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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.02pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.04pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.01pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
No words rose this year.
Positive rising
successful+1
improves+1
Risk Factors (Item 1A)
16,001 words
ITEM 1B. RISK FACTORS
The risks described below could adversely affect the price of CEL-SCI’s common stock.
Risk Factor Summary
CEL-SCI has incurred significant losses since its inception and anticipates that it will continue to incur significant losses for the foreseeable future and may never or maintain .
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
CEL-SCI will require substantial additional capital to remain in operation. A failure to obtain this necessary capital when needed could force CEL-SCI to delay, limit, reduce or terminate the product candidates’ development or commercialization efforts.
The costs of the product candidates’ development and clinical trials are difficult to estimate and will be very high for many years, preventing CEL-SCI from making a profit for the foreseeable future, if ever.
CEL-SCI has not established a definite plan for the marketing of Multikine, if approved.
CEL-SCI depends heavily on the success of Multikine, for which Phase III data has been presented, while its other candidates are still in preclinical phases. CEL-SCI’s product candidates must undergo rigorous preclinical and clinical testing and regulatory approvals, which could be costly and time-consuming and subject CEL-SCI to unanticipateddelays or prevent CEL-SCI from marketing any products. If CEL-SCI is unable to advance its product candidates in clinical development, obtain regulatory approval and ultimately commercialize its product candidates, or experience significant delays in doing so, CEL-SCI’s business will be materially harmed.
Even if CEL-SCI obtains regulatory approval for its investigational products, CEL-SCI will be subject to stringent, ongoing government regulation.
CEL-SCI’s product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial utility of an approved prescribing label, or result in significant negative consequences following marketing approval, if any.
Biologics carry unique risks and uncertainties, which could have a negative impact on CEL-SCI’s future operations.
The current and future relationships with healthcare professionals, principal investigators, consultants, potential customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable healthcare laws and regulations.
CEL-SCI’s commercial success depends, in part, upon attaining significant market acceptance of its product candidates, if approved, among physicians, patients, healthcare payors and major operators of cancer clinics.
CEL-SCI’s patents might not protect its technology from competitors, in which case CEL-SCI may not have any advantage over competitors in selling any products that CEL-SCI may develop.
Much of CEL-SCI’s intellectual property is protected as trade secrets or confidential know-how, not by patents.
You may experience future dilution as a result of future equity offerings or other equity issuances by CEL-SCI.
The price of CEL-SCI’s common stock has been volatile and is likely to continue to be volatile, which could result in substantial losses for CEL-SCI’s shareholders.
Risks Related to CEL-SCI
CEL-SCI has incurred significant losses since its inception and anticipates that it will continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability.
CEL-SCI has a history of net losses, expects 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 its formation and through September 30, 2025, CEL-SCI incurred net losses of approximately $539 million. CEL-SCI has relied principally upon the proceeds from the public and private sales of its securities to finance its activities to date. To date, CEL-SCI has not commercialized any products or generated any revenue from the sale of products, and CEL-SCI does not expect to generate any product revenue for the foreseeable future. CEL-SCI does not know whether or when it will generate product revenue or become profitable.
CEL-SCI is heavily dependent on the success of Multikine for which Phase III data has been announced and presented at ASCO 2022, ESMO 2022, ECHNO 2023, ESTRO 2023, ESMO 2023, IDDST 2024 and ESMO 2024. In March 2025, CEL-SCI also published a comprehensive presentation of results from the Phase 3 trial in the peer reviewed journal Pathology and Oncology Research (POR). The article is titled “Neoadjuvant Leukocyte Interleukin Injection Immunotherapy Improves Overall Survival in Low-risk Locally Advanced Head and Neck Squamous Cell Carcinoma -The IT-MATTERS Study”. CEL-SCI cannot be certain that Multikine will receive regulatory approval or be successfully commercialized even if CEL-SCI receives regulatory approval. Multikine is the only product candidate in late-stage clinical development and CEL-SCI’s business currently depends heavily on its successful development, regulatory approval and commercialization. CEL-SCI has no drug products for sale currently and may never be able to develop approved and marketable drug products.
Even if CEL-SCI succeeds in developing and commercializing one or more of its product candidates, CEL-SCI expects to continue to incur significant operating and capital expenditures as CEL-SCI:
continues to undertake preclinical development and clinical trials for product candidates;
seeks regulatory approvals for product candidates; and
implements additional internal systems and infrastructure.
To become and remain profitable, CEL-SCI must succeed in developing and commercializing product candidates which must generate significant revenue. This will require CEL-SCI to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of its product candidates, discovering or acquiring additional product candidates, obtaining regulatory approval for these product candidates and manufacturing, marketing and selling any products for which CEL-SCI may obtain regulatory approval. CEL-SCI is only in the preliminary stages of most of these activities. CEL-SCI may never succeed in these activities and, even if CEL-SCI does, may never generate revenue that is significant enough to achieveprofitability.
Even if CEL-SCI does achieveprofitability, it may not be able to sustain or increase profitability on a quarterly or annual basis. The failure to become and remain profitable could depress the value of CEL-SCI’s common stock and could impair its ability to raise capital, expand its business, maintain research and development efforts, diversify product offerings or even continue in operation. A decline in the value of CEL-SCI’s common stock could cause its stockholders to lose all or part of their investment.
CEL-SCI has identified conditions and events that raise substantial doubt about its ability to continue as a going concern for more than twelve months from the date of these financial statements.
Primarily as a result of CEL-SCI’s losses incurred to date, CEL-SCI’s expected continued future losses, and the uncertainties associated with obtaining regulatory approval and ultimately commercializing its products, management has identified conditions and events that raise substantial doubt about CEL-SCI’s ability to continue as a going concern. CEL-SCI’s ability to continue as a going concern is contingent upon, among other factors, the sale of its securities or obtaining alternate financing.
CEL-SCI will require substantial additional capital to remain in operation. A failure to obtain this necessary capital when needed could force CEL-SCI to delay, limit, reduce or terminate the product candidates’ development or commercialization efforts.
As of September 30, 2025, CEL-SCI had cash and cash equivalents of approximately $11.0 million. CEL-SCI believes that it will continue to expend substantial resources for the foreseeable future developing Multikine, LEAPS and any other product candidates or technologies that it may develop or acquire. These expenditures will include costs associated with research and development, obtaining regulatory approvals and having the products manufactured, as well as marketing and selling products approved for sale, if any. In addition, other unanticipated costs may arise. CEL-SCI cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of the product candidates.
CEL-SCI’s future capital requirements depend on many factors, including:
the cost of completing a confirmatory registration study of Multikine for the treatment of certain head and neck cancers;
the results of the applications to and meetings with the FDA, the EMA and other regulatory authorities and the consequential effect on operating costs;
the cost, timing and outcome of the 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;
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 CEL-SCI 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 the products, if any of the product candidates are approved for marketing, including product manufacturing, marketing, sales and distribution costs;
the revenue, if any, received from commercial sales of the product candidates for which CEL-SCI receives marketing approval;
the cost of having the product candidates manufactured for clinical trials and in preparation for commercialization;
the 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 its intellectual property rights, including litigation costs, and the outcome of such litigation; and
the extent to which CEL-SCI acquires or in-licenses other products or technologies.
CEL-SCI will need to raise additional funds in order to continue its operations and additional funds may not be available when CEL-SCI needs them on terms that are acceptable to CEL-SCI, or at all. If adequate funds are not available to CEL-SCI on a timely basis, CEL-SCI 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 CEL-SCI develops or acquires, or delay, limit, reduce or terminate its sales and marketing activities that may be necessary to commercialize its product candidates. Due to recurring losses from operations and future liquidity needs, there is substantial doubt about CEL-SCI’s ability to continue as a going concern without additional capital becoming available. The substantial doubt about CEL-SCI’s ability to continue as a going concern could have an adverse impact on CEL-SCI’s ability to execute its business plan, result in the reluctance on the part of certain suppliers to do business with CEL-SCI, or adversely affect CEL-SCI’s ability to raise additional debt or equity capital.
The costs of the product candidates’ development and clinical trials are difficult to estimate and will be very high for many years, preventing CEL-SCI from making a profit for the foreseeable future, if ever.
Clinical and other studies necessary to obtain approval of a new drug or biologic can be time consuming and costly, especially in the United States, but also in foreign countries. The estimates of the costs associated with future clinical trials and research may be substantially higher than what CEL-SCI actually experiences. It is impossible to predict what CEL-SCI will face in the development of a product candidate such as Multikine. The purpose of clinical trials is to provide both CEL-SCI and regulatory authorities with safety and efficacy data in humans. 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. CEL-SCI expects that it 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.
