A (Bad) Day in the Life of a Biotech CEO

You win some, you lose some. For Virginia biotech firm CEL-SCI Corp., winning a small sum meant losing a big sum.

CEL-SCI announced last week it had won a long-running arbitration battle against a contract research organization—only to get pounded by Wall Street anyway. Investors were not happy the company collected only $2.9 million in damages after an arbitrator found inVentiv Health Clinical LLC, now a part of Syneos Health Inc., breached a contract by failing to recruit enough patients for a Phase III clinical trial.

“It’s very hard to see, when you find a material breach [in] a very expensive clinical trial, that you’re damages are only $2.9 million,” CEL-SCI CEO Geert Kersten told me. “I just have a hard time seeing that one.”

As of yesterday’s close, CEL-SCI’s share price has dropped almost 68 percent since the day it announced the decision. But a win is a win, Kersten said, and he doesn’t think the market is reacting rationally.

“What’s the value of a biotech stock? It’s however they trade,” he said. “It’s hope, it’s fear, it’s greed, and all of those kinds of things.”

The legal fight was over a clinical trial for CEL-SCI’s Multikine, an immune system booster for advanced head and neck cancer patients before they undergo treatment. The company said inVentiv brought in only 117 subjects, while the contract called for 880. CEL-SCI said it had to replace inVentiv with two other contract research organizations to carry out the study, and it demanded $50 million in damages.

“We were right on the decision, but somehow it didn’t translate into an award,” Kersten said. “We were not necessarily counting on it, but we thought we were going to get a bigger award.”

Kersten, the company’s biggest shareholder, said investor fickleness goes with the territory for a biotech firm that’s spend decades trying to bring its signature product to market. CEL-SCI has raised $5 million to finish the Multikine trial.

“I have been in very, very tight spots where sometimes I didn’t know how it was going to continue,” he said. “That’s not abnormal in the field of biotech because it takes so long and it costs so much money.

“This is the life of a biotech guy.”

Read more on the arbitration decision here.

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