Blueprint
Filed pursuant to Rule 424(b)(5)
Registration No. 333-226558
This preliminary prospectus supplement and the accompanying
prospectus relate to an effective registration statement under the
Securities Act of 1933, but the information in this prospectus
supplement is not complete and may be changed. This prospectus
supplement and the accompanying prospectus are not an offer to sell
the securities and we are not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
(Subject to Completion, dated December 23, 2019)
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus Dated August 24, 2018)
CEL-SCI CORPORATION
Shares of
Common Stock
We
are
offering
shares of our common stock pursuant to this prospectus supplement
and the accompanying prospectus. The shares will be sold for a
purchase price equal to $
per share of common stock.
Our
common stock is listed on the NYSE American under the symbol
“CVM.” The last reported sale price of our common stock
on the NYSE American on December 20, 2019 was $9.14 per
share.
Investing
in our securities involves significant risks. Please read the
information contained in or incorporated by reference under the
heading “Risk
Factors” beginning on page S-7
of this prospectus supplement, and under similar headings in other
documents filed after the date hereof and incorporated by reference
into this prospectus supplement and the accompanying
prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
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Public offering
price
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$
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$
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Underwriting
discount (1)
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$
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$
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Proceeds, before
expenses, to us
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$
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$
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(1)
In
addition to the underwriting discount, we have agreed to reimburse
the underwriter for certain expenses in connection with this
offering. See “Underwriting” for a description of the
compensation payable to the underwriter.
We
have granted the underwriter an option for a period of 45 days from
the date of this prospectus supplement to purchase up to an
additional shares of our
common stock.
The
underwriter expects to deliver the shares against payment on or
about December , 2019.
Sole Book-Running Manager
AEGIS CAPITAL CORP.
The date of this prospectus supplement is
December , 2019.
TABLE OF CONTENTS
Prospectus Supplement
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Page
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About
This Prospectus Supplement
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S-3
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Special
Note Regarding Forward-Looking Statements
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S-4
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Prospectus
Supplement Summary
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S-5
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The
Offering
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S-5
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Risk
Factors
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S-7
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Use
of Proceeds
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S-8
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Dilution
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S-9
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Certain
U.S. Federal Income Tax Considerations
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S-11
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Underwriting
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S-15
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Legal
Matters
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S-18
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Experts
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S-19
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Where You Can Find Additional Information
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S-19
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Incorporation
of Certain Information By Reference
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S-19
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Prospectus
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1
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Forward-Looking
Statements
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Risk
Factors
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10
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Comparative Share
Data
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30
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Market
for CEL-SCI’s Common Stock.
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34
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Plan of
Distribution
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35
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Description of
Securities
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36
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Experts
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40
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Indemnification
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40
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Additional
Information
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40
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ABOUT THIS PROSPECTUS SUPPLEMENT
This document is part of the registration statement that we filed
with the Securities and Exchange Commission, or the SEC, using a
“shelf” registration process and consists of two parts.
The first part is this prospectus supplement, which describes the
specific terms of this offering. The second part, the accompanying
prospectus, gives more general information, some of which may not
apply to this offering. Generally, when we refer only to the
“prospectus,” we are referring to both parts combined.
This prospectus supplement may add to, update or change information
in the accompanying prospectus and the documents incorporated by
reference into this prospectus supplement or the accompanying
prospectus.
If information in this prospectus supplement is inconsistent with
the accompanying prospectus or with any document incorporated by
reference that was filed with the SEC before the date of this
prospectus supplement, you should rely on this prospectus
supplement. This prospectus supplement, the accompanying prospectus
and the documents incorporated into each by reference include
important information about us, the securities being offered and
other information you should know before investing in our
securities. You should also read and consider information in the
documents we have referred you to in the sections of this
prospectus supplement entitled “Where You Can Find Additional
Information” and “Incorporation of Certain Information
by Reference.”
You should rely only on this prospectus supplement, the
accompanying prospectus, the documents incorporated or deemed to be
incorporated by reference herein or therein and any free writing
prospectus prepared by us or on our behalf. We have not authorized
anyone to provide you with information that is in addition to or
different from that contained or incorporated by reference in this
prospectus supplement and the accompanying prospectus. If anyone
provides you with different or inconsistent information, you should
not rely on it. We are not offering to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should
not assume that the information contained in this prospectus
supplement, the accompanying prospectus or any free writing
prospectus, or incorporated by reference herein, is accurate as of
any date other than as of the date of this prospectus supplement or
the accompanying prospectus or any free writing prospectus, as the
case may be, or in the case of the documents incorporated by
reference, the date of such documents regardless of the time of
delivery of this prospectus supplement and the accompanying
prospectus or any sale of our securities. Our business, financial
condition, liquidity, results of operations and prospects may have
changed since those dates.
All references in this prospectus supplement or the accompanying
prospectus to “the Company,” “our company,”
“we,” “us,” or “our” mean
CEL-SCI Corporation, unless we state otherwise or the context
otherwise requires.
No action is being taken in any jurisdiction outside the United
States to permit a public offering of the securities or possession
or distribution of this prospectus supplement or the accompanying
prospectus in that jurisdiction. Persons who come into possession
of this prospectus supplement or the accompanying prospectus in
jurisdictions outside the United States are required to inform
themselves about and to observe any restrictions as to this
offering and the distribution of this prospectus supplement or the
accompanying prospectus applicable to that
jurisdiction.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the
documents incorporated by reference herein and therein contain
forward-looking statements within the meaning of Section 27A
of the Securities Act, and Section 21E of the Securities
Exchange Act of 1934, as amended, or the Exchange Act.
Forward-looking statements are those that predict or describe
future events or trends and that do not relate solely to historical
matters. You can generally identify forward-looking statements as
statements containing the words “believe,”
“expect,” “may,” “will,”
“anticipate,” “intend,”
“estimate,” “project,” “plan,”
“assume” or other similar expressions, although not all
forward-looking statements contain these identifying words. All
statements contained in this prospectus supplement, the
accompanying prospectus and the documents incorporated by reference
herein and therein regarding our future strategy, plans and
expectations regarding clinical trials, future regulatory
approvals, our plans for the manufacturing and commercialization of
our products, future operations, projected financial position,
potential future revenues, projected costs, future prospects, and
results that might be obtained by pursuing management’s
current plans and objectives are forward-looking statements.
Forward-looking statements include, but are not necessarily limited
to, those relating to:
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our
expectations related to the use of proceeds, if any, from this
offering;
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our
need for, and ability to raise, additional capital;
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the
results and timing of our clinical trials, including in particular
our ongoing Phase 3 clinical trial for Multikine;
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the
regulatory review process and any regulatory approvals that may be
issued or denied by the U.S. Food and Drug Administration, the
European Medicines Agency or other regulatory
agencies;
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our
manufacturing plans;
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our
need to secure collaborators to license, manufacture, market and
sell any products for which we receive regulatory approval in the
future;
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the
results of our internal research and development
efforts;
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the
commercial success and market acceptance of any of our product
candidates that are approved for marketing in the United States or
other countries;
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the
safety and efficacy of medicines or treatments introduced by
competitors that are targeted to indications which our product
candidates are being developed to treat;
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the
acceptance and approval of regulatory filings;
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our
current or prospective collaborators’ compliance
or non-compliance with their obligations under our
agreements with them, or decisions by our collaborators to
discontinue clinical trials and return product candidates to
us;
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our
plans to develop other product candidates; and
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other
factors discussed elsewhere in this prospectus supplement, the
accompanying prospectus or the documents incorporated by reference
herein and therein.