CEL-SCI’s LEAPS technology may not result in a viable drug candidate
Using CEL-SCI’s LEAPS technology, CEL-SCI is developing a LEAPS immunotherapy for the potential treatment of Rheumatoid Arthritis. However, the development of this technology is in a preliminary stage and CEL-SCI is currently focused on having Multikine approved for sale. There can be no assurance that the LEAPS technology will be successful in treating any disease. CEL-SCI’s primary focus at present is seeking the approval of Multikine for the treatment of head and neck cancer.
An adverse determination in any future legal proceedings could have a material adverse effect on CEL-SCI.
CEL-SCI may 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 legal proceedings may result in large judgments or settlements against CEL-SCI, any of which could have a material adverse effect on its 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. CEL-SCI is committed to maintaining high standards of corporate governance and public disclosure. Complying with evolving interpretations of new or changing legal requirements may cause CEL-SCI to incur higher costs as CEL-SCI revises current practices, policies and procedures, and may divert management time and attention from potential revenue-generating activities to compliance matters. If the 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, CEL-SCI’s reputation may also be harmed. Further, CEL-SCI’s 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, CEL-SCI may have difficulty attracting and retaining qualified board members and executive officers, which could harm its business.
CEL-SCI has not established a definite plan for the marketing of Multikine, if approved.
CEL-SCI has not established a definitive plan for marketing Multikine nor has CEL-SCI established a price structure for any of its product candidates, if approved. However, CEL-SCI intends, if it is in a position to do so, to sell Multikine itself 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, CEL-SCI believes, focus on selling Multikine to targeted cancer centers, physicians and clinics involved in the treatment of head and neck cancer. CEL-SCI has already licensed future sales of Multikine, if approved, to three companies: Teva Pharmaceutical Industries Ltd. 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. CEL-SCI believes 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 CEL-SCI will be able to find qualified third-party partners to market its products in other areas, on terms that are favorable to CEL-SCI, or at all.
CEL-SCI 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, CEL-SCI may experience other limitations involving the proposed sale of Multikine, such as uncertainty of third-party coverage and reimbursement. There is no assurance that CEL-SCI can successfully market Multikine, if approved, or any other product candidates it may develop.
CEL-SCI hopes to expand its clinical development capabilities in the future, and any difficulties hiring or retaining key personnel or managing this growth could disrupt its operations.
CEL-SCI is highly dependent on the principal members of its management and development staff. CEL-SCI expects to expand its clinical development and manufacturing capabilities, which will involve hiring additional employees. Future growth will require CEL-SCI to continue to implement and improve its managerial, operational and financial systems and continue to retain, recruit and train additional qualified personnel, which may impose a strain on its administrative and its operational infrastructure. The competition for qualified personnel in the biopharmaceutical field is intense. CEL-SCI is highly dependent on its ability to attract, retain and motivate highly qualified management and specialized personnel required for clinical development. Due to limited resources, CEL-SCI may not be able to effectively manage the expansion of its operations or recruit and train additional qualified personnel. If CEL-SCI is unable to retain key personnel or manage its future growth effectively, CEL-SCI may not be able to implement its business plan.
If product liability or patient injury lawsuits are brought against CEL-SCI, CEL-SCI may incur substantial liabilities and may be required to limit clinical testing or future commercialization of Multikine or its other product candidates.
CEL-SCI faces 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 CEL-SCI is able to commercialize any of its product candidates. For example, CEL-SCI may be sued if its 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, sale or during administration to patients. 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 contaminated Multikine, or could require CEL-SCI to destroy batches of Multikine, thereby subjecting CEL-SCI to possible financial losses, lawsuits and harm to its business.
If CEL-SCI cannot successfullydefend itself against product liability claims, CEL-SCI may incur substantial liabilities or be required to limit or cease the clinical testing or commercialization of its 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 other product candidates, if approved and commercialized, or clinical holds or suspension of the IND while the candidates are still in clinical development;
injury to CEL-SCI’s 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 resources;
substantial monetary awards to trial participants or patients;
recalls of approved products, withdrawal of BLA approvals or new labeling, marketing or promotional restrictions;
loss of revenue;
inability to commercialize Multikine or other product candidates; and
a decline in the price of CEL-SCI’s common stock.
Although CEL-SCI has product liability insurance for Multikine in the amount of $10 million, the successfulprosecution of a product liability case against CEL-SCI could have a materially adverse effect upon its business if the amount of any judgment exceeds the insurance coverage. Any claim that may be brought against CEL-SCI could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by CEL-SCI’s insurance or that is in excess of the limits of the insurance coverage. CEL-SCI’s insurance policies also have various exclusions, and CEL-SCI may be subject to a claim for which CEL-SCI has no coverage. CEL-SCI may have to pay any amounts awarded by a court or negotiated in a settlement that exceed the coverage limitations or that are not covered by its insurance, and CEL-SCI may not have, or be able to obtain, sufficient capital to pay such amounts. CEL-SCI completed enrollment in the Phase III clinical trial for Multikine in September 2016. Although no claims have been brought to date, participants in the clinical trials could bring civil actions against CEL-SCI for any unanticipatedharmful effects allegedly arising from the use of Multikine or any other product candidate that CEL-SCI may attempt to develop.
CEL-SCI’s commercial success depends, in part, upon attaining significant market acceptance of its product candidates, if approved, among physicians, patients, healthcare payors and major operators of cancer clinics.
Even if CEL-SCI obtains regulatory approval for its 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 CEL-SCI receives approval depends on a number of factors, including:
the efficacy and safety of the products as demonstrated in clinical trials;
the timing of market introduction of such product as well as competitive products;
the clinical indications for which the biological product is approved;
the approval, availability, market acceptance and reimbursement for the companion diagnostic, if appropriate or necessary;
acceptance by physicians, major operators of cancer clinics and patients of the biologic as a safe and effective treatment;
the potential and perceived advantages of such product candidate over alternative treatments, especially with respect to patient subsets that are targeted with such product;
the safety of such product 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 sales and marketing efforts.
If CEL-SCI’s product candidates are approved but fail to achieve an adequate level of acceptance by physicians, healthcare payors and patients, CEL-SCI will not be able to generate significant revenues, and CEL-SCI may not become or remain profitable.
Under CEL-SCI’s amended bylaws, stockholders that initiate certain proceedings may be obligated to reimburse CEL-SCI and its officers and directors for all fees, costs and expenses incurred in connection with such proceedings if the claim proves unsuccessful.
On February 18, 2015, CEL-SCI 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 CEL-SCI, or any of its officers or directors, including any derivative claim or claim purportedly filed on CEL-SCI’s 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 CEL-SCI and any of its officers or directors named in the action, for all fees, costs and expenses of every kind and description that CEL-SCI or its officers or directors may incur in connection with the claim. In adopting Article X, it is the 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
in addition to CEL-SCI, only the directors or officers named in the action would be allowed to recover.
The fee-shifting provision contained in Article X of the 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 the ability to invoke the fee-shifting bylaw in connection with claims under the federal securities laws 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 the fee-shifting bylaw in connection with such claims, if any, will depend in part on future developments of the law. CEL-SCI cannot assure its shareholders that CEL-SCI will or will not invoke the fee-shifting bylaw in any particular dispute. In addition, given the unsettled state of the law related to fee-shifting bylaws, such as CEL-SCI’s, CEL-SCI may incur significant additional costs associated with resolving disputes with respect to such bylaw, which could adversely affect CEL-SCI’s 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 may therefore dissuade or discourage stockholders and their attorneys from initiating lawsuits or claimsagainst CEL-SCI or its directors and officers. In addition, it may impact the fees, contingency or otherwise, required by potential plaintiffs’ attorneys to represent the stockholders or otherwise discourageplaintiffs’ attorneys from representing the stockholders at all. As a result, this bylaw may limit the ability of stockholders to alter CEL-SCI’s management and direction, particularly through litigation or the threat of litigation.
The provision of the 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 CEL-SCI and its directors and officers.
Article X of CEL-SCI’s amended bylaws provides that stockholder claims brought against CEL-SCI, or its officers or directors, including any derivative claim or claim purportedly filed on its 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 CEL-SCI or its directors or officers and may have the effect of discouraging lawsuits with respect to claims that may benefit CEL-SCI or its stockholders.
A provision in our Bylaws regarding shareholder claims may not be enforceable.
Article X of our 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.
Although it is our intent that this provision applies to actions arising under the Securities Act of 1933 and the Securities Exchange Act of 1934 there is uncertainty as to whether a court would enforce this provision since Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations under the Securities Act.
In addition, since this provision in our bylaws applies to state law claims there is uncertainty as to whether any court would enforce this provision.
Risks Related to Clinical Development, Government Approvals and the Marketing of Biopharmaceutical Products
CEL-SCI depends heavily on the success of Multikine, for which Phase III data has been presented, while its other candidates are still in preclinical phases. CEL-SCI’s product candidates must undergo rigorous preclinical and clinical testing and regulatory approvals, which could be costly and time-consuming and subject CEL-SCI to unanticipateddelays or prevent CEL-SCI from marketing any products. If CEL-SCI is unable to advance its product candidates in clinical development, obtain regulatory approval and ultimately commercialize its product candidates, or experiences significant delays in doing so, CEL-SCI’s business will be materially harmed.
