Cel-Sci Catches Bad Case of the Biotech Blues

Over the past six years, Cel-Sci Corp.'s stock has bounced back and forth between 15 cents and $12 as it pursued its quest to bring a cancer drug to market. Now it turns out that the Vienna firm may have been going by the wrong accounting rules for much of that time.

Gosh, this biotech business is difficult. Or at least that was the take-home message from a 1,500-word letter that chief executive Geert R. Kersten sent to Cel-Sci shareholders Thursday morning. It was a day after his company issued a news release revealing that it would be late filing its fiscal 2005 financial results because auditors had raised questions about its accounting between 2001 and 2003 for the complex financing instruments known as derivatives. The company said potential restatements would be "of a non-cash nature and do not affect Cel-Sci's cash position."

Kersten did not address that problem in his message, but he had plenty to say about the company's careening stock price.

"These cycles come out of the blue and surprise everyone," wrote Kersten, who sends out his essays to shareholders two or three times a year. "Given the fact that we achieved several very significant milestones last year, but our stock did not move up as we achieved them, one might wonder about investing in these 'irrational biotech stocks,' " he wrote.

After all, he noted, the firm's lead drug, a treatment for head and neck cancer, had received a patent allowing for 19 years of exclusivity. Canadian officials have given the go-ahead for final human testing. U.S. health officials are considering a similar request. And Cel-Sci says it even has a potential treatment in the works for that scary bird flu.

Yet the stock drooped. What gives? "It's a 98 percent pain to be in biotech," Kersten said in an interview. "It's a very, very hard business. The only way to truly stick with it is if you love it. If you go into it for the money, you wouldn't last. You can hope to make money. If you are successful you will make money. But it's a very hard business. And the hardest thing is that it's totally illogical."

Kersten said that "shareholders are puzzled by this business. . . . As a small company, you have to speak from your heart and from your beliefs, because ultimately people invest in people."

The letter's effect on the stock was not immediate. On the day it was released, Cel-Sci shares closed at 53 cents, up two pennies. The stock closed Friday at 54 cents.

-- Michael S. Rosenwald