical hold, warning letters,
product recalls or withdrawals from the market, product seizures,
total or partial suspension of production or distribution,
injunctions, fines, refusals of government contracts, restitution,
disgorgement or civil or criminal penalties. Any agency or judicial
enforcement action could have a material adverse effect on
us.
The requirements
governing the conduct of clinical trials, manufacturing and
marketing of our product candidates, including Multikine, outside
the United States vary from country to country. Foreign approvals
may take longer to obtain than FDA approvals and can require, among
other things, additional testing and different trial designs.
Foreign regulatory approval processes include all of the risks
associated with the FDA approval process. Some of those agencies
also must approve prices for products approved for marketing.
Approval of a product by the FDA or the EMA does not ensure
approval of the same product by the health authorities of other
countries. In addition, changes in regulatory requirements for
product approval in any country during the clinical trial process
and regulatory agency review of each submitted new application may
cause delays or rejections.
We have only
limited experience in filing and pursuing applications necessary to
gain regulatory approvals. Our lack of experience may
impede our ability to obtain timely approvals from regulatory
agencies, if at all. We will not be able to commercialize Multikine
and other product candidates until we have obtained regulatory
approval. In addition, regulatory authorities may also
limit the types of patients to which we or our third-party partners
may market Multikine or our other product candidates. Any failure
to obtain or any delay in obtaining required regulatory approvals
may adversely affect our or our third-party partners’ ability
to successfully market our product candidates.
Even if we obtain regulatory approval for our product candidates,
we will be subject to stringent, ongoing government
regulation.
If our products
receive regulatory approval, either in the United States or
internationally, those products will be subject to limitations on
the approved indicated uses for which the product may be marketed
or to the conditions of approval, and may contain requirements for
potentially costly post-marketing testing, including Phase 4
clinical trials, and surveillance of the safety and efficacy of the
product candidate. We will continue to be subject to
extensive regulatory requirements. These regulations are
wide-ranging and govern, among other things:
●
product
design, development and manufacture;
20
●
product
application and use
●
adverse
drug experience;
●
product
advertising and promotion;
●
product
manufacturing, including good manufacturing practices;
●
record
keeping requirements;
●
registration
and listing of our establishments and products with the FDA, EMA
and other state and national agencies;
●
product
storage and shipping;
●
drug
sampling and distribution requirements;
●
electronic
record and signature requirements; and
●
labeling
changes or modifications.
We and any of our
third-party manufacturers or suppliers must continually adhere to
federal regulations setting forth requirements, known as cGMPs, and
their foreign equivalents, which are enforced by the FDA, the EMA
and other national regulatory bodies through their facilities
inspection programs. If our facilities, or the facilities of our
contract manufacturers or suppliers, cannot pass a pre-approval
plant inspection or fail such inspections in the future, the FDA,
EMA or other national regulators will not approve our marketing
applications for our product candidates, or may withdraw any prior
approval. In complying with cGMP and foreign regulatory
requirements, we and any of our potential third-party manufacturers
or suppliers will be obligated to expend time, money and effort in
production, record-keeping and quality control to ensure that our
product candidates meet applicable specifications and other
requirements.
If we do not comply
with regulatory requirements at any stage, whether before or after
marketing approval is obtained, we may be subject to, among other
things, license suspension or revocation, criminal prosecution,
seizure, injunction, fines, be forced to remove a product from the
market or experience other adverse consequences, including
restrictions or delays in obtaining regulatory marketing approval
for such products or for other product candidates for which we seek
approval. This could materially harm our financial
results, reputation and stock price.
Additionally, we
may not be able to obtain the labeling claims necessary or
desirable for product promotion. If we or other parties identify
adverse effects after any of our products are on the market, or if
manufacturing problems occur, regulatory approval may be suspended
or withdrawn. We may be required to reformulate our products,
conduct additional clinical trials, make changes in product
labeling or indications of use, or submit additional marketing
applications to support any changes. If we encounter any
of the foregoing problems, our business and results of operations
will be harmed and the market price of our common stock may
decline.
FDA
and other governmental authorities’ policies may change and
additional government regulations may be enacted that could
prevent, limit or delay regulatory approval of our product
candidates. If we are slow or unable to adapt to changes in
existing requirements or the adoption of new requirements or
policies, or if we are not able to maintain regulatory compliance,
we may lose any marketing approval that we may have obtained, which
would adversely affect our business, prospects and ability to
achieve or sustain profitability. We cannot predict the
extent of adverse government regulations which might arise from
future legislative or administrative action. Without government
approval, we will be unable to sell any of our product
candidates.
21
Our product candidates may cause undesirable side effects or have
other properties that could delay or prevent their regulatory
approval, limit the commercial profile of an approved label, or
result in significant negative consequences following marketing
approval, if any.
Undesirable side
effects caused by our product candidates could cause us or
regulatory authorities to interrupt, delay or halt clinical trials
and could result in a more restrictive label or the delay or denial
of regulatory approval by the FDA or other comparable foreign
authorities. Results of our clinical trials could reveal a high and
unacceptable severity and/or prevalence of these or other side
effects. In such an event, our trials could be suspended or
terminated and the FDA or comparable foreign regulatory authorities
could order us to cease further development of, or deny approval
of, our product candidates for any or all targeted indications. The
drug-related side effects could affect patient recruitment or the
ability of enrolled patients to complete the trial or result in
potential product liability claims. Any of these occurrences may
harm our business, financial condition and prospects
significantly.
Additionally
if one or more of our product candidates receives marketing
approval, and we or others later identify undesirable side effects
caused by such products, a number of potentially significant
negative consequences could result, including:
●
regulatory
authorities may withdraw approvals of such product;
●
regulatory
authorities may require additional warnings on the
label;
●
we
may be required to create a medication guide outlining the risks of
such side effects for distribution to patients;
●
we
could be sued and held liable for harm caused to patients;
and
●
our
reputation may suffer.
Any of these events
could prevent us from achieving or maintaining market acceptance of
the particular product candidate, if approved, and could
significantly harm our business, results of operations and
prospects.
We rely on third parties to conduct our preclinical and clinical
trials. If these third parties do not successfully carry out their
contractual duties and meet regulatory requirements, or meet
expected deadlines, we may not be able to obtain regulatory
approval for or commercialize our product candidates and our
business could be substantially harmed.
We have relied upon
and plan to continue to rely upon third-party CROs to prepare for,
conduct, monitor and manage data for our ongoing preclinical and
clinical programs. We rely on these parties for all aspects of the
execution of our preclinical and clinical trials, and although we
diligently oversee and carefully manage our CROs, we directly
control only certain aspects of their activities and rely upon them
to provide timely, complete, and accurate reports on their conduct
of our studies. Although such third parties stand in our shoes for
regulatory purposes in the context of our clinical trials,
ultimately we are responsible for ensuring that each of our studies
is conducted in accordance with the applicable protocol, legal,
regulatory, and scientific standards, and our reliance on the CROs
does not relieve us of our regulatory responsibilities. We and our
CROs acting on our behalf as well as principal investigators and
trial sites are required to comply with GCP and other applicable
requirements, which are implemented through
regulations and guidelines enforced by the FDA, the Competent
Authorities of the Member States of the European Economic Area, or
EEA, and comparable foreign regulatory authorities for all of our
products in clinical development. Regulatory authorities enforce
these GCPs through periodic inspections of trial sponsors,
principal investigators, and trial sites. If we or any of our CROs
fail to comply with applicable GCPs or other applicable
regulations, the clinical data generated in our clinical trials may
be determined to be unreliable and we may therefore need to enroll
additional subjects in our clinical trials, or the FDA, EMA or
comparable foreign regulatory authorities may require us to perform
an additional clinical trial or trials before approving our
marketing applications. Moreover, if we or any of our CROs,
principal investigators, or trial sites, fail to comply with
applicable regulatory and GCP requirements, then we, our CROs,
principal investigators, or trial sites may be subject to
enforcement actions, such as fines, warning letters, untitled
letters, clinical holds, civil or criminal penalties, and
injunction. We cannot assure you that upon inspection by a given
regulatory authority, such regulatory authority will determine that
any of our clinical trials comply with GCP regulations. In
addition, our clinical trials must be conducted with product
produced under GMP regulations. Our failure to comply with these
regulations may require us to delay or repeat clinical trials,
which would delay the regulatory approval process.
22
For example, we are
currently involved in a dispute with our former CRO relating to the
conduct of our Phase 3 study where we allege (i) breach of
contract, (ii) fraud in the inducement and (iii) fraud. In
connection with this dispute, we have alleged that our CRO failed
to properly select, monitor and supervise the study sites and
principal investigators, ensure proper enrollment of subjects, and
ensure strict compliance with the Phase 3 trial protocol and GCP
and other applicable regulatory requirements. If we or regulatory
authorities determine that our former CRO did not comply with GCP
or other applicable regulatory requirements, the data collected by
that former CRO may be rendered unusable in support of our
marketing applications, and we may be required to enroll additional
subjects in our Phase 3 study beyond our current plans, which could
cause additional delays in our clinical testing and development
program.