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You should not place undue reliance on our forward-looking
statements because the matters they describe are subject to known
and unknown risks, uncertainties and other unpredictable factors,
many of which are beyond our control. Our forward-looking
statements are based on the information currently available to us
and speak only as of the date on the cover of this prospectus
supplement. New risks and uncertainties arise from time to time,
and it is impossible for us to predict these matters or how they
may affect us. We have included important factors in the cautionary
forward-looking statements included in this prospectus supplement,
particularly in the section of this prospectus supplement entitled
“Risk Factors,” which we believe over time, could cause
our actual results, performance or achievements to differ from the
anticipated results, performance or achievements that are expressed
or implied by our forward-looking statements. We have no duty to,
and do not intend to, update or revise the forward-looking
statements in this prospectus supplement after the date of this
prospectus supplement except to the extent required by the federal
securities laws. You should consider all risks and uncertainties
disclosed in our filings with the SEC, described in the sections of
this prospectus supplement entitled “Where You Can Find More
Information” and “Incorporation of Certain Information
by Reference” and the sections of the accompanying
prospectuses entitled “Incorporation of Certain Information
by Reference” and “Where You Can Find Additional
Information,” all of which are accessible on the SEC’s
website at www.sec.gov.
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights selected information contained elsewhere or
incorporated by reference in this prospectus supplement and the
accompanying prospectus. This summary does not contain all the
information that you should consider before investing in our
securities. You should read the entire prospectus supplement and
the accompanying prospectus carefully, including “Risk
Factors” contained in this prospectus supplement and the
financial statements incorporated by reference in this prospectus
supplement and the accompanying prospectus, before making an
investment decision.
THE OFFERING
Common
stock we are offering
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shares
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Common
stock to be outstanding after this offering
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shares (or shares
if the underwriter exercises its option to purchase
additional shares)
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Option
to purchase additional shares
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We have
granted the underwriter an option for a period of 45 days from the
date of this prospectus supplement to purchase up to an additional
shares of our common stock.
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NYSE
American Symbol and Listing
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Our
common stock is listed on the NYSE American under the symbol
“CVM.”
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Use of
Proceeds
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We
estimate that the net proceeds from this offering, after payment of
estimated offering expenses payable by us and underwriting
discounts will be approximately $
million, or approximately
$ million if
the underwriter exercises in full its option to purchase additional
shares. We intend to use the net proceeds from this offering to
fund the continued development of Multikine, LEAPS and for other
general corporate purposes. See “Use of
Proceeds.”
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Risk
Factors
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Investing
in our securities involves significant risks. Please read the
information contained in or incorporated by reference under the
heading “Risk Factors” beginning on
page S-7 of this prospectus
supplement, and under similar headings in other documents filed
after the date hereof and incorporated by reference into this
prospectus supplement and the accompanying prospectus.
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The number of shares of common stock shown above to be outstanding
after this offering is based on 35,379,956 shares outstanding as of
December 13, 2019 and excludes:
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6,218,684
shares of our common stock issuable upon the exercise of
outstanding stock options as of December 13, 2019, at a weighted
average exercise price of $5.54 per share; and
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5,639,403
shares of our common stock issuable upon the exercise of warrants
outstanding as of December 13, 2019, at a weighted average exercise
price of $7.83 per share.
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Except as otherwise indicated, all information in this prospectus
supplement assumes no exercise by the underwriter of its option to
purchase additional shares.
Business Overview
We are a clinical-stage biotechnology company
focused on finding the best way to activate the immune system to
fight cancer and infectious diseases. Our lead investigational
therapy Multikine® (Leukocyte Interleukin, Injection) is
currently in a pivotal Phase 3 clinical trial for patients who are
newly diagnosed with advanced primary squamous cell carcinoma of
the head and neck, for which we have received Orphan Drug Status
from the U.S. Food and Drug Administration, or FDA. The study was
fully enrolled with 928 patients in September 2016. The
study’s primary end-point is a 10% increase in overall
survival of patients between the two main comparator
groups in
favor of the group receiving the Multikine treatment regimen. The
determination if the study’s primary end-point is met will
occur when there are a total of 298 deaths in those two groups. If
the primary end-point of this global study is achieved, we expect
to use the results to support a Biologics License Application, or
BLA, to the FDA for Multikine for neoadjuvant therapy in patients
with squamous cell carcinoma of the head and neck, or SCCHN
(hereafter also referred to as advanced primary head and neck
cancer).
Our investigational immunotherapy, Multikine, is
being used in a different way than cancer immunotherapy is usually
used. It is given before standard of care surgery has been
administered because that is when the immune system is thought to
be strongest (i.e., as a neoadjuvant). It is
also administered locally around the tumors and near the draining
lymph node. For
example, in the Phase 3
clinical trial, Multikine was given locally for three weeks, five
days per week as a first line treatment before surgery, radiation
and/or chemotherapy. The goal is to help the intact immune system
kill the micro metastases that usually cause recurrence of the
cancer. In short, we believe that local administration of this
neoadjuvant therapy and administration before weakening of the
immune system by surgery, chemotherapy and radiation will result in
improved outcomes and better overall survival rates for patients
suffering from head and neck cancer.
We
are also investigating a peptide-based immunotherapy as a vaccine
for rheumatoid arthritis using our LEAPS technology platform. We
were awarded a Phase 2 Small Business Innovation Research (SBIR)
grant in the amount of $1.5 million from the National Institutes of
Health (NIH) in September 2017. This grant will provide funding to
allow us to advance our first LEAPS product candidate, CEL-4000,
towards an Investigational New Drug (IND) application.
We
were formed as a Colorado corporation in 1983. Our principal office
is located at 8229 Boone Boulevard, Suite 802, Vienna, VA 22182.
Our telephone number is 703-506-9460 and our website is
www.cel-sci.com. We do not incorporate the information on our
website into this report, and you should not consider it part of
this report.
We
make our electronic filings with the Securities and Exchange
Commission (SEC), including our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to these reports available on our website free of charge
as soon as practicable after they are filed or furnished to the
SEC.
RECENT DEVELOPMENTS
The
Independent Data Monitoring Committee (IDMC) for our Phase 3
clinical trial of Multikine announced on October 14, 2019 that it
has completed its most recent review of the Phase 3 study data,
which it performs periodically at regular intervals as required by
our study protocol. The data from all 928 enrolled patients were
provided to the IDMC by the clinical research organization (CRO)
responsible for data management of this Phase 3 study.
The
IDMC recommended that we continue the trial until the appropriate
number of events have occurred.
IDMCs
are committees commonly used by sponsors of clinical trials to
protect the interests of the patients and the integrity of the
study data in ongoing trials, especially when the trials involve
patients with life threatening diseases, and when, as in cancer
clinical trials, they extend over long periods of time. The
continuation of our Phase 3 trial could be the result of factors
other than Multikine and may not be indicative of a potential
positive outcome for the trial.
OUR PRODUCT CANDIDATES
We are a clinical-stage biotechnology company
dedicated to research and development directed at improving the
treatment of cancer and other diseases by using the immune system,
the body’s natural defense system. We are currently focused
on the development of the following product candidates and
technologies:
1)
Multikine, an investigational immunotherapy under development for the potential
treatment of certain head and neck cancers;
2)
L.E.A.P.S.
(Ligand Epitope Antigen Presentation System) technology, or LEAPS,
with two investigational therapies, CEL-2000 and CEL-4000, vaccine
product candidates under development for the potential treatment of
rheumatoid arthritis, and LEAPS-H1N1-DC, a product candidate under
development for the potential treatment of pandemic influenza in
hospitalized patients.
RISK FACTORS
Investing in our securities involves a high degree of risk. In
addition to the other information contained in this prospectus
supplement and in the documents we incorporate by reference, you
should carefully consider the risks discussed below and under the
heading “Risk Factors” in our Annual Report
on Form 10-K, as amended, for the fiscal year ended
September 30, 2019 before making a decision about investing in our
securities. The risks and uncertainties discussed below and in our
Annual Report on Form 10-K/A for the fiscal year ended
September 30, 2019 are not the only ones facing us. Additional
risks and uncertainties not presently known to us may also harm our
business. If any of these risks occur, our business, financial
condition and operating results could be harmed, the trading price
of our common stock could decline and you could lose part or all of
your investment.
