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CEO Geert Kersten of Cel-Sci (CVM) believes his company's valuation is significantly lower than warranted. In the following interview by Peter Epstein, Mr. Kersten candidly addresses important questions about Cel-Sci. This interview was conducted by phone and email in the first week of March. Peter Epstein has no existing or prior relationship with Cel-Sci, but he does own shares of the company.

Please give an overview of Cel-Sci for readers who don't know the story.

Cel-Sci’s work is focused on finding the best way to activate the immune system to fight cancer and infectious diseases. CEL-SCI believes that the best way may be to activate the immune system of patients before they have received surgery, radiation and/or chemotherapy. Its lead investigational therapy Multikine (Leukocyte Interleukin, Injection) is currently being studied in a pivotal Phase III clinical trial against head and neck cancer.

If the study endpoint, which is a 10% improvement in overall survival of the subjects treated with Multikine as compared to subjects treated with the current standard of care only is satisfied, the study results will be used to support applications which will be submitted to regulatory agencies in order to receive from these agencies commercial marketing approvals for Multikine in major markets around the world. Additional clinical indications for Multikine which are being investigated include cervical dysplasia in HIV/HPV co-infected women, and the treatment of peri-anal warts in HIV/HPV co-infected men and women. A Phase I trial of the former indication has been completed at the University of Maryland. The latter indication is now in a Phase I trial in conjunction with the U.S. Navy under a CRADA (Cooperative Research and Development Agreement).

If your team believes that Multikine is so important, why is it taking CEL-SCI so long to get Multikine to market? 

Beta blockers, Erbitux and Copaxone took about 30 years to come to the market. In our case the largest factor was lack of money. Other reasons were 1) doing something that has never been done before, 2) the product is very complex and 3) sometimes you have to wait until the time is ripe. Still, it was mostly lack of funding that slowed us down. We also had to switch our Clinical Research Organization, "CRO" in 2013, which was a significant set back as enrollment was essentially stalled and investors lost patience. The reputational impact was as bad as the decline in our stock price.

Who among your Management & Board has relevant experience with this class of drugs and/or the process of getting through Phase III trials?  

This class of drugs is either a complex biologic or an immunotherapy drug. Complex biologics are very few and they were developed 20 plus years ago. Immunotherapy is a completely new field. Dr. Talor and John Cipriano have expertise in both. What they did not know before coming here, they learned on the job. My team has been with me for 20 years and we are now the world’s foremost experts in our specific area. We are cleared for a pivotal Phase III trial, in 21 countries, in cancer patients who are not terminal. That does not happen to people who do not have a clue.

Who, if anyone, outside the company has performed substantial due diligence on the possible efficacy of Multikine?  

Our various partners for Multikine and all of the financial institutions who underwrote our financings. Also, the FDA and 20 other regulators have seen all of our detailed clinical data. Partners include the U.S. Navy, under a Cooperative Research and Development Agreement (CRADA). A co-development and profit sharing agreement with Ergomed for Multikine in HIV/HPV co-infected men and women. The National Institute of Arthritis Musculoskeletal and Skin Diseases, Rush University Medical Center in Chicago, Teva Pharmaceuticals, Orient Biopharma of Taiwan and the U.S. National Cancer Institute. We've had a remarkable amount of due diligence performed on Multikine over the years.

Intuitively it makes sense to use one's immune system to fight cancers and other diseases. What's the main pushback you get from investors?

Until 2 years ago, most investors did not believe that the immune system could be used to fight cancer. Now they all do. That means that the last two years should have been great for us since all that we had predicted had actually come true. Yet, when the company running our Phase III clinical trial could barely enroll patients, investors bailed from our stock.  It looked as if there was something wrong with our product.

This horrible event caused us to simply disappear from investor's radar screens. Amazingly, once we hired a new group to run our Phase III trial, enrollment rapidly picked up again and now we are enrolling record numbers month over month. We now have 372 patients enrolled (42% of 880 needed) as of the end of February. If the investors thought that the minimal enrollment was due to the drug not working, it certainly is working well now.  The reality is that the drug was never broken.  The only thing broken in our case is the stock price, and that can be fixed with hard work. We expect to have full enrollment by about the end of 2015 and to complete the study in 2017.