If any of our
relationships with our third-party CROs terminate, we may not be
able to enter into arrangements with alternative CROs or to do so
on commercially reasonable terms. In addition, our CROs are not our
employees, and except for remedies available to us under our
agreements with such CROs, we cannot control whether or not they
devote sufficient time and resources to our on-going clinical,
nonclinical and preclinical programs. If CROs do not successfully
fulfill their regulatory obligations, carry out their contractual
duties or obligations or meet expected deadlines, if they need to
be replaced or if the quality or accuracy of the clinical data they
obtain is compromised due to the failure to adhere to our clinical
protocols, regulatory requirements or for other reasons, our
clinical trials may be extended, delayed or terminated, and we may
not be able to obtain regulatory approval for or successfully
commercialize our product candidates. As a result, our results of
operations and the commercial prospects for our product candidates
would be harmed, our costs could increase and our ability to
generate revenues could be delayed.
Switching or adding
additional CROs involves additional cost and requires management
time and focus. In addition, there is a natural transition period
when a new CRO commences work. As a result, delays occur, which can
materially impact our ability to meet our desired clinical
development timelines. Though we diligently oversee and carefully
manage our relationships with our CROs, there can be no assurance
that we will not encounter similar challenges or delays in our
clinical development in the future or that these delays or
challenges will not have a material adverse impact on our business,
financial condition and prospects.
23
We have obtained orphan drug designation from the FDA for Multikine
for neoadjuvant, or primary, therapy in patients with squamous cell
carcinoma of the head and neck, but we may be unable to maintain
the benefits associated with orphan drug designation, including the
potential for market exclusivity.
Under the Orphan
Drug Act, the FDA may grant orphan drug designation to a drug or
biologic intended to treat a rare disease or condition, which is
defined as one occurring in a patient population of fewer than
200,000 in the United States, or a patient population greater than
200,000 in the United States where there is no reasonable
expectation that the cost of developing the drug or biologic will
be recovered from sales in the United States. In the United States,
orphan drug designation entitles a party to financial incentives
such as opportunities for grant funding towards clinical trial
costs, tax advantages and user-fee waivers. In addition, if a
product that has orphan drug designation subsequently receives the
first FDA approval for the disease for which it has such
designation, the product is entitled to orphan drug exclusivity,
which means that the FDA may not approve any other applications,
including a full Biologics License Application, or BLA, to market
the same biologic for the same indication for seven years, except
in limited circumstances, such as a showing of clinical superiority
to the product with orphan drug exclusivity or where the
manufacturer is unable to assure sufficient product
quantity.
Even though we have
received orphan drug designation for Multikine for the treatment of
squamous cell carcinoma of the head and neck, we may not be the
first to obtain marketing approval of a product for the
orphan-designated indication due to the uncertainties associated
with developing pharmaceutical products. In addition, exclusive
marketing rights in the United States may be limited if we seek
approval for an indication broader than the orphan-designated
indication, or may be lost if the FDA later determines that the
request for designation was materially defective or if we are
unable to assure sufficient quantities of the product to meet the
needs of patients with the rare disease or condition. Further, even
if we obtain orphan drug exclusivity for a product candidate, that
exclusivity may not effectively protect the product candidate from
competition because different drugs with different active moieties
can be approved for the same condition. Even after an orphan
product is approved, the FDA can subsequently approve another drug
with the same active moiety for the same condition if the FDA
concludes that the later drug is safer, more effective, or makes a
major contribution to patient care. Orphan drug designation neither
shortens the development time or regulatory review time of a drug
nor gives the drug any advantage in the regulatory review or
approval process.
Our current and future relationships with healthcare professionals,
principal investigators, consultants, customers (actual and
potential) and third-party payors in the United States and
elsewhere may be subject, directly or indirectly, to applicable
healthcare laws and regulations.
Healthcare
providers, physicians and third-party payors in the United States
and elsewhere will play a primary role in the recommendation and
prescription of any drug candidates for which we obtain marketing
approval. Our current and future arrangements with healthcare
professionals, principal investigators, consultants, customers
(actual and potential) and third-party payors may expose us to
broadly applicable fraud and abuse and other healthcare laws,
including, without limitation:
●
the
federal Anti-Kickback Statute, which prohibits, among other things,
persons from knowingly and willfully soliciting, offering,
receiving or providing remuneration, directly or indirectly, in
cash or in kind, to induce or reward, or in return for, either the
referral of an individual for, or the purchase, lease, order or
recommendation of, any good, facility, item or service, for which
payment may be made, in whole or in part, under federal and state
healthcare programs such as Medicare and Medicaid. A person or
entity does not need to have actual knowledge of the statute or
specific intent to violate it to have committed a violation. In
addition, the Affordable Care Act provided that the government may
assert that a claim including items or services resulting from a
violation of the federal Anti-Kickback Statute constitutes a false
or fraudulent claim for purposes of the False Claims
Act;
24
●
federal
civil and criminal false claims laws, including the federal False
Claims Act, which impose criminal and civil penalties, including
civil whistleblower actions, against individuals or entities for,
among other things, knowingly presenting, or causing to be
presented, to the federal government, including the Medicare and
Medicaid programs, claims for payment that are false or fraudulent
or making a false statement to avoid, decrease or conceal an
obligation to pay money to the federal government;
●
the
civil monetary penalties statute, which imposes penalties against
any person or entity who, among other things, is determined to have
presented or caused to be presented a claim to a federal health
program that the person knows or should know is for an item or
service that was not provided as claimed or is false or
fraudulent;
●
the
federal Health Insurance Portability and Accountability Act of
1996, or HIPAA, which created new federal criminal statutes that
prohibit knowingly and willfully executing, or attempting to
execute, a scheme to defraud any healthcare benefit program or
obtain, by means of false or fraudulent pretenses, representations
or promises, any of the money or property owned by, or under the
custody or control of, any healthcare benefit program, regardless
of the payor (e.g., public or private), knowingly and willfully
embezzling or stealing from a health care benefit program,
willfully obstructing a criminal investigation of a healthcare
offense and knowingly and willfully falsifying, concealing or
covering up by any trick or device a material fact or making any
materially false statements in connection with the delivery of, or
payment for, healthcare benefits, items or services relating to
healthcare matters. A person or entity does not need to have
actual knowledge of the statute or specific intent to violate it to
have committed a violation;
●
HIPAA,
as amended by the Health Information Technology for Economic and
Clinical Health Act of 2009, or HITECH, and their respective
implementing regulations, which impose obligations on covered
entities, including healthcare providers, health plans, and
healthcare clearinghouses, as well as their respective business
associates that create, receive, maintain or transmit individually
identifiable health information for or on behalf of a covered
entity, with respect to safeguarding the privacy, security and
transmission of individually identifiable health
information;
●
the
federal Physician Payments Sunshine Act and its implementing
regulations, which imposed annual reporting requirements for
certain manufacturers of drugs, devices, biologicals and medical
supplies for payments and “transfers of value” provided
to physicians and teaching hospitals, as well as ownership and
investment interests held by physicians and their immediate family
members; and
●
analogous
state and foreign laws, such as state anti-kickback and false
claims laws, which may apply to sales or marketing arrangements and
claims involving healthcare items or services reimbursed by
non-governmental third-party payors, including private insurers;
state laws that require pharmaceutical companies to comply with the
pharmaceutical industry’s voluntary compliance guidelines and
the relevant compliance guidance promulgated by the federal
government or otherwise restrict payments that may be made to
healthcare providers; state and foreign laws that require drug
manufacturers to report information related to payments and other
transfers of value to physicians and other healthcare providers or
marketing expenditures; and state and foreign laws governing the
privacy and security of health information in certain
circumstances, many of which differ from each other in significant
ways and often are not preempted by HIPAA, thus complicating
compliance efforts.
Efforts to ensure
that our future business arrangements with third parties will
comply with applicable healthcare laws and regulations may involve
substantial costs. It is possible that governmental authorities
will conclude that our business practices may not comply with
current or future statutes, regulations or case law involving
applicable fraud and abuse or other healthcare laws. If our
operations are found to be in violation of any of these laws or any
other governmental regulations that may apply to us, we may be
subject to significant civil, criminal and administrative
penalties, including, without limitation, damages, fines,
imprisonment, exclusion from participation in government healthcare
programs, such as Medicare and Medicaid, and the curtailment or
restructuring of our operations, all of which could significantly
harm our business. If any of the physicians or other healthcare
providers or entities with whom we expect to do business, including
our current and future collaborators, are found not to be in
compliance with applicable laws, they may be subject to criminal,
civil or administrative sanctions, including exclusions from
participation in government healthcare programs, which could also
adversely affect our business.