CEL-SCI currently has no products approved for sale and CEL-SCI cannot guarantee that it will ever have marketable products. CEL-SCI’s 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 CEL-SCI to unanticipateddelays and may prevent CEL-SCI from marketing the product candidates in the future. 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 the 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. CEL-SCI’s current and future clinical trials may not be successful.
CEL-SCI is in the early development stages for the candidates designed using its LEAPS technology and has not yet initiated any clinical studies for any of those product candidates. Clinical trials can be delayed for a variety of reasons, including delays related to:
the availability of financial resources needed to commence and complete the planned trials;
obtaining regulatory approval to commence a trial;
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 the 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 CEL-SCI is investigating. Furthermore, CEL-SCI relies on CROs and clinical trial sites to ensure the proper and timely conduct of the clinical trials and while CEL-SCI has agreements governing their committed activities, CEL-SCI has limited influence over their actual performance.
CEL-SCI could also encounter significant delays and/or need to terminate a development program for a product candidate if physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of the product candidates while existing treatments have established safety and efficacy profiles. Further, a clinical trial may be suspended or terminated by CEL-SCI, one or more of the IRBs for the institutions in which such trials are being conducted, by CEL-SCI upon a final recommendation by the Independent Data Monitoring Committee, or IDMC, with which CEL-SCI agrees for such trial, or by FDA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or the clinical protocols, as a result of inspection of the clinical trial operations or trial site(s) by FDA or other regulatory authorities, the imposition of a clinical hold or partial 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. The occurrence of any one or more of these events would have significant and severe material consequences for CEL-SCI and could impact CEL-SCI’s ability to continue as a going concern.
If CEL-SCI experiences termination of, or delays in the completion of, any clinical trial of its product candidates, the commercial prospects for the product candidates will be harmed, and the ability to generate product revenues will be delayed. In addition, any delays in completing the clinical trials will increase the costs, slow the product development and approval process and jeopardize the ability to commence product sales and generate revenues. Any of these occurrences may harm CEL-SCI’s 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 the product candidates.
CEL-SCI cannot be certain when or under what conditions it will undertake future clinical trials. Early trials for the other product candidates, or the plans for later trials, may not satisfy the requirements of regulatory authorities, such as the FDA. CEL-SCI may fail to find subjects willing to enroll in the trials. Accordingly, the clinical trials relating to the product candidates may not be completed on schedule, the FDA or foreign regulatory agencies may order CEL-SCI to stop or modify research, or these agencies may not ultimately approve any of the 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 the product candidates. The data collected from the clinical trials may not be sufficient to support regulatory approval of the various product candidates, including Multikine. The failure to adequately demonstrate the safety and efficacy of any of the product candidates would delay or prevent regulatory approval of the product candidates in the United States, which could prevent CEL-SCI from achievingprofitability.
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 III 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, and payment of civil or criminalpenalties. Any agency or judicial enforcement action could have a material adverse effect on CEL-SCI.
The requirements governing the conduct of clinical trials, manufacturing and marketing of the 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.
CEL-SCI has only limited experience in filing and pursuing applications necessary to gain regulatory approvals.
This lack of experience may impede its ability to obtain timely approvals from regulatory agencies, if at all. CEL-SCI will not be able to commercialize Multikine and its other product candidates until CEL-SCI has obtained regulatory approval. In addition, regulatory authorities may also limit the types of patients to which CEL-SCI or its third-party partners may market Multikine (if approved) or the other product candidates. Any failure to obtain or any delay in obtaining required regulatory approvals may adversely affect CEL-SCI’s or its third-party partners’ ability to successfully market the product candidates even if they are approved.
Even if CEL-SCI obtains regulatory approval for its investigational products, CEL-SCI will be subject to stringent, ongoing government regulation.
If CEL-SCI’s 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 IV clinical trials, and surveillance of the safety and efficacy of the investigational products. CEL-SCI 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 monitoring and reporting;
product advertising and promotion;
product manufacturing, including compliance with good manufacturing practices;
record keeping requirements;
registration and listing of 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.
CEL-SCI and any of its third-party manufacturers or suppliers must continually adhere to federal regulations setting forth human drug and biologic manufacturing 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 the facilities, or the facilities of the contract manufacturers or suppliers, cannot pass a pre-approval inspection by regulators or fail such inspections in the future, the FDA, EMA or other national regulators will not approve the marketing applications for the product candidates, or may withdraw any prior approval. In complying with cGMP and foreign regulatory requirements, CEL-SCI and any of its 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 the product candidates meet applicable specifications and other requirements.
If CEL-SCI does not comply with regulatory requirements at any stage, whether before or after marketing approval is obtained, CEL-SCI may be subject to, among other things, license suspension or revocation, criminalprosecution, 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 CEL-SCI seeks approval. This could materially harm CEL-SCI’s financial results, reputation and stock price. Additionally, CEL-SCI may not be able to obtain the labeling claims necessary or desirable for product promotion. If CEL-SCI or other parties identify adverse effects after any of the products are on the market, or if manufacturing problems occur, regulatory approval may be suspended or withdrawn. CEL-SCI may be required to reformulate products, conduct additional clinical trials, make changes in product labeling or indications of use, or submit additional marketing applications to support any changes. If CEL-SCI encounters any of the foregoing problems, its business and results of operations will be harmed and the market price of its 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 CEL-SCI’s product candidates. If CEL-SCI is slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if CEL-SCI is not able to maintain regulatory compliance, CEL-SCI may lose any marketing approval that it may have obtained, which would adversely affect its business, prospects and ability to achieve or sustain profitability. CEL-SCI cannot predict the extent of adverse government regulations which might arise from future legislative or administrative action. Without government approval, CEL-SCI will be unable to sell any of its product candidates.
CEL-SCI’s product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial utility of an approved prescribing label, or result in significant negative consequences following marketing approval, if any.
Undesirable side effects caused by its product candidates could cause CEL-SCI 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 the clinical trials could reveal a high and unacceptableseverity and/or prevalence of these or other side effects. In such an event, the trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order CEL-SCI to cease further development of, or deny approval of, the 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 CEL-SCI’s business, financial condition and prospects significantly.
Additionally, if one or more of the product candidates receives marketing approval, and CEL-SCI or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including but not limited to the following:
regulatory authorities may withdraw approvals of such product or require product recalls;
regulatory authorities may require additional warnings on the label or impose restrictions on product distribution or use;
regulatory authorities may require CEL-SCI to conduct new post-marketing studies or clinical trials;
CEL-SCI could receive warning or untitled letters from the FDA or comparable notices of violations from foreign regulatory authorities;
CEL-SCI may be required to create a medication guide outlining the risks of such side effects for distribution to patients;
CEL-SCI could be sued and held liable for harm caused to patients; and
CEL-SCI’s reputation may suffer.
Any of these events could prevent CEL-SCI from achieving or maintaining market acceptance of a particular product candidate, if approved, and could significantly harm its business, results of operations and prospects.
CEL-SCI relies on third parties to conduct its preclinical and clinical trials. If these third parties do not successfully carry out their contractual duties and meet regulatory requirements, or meet expected deadlines, CEL-SCI may not be able to obtain regulatory approval for or commercialize the product candidates and its business could be substantially harmed.
CEL-SCI does not have the ability to independently conduct large clinical trials. CEL-SCI has relied upon and plans to continue to rely upon third-party CROs to prepare for, conduct, monitor and manage data for its ongoing preclinical and clinical programs, including the global Phase III trial for Multikine. CEL-SCI relies on these parties for all aspects of the execution of its clinical trials and although CEL-SCI diligently oversees and carefully manages the CROs, CEL-SCI directly controls only certain aspects of their activities and relies upon them to provide timely, complete, and accurate reports on the conduct of the studies. Although such third parties provide support and represent CEL-SCI for regulatory purposes in the context of the clinical trials, ultimately CEL-SCI is responsible for ensuring that each of the studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards, and the reliance on the CROs does not relieve CEL-SCI of its regulatory responsibilities. CEL-SCI and the CROs acting on CEL-SCI’s 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 the products in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators, and trial sites. If CEL-SCI or any of the CROs fail to comply with applicable GCPs or other applicable regulations, the clinical data generated in the clinical trials may be determined to be unreliable and CEL-SCI may therefore need to enroll additional subjects in the clinical trials, or the FDA, EMA or comparable foreign regulatory authorities may require CEL-SCI to perform an additional clinical trial or trials before approving the marketing applications. Moreover, if CEL-SCI or any of the CROs, principal investigators, or trial sites, fail to comply with applicable regulatory and GCP requirements, CEL-SCI, the CROs, principal investigators, or trial sites may be subject to enforcement actions, such as fines, warning letters, untitled letters, clinical holds, civil or criminalpenalties, and/or injunctions. CEL-SCI cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of the clinical trials comply with cGCP regulations. In addition, the clinical trials must be conducted with product produced under cGMP regulations. The failure to comply with these regulations may require CEL-SCI to delay or repeat clinical trials, which would delay the regulatory approval process.