Risks Related to this Offering
Management will have broad discretion as to the use of the proceeds
from this offering.
We
currently intend to use the net
proceeds from the offering to fund the continued development of
Multikine, LEAPS and for other general corporate purposes.
See the “Use of Proceeds” section of this prospectus
supplement. We have not designated the specific amount of net
proceeds to us from this offering that will be used for these
purposes. Accordingly, our management will have broad discretion as
to the allocation of these net proceeds and could use them for
purposes other than those contemplated at the time of this
offering. You will be relying on the judgment of our management
with regard to the use of these net proceeds, and you will not have
the opportunity, as part of your investment decision, to assess
whether the net proceeds are being used appropriately. It is
possible that the net proceeds will be invested in a way that does
not yield a favorable, or any, return for us. The failure of our
management to use such funds effectively could have a material
adverse effect on our business, financial condition, operating
results and cash flow.
In
addition, the net proceeds from this offering will not be
sufficient to complete clinical trials and other studies required
for the approval of any product candidate, including the Phase 3
clinical trial of Multikine, by the FDA or any other regulatory
authority, and we will need significant additional funds in order
to complete the Phase 3 Multikine study.
You will experience immediate and substantial dilution in the net
tangible book value of the common stock you purchase in this
offering.
Since
the offering price of the securities offered pursuant to this
prospectus supplement and the accompanying prospectus is higher
than the net tangible book value per share of our common stock, you
will suffer substantial dilution in the net tangible book value of
the common stock you purchase in this offering. After giving effect
to the sale of shares of common stock in this
offering, deducting underwriting discounts and estimated offering
expenses payable by us, if you purchase securities in this
offering, you will suffer immediate and substantial dilution of
approximately
$
per share in the net tangible book value of the common stock you
acquire based on our net tangible book value as of September 30,
2019.
You may experience future dilution as a result of future equity
offerings or other equity issuances.
We
expect that significant additional capital will be needed in the
future to continue our planned operations. To raise additional
capital, we may in the future offer additional shares of our common
stock or other securities convertible into or exchangeable for our
common stock. To the extent we raise
additional capital by issuing equity securities, our stockholders
may experience substantial dilution. These sales may result in
material dilution to our existing stockholders and new investors
could gain rights superior to existing stockholders.
Our outstanding options and warrants may adversely affect the
trading price of our common stock.
As
of December 13, 2019, there were outstanding warrants which allow
the holders to purchase 5,639,403 shares of common stock, with a
weighted average exercise price of $7.83 per share, and outstanding
options which allow the holders to purchase up to 6,218,684 shares
of common stock, with a weighted average exercise price of $5.54
per share. The outstanding options and warrants could adversely
affect our ability to obtain future financing or engage in certain
mergers or other transactions, since the holders of options and
warrants can be expected to exercise them at a time when we may be
able to obtain additional capital through a new offering of
securities on terms more favorable to us than the terms of the
outstanding options and warrants. For the life of the options
and warrants, the holders have the opportunity to profit from a
rise in the market price of our common stock without assuming the
risk of ownership. The issuance of shares upon the exercise
of outstanding options and warrants will also dilute our ownership
interests existing stockholders.
USE OF PROCEEDS
We
estimate that the proceeds from this offering, after deducting
estimated offering expenses payable by us and underwriting
discounts and commissions will be approximately $
million. We intend to use the net
proceeds from this offering to fund the continued development of
Multikine, LEAPS and for other general corporate purposes. We have
not determined the amounts we plan to spend on the areas listed
above or the timing of these expenditures. As a result, our
management will have broad discretion to allocate the net proceeds
from this offering. Pending application of the net proceeds as
described above, we intend to invest the net proceeds from this
offering in short-term, investment-grade, interest-bearing
securities.
DILUTION
If
you purchase shares of common stock in this offering, you will
experience dilution to the extent of the difference between the
public offering price of the shares of common stock in this
offering and the net tangible book value per share of our common
stock immediately after this offering.
Our
net tangible book value as of September 30, 2019 was approximately
$4,800,000, or $0.14 per share of common stock based on 35,231,776
outstanding shares of common stock on that date. Net tangible book
value per share is equal to our total tangible assets minus total
liabilities, all divided by the number of shares of common stock
outstanding as of September 30, 2019.
After giving effect to the sale of shares
of common stock in this offering at the public offering price of $
per share of common stock and after deducting the underwriting
discounts, commissions and estimated offering expenses payable by
us, our as adjusted net tangible book value would have been
approximately $
million, or approximately
$ per share of
common stock, as of September 30, 2019. This represents an
immediate increase in net tangible book value of approximately
$ per
share to existing stockholders and an immediate dilution of
approximately $ per
share to new investors. The following table illustrates this
calculation on a per share basis:
Public offering
price per share
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$
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Net tangible book
value per share as of September 30, 2019
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$0.14
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Increase in net
tangible book value per share attributable to new
investors
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$
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As adjusted net
tangible book value per share after giving effect to this
offering
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$
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Dilution per share
to investors in this offering
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$
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The
above calculation is based on 35,231,776 shares of our common stock
outstanding as of September 30, 2019 and excludes as of that
date:
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5,772,303 shares of
our common stock issuable upon the exercise of outstanding warrants
as of September 30, 2019, at a weighted average exercise price of
$7.70 per share; and
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6,218,216 shares of our common stock
issuable upon the exercise of outstanding stock options as of
September 30, 2019, at a weighted average exercise price of $5.54
per share.
In
addition, the amounts in the table above assume no exercise by the
underwriter of its option to purchase additional shares. If the
underwriter exercises its option to purchase shares of our common
stock in full, the pro forma net tangible book value per share
after this offering would be approximately $ per share,
representing an increase in net tangible book value per share
attributable to this offering of approximately $ and dilution in
net tangible book value per share to investors in this offering of
approximately
$
..
The
above illustration of dilution per share to investors participating
in this offering assumes no exercise of outstanding options or
warrants to purchase shares of our common stock. The exercise of
outstanding options and warrants having an exercise price less than
the offering price will increase dilution to new investors. In
addition, we may choose to raise additional capital depending on
market conditions, our capital requirements and strategic
considerations, even if we believe we have sufficient funds for our
current or future operating plans. To the extent that we raise
additional capital through the sale of equity or convertible debt
securities, the issuance of these securities could result in
further dilution to our stockholders.
DIVIDEND POLICY
We
have never declared or paid cash dividends on our capital stock. We
currently intend to retain our future earnings, if any, for use in
our business and therefore do not anticipate paying cash dividends
in the foreseeable future. Payment of future dividends, if any,
will be at the discretion of our board of directors after taking
into account various factors, including our financial condition,
operating results, current and anticipated cash needs and plans for
expansion.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
This
section summarizes certain U.S. federal income tax considerations
relating to the purchase, ownership and disposition of common stock
to be sold in this offering. This summary does not provide a
complete analysis of all potential tax considerations. The
information provided below is based upon provisions of the Internal
Revenue Code of 1986, as amended, or the Code, Treasury regulations
promulgated thereunder and administrative rulings and judicial
decisions, all as currently in effect. These authorities may change
at any time, possibly on a retroactive basis, or the U.S. Internal
Revenue Service, or the IRS, might interpret the existing
authorities differently. In either case, the tax considerations of
purchasing, owning or disposing of common stock could differ from
those described below. We have not sought and will not seek any
rulings from the IRS regarding the matters discussed below. There
can be no assurance the IRS or a court will not take a contrary
position to that discussed below regarding the tax consequences of
the purchase, ownership and disposition of our common
stock.