25
Failure to obtain or maintain adequate coverage and reimbursement
for our product candidates, if approved, could limit our ability to
market those products and decrease our ability to generate
revenue.
Sales of our
product candidates will depend substantially, both domestically and
abroad, on the extent to which the costs of our product candidates
will be paid by health maintenance, managed care, pharmacy benefit,
and similar healthcare management organizations, or reimbursed by
government authorities, private health insurers and other
third-party payors. We anticipate that government authorities and
other third-party payors will continue efforts to contain
healthcare costs by limiting the coverage and reimbursement levels
for new drugs. If coverage and reimbursement are not available, or
are available only to limited levels, we may not be able to
successfully commercialize our product candidates. Even if coverage
is provided, the approved reimbursement amount may not be high
enough to allow us to establish or maintain pricing sufficient to
realize a return on our investment. It is difficult to predict at
this time what third-party payors will decide with respect to the
coverage and reimbursement for our product candidates.
Healthcare legislative reform measures may have a material adverse
effect on our business and results of operations.
In the United
States, there have been and continue to be a number of legislative
initiatives to contain healthcare costs that may result in more
limited coverage or downward pressure on the price we may otherwise
receive for our product candidates. For example, in March 2010, the
Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act, or collectively, the
Affordable Care Act, was passed, which substantially changes the
way health care is financed by both governmental and private
insurers, and significantly impacts the U.S. pharmaceutical
industry. The Affordable Care Act, among other things, addressed a
new methodology by which rebates owed by manufacturers under the
Medicaid Drug Rebate Program are calculated
for drugs that are
inhaled, infused, instilled, implanted or injected, increased the
minimum Medicaid rebates owed by manufacturers under the Medicaid
Drug Rebate Program and extended the rebate program to individuals
enrolled in Medicaid managed care organizations, established annual
fees and taxes on manufacturers of certain branded prescription
drugs, and established the Center for Medicare and Medicaid
Innovation with broad authority to test and implement new payment
models under Medicare and Medicaid, which are designed to reduce
expenditures while preserving and enhancing quality of
care.
In addition, other
legislative changes have been proposed and adopted in the United
States since the Affordable Care Act was enacted. On August 2,
2011, the Budget Control Act of 2011 among other things, created
measures for spending reductions by Congress. A Joint Select
Committee on Deficit Reduction, tasked with recommending a targeted
deficit reduction of at least $1.2 trillion for the years 2013
through 2021, was unable to reach required goals, thereby
triggering the legislation's automatic reduction to several
government programs. This includes aggregate reductions of Medicare
payments to providers of 2% per fiscal year, which went into effect
in April 2013 and, due to subsequent legislative amendments to the
statute, will remain in effect through 2024 unless additional
Congressional action is taken. On January 2, 2013, President Obama
signed into law the American Taxpayer Relief Act of 2012, which,
among other things, further reduced Medicare payments to several
providers, including hospitals, imaging centers and cancer
treatment centers. On April 16, 2015, President Obama signed into
law the Medicare Access and CHIP Reauthorization Act of 2015, or
MACRA. Among other things, MACRA creates incentives for physicians
to participate in alternative payment models under Medicare that
emphasize quality and value in place of the traditional,
volume-based fee-for-service program. We expect that additional
state and federal healthcare reform measures will be adopted in the
future, any of which could limit the amounts that federal and state
governments will pay for healthcare products and services, which
could result in reduced demand for our product candidates or
additional pricing pressures.
26
Foreign governments often impose strict price controls, which may
adversely affect our future profitability.
We intend to seek
approval to market Multikine in both the United States and foreign
jurisdictions. If we obtain approval in one or more foreign
jurisdictions, we will be subject to rules and regulations in those
jurisdictions relating to Multikine. In some foreign countries,
particularly in the European Union, prescription drug pricing is
subject to governmental control. In these countries, pricing
negotiations with governmental authorities can take considerable
time after the receipt of marketing approval for a drug candidate.
Coverage and reimbursement decisions in one foreign jurisdiction
may impact decisions in other countries. To obtain reimbursement or
pricing approval in some countries, we may be required to conduct
clinical trials that demonstrate our product candidate is more
effective than current treatments and that compare the
cost-effectiveness of Multikine to other available therapies. If
reimbursement of Multikine is unavailable or limited in scope or
amount, or if pricing is set at unsatisfactory levels, we may be
unable to achieve or sustain profitability.
Risks Related to Intellectual Property
We may not be able to achieve or maintain a competitive position,
and other technological developments may result in our proprietary
technologies becoming uneconomical or obsolete.
We are involved in
a biomedical field that is undergoing rapid and significant
technological change. The pace of change continues to
accelerate. The successful development of product
candidates from our compounds, compositions and processes, through
research financed by us, or as a result of possible third-party
licensing arrangements with pharmaceutical or other companies, is
not assured. We may fail to apply for patents on
important technologies or product candidates in a timely fashion,
or at all.
Many companies are
working on drugs designed to cure or treat cancer or cure and treat
viruses, such as HPV or H1N1. Many of these companies
have financial, research and development, and marketing resources,
which are much greater than ours, and are capable of providing
significant long-term competition either by establishing in-house
research groups or by forming collaborative ventures with other
entities. In addition, smaller companies and non-profit
institutions are active in research relating to cancer and
infectious diseases. The future market share of
Multikine or our other product candidates, if approved, will be
reduced or eliminated if our competitors develop and obtain
approval for products that are safer or more effective than our
product candidates. Moreover, the patent positions of
pharmaceutical companies are highly uncertain and involve complex
legal and factual questions for which important legal principles
are often evolving and remain unresolved. As a result, the validity
and enforceability of patents cannot be predicted with certainty.
In addition, we do not know whether:
●
we
were the first to make the inventions covered by each of our issued
patents and pending patent applications;
●
we
were the first to file patent applications for these
inventions;
27
●
others
will independently develop similar or alternative technologies or
duplicate any of our technologies;
●
any
of our pending patent applications will result in issued
patents;
●
any
of our patents will be valid or enforceable;
●
any
patents issued to us or our collaboration partners will provide us
with any competitive advantages, or will be challenged by third
parties;
●
we
will be able to develop additional proprietary technologies that
are patentable;
●
the
U.S. government will exercise any of its statutory rights to our
intellectual property that was developed with government funding;
or
●
our
business may infringe the patents or other proprietary rights of
others.
Our patents might not protect our technology from competitors, in
which case we may not have any advantage over competitors in
selling any products that we may develop.
Our commercial
success will depend in part on our ability to obtain additional
patents and protect our existing patent position, as well as our
ability to maintain adequate intellectual property protection for
our technologies, product candidates, and any future products in
the United States and other countries. If we do not adequately
protect our technology, product candidates and future products,
competitors may be able to use or practice them and erode or negate
any competitive advantage we may have, which could harm our
business and ability to achieve profitability. The laws of some
foreign countries do not protect our proprietary rights to the same
extent or in the same manner as U.S. laws, and we may encounter
significant problems in protecting and defending our proprietary
rights in these countries. We will be able to protect our
proprietary rights from unauthorized use by third parties only to
the extent that our proprietary technologies, product candidates
and any future products are covered by valid and enforceable
patents or are effectively maintained as trade
secrets.
Certain aspects of
our technologies are covered by U.S. and foreign patents. In
addition, we have a number of new patent applications pending.
There is no assurance that the applications still pending or which
may be filed in the future will result in the issuance of any
patents. Furthermore, there is no assurance as to the breadth and
degree of protection any issued patents might afford us. Disputes
may arise between us and others as to the scope and validity of
these or other patents. Any defense of the patents could prove
costly and time consuming and there can be no assurance that we
will be in a position, or will deem it advisable, to carry on such
a defense. A suit for patent infringement could result
in increasing costs, delaying or halting development, or even
forcing us to abandon a product candidate. Other private
and public concerns, including universities, may have filed
applications for, may have been issued, or may obtain additional
patents and other proprietary rights to technology potentially
useful or necessary to us. We are not currently aware of any such
patents, but the scope and validity of such patents, if any, and
the cost and availability of such rights are impossible to
predict.
Much of our intellectual property is protected as trade secrets or
confidential know-how, not as a patent.
We consider
proprietary trade secrets and/or confidential know-how and
unpatented know-how to be important to our
business. Much of our intellectual property pertains to
our manufacturing system, certain aspects of which may not be
suitable for patent filings and must be protected as trade secrets
and/or confidential know-how. This type of information
must be protected diligently by us to protect its disclosure to
competitors, since legal protections after disclosure may be
minimal or non-existent. Accordingly, much of our value
is dependent upon our ability to keep our trade secrets and
know-how confidential.