If any of the relationships with the third-party CROs terminate, CEL-SCI may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. In addition, the CROs are not CEL-SCI’s employees, and except for remedies available to CEL-SCI under the agreements with such CROs, CEL-SCI cannot control whether or not they devote sufficient time and resources to the 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 the clinical protocols, regulatory requirements or for other reasons, the clinical trials may be extended, delayed or terminated, and CEL-SCI may not be able to obtain regulatory approval for, or successfully commercialize, the product candidates. As a result, CEL-SCI’s results of operations and the commercial prospects for the product candidates would be harmed, the costs could increase and the 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 CEL-SCI’s ability to meet the desired clinical development timelines. Though CEL-SCI diligently oversees and carefully manages its relationships with the CROs, there can be no assurance that CEL-SCI will not encounter similar challenges or delays in clinical development in the future or that these delays or challenges will not have a material adverse impact on CEL-SCI’s business, financial condition and prospects.
CEL-SCI has 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 CEL-SCI 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 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 CEL-SCI has received orphan drug designation for Multikine for the treatment of squamous cell carcinoma of the head and neck, CEL-SCI 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. CEL-SCI believes this to be unlikely since it does not know of any other company with a similar technology in Phase III studies. In addition, exclusive marketing rights in the United States may be limited if CEL-SCI seeks 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 CEL-SCI is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if CEL-SCI obtains 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.
Statements in this report about the efficacy and pathway of approval for Multikine are based on CEL-SCI’s analysis of its Phase III trial and are speculative in nature and may ultimately prove to be inaccurate or incorrect.
This report contains statements about CEL-SCI’s intention to pursue accelerated and/or conditional approval in various jurisdictions for Multikine, about Multikine's demonstrated efficacy and the potential to receive such approvals based on CEL-SCI’s analysis of the results of its Phase III trial and other data. However, these statements reflect CEL-SCI’s opinions and beliefs, and although CEL-SCI believe such statements are accurate, they are speculative in nature and there is a possibility that they may be inaccurate or incorrect. There is no certainty that the results observed in CEL-SCI’s Phase III trial will be replicated in any future study or results from any future study would not vary significantly from CEL-SCI’s Phase III trial results, or that CEL-SCI’s results to date, or the results of any future study, will be sufficient to obtain accelerated and/or conditional approvals for Multikine in any jurisdiction.
CEL-SCI will need to conduct a ‘Bridging study’ for the assay used in the confirmatory study to detect/determine the PD-L1 status of patients. The Bridging study will test the concordance of the PD-L1 test results between the assay used in the clinical trial with the diagnostic companion test for PD-L1; developed in collaboration with a diagnostics testing partner prior to submission for marketing approval for Multikine. If the bridging study or collaboration with CEL-SCI’s diagnostics partner is disrupted, then CEL-SCI may not be able to timely submit the marketing approval to the FDA.
For the confirmatory study, CEL-SCI is required to perform an assay for PD-L1 to determine if patients meet the required PD-L1 selection criteria. The PD-L1 test CEL-SCI proposes to use to select patients for the confirmatory study is the same test that was used in CEL-SCI’s phase 3 trial, but is not a currently approved test for head and neck cancer. FDA agreed this test is acceptable to use for the confirmatory study, however, the FDA also stipulated that Multikine will only be approved for commercial use in conjunction with a CDRH approved companion diagnostic test which will be used to determine PD-L1 levels in the head and neck cancer patient population for which Multikine is intended. CEL-SCI intends to select a partner who has expertise in developing a diagnostic test for the companion diagnostic test’s development, validation, and future submission.
CEL-SCI will need to perform a bridging study to show that the PD-L1 assay test results CEL-SCI used for the selection of patients for the confirmatory study can be reproduced at an acceptable level of concordance using the companion diagnostic test for the testing of the same patient samples. There can be no assurance that CEL-SCI will be able to identify and collaborate with a suitable diagnostic partner on a timely basis, or at all. Even if CEL-SCI was able to establish such a collaboration, although there is a very good likelihood that CEL-SCI will be successful in this regard, there can be no complete assurance that CEL-SCI will be able to perform the bridging study successfully, on a timely basis or at all. Therefore, CEL-SCI may be unable to fulfill the criteria required to be able to submit the BLA and marketing license application to the FDA in a timely manner.
Biologics carry unique risks and uncertainties, which could have a negative impact on CEL-SCI’s future operations.
The successful discovery, development, manufacturing and sale of biological products such as CEL-SCI’s candidates is a long, expensive and uncertain process. There are unique risks and uncertainties with biologics. For example, access to and supply of necessary biological materials, such as cell lines, may be limited and governmental regulations restrict access to and regulate the transport and use of such materials. In addition, the development, manufacturing and sale of biologics is subject to regulations that are often more complex and extensive than the regulations applicable to other pharmaceutical products. Manufacturing biologics, especially in large quantities, is often complex and may require the use of innovative technologies. Such manufacturing also requires facilities specifically designed and validated for this purpose and sophisticated quality assurance and quality control procedures. Biologics are also frequently costly to manufacture because production inputs are derived from living animal or plant material, and some biologics cannot be made synthetically. Failure to successfully discover, develop, manufacture and sell its biological product candidates would adversely impact CEL-SCI’s business and future results of operations.
CEL-SCI may face substantial competition, which may result in others discovering, developing or commercializing competing products more quickly or more successfully than CEL-SCI.
The development and commercialization of new drug and biological products is highly competitive. CEL-SCI expects to face competition with respect to any product candidates that CEL-SCI may seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.
Many of the companies which CEL-SCI may compete with in the future have significantly greater financial resources and expertise in research and development, manufacturing, nonclinical studies, conducting clinical trials, obtaining marketing approvals and marketing approved products than CEL-SCI. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of CEL-SCI’s potential competitors. Smaller and early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties may compete with CEL-SCI in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, CEL-SCI’s programs.
CEL-SCI may be unable to successfully scale-up manufacturing of its lead product candidate Multikine in sufficient quality and quantity, which would delay or prevent CEL-SCI from commercializing this product, if approved for marketing by the FDA or other regulatory agencies.
In order to commercialize its product candidates, CEL-SCI will need to manufacture them in large quantities. At the present time, CEL-SCI is manufacturing Multikine in preparation for the confirmatory registration study. CEL-SCI may be unable to successfully increase the manufacturing capacity for its lead product candidate Multikine due to issues that may arise during scale-up activities.
Further, in order to release product and demonstrate stability of product candidates for future commercial use, CEL-SCI’s analytical methods must be validated in accordance with regulatory guidelines. CEL-SCI may not be able to successfully validate or maintain validation of its analytical methods during scale-up or demonstrate adequate purity, stability or comparability of its biological product candidates in a timely or cost-effective manner, or at all. Even if CEL-SCI believes its manufacturing processes meet all of the regulatory manufacturing requirements, the FDA will review those processes and the manufacturing facility as part of the review of the future BLA for Multikine when submitted. If CEL-SCI is unable to successfully scale up the manufacture of Multikine in sufficient quality and quantity, or if CEL-SCI encounters validation issues, the development, testing, and clinical trials of future product candidates, may be delayed or be infeasible, and regulatory approval or commercial launch of any resulting product, including Multikine, may be delayed or may not be successfullyachieved.
The current and future relationships with healthcare professionals, principal investigators, consultants, potential customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable healthcare laws and regulations.
Although CEL-SCI does not currently have any products on the market, if CEL-SCI begins commercializing its product candidates, CEL-SCI will be subject to additional healthcare statutory and regulatory requirements and oversight by federal and state governments as well as foreign governments in the jurisdictions in which CEL-SCI conducts its business. 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 CEL-SCI obtains marketing approval. The current and future arrangements with healthcare professionals, principal investigators, consultants, potential customers and third-party payors may expose CEL-SCI 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 FalseClaims Act;
federal civil and criminalfalseclaims laws, including the federal FalseClaims 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 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 willfullyembezzling or stealing from a health care benefit program, willfullyobstructing a criminalinvestigation of a healthcare offense and knowingly and willfullyfalsifying, 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;
HIPAA, which also imposes 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 U.S. federal physicians payment transparency requirements, sometimes called the “Sunshine Act” and its implementing regulations, which requires certain manufacturers of drugs, devices, biologicals and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report to the Centers for Medicare & Medicaid Services, or CMS, information related to physician payments and “other transfers of value” to physicians and teaching hospitals and, for transfers of value to other healthcare providers, as well as the ownership and investment interests held by physicians and their immediate family members;
analogous state and foreign laws, such as state anti-kickback and falseclaims 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 which 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;
the U.S. federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under federal healthcare programs; and
state and foreign laws that govern the privacy and security of health information in certain circumstances, including state security breach notification laws, state health information privacy laws and federal and state consumer protection laws, 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 the 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 the business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws. If CEL-SCI’s operations are found to be in violation of any of these laws or any other governmental regulations, CEL-SCI 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 the operations, all of which could significantly harm CEL-SCI’s business. If any of the physicians or other healthcare providers or entities with whom CEL-SCI expects to do business, including 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 CEL-SCI’s business.