This
discussion is limited to holders that hold the common stock as a
“capital asset” within the meaning of Section 1221
of the Code (generally, property held for investment). This
discussion does not address all of the U.S. federal income tax
considerations that might be relevant to a beneficial owner in
light of such beneficial owner’s particular circumstances,
such as the impact of the Medicare contribution tax on net
investment income or alternative minimum tax. In addition, this
discussion does not address tax considerations to beneficial owners
subject to special treatment under the U.S. federal income tax
laws, including:
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a
broker, dealer or trader in securities, currencies, commodities, or
notional principal contracts;
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a bank,
financial institution or insurance company;
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a
regulated investment company, a real estate investment trust or
grantor trust;
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a tax-exempt entity
or organization, including an individual retirement account or Roth
IRA as defined in Section 408 or 408A of the Code,
respectively;
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a
person holding the common stock as part of a hedging, integrated,
or conversion transaction or a straddle, or a person deemed to sell
common stock under the constructive sale provisions of the
Code;
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a
trader in securities that has elected
the mark-to-market method of tax accounting for
securities;
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an
entity that is treated as a partnership or other pass-through
entity for U.S. federal income tax purposes;
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a
person who is a partner or investor in a partnership or other
pass-through entity that holds the common stock;
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a U.S.
person whose “functional currency” is not the U.S.
dollar;
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a
controlled foreign corporation or passive foreign investment
company;
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a
person who holds or receives common stock pursuant to the exercise
of any employee stock option or otherwise as
compensation;
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a
qualified foreign pension fund or an entity that is wholly owned by
one or more qualified foreign pension funds; or
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a U.S.
expatriate and former citizens or long-term residents of the United
States.
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For
purposes of this discussion, a “U.S. holder” is a
beneficial owner of a share of common stock that is, for U.S.
federal income tax purposes:
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an
individual who is a citizen or resident of the United
States;
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a
corporation (or any other entity treated as a corporation for U.S.
federal income tax purposes) created or organized in or under the
laws of the United States, any state thereof or the District of
Columbia;
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an
estate the income of which is subject to U.S. federal income
taxation regardless of its source; or
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a trust
if (1) it is subject to the primary supervision of a court
within the United States and one or more U.S. persons have the
authority to control all substantial decisions of the trust or
(2) it has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a U.S. person.
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For
purposes of this discussion,
a “non-U.S. holder” is a beneficial owner of
a share of common stock that is (i) a foreign corporation for
U.S. federal income tax purposes, (ii) a nonresident alien
individual, or (iii) a foreign estate or trust that in each
case is not subject to U.S. federal income tax on
a net-income basis on income or gain from the sale share
of common stock.
If
an entity treated as a partnership for U.S. federal income tax
purposes holds shares of common stock, the tax treatment of a
person treated as a partner in such partnership will generally
depend upon the status of the partner and the activities of the
partnership. This discussion does not address the tax
considerations to an entity treated as a partnership for U.S.
federal income tax purposes or any investor in such entity.
Accordingly, partnership holding shares of common stock and any
partner therein should consult its own tax advisors as to the tax
consequences of holding and disposing of shares of common
stock.
You are urged to consult your tax advisor with respect to the
application of the U.S. federal income tax laws to your particular
situation, as well as any tax consequences of the purchase,
ownership and disposition of our common stock arising under the
U.S. federal estate or gift tax rules or under the laws of any U.S.
state or local or any non-U.S. or other taxing
jurisdiction or under any applicable tax treaty.
Certain U.S. Federal Income Tax Considerations for U.S. Holders of
Common Stock
Dividends on our Common Stock
We
do not expect to declare or pay any distributions on our common
stock in the foreseeable future. If we do make any distributions on
shares of our common stock, however, such distributions will be
includible in the gross income of a U.S. holder as ordinary
dividend income to the extent paid out of current or accumulated
earnings and profits, as determined for U.S. federal income tax
purposes. Any portion of a distribution in excess of current or
accumulated earnings and profits would be treated as a return of
the holder’s tax basis in its common stock and then as gain
from the sale or exchange of the common stock. Under current law,
if certain requirements are met, a preferential U.S. federal income
tax rate will apply to any dividends paid to a holder of common
stock who is a U.S. individual.
Distributions
to U.S. holders that are corporate shareholders, constituting
dividends for U.S. federal income tax purposes, may qualify for the
dividends received deduction, or DRD, which is generally available
to corporate shareholders. No assurance can be given that we will
have sufficient earnings and profits (as determined for U.S.
federal income tax purposes) to cause any distributions to be
eligible for a DRD. In addition, a DRD is available only if certain
holding periods and other taxable income requirements are
satisfied.
Sale of Common Stock
A
U.S. holder of common stock will generally recognize gain or loss
on the taxable sale, exchange, or other taxable disposition of such
stock in an amount equal to the difference between such U.S.
holder’s amount realized on the sale and its adjusted tax
basis in the common stock sold. A U.S. holder’s amount
realized should equal the amount of cash and the fair market value
of any property received in consideration of its stock. The gain or
loss should be capital gain or loss and should be long-term capital
gain or loss if the common stock is held for more than one year at
the time of disposition. The deductibility of capital losses for
U.S. federal income tax purposes is subject to limitations under
the Code. Under current law, long-term capital gain recognized by
an individual U.S. holder is generally eligible for a preferential
U.S. federal income tax rate.
Information Reporting and Backup Withholding
Information
reporting requirements generally will apply to payments of
dividends on shares of common stock and to the proceeds of a sale
of common stock unless a U.S. holder is an exempt recipient, such
as a corporation. Backup withholding will apply to those payments
if a U.S. holder fails to provide its correct taxpayer
identification number and certification of exempt status, or fails
to report in full dividend income. Any amount withheld under the
backup withholding rules will be allowed as a refund or a credit
against U.S. federal income tax liability, provided the required
information is timely furnished to the IRS.
Certain U.S. Federal Income Tax Considerations
for Non-U.S. Holders of Common Stock
Dividends on our Common Stock
We
do not expect to declare or pay any distributions on our common
stock in the foreseeable future. If we do make any distributions on
shares of our common stock, however, such distributions will
constitute dividends for U.S. federal income tax purposes to the
extent paid from our current or accumulated earnings and profits,
as determined under U.S. federal income tax principles.
Distributions in excess of our current and accumulated earnings and
profits will constitute a return of capital that is applied against
and reduces, but not below zero,
a non-U.S. holder’s adjusted tax basis in shares of
our common stock. Any remaining excess will be treated as gain
realized on the sale or other disposition of our common stock. See
“ —Sale of Common Stock.” Any dividend paid to
a non-U.S. holder on our common stock will generally be
subject to U.S. withholding tax at a 30% rate. The withholding tax
might not apply, however, or might apply at a reduced rate, under
the terms of an applicable income tax treaty between the United
States and the non-U.S. holder’s country of
residence. Non-U.S. holders should consult their own tax
advisors regarding their entitlement to benefits under a relevant
income tax treaty. Generally, in order for us or our paying agent
to withhold tax at a lower treaty rate, a non-U.S. holder
must certify its entitlement to treaty benefits.
A non-U.S. holder generally can meet this certification
requirement by providing to us or our paying agent an applicable
IRS Form W-8 (which generally remains valid for three
years, after which time a new properly completed and executed form
must be provided to us or our paying agent). If the holder holds
the stock through a financial institution or other agent acting on
the holder’s behalf, the holder will be required to provide
appropriate documentation to the agent. The holder’s agent
will then be required to provide certification to us or our paying
agent, either directly or through other intermediaries. If
a non-U.S. holder is eligible for a reduced rate of U.S.
federal withholding tax under an income tax treaty,
such non-U.S. holder may obtain a refund or credit of any
excess amounts withheld by filing an appropriate claim for a refund
with the IRS in a timely manner.