28
To protect this
type of information against disclosure or appropriation by
competitors, our policy is to require our employees, consultants,
contractors and advisors to enter into confidentiality agreements
with us. However, current or former employees, consultants,
contractors and advisers may unintentionally or willfully disclose
our confidential information to competitors, and confidentiality
agreements may not provide an adequate remedy in the event of
unauthorized disclosure of confidential information. Enforcing a
claim that a third party obtained illegally, and is using, trade
secrets and/or confidential know-how is expensive, time consuming
and unpredictable. The enforceability of confidentiality agreements
may vary from jurisdiction to jurisdiction.
In addition, in
some cases a regulator considering our application for product
candidate approval may require the disclosure of some or all of our
proprietary information. In such a case, we must decide
whether to disclose the information or forego approval in a
particular country. If we are unable to market our
product candidates in key countries, our opportunities and value
may suffer.
Failure to obtain
or maintain trade secrets and/or confidential know-how trade
protection could adversely affect our competitive position.
Moreover, our competitors may independently develop substantially
equivalent proprietary information and may even apply for patent
protection in respect of the same. If successful in obtaining such
patent protection, our competitors could limit our use of such
trade secrets and/or confidential know-how.
We may be subject to claims challenging the inventorship or
ownership of our patents and other intellectual
property.
We may also be
subject to claims that former employees, collaborators or other
third parties have an ownership interest in our patents or other
intellectual property. We may be subject to ownership disputes in
the future arising, for example, from conflicting obligations of
consultants or others who are involved in developing our product
candidates. Litigation may be necessary to defend against these and
other claims challenging inventorship or ownership. If we fail in
defending any such claims, in addition to paying monetary damages,
we may lose valuable intellectual property rights, such as
exclusive ownership of, or right to use, valuable intellectual
property. Such an outcome could have a material adverse effect on
our business. Even if we are successful in defending against such
claims, litigation could result in substantial costs and be a
distraction to management and other employees.
Risks Related to our common stock
You may experience future dilution as a result of future equity
offerings or other equity issuances.
We expect that
significant additional capital will be needed in the future to
continue our planned operations. To raise additional capital, we
may in the future offer additional shares of our common stock or
other securities convertible into or exchangeable for our common
stock. We cannot assure you that we will be able to sell
shares or other securities in any other offering at a price per
share that is equal to or greater than the price per share paid by
investors in this offering. The price per share at which
we sell additional shares of our common stock or other securities
convertible into or exchangeable for our common stock in future
transactions may be higher or lower than the price per share in
this offering. To the extent we raise additional capital
by issuing equity securities, our stockholders may experience
substantial dilution. If we sell common stock, convertible
securities or other equity securities, your investment in our
common stock will be diluted. These sales may also result in
material dilution to our existing stockholders, and new investors
could gain rights superior to our existing
stockholders.
29
Our outstanding options and warrants may adversely affect the
trading price of our common stock.
As of June 30,
2015, there were outstanding options which allow the holders to
purchase approximately 7,545,600 shares of our common stock, at
prices ranging between $0.55 and $20.00 per share, with a weighted
average exercise price of $2.75 per share; outstanding warrants
which allow the holders to purchase approximately 55,086,316 shares
of our common stock, at prices ranging between $0.53 and $5.00 per
share, with a weighted average exercise price of $1.38 per
share; and a convertible loan, which allows the holder to acquire
approximately 1,871,282 shares of our common stock at a conversion
price of $0.59. The outstanding options and warrants could
adversely affect our ability to obtain future financing or engage
in certain mergers or other transactions, since the holders of
options and warrants can be expected to exercise them at a time
when we may be able to obtain additional capital through a new
offering of securities on terms more favorable to us than the terms
of the outstanding options and warrants. For the life of the
options, warrants and the convertible loan, the holders have the
opportunity to profit from a rise in the market price of our common
stock without assuming the risk of ownership. The issuance of
shares upon the exercise of outstanding options and warrants, or
the conversion of the loan, will also dilute the ownership
interests of our existing stockholders.
Our ability to utilize our net operating loss carryforwards and
certain other tax attributes may be limited.
Under Section 382
of the Internal Revenue Code of 1986, as amended, if a corporation
undergoes an “ownership change” (generally defined as a
greater than 50% change (by value) in its equity ownership over a
three-year period), the corporation’s ability to use its
pre-change net operating loss carryforwards and other pre-change
tax attributes to offset its post-change income may be limited.
Taking into account our prior securities offerings and other
transactions, we may have triggered an “ownership
change” limitation. In addition, we may experience ownership
changes in the future as a result of subsequent shifts in our stock
ownership, some of which are outside our control. As a result, our
ability to use our pre-change net operating loss carryforwards and
other pre-change tax attributes to offset U.S. federal taxable
income may be subject to limitations, which could result in
increased tax liability.
We may have exposure for certain securities we sold in October
2013.
In September 2012,
we filed a shelf Registration Statement covering the sale of
$50,000,000 of securities (the “2012 Registration
Statement”), and in January 2013 we filed another shelf
Registration Statement covering the sale of an additional
$50,000,000 of securities (the “2013 Registration
Statement”). In October 2013, we filed a prospectus
supplement to the 2012 Registration Statement for the sale in an
underwritten public offering of 17,826,087 shares of our common
stock, 20,475,000 Series S Warrants, as well as up to 20,475,000
shares of common stock issuable upon the exercise of the Series S
warrants (the “October
Prospectus”). Collectively, we offered
approximately $43.4 million of securities pursuant to the October
Prospectus. This amount includes approximately $17.8
million for the sale of the common stock and Series S warrants and
$25.6 million upon the exercise of the Series S Warrants. We
subsequently realized that at the time of the October 2013 offering
we had only approximately $28.9 million available for issuance
under the 2012 Registration Statement. As a result, we
offered securities that were not registered with the SEC, and that
may not have been eligible for an exemption from registration under
the federal or state securities laws. We had securities available
under the 2013 Registration Statement to register all of the
securities not covered by the 2012 Registration
Statement. In December 2013, we filed a prospectus
supplement to the 2013 Registration Statement registering the offer
and sale of all of the shares of common stock issuable upon
exercise of the Series S Warrants included in the October 2013
offering to assure that the offering and sale of all of the shares
issuable upon exercise of the Series S Warrants were registered
(the “December Prospectus”). Prior to the filing of the
December Prospectus, no Series S Warrants issued in the October
offering had been exercised. Notwithstanding the
above, the actions we have taken to mitigate our possible
non-compliance with securities laws will not prevent regulators
from asserting that we violated the law, from imposing penalties
and fines against us with respect to any potential violations of
securities laws, and may subject us to possible claims for damages
from certain investors.
30
Since we do not intend to pay dividends on our common stock, any
potential return to investors will result only from any increases
in the price of our common stock.
At the present
time, we intend to use available funds to finance our operations.
Accordingly, while payment of dividends rests within the discretion
of our board of directors, no common stock dividends have been
declared or paid by us and we have no intention of paying any
common stock dividends in the foreseeable future. Additionally, any
future debt financing arrangement may contain terms prohibiting or
limiting the amount of dividends that may be declared or paid on
our common stock. Any return to our investors will
therefore be limited to appreciation in the price of our common
stock, which may never occur. If our stock price does
not increase, our investors are unlikely to receive any return on
their investments in our common stock.
The price of our common stock has been volatile and is likely to
continue to be volatile, which could result in substantial losses
for purchasers of our common stock.
Our stock price has
been, and is likely to continue to be, volatile. The stock market
in general has experienced extreme volatility that has often been
unrelated to the operating performance of particular
companies.
As a result of this
volatility, you may not be able to sell your shares of our common
stock at or above its current market price. The market price for
our common stock may be influenced by many factors,
including:
●
actual
or anticipated fluctuations in our financial condition and
operating results;
●
actual
or anticipated changes in our growth rate relative to our
competitors;
●
competition
from existing products or new products or product candidates that
may emerge;
●
development
of new technologies that may address our markets and may make our
technology less attractive;
●
changes
in physician, hospital or healthcare provider practices that may
make our product candidates less useful;
●
announcements
by us, our partners or our competitors of significant acquisitions,
strategic partnerships, joint ventures, collaborations or capital
commitments;
●
developments
or disputes concerning patent applications, issued patents or other
proprietary rights;
●
the
recruitment or departure of key personnel;
●
failure
to meet or exceed financial estimates and projections of the
investment community or that we provide to the public;
●
actual
or anticipated changes in estimates as to financial results,
development timelines or recommendations by securities
analysts;
●
variations
in our financial results or those of companies that are perceived
to be similar to us;
31
●
changes
to coverage and reimbursement levels by commercial third-party
payors and government payors, including Medicare, and any
announcements relating to reimbursement levels;
●
general
economic, industry and market conditions; and
●
the
other factors described in this “Risk Factors”
section.
Under our amended bylaws, stockholders that initiate certain
proceedings may be obligated to reimburse us and our officers and
directors for all fees, costs and expenses incurred in connection
with such proceedings if the claim proves
unsuccessful.