Failure to obtain or maintain adequate coverage and reimbursement for the product candidates, if approved, could limit the ability to market those products and decrease CEL-SCI’s ability to generate revenue.
Sales of CEL-SCI’s product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of the approved products 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. CEL-SCI anticipates 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 and biologics. If coverage and reimbursement are not available, or are available only to limited levels, CEL-SCI may not be able to successfully commercialize its product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow CEL-SCI to establish or maintain pricing sufficient to realize a return on its investment. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for CEL-SCI’s product candidates.
Moreover, in some countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals 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 product. To obtain reimbursement or pricing approval in some countries, CEL-SCI may be required to conduct a clinical trial that compares the cost-effectiveness of its product candidate to other available therapies. If reimbursement of its products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, CEL-SCI’s business could be harmed, possibly materially.
Even if any product candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.
If CEL-SCI’s product candidates do not achieve an adequate level of acceptance, CEL-SCI may not generate significant product revenues and CEL-SCI may not become profitable. The degree of market acceptance of its product candidates, including Multikine if approved for commercial sale, will depend on a number of factors, including:
the timing of CEL-SCI’s receipt of any marketing approvals;
the terms of any approvals and the countries in which approvals are obtained;
the efficacy and safety and potential advantages and disadvantages compared to alternative treatments, including future alternative treatments;
the prevalence and severity of any side effects associated with CEL-SCI’s product candidates;
the indications for which its products are approved and the scope of risk information required to be included in the product labeling;
adverse publicity about CEL-SCI’s products or favorable publicity about competing products;
the approval of other products for the same indications as CEL-SCI’s products;
CEL-SCI’s ability to offer its products for sale at competitive prices;
the convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
the success of CEL-SCI’s physician education programs;
the strength of CEL-SCI’s marketing and distribution support; and
the availability of third-party coverage and adequate reimbursement.
If any product candidate CEL-SCI commercializes fails to achieve market acceptance, it could have a material and adverse effect on CEL-SCI’s business, financial condition, results of operation and prospects.
CEL-SCI currently has no marketing and sales force. If CEL-SCI is unable to establish effective sales or marketing capabilities or enter into agreements with third parties to sell or market its product candidates, CEL-SCI may not be able to effectively sell or market its product candidates, if approved, or generate product revenues.
CEL-SCI currently has no sales and marketing infrastructure due to the fact that all of its product candidates are still in clinical development. To achieve commercial success for any approved product candidate for which CEL-SCI retains sales and marketing responsibilities, CEL-SCI must build its sales, marketing, managerial, and other non-technical capabilities or make arrangements with third parties to perform these services. For example, CEL-SCI has entered into agreements with certain foreign distributors to commercialize Multikine, if approved, within their respective territories. However, CEL-SCI may determine that there is a need to building its own sales force in the United States for the future marketing of Multikine, if approved, rather than seeking a U.S. co-marketing partner or relying on a contracted sales force. There are risks involved with either establishing its own sales and marketing capabilities or entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which CEL-SCI recruits a sales force and establishes marketing capabilities is delayed or does not occur for any reason, CEL-SCI would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and its investment would be lost if CEL-SCI cannot retain or reposition its sales and marketing personnel.
Factors that may inhibit CEL-SCI’s efforts to commercialize its product candidates on its own include:
CEL-SCI’s inability to recruit, hire, retain and incentivize adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to use and administer CEL-SCI’s future products;
the lack of complementary products to be offered by sales personnel, which may put CEL-SCI at a competitive disadvantage relative to companies with more extensive product lines; and
unforeseen costs and expenses associated with establishing an independent sales and marketing organization.
If CEL-SCI does not establish sales and marketing capabilities successfully, either on its own or in collaboration with third parties, CEL-SCI will not be successful in commercializing Multikine, if approved, or any of its other product candidates that receive marketing approval or any such commercialization may experience delays or limitations.
CEL-SCI’s business activities may be subject to the Foreign Corrupt Practices Act and similar anti-bribery and anti-corruption laws of other countries in which CEL-SCI operates or will operate in the future.
CEL-SCI has conducted and has ongoing studies in international locations and may in the future initiate additional studies in countries other than the United States. Moreover, CEL-SCI has entered into agreements with foreign distributors to commercialize Multikine, if approved, in various territories outside of the United States. As a result, CEL-SCI’s business activities may be subject to the Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which CEL-SCI operates. The FCPA generally prohibits offering, promising, giving or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.
CEL-SCI’s business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, the healthcare providers who prescribe biopharmaceuticals are employed by their government, and the purchasers of biopharmaceuticals are government entities; therefore, CEL-SCI’s dealings with these prescribers and purchasers are subject to regulation under the FCPA. Recently the SEC and Department of Justice have increased their FCPA enforcement activities with respect to biotechnology and pharmaceutical companies. There is no certainty that all of CEL-SCI’s employees, agents or contractors conducting business abroad will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions against CEL-SCI, its officers or employees, the closing of CEL-SCI’s facilities, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs and prohibitions on the conduct of CEL-SCI’s business. Any such violations could include prohibitions on CEL-SCI’s ability to offer its product candidates, if approved, in one or more countries and could materially damage its reputation, its brand, its future international marketing efforts, its ability to attract and retain employees and its business, prospects, operating results and financial condition.
Healthcare legislative reform measures may have a material adverse effect on CEL-SCI’s business and results of operations.
Existing regulatory policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of CEL-SCI’s product candidates. CEL-SCI cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If CEL-SCI is slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if CEL-SCI is not able to maintain regulatory compliance, CEL-SCI may lose any marketing approval that it may have obtained and it may not achieve or sustain profitability.
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 CEL-SCI may otherwise receive for its product candidates. For example, in March 2010, Congress passed the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act, which expanded healthcare coverage through Medicaid expansion and the implementation of the individual mandate for health insurance coverage and which included changes to the coverage and reimbursement of drug products under federal healthcare programs. The ACA contains a number of provisions that affect coverage and reimbursement of drug and biological products and/or that could potentially reduce the demand for pharmaceutical products such as increasing drug rebates under state Medicaid programs for brand name prescription drugs and extending those rebates to Medicaid managed care and assessing a fee on manufacturers and importers of brand name prescription drugs reimbursed under certain government programs, including Medicare and Medicaid. Tax reform legislation was enacted at the end of 2017 that eliminates the tax penalty established under the ACA for individuals who do not maintain mandated health insurance coverage beginning in 2019. In a May 2018 report, the Congressional Budget Office estimated that, compared to 2018, the number of uninsured will increase by 3 million in 2019 and 6 million in 2028, in part due to the elimination of the individual mandate. The ACA has also been subject to judicial challenge. In December 2018, a federal district court, in a challenge brought by a number of state attorneys general, found the ACA unconstitutional in its entirety because, once Congress repealed the individual mandate provision, there was no longer a basis to rely on Congressional taxing authority to support enactment of the law. Pending appeals, which could take some time, the ACA is still operational in all respects.
In December 2022, Congress enacted amendments to the accelerated approval program as part of the Food and Drug Omnibus Reform Act (“FDORA”), expanding FDA’s authority to, among other things, use expedited withdrawal procedures if a sponsor fails to conduct a confirmatory clinical trial with due diligence and require a confirmatory trial be underway prior to granting an accelerated approval.
CEL-SCI’s industry continues to face potential changes in the legal and regulatory landscape on the federal, state and international levels. Additional legislative actions to control U.S. healthcare or other costs have passed. The Budget Control Act, as amended, resulted in the imposition of 2% reductions in Medicare (but not Medicaid) payments to providers in 2013 and will remain in effect through 2027 unless additional Congressional action is taken. There has also been increasing and considerable public and government interest in the United States with respect to specialty drug pricing practices, including proposed federal and state legislation designed to bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, put in place limits and caps on pharmaceutical prices, request rebates for certain pharmaceutical products, and reform government program reimbursement methodologies for drugs. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what biopharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. In markets outside of the United States, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and control the prices of medicinal products for human use.
CEL-SCI expects that current or future healthcare reform measures may result in more rigorous coverage criteria and in additional downward pressure on the price that it receives for any approved product, including Multikine if it is approved for commercialization. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent CEL-SCI from being able to generate revenue, attainprofitability or commercialize its product candidates.