Dividends
received by a non-U.S. holder that are effectively
connected with a U.S. trade or business conducted by
the non-U.S. holder, or, if an income tax treaty between
the United States and the non-U.S. holder’s country
of residence applies, are attributable to a permanent establishment
or a fixed base maintained by the non-U.S. holder in the
United States, are not subject to such withholding tax. To obtain
this exemption, a non-U.S. holder must provide us or our
paying agent with an IRS Form W-8ECI properly certifying
such exemption. Such effectively connected dividends, although not
subject to withholding tax, are taxed at the same graduated rates
applicable to U.S. persons, as defined under the Code, net of
certain deductions and credits, subject to any applicable income
tax treaty providing otherwise.
Sale of Common Stock
Non-U.S. holders
will generally not be subject to U.S. federal income tax on any
gains realized on the sale, exchange or other disposition of common
stock unless:
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the
gain (1) is effectively connected with the conduct by
the non-U.S. holder of a U.S. trade or business and
(2) if an income tax treaty between the United States and
the non-U.S. holder’s country of residence applies,
the gain is attributable to a permanent establishment or a fixed
base maintained by the non-U.S. holder in the United
States, in which case the special rules described below
apply;
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the non-U.S. holder
is an individual who is present in the United States for 183 days
or more in the taxable year of the sale, exchange or other
disposition of our common stock, and certain other requirements are
met, in which case the gain would be subject to a flat 30% tax, or
such reduced rate as may be specified by an applicable income tax
treaty, which may be offset by U. S. source capital losses, even
though the individual is not considered a resident of the United
States; or
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if we
are, or were within the shorter of the five-year period preceding
the disposition and the non-U.S. holder’s holding
period, a “U.S. real property holding corporation,” or
USRPHC.
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We
do not believe that we are a USRPHC and we do not anticipate
becoming one in the future. Even if we are or become a USRPHC, as
long as our common stock is regularly traded on an established
securities market, then only a non-U.S. holder that
actually or constructively owns (at any time during the shorter of
the five-year period preceding the date of disposition or the
holder’s holding period) more than 5% of our outstanding
common stock will be subject to U.S. federal income tax on the
disposition of our common stock.
Any
gain described in the first bullet point above will be subject to
U.S. federal income tax at the regular graduated rates. If
the non-U.S. holder is a corporation, under certain
circumstances, that portion of its earnings and profits that is
effectively connected with its U.S. trade or business, subject to
certain adjustments, generally would be subject to a “branch
profits tax.” The branch profits tax rate is generally 30%,
although an applicable income tax treaty between the United States
and the non-U.S. holder’s country of residence
might provide for a lower rate.
Information Reporting and Backup Withholding
We
must report annually to the IRS and to
each non-U.S. holder the gross amount of the
distributions on our common stock paid to such holder and the tax
withheld, if any, with respect to such
distributions. Non-U.S. holders may have to comply with
specific certification procedures to establish that the holder is
not a U.S. person (as defined in the Code) in order to avoid backup
withholding at the applicable rate with respect to dividends on our
common stock. Dividends paid to non-U.S. holders subject
to withholding of U.S. federal income tax, as described above in
“Dividends on Our Common Stock,” generally will be
exempt from U.S. backup withholding.
Information
reporting and backup withholding will generally apply to the
proceeds of a disposition of our common stock by
a non-U.S. holder effected by or through the U.S. office
of any broker, U.S. or foreign, unless the holder certifies its
status as a non-U.S. holder and satisfies certain other
requirements, or otherwise establishes an exemption. Generally,
information reporting and backup withholding will not apply to a
payment of disposition proceeds to a non-U.S. holder
where the transaction is effected outside the United States through
a non-U.S. office of a broker. However, for information
reporting purposes, dispositions effected through
a non-U.S. office of a broker with substantial U.S.
ownership or operations generally will be treated in a manner
similar to dispositions effected through a U.S. office of a
broker. Non-U.S. holders should consult their own tax
advisors regarding the application of the information reporting and
backup withholding rules to them.
Copies
of information returns may be made available to the tax authorities
of the country in which the non-U.S. holder resides or is
incorporated under the provisions of a specific treaty or
agreement. Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules from a payment to
a non-U.S. holder can be refunded or credited against
the non-U.S. holder’s U.S. federal income tax
liability, if any, provided that an appropriate claim is filed with
the IRS in a timely manner.
Withholding on Foreign Accounts
Legislation
known as the Foreign Account Tax Compliance Act and guidance issued
thereunder (“FATCA”) imposes withholding taxes on
certain types of payments made to “foreign financial
institutions” and certain other foreign entities (including
financial intermediaries). FATCA generally imposes withholding at a
rate of 30% on payments to certain foreign entities of dividends on
our common stock and the gross proceeds of dispositions of our
common stock, unless various U.S. information reporting and due
diligence requirements (generally relating to ownership by U.S.
persons of interests in or accounts with those entities) have been
satisfied or the entity otherwise qualifies for an exemption. An
intergovernmental agreement between the United States and an
applicable foreign country may modify these requirements. These
withholding rules generally apply to payments of dividends on
common stock, and to payments of gross proceeds from a sale or
other disposition our common stock made on or after January 1,
2019. You should consult your tax advisor regarding the application
of FATCA.
The preceding discussion of U.S. federal tax considerations is for
general information only. It is not tax advice. Each prospective
investor should consult its own tax advisor regarding the
particular U.S. federal, state and local and non-U.S. tax
consequences of purchasing, holding and disposing of our common
stock, including the consequences of any proposed change in
applicable laws.
UNDERWRITING
Aegis
Capital Corp. is acting as the underwriter of this offering. We
have entered into an underwriting agreement dated
,
2019 with the underwriter. Pursuant to the terms and subject to the
conditions set forth in the underwriting agreement, we have agreed
to sell to the underwriter and the underwriter has agreed to
purchase, at the public offering price less the underwriting
discounts set forth on the cover page of this prospectus
supplement, the following number of shares of our common
stock.
Underwriter
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Aegis Capital
Corp.
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The
underwriter is committed to purchase all of the shares of common
stock offered by us other than those covered by the option to
purchase additional shares described below, if it purchases any
shares. The obligations of the underwriter may be terminated upon
the occurrence of certain events specified in the underwriting
agreement. Furthermore, pursuant to the underwriting agreement, the
underwriter’s obligations are subject to customary
conditions, representations and warranties contained in the
underwriting agreement, such as receipt by the underwriter of
officers’ certificates and legal opinions.
We have
agreed to indemnify the underwriter against specified liabilities,
including liabilities under the Securities Act, and to contribute
to payments the underwriter may be required to make in respect
thereof.
The
underwriter is offering the shares of common stock, subject to
prior sale, when, as and if issued to and accepted by it, subject
to approval of legal matters by its counsel and other conditions
specified in the underwriting agreement. The underwriter reserves
the right to withdraw, cancel or modify offers to the public and to
reject orders in whole or in part.
The
underwriter proposes to offer the shares of common stock offered by
us to the public at the public offering price set forth on the
cover of this prospectus supplement. In addition, the underwriter
may offer some of the shares of common stock to other securities
dealers at such price less a concession of
$ per
share.
We have
granted the underwriter an over-allotment option. This option,
which is exercisable for up to 45 days after the date of this
prospectus supplement, permits the underwriter to purchase a
maximum of additional shares of common stock from us to cover
over-allotments. If the underwriter exercises all or part of this
option, it will purchase shares of common stock covered by the
option at the public offering price that appears on the cover page
of this prospectus supplement, less the underwriting discount. If
this option is exercised in full, the total price to the public
will be approximately
$ and
the total proceeds to us, before expenses, will be approximately
$ ,
assuming no sale of shares to Company Investors.