On February 18,
2015, we adopted new bylaws which include a fee-shifting provision
in Article X for stockholder claims. Article X provides that in the
event that any stockholder initiates or asserts a claim against us,
or any of our officers or directors, including any derivative claim
or claim purportedly filed on our behalf, and the stockholder does
not obtain a judgment on the merits that substantially achieves, in
substance and amount, the full remedy sought, then the stockholder
will be obligated to reimburse us and any of our officers or
directors named in the action, for all fees, costs and expenses of
every kind and description that we or our officers or directors may
incur in connection with the claim. In adopting Article
X, it is our intent that:
●
All
actions, including federal securities law claims, would be subject
to Article X;
●
The
phrase “a judgment on the merits” means the
determination by a court of competent jurisdiction on the matters
submitted to the court;
●
The
phrase “substantially achieves, in both substance and
amount” means the plaintiffs in the action would be awarded
at least 90% of the relief sought;
●
Only
persons who were stockholders at the time an action was brought
would be subject to Article X; and
●
Only
the directors or officers named in the action would be allowed to
recover.
The fee-shifting
provision contained in Article X of our bylaws is not limited to
specific types of actions, but is rather potentially applicable to
the fullest extent permitted by law. Fee-shifting bylaws are
relatively new and untested. The case law and potential legislative
action on fee-shifting bylaws are evolving and there exists
considerable uncertainty regarding the validity of, and potential
judicial and legislative responses to, such bylaws. For example, it
is unclear whether our ability to invoke our fee-shifting bylaw in
connection with claims under the federal securities
laws, including any claims related to this offering, would be
pre-empted by federal law. Similarly, it is unclear how courts
might apply the standard that a claiming stockholder must obtain a
judgment that substantially achieves, in substance and amount, the
full remedy sought. The application of our fee-shifting bylaw in
connection with such claims, if any, will depend in part on future
developments of the law. We cannot assure you that we will or will
not invoke our fee-shifting bylaw in any particular dispute,
including any claims related to this offering. In addition, given
the unsettled state of the law related to fee-shifting bylaws, such
as ours, we may incur significant additional costs associated with
resolving disputes with respect to such bylaw, which could
adversely affect our business and financial condition.
If a stockholder
that brings any such claim, suit, action or proceeding is unable to
obtain the required judgment, the attorneys’ fees and other
litigation expenses that might be shifted to a claiming stockholder
are potentially significant. This fee-shifting bylaw, therefore,
may dissuade or discourage stockholders (and their attorneys) from
initiating lawsuits or claims against us or our directors and
officers. In addition, it may impact the fees, contingency or
otherwise, required by potential plaintiffs’ attorneys to
represent our stockholders or otherwise discourage
plaintiffs’ attorneys from representing our stockholders at
all. As a result, this bylaw may limit the ability of stockholders
to affect our management and direction of CEL-SCI, particularly
through litigation or the threat of litigation.
32
The provision of our amended bylaws requiring exclusive venue in
the U.S. District Court for Delaware for certain types of lawsuits
may have the effect of discouraging lawsuits against us and our
directors and officers.
Article X of our
amended bylaws provides that stockholder claims brought against us,
or our officers or directors, including any derivative claim or
claim purportedly filed on our behalf, must be brought in the U.S.
District Court for the district of Delaware and that with respect
to any such claim, the laws of Delaware will apply.
The exclusive forum
provision may limit a stockholder’s ability to bring a claim
in a judicial forum the stockholder finds favorable for disputes
with us or our directors or officers, and may have the effect of
discouraging lawsuits with respect to claims that may benefit us or
our stockholders.
COMPARATIVE
SHARE DATA
|
|
Number of Shares
|
|
Shares outstanding
as of June 30, 2015
|
112,027,058
|
The number of
shares outstanding as of June 30, 2015 excludes shares which may be
issued upon the exercise of the options or warrants, or the
conversion of the note, described below.
|
|
Number of Shares
|
Reference
|
|
Shares
issuable upon the exercise of Series N warrants
|
2,844,627
|
A
|
|
Shares
issuable upon exercise of options granted to CEL-SCI's
officers, directors, employees, consultants, and third
parties
|
7,545,600
|
B
|
|
Shares
issuable upon conversion of note payable to officer and
director
|
1,871,282
|
C
|
|
Shares
issuable upon exercise of Series H warrants
|
1,200,000
|
D
|
|
Shares
issuable upon exercise of Series P warrants
|
590,001
|
E
|
|
Shares
issuable upon exercise of Series Q warrants
|
1,200,000
|
F
|
|
Shares
issuable upon exercise of Series R warrants
|
2,625,000
|
G
|
|
Shares
issuable upon exercise of Series S warrants
|
25,928,010
|
H
|
|
Shares
issuable upon exercise of Series U warrants
|
445,514
|
I
|
|
Shares
issuable upon exercise of Series V warrants
|
20,253,164
|
J
|
A.
In
August 2008, CEL-SCI sold 138,339 shares of common stock and
207,508 Series N warrants in a private financing for $1,037,500. In
June 2009, an additional 116,667 shares and 181,570 Series N
warrants were issued to the investors. In October 2011,
the outstanding 389,078 Series N warrants issued were reset from
$4.00 to $3.00. In addition, the investors were issued
129,693 warrants exercisable at $3.00. In October 2013
and December 2013, in connection with public offerings of common
stock on those dates, the Company reset the exercise price from
$3.00 to $0.53 and issued the Series N warrant holders 2,432,649
additional warrants exercisable at $0.53 as required by the warrant
agreements. In January 2014, the Company offered the
investors the option to extend the Series N warrants by one year
and allow for cashless exercise, in exchange for cancelling the
reset provision in the warrant agreement. One of the
investors with 2,844,627 warrants accepted this
offer. On March 21, 2014, the other investor exercised
106,793 Series N Warrants and 92,715 Series N warrants in a
cashless exercise. On October 28, 2014, the remaining Series N
Warrants were transferred to the de Clara Trust, of which the
Company’s CEO, Geert Kersten, is the trustee and a
beneficiary. On June 29, 2015, the warrants were extended and
expire on August 18, 2017. This was done as part of the
agreement to extend the note due for repayment on July 6, 2015 and
mentioned in more detail in C below for a lesser interest
rate. As of June 30, 2015, the remaining 2,844,627
Series N warrants entitle the holders to purchase one share of the
Company's common stock at a price of $0.53 per share at any time
prior to August 18, 2017.
33
B.
The
options are exercisable at prices ranging from $0.55 to $20.00 per
share. CEL-SCI may also grant options to purchase additional shares
under its Incentive Stock Option and Non-Qualified Stock Option
Plans.
C.
Between
December 2008 and June 2009, Maximilian de Clara, the
Company’s President and a director, loaned the Company
$1,104,057 under a note payable. In June 2009, the Company issued
164,824 warrants, exercisable at $4.00 per share, to Mr. de
Clara. The warrants expired on December 24,
2014. In July 2009, as consideration for a further
extension of the loan, the Company issued 184,930 warrants
exercisable at $5.00 per share to Mr. de Clara. These
warrants expired on January 6, 2015. On May 13, 2011, to
recognize Mr. de Clara’s willingness to agree to subordinate
his note to convertible preferred shares and convertible debt,
CEL-SCI extended the maturity date of the note to July 6, 2015. The
loan from Mr. de Clara bears interest at 15% per year and is
secured by a lien on substantially all of CEL-SCI’s
assets. CEL-SCI does not have the right to prepay the
loan without Mr. de Clara’s consent. In August
2014, the loan and warrants were transferred to the de Clara Trust,
of which the Company’s CEO, Geert Kersten, is the trustee and
a beneficiary. On June 29, 2015, CEL-SCI extended the
maturity date of the note to July 6, 2017, lowered the interest
rate to 9% per year and changed the conversion price to
$0.59.
D.
On
January 25, 2012, CEL-SCI sold 1,600,000 shares of its common stock
to institutional investors for $5,760,000 or $3.60 per share. The
investors also received Series H warrants which entitle the
investors to purchase up to 1,200,000 shares of CEL-SCI’s
common stock. The Series H warrants may be exercised at
any time prior to August 1, 2015 at a price of $5.00 per
share. As of June 30, 2015, none of the Series H
Warrants had been exercised.
E
On
February 10, 2012, CEL-SCI issued 590,001 Series P warrants to the
former holder of the Series O warrants as an inducement for the
early exercise of the Series O warrants. The Series P warrants
allow the holder to purchase up to 590,001 shares of
CEL-SCI’s common stock at a price of $4.50 per share. The
Series P warrants are exercisable at any time prior to March 7,
2017. As of June 30, 2015, none of the Series P Warrants
had been exercised.
F.