Legislative and regulatory proposals also have been made to expand post-approval requirements and restrict sales and promotional activities for biotechnology products. CEL-SCI cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations for biological products will be changed, or what the impact of such changes on the marketing approvals of its product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval and decision-making processes may significantly delay or prevent marketing approval, as well as subject CEL-SCI to more stringent product labeling and post-marketing testing and other requirements.
Foreign governments often impose strict price controls, which may adversely affect CEL-SCI’s future profitability.
CEL-SCI intends to seek approval to market its lead investigational product, Multikine, in both the United States and foreign jurisdictions. If CEL-SCI obtains approval in one or more foreign jurisdictions, CEL-SCI 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, CEL-SCI may be required to conduct clinical trials that demonstrate the 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, CEL-SCI may be unable to achieve or sustain profitability.
If CEL-SCI fails to comply with environmental, health and safety laws and regulations, CEL-SCI could become subject to fines or penalties or incur costs that could harm its business.
CEL-SCI is subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes generated in its biologic manufacturing facility. CEL-SCI cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from its use of hazardous materials, including radioactive materials used in its research laboratory, CEL-SCI could be held liable for any resulting damages, and the amount of the liability could exceed its resources. CEL-SCI also could incur significant costs associated with civil or criminalfines and penalties for failure to comply with such laws and regulations.
Risks Related to Intellectual Property
CEL-SCI may not be able to achieve or maintain a competitive position, and other technological developments may result in its proprietary technologies becoming uneconomical or obsolete.
CEL-SCI is 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 the compounds, compositions and processes, through research financed by CEL-SCI, or as a result of possible third-party licensing arrangements with pharmaceutical or other companies, is not assured. CEL-SCI 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. Many of these companies have financial, research and development, and marketing resources which are much greater than CEL-SCI’s 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 the other product candidates, if approved, will be reduced or eliminated if the competitors develop and obtain approval for products that are safer or more effective than CEL-SCI’S 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, CEL-SCI does not know whether:
CEL-SCI was the first to make the inventions covered by each of its issued patents and pending patent applications;
CEL-SCI was the first to file patent applications for these inventions;
others will independently develop similar or alternative technologies or duplicate any of CEL-SCI’s technologies;
any of the pending patent applications will result in issued patents;
any of the patents will be valid or enforceable;
any patents issued to CEL-SCI or its collaboration partners will provide CEL-SCI with any competitive advantages or will be challenged by third parties;
CEL-SCI will be able to develop additional proprietary technologies that are patentable;
the U.S. government will exercise any of its statutory rights to CEL-SCI’s intellectual property that was developed with government funding; or
its business may infringe the patents or other proprietary rights of others.
CEL-SCI’s patents might not protect its technology from competitors, in which case CEL-SCI may not have any advantage over competitors in selling any products that CEL-SCI may develop.
CEL-SCI’s commercial success will depend in part on its ability to obtain additional patents and protect its existing patent position, as well as its ability to maintain adequate intellectual property protection for the technologies, product candidates, and any future products in the United States and other countries. If CEL-SCI does not adequately protect its technology, product candidates and future products, competitors may be able to use or practice them and erode or negate any competitive advantage CEL-SCI may have, which could harm CEL-SCI’s business and its ability to achieveprofitability. The laws of some foreign countries do not protect the proprietary rights to the same extent or in the same manner as U.S. laws, and CEL-SCI may encounter significant problems in protecting and defending its proprietary rights in these countries. CEL-SCI will be able to protect its proprietary rights from unauthorized use by third parties only to the extent that its 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 CEL-SCI’s technologies are covered by U.S. and foreign patents. In addition, CEL-SCI has a number of new patent applications pending. There is no assurance that the applications which are 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 CEL-SCI. Disputes may arise between CEL-SCI 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 CEL-SCI 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 CEL-SCI 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 CEL-SCI. CEL-SCI is 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 CEL-SCI’s intellectual property is protected as trade secrets or confidential know-how, not as a patent.
CEL-SCI considers proprietary trade secrets and/or confidential and unpatented know-how to be important to its business. Much of the intellectual property pertains to CEL-SCI’s manufacturing methodologies, 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 CEL-SCI to protect its disclosure to competitors, since legal protections after disclosure may be minimal or non-existent. Accordingly, much of the value of this intellectual property is dependent upon the ability of CEL-SCI to keep its trade secrets and know-how confidential.
To protect this type of information against disclosure or appropriation by competitors, CEL-SCI’s policy is to require its employees, consultants, contractors and advisors to enter into confidentiality agreements with CEL-SCI. However, current or former employees, consultants, contractors and advisers may unintentionally or willfullydisclose the 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 the patent application for a product candidate approval may require the disclosure of some or all of the proprietary information. In such a case, CEL-SCI must decide whether to disclose the information or forego approval in a particular country. If CEL-SCI is unable to market its product candidates in key countries, CEL-SCI’s opportunities and value may suffer.
Failure to obtain or maintain trade secrets and/or confidential know-how trade protection could adversely affect CEL-SCI’S competitive position. Moreover, 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, competitors could limit the use of such trade secrets and/or confidential know-how.
CEL-SCI may be subject to claimschallenging the inventorship or ownership of its patents and other intellectual property.
CEL-SCI may also be subject to claims that former employees, collaborators or other third parties have an ownership interest in its patents or other intellectual property. CEL-SCI may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing the product candidates. Litigation may be necessary to defendagainst these and other claimschallenging inventorship or ownership. If CEL-SCI fails in defending any such claims, in addition to paying monetary damages, CEL-SCI may losevaluable 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 its business. Even if CEL-SCI is successful in defendingagainst such claims, litigation could result in substantial costs and be a distraction to CEL-SCI’s management and employees.
Risks Related to CEL-SCI’s common stock
Future equity offerings or other equity issuances may result in dilution to existing shareholders.
CEL-SCI expects that significant additional capital will be needed in the future to continue its planned operations. To raise additional capital, CEL-SCI may in the future offer additional shares of its common stock or other securities convertible into or exchangeable for its common stock. To the extent CEL-SCI raises additional capital by issuing equity securities, CEL-SCI’s stockholders may experience substantial dilution. These sales may result in new investors gaining rights superior to existing stockholders.
Section 382 of the Internal Revenue Code May Limit the Use of CEL-SCI’s Net Operating Losses.
Pursuant to Section 382 of the Internal Revenue Code, or IRC, annual use of CEL-SCI’s net operating loss (NOL) carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. Such ownership change could result in annual limitations on the utilization of tax attributes, including NOL carryforwards and tax credits. CEL-SCI performed an estimated analysis to determine if any additional ownership changes occurred during the year ended September 30, 2025 and changes were identified. Since CEL-SCI identified changes in ownership, $6.7 million NOL and $0.9 million tax credit carryforwards were eliminated or restricted. Therefore, CEL-SCI removed the related asset from the deferred tax asset schedule with a corresponding reduction in the valuation allowance.
The exercise of outstanding warrants and options will cause dilution.
As of September 30, 2025, there were outstanding warrants which allow the holders to purchase 36,421 shares of common stock, with a weighted average exercise price of $94.76 per share and outstanding options which allow the holders to purchase up to 708,556 shares of common stock, with a weighted average exercise price of $152.36 per share. There are 2,122 options remaining for future issuances under our current stock option plans. The exercise of these outstanding warrants and options will cause dilution to holders of our common stock.
Since CEL-SCI does not intend to pay dividends on its common stock, any potential return to investors will result only from any increases in the price of its common stock.
At the present time, CEL-SCI intends to use available funds to finance its operations. Accordingly, while payment of dividends rests within the discretion of its board of directors, no common stock dividends have been declared or paid by CEL-SCI and CEL-SCI has 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 CEL-SCI’s common stock. Any return to CEL-SCI’s shareholders will therefore be limited to appreciation in the price of its common stock, which may never occur. If CEL-SCI’s stock price does not increase, CEL-SCI’S shareholders are unlikely to receive any return on their investments in CEL-SCI’s common stock.
The price of CEL-SCI’s common stock has been volatile and is likely to continue to be volatile, which could result in substantial losses for CEL-SCI’s shareholders.
CEL-SCI’s stock price has been, and is likely to continue to be, volatile. As a result of this volatility, CEL-SCI’s shareholders may not be able to sell their shares at or above the price they paid for their shares. The market price for CEL-SCI’s common stock may be influenced by many factors, including:
actual or anticipated fluctuations in CEL-SCI’s financial condition and operating results;
actual or anticipated changes in CEL-SCI’s growth rate relative to competitors;
competition from existing products or new products or product candidates that may emerge;
development of new technologies that may make CEL-SCI’s technology less attractive;
changes in physician, hospital or healthcare provider practices that may make CEL-SCI’s product candidates less useful;
announcements by CEL-SCI, its partners or 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;
actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
variations in its financial results or those of companies that are perceived to be similar to CEL-SCI;
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.