Discounts and Commissions. The
following table shows the public offering price, underwriting
discount and proceeds, before expenses, to us. The information
assumes either no exercise or full exercise by the underwriter of
its over-allotment option.
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Public offering
price
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$
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$
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$
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Underwriting
discount
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$
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$
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$
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Proceeds, before
expenses, to us
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$
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$
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$
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We have
also agreed to pay all expenses relating to the offering, including
(a) all filing fees and expenses relating to the registration of
the shares of common stock to be sold in the offering (including
shares of common stock sold upon exercise of the
underwriter’s over-allotment option) with the Commission; (b)
all fees associated with the review of the offering by FINRA and
all fees and expenses relating to the listing of such shares of
common stock on the NYSE American; (c) all fees, expenses and
disbursements relating to the registration, qualification or
exemption of securities offered under the “blue sky”
securities laws designated by the underwriter; (d) all fees,
expenses and disbursements relating to the registration,
qualification or exemption of securities offered under the
securities laws of foreign jurisdictions designated by the
underwriter; (e) transfer and/or stamp taxes, if any, payable upon
the transfer of the shares of common stock from the Company to the
underwriter; (f) fees and expenses of our legal counsel and
accountants; and (g) up to $65,000 for the actual fees and expenses
incurred by the underwriter, including legal fees, not to exceed
$65,000 or $25,000 if the offering is not consummated.
Discretionary Accounts. The underwriter
does not intend to confirm sales of the shares of common stock
offered hereby to any accounts over which it has discretionary
authority.
Lock-Up Agreements. Pursuant to certain
“lock-up” agreements, (a) our executive officers and
directors as of the pricing date of the offering, have agreed,
subject to certain exceptions, not to offer, issue, sell, contract
to sell, encumber, grant any option for the sale of or otherwise
dispose of any securities of the company without the prior written
consent of the underwriter, for a period of 45 days from the date
of the offering, and (b) subject to certain exceptions, including
sales to non-U.S. investors at an effective price per share of
common stock equal to or greater than the public offering price per
share in this offering, we, and any successor, have agreed not to
for a period of 45 days from the date of the pricing of the
offering (1) offer, sell or otherwise transfer or dispose of,
directly or indirectly, any shares of capital stock of the Company
or (2) file or caused to be filed any registration statement with
the SEC relating to the offering of any shares of our capital stock
or any securities convertible into or exercisable or exchangeable
for shares of our capital stock. This lock-up provision applies to
shares of common stock and to securities convertible into or
exchangeable or exercisable for shares of common stock. It also
applies to shares of common stock owned now or acquired later by
the person executing any such “lock-up” agreement or
for which the person executing such agreement later acquires the
power of disposition.
Electronic Offer, Sale and Distribution of
Shares. A prospectus supplement in electronic format may be
made available on the websites maintained by the underwriter and
the underwriter may distribute prospectus supplements
electronically. The underwriter may agree to allocate a number of
shares for sale to its online brokerage account holders. Internet
distributions will be allocated by the underwriter and on the same
basis as other allocations. Other than the prospectus supplement in
electronic format, the information on these websites is not part of
this prospectus supplement or the registration statement of which
this prospectus supplement forms a part, has not been approved or
endorsed by us or the underwriter in its capacity as underwriter,
and should not be relied upon by investors.
Other Relationships. The underwriter
and its affiliates may in the future provide various investment
banking, commercial banking and other financial services for us and
our affiliates for which they may receive customary fees; however,
except as disclosed in this prospectus supplement, we have no
present arrangements with the underwriter for any further
services.
Stabilization. In connection with this
offering, the underwriter may engage in stabilizing transactions,
over-allotment transactions, syndicate covering transactions,
penalty bids and purchases to cover positions created by short
sales.
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Stabilizing
transactions permit bids to purchase shares so long as the
stabilizing bids do not exceed a specified maximum, and are engaged
in for the purpose of preventing or retarding a decline in the
market price of the shares while the offering is in
progress.
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Over-allotment
transactions involve sales by the underwriter of shares in excess
of the number of shares the underwriter is obligated to purchase.
This creates a syndicate short position which may be either a
covered short position or a naked short position. In a covered
short position, the number of shares over-allotted by the
underwriter is not greater than the number of shares that it may
purchase in the over-allotment option. In a naked short position,
the number of shares involved is greater than the number of shares
in the over-allotment option. The underwriter may close out any
short position by exercising its over-allotment option and/or
purchasing shares in the open market.
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Syndicate
covering transactions involve purchases of shares in the open
market after the distribution has been completed in order to cover
syndicate short positions. In determining the source of shares to
close out the short position, the underwriter will consider, among
other things, the price of shares available for purchase in the
open market as compared with the price at which they may purchase
shares through exercise of the over-allotment option. If the
underwriter sells more shares than could be covered by exercise of
the over-allotment option and, therefore, has a naked short
position, the position can be closed out only by buying shares in
the open market. A naked short position is more likely to be
created if the underwriter is concerned that after pricing there
could be downward pressure on the price of the shares in the open
market that could adversely affect investors who purchase in the
offering.
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Penalty
bids permit the underwriter to reclaim a selling concession from a
syndicate member when the shares originally sold by that syndicate
member are purchased in stabilizing or syndicate covering
transactions to cover syndicate short positions.
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These
stabilizing transactions, over-allotment transactions, syndicate
covering transactions and penalty bids may have the effect of
raising or maintaining the market price of shares of our common
stock or preventing or retarding a decline in the market price of
shares of our common stock. As a result, the price of shares of our
common stock in the open market may be higher than it would
otherwise be in the absence of these transactions. Neither we nor
the underwriter make any representation or prediction as to the
effect that the transactions described above may have on the price
of shares of our common stock. These transactions may be effected
on the NYSE American or otherwise.
Passive Market Making. In connection
with this offering, the underwriter and selling group members may
engage in passive market making transactions in shares of our
common stock in accordance with Rule 103 of Regulation M under the
Exchange Act, during a period before the commencement of offers or
sales of the shares and extending through the completion of the
distribution. A passive market maker must display its bid at a
price not in excess of the highest independent bid of that
security. However, if all independent bids are lowered below the
passive market maker’s bid, that bid must then be lowered
when specified purchase limits are exceeded.
Offer restrictions outside the United States
Other
than in the United States, no action has been taken by us or the
underwriter that would permit a public offering of the securities
offered by this prospectus supplement in any jurisdiction where
action for that purpose is required. The securities offered by this
prospectus supplement may not be offered or sold, directly or
indirectly, nor may this prospectus supplement or any other
offering material or advertisements in connection with the offer
and sale of any such securitiesbe distributed or published in any
jurisdiction, except under circumstances that will result in
compliance with the applicable rules and regulations of that
jurisdiction. Persons into whose possession this prospectus
supplement comes are advised to informthemselves about and to
observe any restrictions relating to the offering and the
distribution of this prospectus supplement. This prospectus
supplement does not constitute an offer to sell or a solicitation
of an offer to buy any securities offered by this prospectus
supplement in any jurisdiction in which such an offer or a
solicitation is unlawful.
LEGAL
MATTERS
The
validity of the securities offered hereby has been passed upon for
us by Hart & Hart, LLC of Denver, Colorado, and Sichenzia Ross
Ference LLP of New York, New York, acted as counsel for the
underwriter.