On
June 21, 2012, CEL-SCI sold 1,600,000 shares of its common stock to
institutional investors for $5,600,000 or $3.50 per share. The
investors also received Series Q warrants which allow the investors
to purchase up to 1,200,000 shares of CEL-SCI’s common
stock. The Series Q warrants may be exercised at any
time after prior to December 22, 2015 at a price of $5.00 per
share. As of June 30, 2015, none of the Series Q
Warrants had been exercised.
34
G.
On December 4,
2012, CEL-SCI sold 3,500,000 shares of its common stock to
institutional investors for $10,500,000 or $3.00 per share. The
investors also received Series R warrants which entitle the
investors to purchase up to 2,625,000 shares of CEL-SCI’s
common stock. The Series R warrants may be exercised at
any time prior to December 7, 2016 at a price of $4.00 per
share. As of June 30, 2015, none of the Series R
Warrants had been exercised.
H
On
October 11, 2013, CEL-SCI closed a public offering of 17,826,087
shares of its common stock, as well as 20,475,000 Series S
warrants, for net proceeds of approximately $16,424,000, after
deduction for underwriting discounts and commissions. The Series S
warrants may be exercised at any time prior to October 11, 2018 at
a price of $1.25 per share.
On December 24,
2013, CEL-SCI closed a public offering of 4,761,905 units of common
stock and warrants at a price of $0.63 per unit for net proceeds of
$2,790,000, net of underwriting discounts and commissions and
offering expenses of the Company. Each unit consisted of
one share of common stock and one Series S warrant to purchase one
share of common stock. The Series S warrants may be
exercised at any time prior to October 11, 2018 at a price of $1.25
per share. In addition, the underwriters purchased 476,190 units of
common stock and warrants pursuant to the overallotment option, for
which the Company received net proceeds of approximately
$279,000.
On February 7,
2014, the Series S warrants issued in connection with the public
offerings in October and December 2013 began trading on the NYSE
MKT under the ticker symbol “CVM WS”.
On October 21,
2014, the Company sold 1,320,000 shares of common stock and 330,000
warrants to purchase shares of common stock in a private
offering. Additionally, on October 24, 2014, the Company
closed an underwritten public offering of 7,894,737 shares of
common stock and 1,973,684 Series S warrants to purchase shares of
common stock at a combined per unit price of $0.76 for net proceeds
of approximately $6.4 million, net of underwriting discounts and
commissions and offering expenses. The Series S warrants
may be exercised at a price of $1.25 and expire on October 11,
2018.
As of June 30,
2015, 2,088,769 Series S Warrants had been exercised, and the
Company received proceeds of $2,610,961. The remaining
25,928,010 Series S warrants entitle the holders to purchase one
share of CEL-SCI's common stock at a price of $1.25 per
share.
I.
On April 17, 2014,
CEL-SCI closed a public offering of 7,128,229 shares of common
stock and warrants to purchase an aggregate of 1,782,057 shares of
common stock. The units were sold at a price of $1.40 per unit and
resulted in net proceeds of approximately $9.23
million. The warrants were immediately exercisable at
$1.58 per share and expire on October 17, 2014. On
October 17, 2014, all the Series T Warrants expired.
CEL-SCI issued
Dawson James Securities, Inc. and Laidlaw & Company (UK) Ltd.
445,514 Series U warrants for being joint book-running managers and
underwriters for this offering. Each Series U warrant
entitles the holder to purchase one share of CEL-SCI’s common
stock. The Series U warrants were exercisable on October
17, 2014 at a price of $1.75 per share and expire on October 17,
2017. As of June 30, 2015, none of the Series U warrants
had been exercised.
J.
On May 28, 2015,
CEL-SCI closed a best efforts public offering of 20,253,164 shares
of common stock and 20,253,164 Series V warrants to purchase shares
of common stock. The common stock and warrants were sold at a
combined price of $0.79 and resulted in aggregate gross proceeds of
$16 million, prior to deducting placement agent commissions and
offering expenses. The warrants are immediately exercisable, expire
May 28, 2020 and have an exercise price of $0.79 per share. As of
June 30, 2015, none of the Series V warrants had been
exercised.
35
MARKET
FOR CEL-SCI’S COMMON STOCK
Our
common stock is publicly traded on the NYSE MKT under the symbol
“CVM”. The following table sets forth, for the periods
indicated, the high and low intraday sale prices of our common
stock as reported by the NYSE MKT.
|
|
HIGH
|
LOW
|
|
FY
2015
|
|
|
|
Third Quarter
(through June 30, 2015)
|
$1.09
|
$0.59
|
|
Second Quarter
(through March 31, 2015)
|
$1.23
|
$0.59
|
|
First Quarter
(through December 31, 2014)
|
$0.91
|
$0.54
|
|
FY
2014
|
|
|
|
Fourth Quarter
(through September 30, 2014)
|
$1.30
|
$0.75
|
|
Third Quarter
(through June 30, 2014)
|
$1.72
|
$0.98
|
|
Second Quarter
(through March 31, 2014)
|
$1.90
|
$0.59
|
|
First Quarter
(through December 31, 2013)
|
$1.80
|
$0.53
|
|
FY
2013(1)
|
|
|
|
Fourth Quarter
(through September 30, 2013)
|
$2.70
|
$1.60
|
|
Third Quarter
(through June 30, 2013)
|
$3.10
|
$2.00
|
|
Second Quarter
(through March 31, 2013)
|
$2.90
|
$2.10
|
|
First Quarter
(through December 31, 2012)
|
$3.90
|
$2.60
|
(1)
The
numbers shown for FY 2013 are adjusted for a 1-for-10 reverse stock
split effected on September 25, 2013.
As of June 30,
2015, there were 112,027,058 outstanding shares of our common stock
outstanding held by approximately 1,300 holders of
record.
Holders of common
stock are entitled to receive dividends as may be declared by the
Board of Directors out of legally available funds and, in the event
of liquidation, to share pro rata in any distribution of
CEL-SCI’s assets after payment of liabilities. The Board of
Directors is not obligated to declare a dividend. CEL-SCI has not
paid any dividends on its common stock and CEL-SCI does not have
any current plans to pay any common stock dividends.
The provisions in
CEL-SCI’s Articles of Incorporation relating to
CEL-SCI’s preferred stock would allow CEL-SCI’s
directors to issue preferred stock with rights to multiple votes
per share and dividend rights which would have priority over any
dividends paid with respect to CEL-SCI’s common
stock. The issuance of preferred stock with such rights
may make more difficult the removal of management, even if such
removal would be considered beneficial to shareholders generally,
and will have the effect of limiting shareholder participation in
certain transactions such as mergers or tender offers if such
transactions are not favored by incumbent management.
The market price of
CEL-SCI’s common stock, as well as the securities of other
biopharmaceutical and biotechnology companies, have historically
been highly volatile, and the market has from time to time
experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies.
Factors such as fluctuations in CEL-SCI’s operating results,
announcements of technological innovations or new therapeutic
products by CEL-SCI or its competitors, governmental regulation,
developments in patent or other proprietary rights, public concern
as to the safety of products developed by CEL-SCI or other
biotechnology and pharmaceutical companies, and general market
conditions may have a significant effect on the market price of
CEL-SCI’s common stock.
36
PLAN
OF DISTRIBUTION
CEL-SCI may sell
shares of its common stock, preferred stock, convertible preferred
stock, rights, or warrants, units consisting of any of the
foregoing, as well as any of these securities issuable upon the
exercise of warrants in and/or outside the United
States: (i) through underwriters, placement agents, or
dealers; (ii) directly to a limited number of purchasers or to a
single purchaser; or (iii) through agents. The
applicable prospectus supplement with respect to the offered
securities will set forth the name or names of any underwriters or
agents, if any, the purchase price of the offered securities and
the proceeds to CEL-SCI from such sale, any delayed delivery
arrangements, any underwriting discounts, commissions, and other
items constituting underwriters' or placement agents’
compensation, the public offering price and any discounts or
concessions allowed or reallowed or paid to dealers and any
compensation paid to an underwriter or a placement
agent. The public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed
from time to time.
Notwithstanding the
above, the maximum commission or discount to be received by any
NASD member or independent broker-dealer will not be greater than
10% in connection with the sale of any securities offered by means
of this prospectus or any related prospectus supplement, exclusive
of any non-accountable expense allowance. Any securities
issued by CEL-SCI to any FINRA member or independent broker-dealer
in connection with an offering of CEL-SCI’s securities will
be considered underwriting compensation and may be restricted from
sale, transfer, assignment, or hypothecation for a number of months
following the effective date of the offering, except to officers or
partners (not directors) of any underwriter or member of a selling
group and/or their officers or partners.
CEL-SCI’s
securities may be sold:
●
At a
fixed price.
●
As the result of
the exercise of warrants or rights, or the conversion of preferred
shares, at fixed or varying prices, as determined by the terms of
the warrants, rights or convertible securities.
●
At varying prices
in at the market offerings.