CEL-SCI has identified material weaknesses in its internal control over financial reporting. Failure to achieve and maintain effective internal controls over financial reporting could adversely affect CEL-SCI’s ability to report its results of operations and financial condition accurately and in a timely manner, which could have an adverse impact on CEL-SCI’s business.
CEL-SCI’s management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement in an entity’s annual or interim consolidated financial statements might not be prevented or detected on a timely basis.
As described in Item 9A of this Annual Report, management noted material weaknesses in its internal control over financial reporting as of September 30, 2025. CEL-SCI’s management concluded that material weaknesses existed relating to the logical access to information technology systems that support CEL-SCI’s financial reporting process and the operating effectiveness of certain management review controls. Although these control weaknesses did not result in any material misstatement of CEL-SCI’s financial statements for the periods presented, they could lead to a future material misstatement of account balances or disclosures. As a result, CEL-SCI’s management concluded that its internal controls over financial reporting were not effective as of September 30, 2025.
In order to remediate these material weaknesses, CEL-SCI will change certain control activities over financial reporting to include, but not limited to, the following: (i) evaluating and implementing enhanced process controls around access to information technology systems and (ii) enhancing the operating effectiveness of management’s review controls.
If CEL-SCI is unable to remediate the material weaknesses timely and sufficiently or if CEL-SCI identifies future material weaknesses in its internal control over financial reporting or is unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) in a timely manner or assert that its internal control over financial reporting is effective, CEL-SCI may experience a loss of investor confidence in the accuracy and completeness of its financial statements, incur material misstatements in its financial statements, incur difficulty accessing capital on favorable terms, or at all, be subject to fines, penalties or judgments, incur reputational harm, and the market price of its common stock may be adversely affected.
Cybersecurity breaches could affect CEL-SCI’s operations.
Security breaches and other disruptions in CEL-SCI’S information technology systems could limit CEL-SCI’s capacity to effectively monitor and control its operations, compromise its suppliers’ confidential information or otherwise adversely affect its operating results or business reputation. Any failure to effectively prevent, detect and/or recover from any such security breaches could result in legal claims or regulatory penalties under laws protecting the privacy of personal information, disrupt operations, and damage CEL-SCI’s reputation, which could adversely affect its business.
ITEM 1B. UNRESOLVED SEC COMMENTS
None
ITEM 1C. CYBERSECURITY
CEL-SCI recognizes the importance of assessing, identifying, and managing material risks from cybersecurity threats. CEL-SCI’s policies, standards and procedures for assessing, identifying, and managing material risks from cybersecurity threats are integrated into its overall risk management system. In this regard, CEL-SCI uses various tools and processes to help prevent, identify, and resolve any identified vulnerabilities and security incidents in a timely manner. These include, but are not limited to, internal reporting, routine employee awareness updates, annual cyber security training, monthly email testing engaging experts and third-party monitoring and detection tools.
CEL-SCI employs third-party information technology (“IT’) consultants to manage its information technology environment and help manage and assess cybersecurity risks. The third-party IT consultants have relevant industry experience, including security solutions and data protection and recovery. Using various monitoring and detection tools implemented into CEL-SCI’s internal technology systems, they can identify cybersecurity threats and report such risks to CEL-SCI’s management team.
CEL-SCI’s management team oversees efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which includes oversight over its third-party IT consultant, monitoring systems and employee engagement. The management team is responsible for reporting any cybersecurity risks identified by CEL-SCI’s third-party IT consultant to its board of directors.
CEL-SCI’s board of directors is responsible for oversight over its risk management system, including review and approval of the risk management system and processes implemented by management to identify, assess, manage and mitigate cybersecurity risks. The Board is responsible for monitoring and assessing material risk exposure to cybersecurity risks, and CEL-SCI’s management is responsible for the day-to-day supervision of the material risks CEL-SCI may face.
CEL-SCI’s risks from cybersecurity threats have not affected or are reasonably not likely to materially affect its business strategy, results of operations, or financial condition.
2,797 words
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial statements and the related notes thereto appearing elsewhere in this report.
Multikine (Leukocyte Interleukin, Injection) which, for simplicity, is referred to in this report as Multikine, is the trademark that the Company has registered for this investigational therapy, and this proprietary name is subject to FDA review under the Company’s future anticipated regulatory submission for approval. Multikine has not been licensed or approved by the FDA or any other regulatory agency. Neither has its safety or efficacy been established for any use.
CEL-SCI also owns and is developing a pre-clinical technology called LEAPS (Ligand Epitope Antigen Presentation System). CEL-SCI is using its LEAPS technology platform to investigate its lead peptide-based immunotherapy (CEL-4000) as a vaccine treatment for rheumatoid arthritis.
All of CEL-SCI’s projects are under development. As a result, CEL-SCI cannot predict when it will be able to generate any revenue from the sale of any of its products. In August 2025, CEL-SCI filed a Breakthrough Medicine Designation application with the Saudi Food and Drug Authority (SFDA) for Multikine in the Kingdom of Saudi Arabia by one of the Kingdom’s premier pharmaceutical and healthcare companies, Dallah Pharma.
Since inception, CEL-SCI has financed its operations through the issuance of equity securities, convertible notes, loans and certain research grants. CEL-SCI will likely continue to generate net operating losses as it continues the development of Multikine and brings other drug candidates into clinical trials. Until such time as CEL-SCI becomes profitable, any or all of these financing vehicles or others may be utilized to assist CEL-SCI’s capital requirements.
Results of Operations and Financial Condition
The Company incurred a net operating loss of approximately $24.8 million for the twelve months ended September 30, 2025. This net operating loss consists of significant non-cash expenses accounting for approximately 27% of the operating loss. The non-cash operating expenses include approximately $2.7 million in stock-based compensation to employees and non-employees and approximately $3.9 million in depreciation and amortization expense.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including the development of our products, and include:
employee‑related expenses, including salaries, related benefits and stock‑based compensation expense for employees engaged in research and development functions;
fees paid to consultants for services directly related to our product development and regulatory efforts;
expenses incurred under agreements with Clinical Research Organizations, or CROs, and consultants that conduct and provide supplies for our clinical studies and clinical trials;
costs associated with clinical activities and development activities; and
costs related to compliance with regulatory requirements.
The following table summarizes our research and development expenses for the years ended September 30, 2025 and 2024:
Year Ended September 30,
(in thousands)
Clinical trial expense
Supplies & materials
Personnel-related expenses
Stock-based compensation
Depreciation and amortization expense
Other expenses
Total research and development expenses
During the year ended September 30, 2025, research and development expenses decreased by approximately $2.3 million, or 13%, compared to the year ended September 30, 2024. A major component of the decrease in research and development expenses over the prior period included an approximate $2.1 million decrease in employee stock compensation expense. The decrease in employee stock compensation expense is due to options issued in prior periods having a higher fair value because of the Company’s stock price and the forfeiture of stock options during fiscal year ended September 30, 2025 which resulted in the reversal of approximately $0.6 million in research and development expense. Additionally there was an approximate $0.5 million net decrease of other research and development expenses, offset by an increase of $0.3 million in costs incurred related to its clinical study activities.
CEL-SCI’s research and development efforts involved Multikine and LEAPS. The table below shows the research and development expenses associated with each project during the reporting periods.
Year Ended September 30,
Multikine
LEAPS
Total research and development
CEL-SCI’s Phase III clinical trial began in December 2010 after the completion and validation of CEL-SCI’s dedicated manufacturing facility. The Phase III clinical trial was fully enrolled in September 2016, reached its primary endpoint in April 2020 and achieved database lock in December 2020. The data was unblinded in June 2021, the primary endpoint results were announced in June 2021, additional data was presented at ASCO 2022, ESMO 2022, ECHNO 2023, ESTRO 2023, ESMO 2023, IDDST 2024 and ESMO 2024. As part of CEL-SCI’s global regulatory approval strategy, CEL-SCI concurrently plans to conduct a confirmatory registration study to support a filing for marketing authorization in the United States and pursue filings for marketing authorization in Canada, United Kingdom and Europe.
As explained in Item 1 of this report, clinical and other studies necessary to obtain regulatory approval of a new drug involve significant costs and require several years to complete. The extent of the CEL-SCI’s clinical trials and research programs are primarily based upon the amount of capital available to CEL-SCI and the extent to which CEL-SCI has received regulatory approvals for clinical trials. The inability of CEL-SCI to conduct clinical trials or research, whether due to a lack of capital or regulatory approval, will prevent CEL-SCI from completing the studies and research required to obtain regulatory approval for any products which CEL-SCI is developing. Without regulatory approval, CEL-SCI will be unable to sell any of its products. Since all of CEL-SCI’s projects are under development, CEL-SCI cannot predict when it will be able to generate any revenue from the sale of any of its products.