EXPERTS
The
financial statements as of September 30, 2019 and 2018 and for the
years then ended and management’s assessment of the
effectiveness of internal control over financial reporting as of
September 30, 2019 incorporated by reference in this Prospectus
Supplement have been so incorporated in reliance on the reports of
BDO USA, LLP, an independent registered public accounting firm,
(the report on the financial statements contains an explanatory
paragraph regarding the Company's ability to continue as a going
concern, and the report on the effectiveness of internal control
over financial reporting expresses an adverse opinion on the
effectiveness of the Company's internal control over financial
reporting as of September 30, 2019) incorporated herein by
reference, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement
on Form S-3 (File No. 333-226558) under
the Securities Act of 1933, as amended, or the Securities Act, with
respect to the securities offered by this prospectus supplement and
the accompanying prospectus. This prospectus supplement and the
accompanying prospectus filed as part of the registration statement
do not contain all the information set forth in the registration
statement and its exhibits and schedules. For further information
about us, we refer you to the registration statement and to its
exhibits and schedules.
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. The SEC maintains a website that
contains reports, proxy and information statements and other
information regarding issuers that file electronically with the
SEC, including us. The address of the SEC website is www.sec.gov.
Our common stock is listed on the NYSE American, and reports, proxy
statements and other information concerning us can also be
inspected at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
These documents are also available, free of charge, through t our
website at www.cel-sci.com. Information contained on or accessible
through our website is not incorporated by reference into this
prospectus supplement or the accompanying prospectus and you should
not consider information on or accessible through our website to be
part of this prospectus supplement or the accompanying
prospectus.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference” the
information we file with it, which means that we can disclose
important information to you by referring you to those documents
instead of having to repeat the information in this prospectus
supplement and the accompanying prospectus. The information
incorporated by reference is considered to be part of this
prospectus supplement and the accompanying prospectus, and later
information that we file with the SEC prior to the completion of
this offering will automatically update and supersede this
information. We incorporate by reference the documents listed below
that we have filed with the SEC (other than current reports
furnished under Item 2.02 or Item 7.01 of Form 8-K and exhibits
filed on such form that are related to such items):
●
our annual
report on Form 10-K and 10-K/A for the fiscal year ended September
30, 2019 that we filed with the SEC on December 16, 2019 and
December 23, 2019;
●
our
current reports on Form 8-K filed with the SEC on October 15, 2019
and December 23, 2019; and
●
the description of
our common stock contained in our Registration Statement on Form
8-A filed with the SEC on July 2, 1996 and all amendments and
reports updating that description.
We also incorporate by reference into this prospectus supplement
and the accompanying prospectus all documents (other than current
reports furnished under Item 2.02 or Item 7.01 of
Form 8-K and exhibits filed on such form that are related
to such items) that are filed by us with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended, or the Exchange Act, after the date of this
prospectus supplement until we sell all of the securities covered
by this prospectus supplement and the accompanying prospectus or
the sale of securities by us pursuant to this prospectus supplement
and the accompanying prospectus is terminated.
A statement contained in a document incorporated by reference into
this prospectus supplement and the accompanying prospectus shall be
deemed to be modified or superseded for purposes of this prospectus
supplement and the accompanying prospectus to the extent that a
statement contained in this prospectus supplement and the
accompanying prospectus or in any other subsequently filed document
which is also incorporated in this prospectus supplement and the
accompanying prospectus modifies or replaces such statement. Any
statements so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this prospectus
supplement and the accompanying prospectus.
You may request a copy of these documents, orally or in writing,
which will be provided to you at no cost by
contacting:
CEL-SCI Corporation
8229 Boone Blvd., #802
Vienna, Virginia 22182
Attention: Senior Vice President of Operations
Telephone: (703) 506-9460
PROSPECTUS
CEL-SCI
CORPORATION
Common
Stock
CEL-SCI Corporation
may offer from time to time shares of common stock, preferred
stock, convertible preferred stock, rights, warrants, units
consisting of one or more of these securities, as well as any of
these securities
issuable upon the exercise of warrants, at an initial offering price not
to exceed $100,000,000, at prices and on terms to be determined at
or prior to the time of sale in light of market conditions at the
time of sale.
Specific terms
pertaining to the securities offered by this prospectus will be set
forth in one or more accompanying prospectus supplements, together
with the terms of the offering and the initial price and the net
proceeds to CEL-SCI from the sale. The prospectus
supplement will set forth, without limitation, the terms of the
offering and sale of such securities.
CEL-SCI may sell
the securities offered by this prospectus directly, through agents
designated from time to time, or through underwriters or dealers.
If any agents of CEL-SCI or any underwriters or dealers are
involved in the sale of the securities, the names of the agents,
underwriters or dealers, any applicable commissions and discounts,
and the net proceeds to CEL-SCI will be set forth in the applicable
prospectus supplement.
CEL-SCI may not use
this prospectus to complete sales of its securities unless this
prospectus is accompanied by a prospectus supplement.
The securities
offered by this prospectus are speculative and involve a high
degree of risk and should be purchased only by persons who can
afford to lose their entire investment. For a
description of certain important factors that should be considered
by prospective investors, see "Risk Factors" beginning on page 16
of this prospectus.
Neither the
Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or has
passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a
criminal offense.
CEL-SCI's common
stock is traded on the NYSE American under the symbol
“CVM”. On August 16, 2018 the closing price
of CEL-SCI’s common stock on the NYSE American was
$0.98.
The date of this
Prospectus is ________, 2018
PROSPECTUS
SUMMARY
THIS
SUMMARY IS QUALIFIED BY THE OTHER INFORMATION APPEARING ELSEWHERE
IN THIS PROSPECTUS.
CEL-SCI is focused
on finding the best way to activate the immune system to fight
cancer and infectious diseases. Its lead investigational therapy
Multikine® (Leukocyte Interleukin, Injection) is currently in
a pivotal Phase 3 clinical trial involving head and neck cancer,
for which CEL-SCI has received Orphan Drug Status from the U.S.
FDA. The study was fully enrolled with 928 patients in September
2016. Currently the Company is waiting for the occurrence of 298
events (deaths) in the two main groups to determine final results.
If the primary endpoint of this global study is achieved, the
results will be used to support applications to regulatory agencies
around the world for worldwide commercial marketing approvals as a
first line cancer therapy.
CEL-SCI’s
immune therapy, Multikine, is being used in a different way than
immune therapy is usually used. It is given before any other
therapy has been administered because that is when the immune
system is thought to be strongest. It is also administered locally
to treat tumors or infections. For example, in the Phase 3 clinical
trial, Multikine is given locally at the site of the tumor as a
first line treatment before surgery, radiation and/or chemotherapy.
The goal is to help the intact immune system kill the micro
metastases that usually cause recurrence of the cancer. In short,
CEL-SCI believes that local administration and administration
before weakening of the immune system by chemotherapy and radiation
will result in higher efficacy with less or no
toxicity.
CEL-SCI is also
investigating a different peptide-based immunotherapy
(LEAPS-H1N1-DC) as a possible treatment for H1N1 hospitalized
patients and as a vaccine (CEL-2000 and CEL-4000) for Rheumatoid
Arthritis (currently in preclinical testing) using its LEAPS
technology platform. CEL-SCI was recently awarded a Phase 2 Small
Business Innovation Research (SBIR) grant in the amount of $1.5
million from the National Institutes of Health (NIH). This grant
will provide funding to allow CEL-SCI to advance its first LEAPS
product candidate, CEL-4000, towards an Investigational New Drug
(IND) application, by funding GMP manufacturing, IND enabling
studies, and additional mechanism of action studies.
CEL-SCI was formed
as a Colorado corporation in 1983. CEL-SCI’s principal office
is located at 8229 Boone Boulevard, Suite 802, Vienna, VA 22182.
CEL-SCI’s telephone number is 703-506-9460 and its website is
www.cel-sci.com.
CEL-SCI does not incorporate the information on its website into
this prospectus, and you should not consider it part of this
prospectus.