●
In privately
negotiated transactions, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices.
If underwriters are
used in the sale, the offered securities will be acquired by the
underwriters for their own account and may be resold from time to
time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The securities may be
offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or
underwriters with respect to a particular underwritten offering of
securities will be named in the prospectus supplement relating to
such offering and, if an underwriting syndicate is used, the
managing underwriter or underwriters will be set forth on the cover
of such prospectus supplement. Unless otherwise set
forth in the prospectus supplement, the obligations of the
underwriters to purchase the offered securities will be subject to
conditions precedent and the underwriters may be obligated to
purchase all the offered securities if any are
purchased.
If dealers are
utilized in the sale of offered securities in respect of which the
prospectus supplement
is delivered, CEL-SCI will sell the offered securities to the
dealers as principals. The dealers may then resell the
offered securities to the public at varying prices to be determined
by the dealers at the time of resale. The names of the
dealers and the terms of the transaction will be set forth in the
prospectus supplement relating to the securities sold to the
dealers.
37
If an agent is used
in an offering, the agent will be named, and the terms of the
agency will be set forth, in the prospectus
supplement. Unless otherwise indicated in the prospectus
supplement, an agent will act on a best efforts basis for the
period of its appointment.
The securities may
be sold directly by CEL-SCI to institutional investors or others,
who may be deemed to be underwriters within the meaning of the
Securities Act of 1933 with respect to any resale of the securities
purchased by the institutional investors. The terms of
any of the sales, including the terms of any bidding or auction
process, will be described in the applicable prospectus
supplement.
CEL-SCI may permit
agents or underwriters to solicit offers to purchase its securities
at the public offering price set forth in a prospectus supplement
pursuant to a delayed delivery arrangement providing for payment
and delivery on the date stated in the prospectus
supplement. Any delayed delivery contract will contain
definite fixed price and quantity terms. The obligations
of any purchaser pursuant to a delayed delivery contract will not
be subject to any market outs or other conditions other than the
condition that the delayed delivery contract will not violate
applicable law. In the event the securities underlying
the delayed delivery contract are sold to underwriters at the time
of performance of the delayed delivery contract, those securities
will be sold to those underwriters. Each delayed
delivery contract shall be subject to CEL-SCI’s
approval. CEL-SCI will pay the commission indicated in
the prospectus supplement to underwriters or agents soliciting
purchases of securities pursuant to delayed delivery arrangements
accepted by CEL-SCI.
Notwithstanding the
above, while prospectus supplements may provide specific offering
terms, or add to or update information contained in this
prospectus, any fundamental changes to the offering terms will be
made by means of a post-effective amendment.
Agents, dealers and
underwriters may be entitled under agreements entered into with
CEL-SCI to indemnification from CEL-SCI against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments made by such agents, dealers
or underwriters.
DESCRIPTION
OF SECURITIES
Common Stock
CEL-SCI is
authorized to issue 600,000,000 shares of common stock, (the
"common stock"). Holders of common stock are each
entitled to cast one vote for each share held of record on all
matters presented to shareholders. Cumulative voting is
not allowed; hence, the holders of a majority of the outstanding
common stock can elect all directors.
Holders of common
stock are entitled to receive such dividends as may be declared by
the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution
of CEL-SCI's assets after payment of liabilities. The
board is not obligated to declare a dividend. It is not
anticipated that dividends will be paid in the foreseeable
future.
Holders of common
stock do not have preemptive rights to subscribe to additional
shares if issued by CEL-SCI. There is no conversion,
redemption, sinking fund or similar provision regarding the common
stock. All of the outstanding shares of common stock are
fully paid and non-assessable.
38
Preferred Stock
CEL-SCI is
authorized to issue up to 200,000 shares of preferred
stock. CEL-SCI's Articles of Incorporation provide that
the Board of Directors has the authority to divide the preferred
stock into series and, within the limitations provided by Colorado
statute, to fix by resolution the voting power, designations,
preferences, and relative participation, special rights, and the
qualifications, limitations or restrictions of the shares of any
series so established. As the Board of Directors has
authority to establish the terms of, and to issue, the preferred
stock without shareholder approval, the preferred stock could be
issued to defend against any attempted takeover of
CEL-SCI. As of June 30, 2015, no shares of preferred
stock were outstanding.
Rights Agreement
In November 2007,
we declared a dividend of one Series A Right and one Series B
Right, or collectively the Rights, for each share of our common
stock which was outstanding on November 9, 2007. When
the Rights become exercisable, each Series A Right will entitle the
registered holder, subject to the terms of a Rights Agreement, to
purchase from us one share of our common stock at a price equal to
20% of the market price of our common stock on the exercise date,
although the price may be adjusted pursuant to the terms of the
Rights Agreement. If after a person or group of
affiliated persons has acquired 15% or more of our common stock or
following the commencement of a tender offer for 15% or more of our
outstanding common stock (i) we are acquired in a merger or other
business combination and we are not the surviving corporation, (ii)
any person consolidates or merges with us and all or part of our
common shares are converted or exchanged for securities, cash or
property of any other person, or (iii) 50% or more of our
consolidated assets or earning power are sold, proper provision
will be made so that each holder of a Series B Right will
thereafter have the right to receive, upon payment of the exercise
price of $100 (subject to adjustment), that number of shares of
common stock of the acquiring company which at the time of such
transaction has a market value that is twice the exercise price of
the Series B Right.
The description and
terms of the Rights are set forth in a Rights Agreement between the
Company and Computershare Trust Company, N.A., as Rights
Agent.
Distribution of Rights
Initially,
stockholders will not receive separate certificates for the Rights
as the Rights will be represented by outstanding common stock
certificates. Until the exercise date, the Rights cannot be bought,
sold or otherwise traded separately from the common stock.
Certificates for common stock will carry a notation that indicates
that Rights are attached to the common stock and incorporate the
terms of the Rights Agreement.
Separate
certificates representing the Rights will be distributed as soon as
practicable after the earliest to occur of:
●
15 business days
following a public announcement that a person or group of
affiliated or associated persons has acquired beneficial ownership
of 15% or more of the outstanding common stock, or
●
15 business days
(or such later date as may be determined by action of our board of
directors prior to such time as any person or group of affiliated
persons has acquired 15% or more of our common stock) following the
commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result in
the beneficial ownership by a person or group of 15% or more of
such outstanding common stock.
39
The earlier of such
dates described above is called the “distribution
date.”
Until the
distribution date (or earlier redemption or expiration of the
Rights), the surrender for transfer of any certificates for common
stock outstanding as of the record date, even without such
notation, will also constitute the transfer of the Rights
associated with the common stock represented by such certificate.
As soon as practicable following the distribution date, separate
certificates evidencing the Rights will be mailed to holders of
record of the common stock as of the close of business on the
distribution date and such separate right certificates alone will
evidence the Rights.
Exercise and Expiration
The holders of the
Rights are not required to take any action until the Rights become
exercisable. The Rights are not exercisable until the distribution
date. Holders of the Rights will be notified by us that
the Rights have become exercisable. The Rights will
expire on October 30, 2020, unless the expiration date is extended
or unless the Rights are earlier redeemed by us as described
below.
Redemption
At any time prior
to the distribution date, our board of directors may redeem the
Rights in whole, but not in part, at a price of $0.0001 per Right.
Subject to the foregoing, the redemption of the Rights may be made
effective at such time, on such basis and with such conditions as
our board of directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only entitlement of the
holders of Rights will be to receive the redemption
price.
Exchange Option
At any time after a
person or group of affiliated persons has acquired 15% or more of
our common stock or following the commencement of a tender offer
for 15% or more of our outstanding common stock, and prior to the
acquisition by such person of 50% or more of the outstanding common
stock, our board of directors may exchange the Rights (other than
Rights owned by such person or group which have become void), in
whole or in part, at an exchange ratio of one share of common stock
per Right (subject to adjustment).
Other Provisions
The terms of the
Rights may be amended by our board of directors without the consent
of the holders of the Rights, except that from and after such time
a person or group of affiliated persons has acquired 15% or more of
our common stock no such amendment may adversely affect the
interests of the holders of the Rights.
Until a Right is
exercised, the holder of the Right, as such, will not have any
rights as a stockholder, including, without limitation, the right
to vote or to receive dividends.
The Rights may have
certain anti-takeover effects. The Rights will cause substantial
dilution to a person or group that attempts to acquire us on terms
not approved by our board of directors. However, the Rights should
not interfere with any merger or other business combination
approved by a majority of our board of directors because the Rights
may be redeemed by us at any time prior to the distribution date.
Thus, the Rights are intended to encourage persons who may seek to
acquire control of us to initiate such an acquisition through
negotiations with our board of directors. However, the effect of
the Rights may be to discourage a third party from making a partial
tender offer or otherwise attempting to obtain a substantial
position in the equity securities of, or seeking to obtain control
of, us. To the extent any potential acquisition is
deterred by the Rights, the Rights may have the effect of
preserving incumbent management in office.