General and Administrative Expenses
During the year ended September 30, 2025, general and administrative expenses increased by approximately $0.7 million, or 9%, compared to the year ended September 30, 2024. The major components of general and administrative expenses include an approximate increase of $0.7 million in public relations costs during the current year, and an approximate increase of $0.4 million in legal and accounting fees primarily due to out of scope work, offset by an approximate $0.3 million decrease of employee stock compensation expense due to options issued in the prior period having a higher fair value because of the Company’s stock price, and an approximate $0.1 million decrease in other general and administrative expenses.
Interest Expense, Net
Net interest expense decreased by approximately $0.1 million for the year ended September 30, 2025 compared to the year ended September 30, 2024. This decrease is primarily due to less interest paid on leases as higher principal balances have been paid over the last year.
Liquidity and Capital Resources
CEL-SCI has relied primarily upon capital generated from the public and private offerings of its common stock. In addition, CEL-SCI has utilized short-term loans to meet its capital requirements. Capital raised by CEL-SCI has been used to acquire an exclusive worldwide license to use, and later purchase, certain patented and unpatented proprietary technology and know-how relating to the human immunological defense system and for clinical trials. Capital has also been used for patent applications, debt repayment, research and development, administrative costs, and for CEL-SCI’s laboratory and manufacturing facilities. CEL-SCI does not anticipate realizing significant revenues until it enters into licensing arrangements regarding its technology and know-how or until it receives regulatory approval to sell its products (which could take a number of years). As a result, CEL-SCI has been dependent primarily upon the proceeds from the sale of its securities to meet all of its liquidity and capital requirements and anticipates having to do so in the future. During fiscal years 2025 and 2024, CEL-SCI raised net proceeds of approximately $25.0 million and $21.2 million, respectively, through a combination of the sale of common stock and the exercise of warrants.
The cost of the confirmatory registration study is estimated to be about $30 million. The Company will be required to raise additional capital or find additional long-term financing to continue with its research efforts. The ability to raise capital may be dependent upon market conditions that are outside the control of the Company. The ability of the Company to complete the necessary clinical trials and obtain FDA approval for the sale of products to be developed on a commercial basis is uncertain. Ultimately, the Company must complete the development of its products, obtain the appropriate regulatory approvals and obtain sufficient revenues to support its cost structure. However, there can be no assurance that the Company will be able to raise sufficient capital to support its operations. Due to recurring losses from operations and future liquidity needs, there is substantial doubt about the Company’s ability to continue as a going concern.
In August 2007, CEL-SCI leased a building near Baltimore, Maryland. The building, which consists of approximately 73,000 square feet, has been remodeled in accordance with CEL-SCI’s specifications so that it can be used by CEL-SCI to manufacture Multikine for CEL-SCI’s Phase III clinical trials and sales of the drug if approved by the FDA. The lease expires on October 31, 2028, and required annual base rent payments of approximately $2.7 million during the twelve months ended September 30, 2025. See Item 2 of this report for more information concerning the terms of this lease.
During the fiscal years ended September 30, 2025 and 2024, 733,834 and 189,335 pre-funded warrants were exercised, respectively.
During the year ended September 30, 2025, the Company’s cash increased by approximately $6.2 million. The significant component of this increase included gross proceeds from the financings during the year ended September 30, 2025 of approximately $28.3 million offset by cash used to fund the Company’s regular operations of approximately $17.0 million, approximately $3.1 million in payments for costs to issue common stock and approximately $2.0 million in payments on the Company’s finance lease obligations.
During the year ended September 30, 2024, the Company’s cash increased by approximately $0.6 million. The significant component of this increase included approximately $21.2 million of cash received from issuance of common stock, and exercise of warrants offset by cash used to fund the Company’s regular operations of approximately $18.8 million, approximately $0.1 million used to acquire research and development equipment, and approximately $1.8 million in payments on the Company’s finance leases.
Supplies are purchased for use in the Company’s manufacturing and R&D efforts. During the year ended September 30, 2025, the supplies decreased by approximately $1.0 million primarily due to supplies used in the manufacturing of the clinical lot in the third quarter of the current fiscal year.
Primarily as a result of CEL-SCI’s losses incurred to date, its expected continued future losses, and limited cash balances, CEL-SCI has included a disclosure in its financial statements expressing substantial doubt about its ability to continue as a going concern.
Future Capital Requirements
CEL-SCI’s material capital commitments include funding operating losses, funding its research and development program and making required lease payments.
For information on employment contracts, see Item 11 of this report.
CEL-SCI will need to raise additional funds, either through debt or equity financings or a partnering arrangement, to bring Multikine to market. The ability of CEL-SCI to complete the necessary clinical trials and obtain FDA approval for the sale of products to be developed on a commercial basis is uncertain. However, it is possible that CEL-SCI will not be able to generate enough cash to continue operations at its current level. CEL-SCI’s management has engaged in fundraising for over 30 years and believes that the manner in which it is proceeding will produce the best possible outcome for the shareholders. There can be no assurances that CEL-SCI will be successful in raising additional funds.
Clinical and other studies necessary to obtain regulatory approval of a new drug involve significant costs and require several years to complete. The extent of CEL-SCI’s clinical trials and research programs are primarily based upon the amount of capital available to CEL-SCI and the extent to which CEL-SCI has received regulatory approvals for clinical trials. The inability of CEL-SCI to conduct clinical trials or research, whether due to a lack of capital or regulatory approval, will prevent CEL-SCI from completing the studies and research required to obtain regulatory approval for any products which CEL-SCI is developing. Without regulatory approval, CEL-SCI will be unable to sell any of its products.
In the absence of revenues, CEL-SCI will be required to raise additional funds through the sale of securities, debt financings or other arrangements in order to continue with its research efforts. However, there can be no assurance that such financing will be available or be available on favorable terms. Ultimately, CEL-SCI must complete the development of its products, obtain appropriate regulatory approvals and obtain sufficient revenues to support its cost structure.
Since all of CEL-SCI’s projects are under development, CEL-SCI cannot predict with any certainty the funds required for future research and clinical trials, the timing of future research and development projects, or when it will be able to generate any revenue from the sale of any of its products.
CEL-SCI's cash flow and earnings are subject to fluctuations due to changes in interest rates on its bank accounts, and, to an immaterial extent, foreign currency exchange rates.
Critical Accounting Estimates
CEL-SCI's significant accounting estimates are more fully described in Note 3 to the financial statements included as part of this report. However, certain accounting estimates are particularly important to the portrayal of CEL-SCI’s financial position and results of operations and require the application of significant judgments by management. As a result, the financial statements are subject to an inherent degree of uncertainty. In applying those estimates, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. These estimates are based on CEL-SCI's historical experience, terms of existing contracts, observance of trends in the industry and information available from outside sources, as appropriate.
Management believes that the following critical accounting estimates require the most significant judgments and estimates with respect to the preparation of CEL-SCI’s financial statements.
Lease Accounting – The measurement of the finance and operating lease right-of-use asset and lease liabilities requires the determination of an estimated lease term and an incremental borrowing rate. The determination of the incremental borrowing rates for new and modified lease contracts is a critical accounting estimate. Significant judgment is required by management to develop inputs and assumptions used to determine the incremental borrowing rate for lease contracts.
Share-based Compensation – Compensation cost for all share-based awards is measured at fair value as of the grant date in accordance with the provisions of ASC 718, Compensation – Stock Compensation (“ASC 718”). The fair value of stock options is calculated using the Black-Scholes option pricing model. The Black-Scholes model requires six input variables: the strike price of an option, the current stock price, the time to expiration, the risk-free rate, the dividend yield and the volatility. The share-based compensation cost is recognized using the straight-line method as expense over the requisite service or vesting period.
CEL-SCI has Incentive Stock Option Plans, Non-Qualified Stock Option Plans, Stock Compensation Plans, Stock Bonus Plans and an Incentive Stock Bonus Plan. These Plans are collectively referred to as the “Plans”. All Plans have been approved by CEL-SCI’s stockholders.
CEL-SCI’s stock options are not transferable, and the actual value of the stock options that an employee may realize, if any, will depend on the excess of the market price on the date of exercise over the exercise price. For options issued with service conditions only, CEL-SCI has based its assumption for stock price volatility on the variance of daily closing prices of CEL-SCI’s stock. The risk-free interest rate assumption is based on the U.S. Treasury rate at the date of grant with the term equal to the expected life of the option. Forfeitures are accounted for when they occur. The expected term of options represents the period that options granted are expected to be outstanding and has been determined based on an analysis of historical exercise behavior. If any of the assumptions used in the Black-Scholes model change significantly, share-based compensation expense for new awards may differ materially in the future from that recorded in the current period.
Restricted stock granted under the Incentive Stock Bonus Plan and options granted under the Non-Qualified Stock Option Plans are subject to service, performance and market conditions and meet the classification of equity awards. These awards were measured at fair value on the grant dates using a Monte Carlo simulation for issuances where the attainment of performance criteria is uncertain. The total compensation cost will be expensed over the estimated requisite service period.
