Cel-Sci has faced challenges in biotech market but sees hope in tumor treatment
Monday, February 28, 2011
The chief executive at Vienna-based biotechnology firm Cel-Sci has written periodic letters to shareholders since assuming the helm of the company in 1995. In his latest correspondence, dated Feb. 24, the frustrations of a longtime executive in an often-uncertain industry were palpable.
He bemoaned and denied recent Internet rumors that the company's third-phase trials were stalled. He seethed over efforts by hedge funds to wrest control of the company two years ago. He even harkened back to the late 1990s, saying members of the board thought at the time that the company should upend its biological roots and embrace the dot-com era.
The grievances outlined by Geert R. Kersten may be specific to the history of his company, which since 1983 has been developing a drug to treat head and neck cancer, but the difficulties inherent in bringing a drug to market and the endurance demanded of biotech executives are experienced throughout the industry.
"Being a biotech CEO is a lot less fun than people think," Kersten said in an interview. "You've got to believe [in your products], otherwise you find no solace in the downtimes. The worst parts are all behind us, [but] I've been through . . . war stories that could fill whole books."
It's a sentiment that biotechnology executives echo at industry functions, particularly as the struggle to attract investors has become more arduous during the country's financial downturn. Venture capitalists have largely shied away from deals in which a return is not guaranteed or reasonably quick. But a spirit of resilience and greater purpose is also common, born from the fact that the industry produces life-saving innovations.
Cel-Sci's story, which it characterizes on its Web site as one of "vision, persistence, and survival," fits that mold. Although the company has several products in development, Multikine, a treatment for neck and head tumors, has long been a point of focus.
In clinical trials, the drug was used to treat patients after their tumors were removed in surgery to reduce the recurrence of their cancer. It works by impeding a tumor's natural ability to fend off the body's immune system. Third-phase trials started in December. If successful, Cel-Sci said, it probably would submit the drug for regulatory approval.
The company's stock has remained below a dollar for the past year, peaking at about 92 cents per share in December. It closed Friday at 68 cents per share.
"They're the kind of company with a resilience that is significant, especially compared to many companies that when they have their first setback . . . the funding for the company often gets pulled out from under them," said Mark Herzog, executive director of the Virginia Biotechnology Association. "They've always rebounded and shown a remarkable resilience, especially in an industry like this that's up against so many challenges."
Although biotechnology companies are known for development cycles that consume gobs of time and money, Cel-Sci's 28-year-old endeavor stands out as particularly long. Kersten attributes that to the novelty of the drug, which he said must be used before more-proven treatments, such as radiation and chemotherapy, that hammer on the immune system.
"It's a big deal to put an unproven therapy ahead of three proven therapies, so that's why it took so long for us," he said. "That's why people started writing us off. They didn't understand the enormity of our task."
Kersten, in his letter to shareholders, said the company has been a victim of "games of greed," some coming from within the company.
The earliest of the "war stories" shared in Kersten's letter surrounds what he describes as an effort in 1999 by some members of the board to steer the company toward the Web. He said the directors thought the company's cash should be spent pursuing a Yahoo-like endeavor, effectively killing its scientific research.
Then, a few years ago, at the onset of the recent economic downturn, Kersten sought a reprieve from creditors because the company was low on money. The hedge funds that held debentures were not willing to budge, he said, and instead wanted to buy the company for less than its stock value at the time.
Court records show Cel-Sci also has been a party in four lawsuits since 1996, including an ongoing dispute with New York-based Iroquois Master Fund.
But Kersten's optimism remains. He said the doubts his company has faced over the years and questions about the drug's ability to deliver will be resolved by positive clinical trial results.
"We have not taken shortcuts before and we will certainly not do so now. We have never felt more excited about the Company's future," Kersten writes at the letter's end. "We thank you for your support."