40
Attorneys’ Fees in Stockholder Actions
On February 18,
2015, we adopted new bylaws which include a fee-shifting provision
in Article X for stockholder claims. Article X provides that in the
event that any stockholder initiates or asserts a claim against us,
or any of our officers or directors, including any derivative claim
or claim purportedly filed on our behalf, and the stockholder does
not obtain a judgment on the merits that substantially achieves, in
substance and amount, the full remedy sought, then the stockholder
will be obligated to reimburse us and any of our officers or
directors named in the action, for all fees, costs and expenses of
every kind and description, including but not limited to all
reasonable attorneys’ fees and other litigation expenses,
that we or our officers or directors who were named in the action
may incur in connection with such claim.
Our fee-shifting
bylaw is not limited to specific types of actions, but is rather
potentially applicable to the fullest extent permitted by law.
There are several types of remedies that a stockholder may seek in
connection with an action or proceeding against us, including
declaratory or injunctive relief, or monetary damages. If a
stockholder is not successful in obtaining a judgment that
substantially achieves in substance, such as in the case of a claim
for declaratory or injunctive relief, or amount, such as in the
case of a claim for monetary damages, our and our officers’
and directors’ litigation expenses may be shifted to the
stockholder.
Fee-shifting bylaws
are relatively new and untested. The case law and potential
legislative action on fee shifting bylaws are evolving and there
exists considerable uncertainty regarding the validity of, and
potential judicial and legislative responses to, such bylaws. For
example, it is unclear whether our ability to invoke our
fee-shifting bylaw in connection with claims under the federal
securities laws, including claims related to this offering, would
be pre-empted by federal law. Similarly, it is unclear how courts
might apply the standard that a stockholder must obtain a judgment
that substantially achieves, in substance and amount, the full
remedy sought. The application of our fee shifting bylaw in
connection with such claims, if any, will depend in part on future
developments of the law. We cannot assure you that we will or will
not invoke our fee-shifting bylaw in any particular dispute,
including any claims related to this offering.
If a stockholder
that brings any such claim is unable to obtain the required
judgment, the attorneys’ fees and other litigation expenses
that might be shifted to such a stockholder are potentially
significant. This fee-shifting bylaw, therefore, may dissuade or
discourage stockholders (and their attorneys) from initiating
lawsuits or claims against us or our directors and officers. In
addition, it may impact the fees, contingency or otherwise,
required by potential plaintiffs’ attorneys to represent our
stockholders or otherwise discourage plaintiffs’ attorneys
from representing our stockholders at all. As a result, this bylaw
may limit the ability of stockholders to affect the management and
direction of our company, particularly through litigation or the
threat of litigation.
Warrants Held by Private Investors
See
“Comparative Share Data” for information concerning
CEL-SCI’s outstanding options, warrants and convertible
securities.
Transfer Agent
Computershare,
Inc., of Denver, Colorado, is the transfer agent for CEL-SCI's
common stock.
41
EXPERTS
The financial
statements as of September 30, 2014 and 2013 and for each of the
three years in the period ended September 30, 2014 and
management’s assessment of the effectiveness of internal
control over financial reporting as of September 30, 2014
incorporated by reference in this Prospectus have been so
incorporated in reliance on the reports of BDO USA, LLP, an
independent registered public accounting firm, incorporated herein
by reference, given on the authority of said firm as experts in
auditing and accounting.
INDEMNIFICATION
CEL-SCI's bylaws
authorize indemnification of a director, officer, employee or agent
of CEL-SCI against expenses incurred by him in connection with any
action, suit, or proceeding to which he is named a party by reason
of his having acted or served in such capacity, except for
liabilities arising from his own misconduct or negligence in
performance of his duty. In addition, even a director,
officer, employee, or agent of CEL-SCI who was found liable for
misconduct or negligence in the performance of his duty may obtain
such indemnification if, in view of all the circumstances in the
case, a court of competent jurisdiction determines such person is
fairly and reasonably entitled to
indemnification. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers, or persons controlling CEL-SCI
pursuant to the foregoing provisions, CEL-SCI has been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
ADDITIONAL
INFORMATION
CEL-SCI is subject
to the requirements of the Securities Exchange Act of l934 and is
required to file reports, proxy statements and other information
with the Securities and Exchange Commission. Copies of
any such reports, proxy statements and other information filed by
CEL-SCI can be read and copied at the Commission’s Public
Reference Room at 100 F Street, N.E., Washington, D.C.,
20549. The public may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission maintains an Internet
site that contains reports, proxy and information statements, and
other information regarding CEL-SCI. The address of that
site is http://www.sec.gov.
CEL-SCI will
provide, without charge, to each person to whom a copy of this
prospectus is delivered, including any beneficial owner, upon the
written or oral request of such person, a copy of any or all of the
documents incorporated by reference below (other than exhibits to
these documents, unless the exhibits are specifically incorporated
by reference into this prospectus). Requests should be directed
to:
CEL-SCI
Corporation
8229 Boone Blvd.,
#802
Vienna,
Virginia 22182
(703)
506-9460
We incorporate by
reference the filed documents listed below, except as superseded,
supplemented or modified by this Registration Statement, and any
future filings we will make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act:
●
our
Annual Report on Form 10-K, including Amendments 1 and 2, for the
fiscal year ended September 30, 2014;
●
our
Quarterly Reports on Form 10-Q for the three months ended December
31, 2014 and March 31, 2015;
42
●
our
Current Reports on Form 8-K filed with the SEC on October 22, 2014,
October 23, 2014, February 18, 2015, March 18, 2015, April 2, 2015,
May 11, 2015, May 13, 2015, May 26, 2015, May 29, 2015, June 23,
2015, and June 29, 2015;
●
our DefinitiveProxy
Statement, which was filed with the SEC on April 21,
2015;
●
the description of
our common stock contained in our Registration Statement on Form
8-A filed with the SEC on July 2, 1996 and all amendments and
reports updating that description; and the description of our
Series S warrants contained in our Registration Statement on Form
8-A filed with the SEC on January 3, 2014 and all amendments and
reports updating that description.
All documents filed
with the Commission by CEL-SCI pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this
prospectus and prior to the termination of this offering shall be
deemed to be incorporated by reference into this prospectus and to
be a part of this prospectus from the date of the filing of such
documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference shall be
deemed to be modified or superseded for the purposes of this
prospectus to the extent that a statement contained in this
prospectus or in any subsequently filed document which also is or
is deemed to be incorporated by reference in this prospectus
modifies or supersedes such statement. Such statement so
modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this
prospectus.
Investors are
entitled to rely upon information in this prospectus or
incorporated by reference at the time it is used by CEL-SCI to
offer and sell securities, even though that information may be
superseded or modified by information subsequently incorporated by
reference into this prospectus.
CEL-SCI has filed
with the Securities and Exchange Commission a Registration
Statement under the Securities Act of l933, as amended, with
respect to the securities offered by this
prospectus. This prospectus does not contain all of the
information set forth in the Registration Statement. For
further information with respect to CEL-SCI and such securities,
reference is made to the Registration Statement and to the exhibits
filed with the Registration Statement. Statements
contained in this prospectus as to the contents of any contract or
other documents are summaries which are not necessarily complete,
and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by
such reference. The Registration Statement and related
exhibits may also be examined at the Commission’s internet
site.
No dealer
salesman or other person has been authorized to give any
information or to make any representations, other than those
contained in this prospectus. Any information or
representation not contained in this prospectus must not be relied
upon as having been authorized by CEL-SCI. This
prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, the securities offered hereby in any state or
other jurisdiction to any person to whom it is unlawful to make
such offer or solicitation. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has been no change
in the affairs of CEL-SCI since the date of this
prospectus.
43
TABLE
OF CONTENTS
|
|
Page
|
|
Prospectus
Summary
|
2
|
|
Forward-Looking
Statements
|
10
|
|
Risk
Factors
|
11
|
|
Comparative
Share Data
|
33
|
|
Market
for CEL-SCI’s Common Stock.
|
36
|
|
Plan
of Distribution
|
37
|
|
Description
of Securities
|
38
|
|
Experts
|
42
|
|
Indemnification
|
42
|
|
Additional
Information
|
42
|
Common
Stock
CEL-SCI
CORPORATION
PROSPECTUS
CEL-SCI
CORPORATION
10,000,000
Shares of Common Stock
and
Warrants
to Purchase 5,000,000 Shares of Common Stock
____________________
Prospectus
Supplement
____________________
_______________________________
Rodman & Renshaw
a unit of H.C. Wainwright & Co.
August
23, 2016
CEL-SCI
CORPORATION
Common
Stock
and
Warrants
____________________
Preliminary
Prospectus Supplement
____________________
,
2016
S-62