Please describe the Navy's testing of Multikine and the importance of this trial? 

Key to the collaboration with the Navy is that another clinical indications for Multikine is being investigated, the treatment of peri-anal warts in HIV/HPV co-infected men and women. This disease does not have effective treatment. If Multikine works, with the same formulation as that used in our Phase III trial, it may become very important very quickly. Further, we could have results from the Navy's studies by the end of this year.

Please describe CEL-SCI's capital structure? 

Straight common stock, 91.3 million outstanding, 36 million warrants and options, almost all of them with strike prices between $1.25 and $20.

What percentage of shares are owned by insiders including the Management & Board? 

About 18% (for full disclosure I bought a lot of shares last year and now own about 10%). Shareholders tell me that they think institutions are looking at our company once again. Trading volume has been well above normal.  I continue to remain focused on operating the company and trying to get the story out.

How will you fund your company through Phase III ?

As part of our needing to replace our CRO in 2013, we filed for an Arbitration to recover damages. We continue to believe that we have a strong position in the Arbitration case scheduled for May, 4th of this year. We are seeking $50 million, but the amount could be higher or lower than $50 million, including the possibility of us getting nothing. However, I continue to believe that we will win.  If we don't prevail in the Arbitration, we will have to do additional capital raises and/or pursue partnering alternatives.

What are the near term catalysts for CEL-SCI in 2015?

Continued progress on Phase III leading to full enrollment by year-end, arbitration finalization and data from the Navy's work on the treatment of peri-anal warts in HIV/HPV co-infected men and women.  2015 should be a very interesting year for us.

Can you describe the key takeaways from the successful Phase I & II trials? 

No safety problems, 12% of patients had no remaining cancer cells at all after 3 weeks of injections 5 times per week. The remaining patients had 50% less cancer cells and Phase II results showed an increase in survival. Our Phase III trial requires an increased survival rate of 10%. We obviously believe that Multikine can achieve that in our Phase III trial.

Assuming successful Phase III trials, how long might it take Multikine to hit the market? 

It has orphan drug status. Therefore, we should get fast review. Head and neck cancer is an unmet medical need. The tumor hides from the immune system. Our drug helps the immune system fight the tumor while the patient's immune system is still healthy. Multikine is the only experimental treatment to be used before the standard of care, surgery to remove the tumor, thenradiation or radiation plus chemo treatments.

Although Multikine has successfully reached Phase III, there's still considerable risk. What factors make you confident about Phase III?

The fact that enrollment is accelerating at hospitals that have already treated several patients suggests that surgeons are seeing Multikine responses that they deem to be promising.

CEL-SCI stock was at $9.10 per share in December, 2010. Now it's at $1.06. Briefly, what caused this major decline?

The prior CRO’s enrollment was so slow that we could show little to no progress. Investors lost patience, believing the drug was no good (due again to the lack of enrollment of patients). That caused us to switch CROs and investors feared that we would never finish the study and go out of business. We seem to have fallen off investor's radar screens.

Are there any misconceptions about CEL-SCI that you would like to address?

Let us focus on the misconception that the lack of enrollment suggested that the drug would not "work." By that logic, the drug now appears to "work" as enrollment is up 2,000%, so the stock should be back at $9 again! There are many companies with less advanced drugs in Phase I and Phase II trials with valuations that are multiples of ours.  Many of them will never make it into a Phase III trial. We believe our drug could be a game-changer in that it could represent a 4th modularity to be used before surgery, radiation and chemo. 

Further, we believe that the possible applications for Multikine are broader than some of our peers' drugs. Yet, our stock trades at a market cap of roughly $100 million while several peers trade at valuations in the billions. Pre-clinical cancer immunotherapy companies trade at those levels.  We don't suggest that our peers are necessary overvalued, we think that CEL-SCI is demonstrably undervalued.  When we have the Phase III study fully enrolled, do you think that we will still be at a valuation of $100 million?  I bet that it will not and I have put a lot of money behind that bet.