CEL-SCI makes its
electronic filings with the Securities and Exchange Commission
(SEC), including its annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K and amendments to these
reports available on its website free of charge as soon as
practicable after they are filed or furnished to the
SEC.
In this prospectus,
unless otherwise specified or the context requires otherwise, the
terms “CEL-SCI,” the “Company,”
“we,” “us” and “our” to refer
to CEL-SCI Corporation. Our fiscal year ends on September
30.
CEL-SCI’S
PRODUCTS
CEL-SCI is
dedicated to research and development directed at improving the
treatment of cancer and other diseases by using the immune system,
the body’s natural defense system. CEL-SCI is currently
focused on the development of the following product candidates and
technologies:
1)
Multikine,
an investigational immunotherapy under development for
the potential treatment of certain head and neck
cancers;
2)
L.E.A.P.S. (Ligand
Epitope Antigen Presentation System) technology, or LEAPS, with two
investigational therapies, LEAPS-H1N1-DC, a product candidate under
development for the potential treatment of pandemic influenza in
hospitalized patients, and CEL-2000 and CEL-4000, vaccine product
candidates under development for the potential treatment of
rheumatoid arthritis.
MULTIKINE
Our lead
investigational therapy, Multikine, is currently being developed as
a potential therapeutic agent directed at using the immune system
to produce an anti-tumor immune response. Data from Phase 1 and
Phase 2 clinical trials suggest that Multikine may help the immune
system “see” the tumor and then attack it, enabling the
body’s own anti-tumor immune response to fight the tumor.
Multikine is the trademark we have registered for this
investigational therapy, and this proprietary name is subject to
review by the U.S. Food and Drug Administration, or FDA, in
connection with our future anticipated regulatory submission for
approval. Multikine has not been licensed or approved for sale,
barter or exchange by the FDA or any other regulatory agency, such
as the European Medicine Agency, or EMA. Neither has its safety or
efficacy been established for any use.
Multikine is an
immunotherapy product candidate comprised of a patented defined
mixture of 14 human natural cytokines and is manufactured in a
proprietary manner in our manufacturing facility. We spent over 10
years and more than $80 million developing and validating the
manufacturing process for Multikine. The pro-inflammatory cytokine
mixture includes interleukins, interferons, chemokines and
colony-stimulating factors, which contain elements of the
body’s natural mix of defenses against cancer.
Multikine is
designed to be used in a different way than immune therapy is
generally being used. Generally immunotherapy is given to patients
who have already failed other treatments of such as surgery,
radiation and/or chemotherapy and most of the time it is
administered systemically. Multikine on the other hand is
administered locally to treat tumors and their microenvironment
before any other therapy has been administered because it is
believed that is the time when the immune system is thought to be
most amenable to activation against the tumor. For example, in the
Phase 3 clinical trial, Multikine is injected locally at the site
of the tumor and near the adjacent draining lymph nodes as a first
line of treatment before surgery, radiation and/or chemotherapy
because that is when the immune system is thought to be strongest.
The goal is to help the intact immune system recognize and kill the
tumor micro metastases that usually cause recurrence of the cancer.
In short, CEL-SCI believes that the local administration and
administration of Multikine and its administration before weakening
of the immune system by chemotherapy and radiation will result in
better anti-tumor response than if Multikine were administered as a
second- or later-line therapy. In clinical studies of Multikine,
administration of the investigational therapy to head and neck
cancer patients has demonstrated the potential for lesser or no
appreciable toxicity.
Source: Adapted from Timar et al., Journal of Clinical Oncology
23(15) May 20, 2005
The first
indication CEL-SCI is pursuing for its investigational drug product
candidate Multikine is an indication for the neoadjuvant therapy in
patients with squamous cell carcinoma of the head and neck, or
SCCHN (hereafter also referred to as advanced primary head and neck
cancer).
SCCHN is a type of
head and neck cancer, and CEL-SCI believes that, in the aggregate,
there is a large, unmet medical need among head and neck cancer
patients. CEL-SCI believes the last FDA approval of a therapy
indicated for the treatment of advanced primary head and neck
cancer was over 50 years ago. In the aggregate, head and neck
cancer represents about 6% of the world’s cancer cases, with
approximately over 650,000 patients diagnosed worldwide each year,
and nearly 60,000 patients diagnosed annually in the United States.
Multikine investigational immunotherapy was granted Orphan Drug
designation for neoadjuvant therapy in patients with SCCHN by the
FDA in the United States.
This trial is
currently primarily under the management of two clinical research
organizations, or CROs: ICON Inc. or ICON, and Ergomed Clinical
Research Limited, or Ergomed.
The Phase 3 study
was designed with the objective that, if the study endpoint, which
is an improvement in overall survival of the subjects treated with
the Multikine treatment regimen plus the current standard of care
(SOC) as compared to subjects treated with the current SOC only, is
satisfied, the study results are expected to be used to support
applications that we plan to submit to regulatory agencies in order
to seek commercial marketing approvals for Multikine in major
markets around the world. This assessment can only be made when a
certain number of deaths have occurred in these two main comparator
groups of the study.
The primary
endpoint for the protocol for this Phase 3 head and neck cancer
study required that a 10% increase in overall survival be obtained
in the Multikine group which also is administered CIZ (CIZ = low
dose (non-chemotherapeutic) of cyclophosphamide, indomethacin and
Zinc-multivitamins) all of which are thought to enhance Multikine
activity), plus Standard of Care (Surgery + Radiotherapy or
Chemoradiotherapy) arm of the study over the Control comparator
(Standard of Care alone) arm. As the study was designed, the final
determination of whether this endpoint had been successfully
reached could only be determined when 298 events (deaths) had
occurred in the combined comparator arms of the study.
Nine hundred
twenty-eight (928) newly diagnosed head and neck cancer patients
have been enrolled in this Phase 3 cancer study and all the
patients who have completed treatment continue to be followed for
protocol-specific outcomes in accordance with the Study Protocol.
The last patient was enrolled in the study in September 2016.
Approximately 135 patients were enrolled in the study from 2011 to
2013, about 195 were enrolled in 2014, about 340 in 2015, and about
260 in 2016. The study protocol assumed an overall survival rate of
about 55% at 3 years for the SOC treatment group alone. At this
point in the study the 928 patients enrolled in the study are being
followed-up as required by the study protocol.
Since CEL-SCI
launched its Phase 3 clinical trial for Multikine, CEL-SCI has
incurred expenses of approximately $48.7 million as of March 31,
2018 on direct costs for the Phase 3 clinical trial. CEL-SCI
estimates it will incur additional expenses of approximately $10.5
million for the remainder of the Phase 3 clinical trial. It should
be noted that this estimate is based only on the information
currently available in CEL-SCI’s contracts with the Clinical
Research Organizations responsible for managing the Phase 3
clinical trial and does not include other related costs, e.g., the
manufacturing of the drug. This number may be affected by the rate
of death accumulation in the study, foreign currency exchange
rates, and many other factors, some of which cannot be foreseen
today. It is therefore possible that the cost of the Phase 3
clinical trial will be higher than currently
estimated.
On August 10, 2017,
we received a letter from the U.S. Food and Drug Administration
(FDA) stating that the clinical hold that had been imposed on our
Phase 3 cancer study with Multikine has been removed and that all
clinical trial activities under this Investigational New Drug
application (IND) may resume.
Ultimately, the
decision as to whether CEL-SCI’s drug product candidate is
safe and effective can only be made by FDA and/or by other
regulatory authorities based upon an assessment of all of the data
from an entire drug development program submitted as part of an
application for marketing approval. As detailed elsewhere in this
prospectus supplement the current Phase 3 clinical study for
CEL-SCI’s investigational drug may or may not be able to be
used as the pivotal study supporting a marketing application in the
United States, and, if not, at least one entirely new Phase 3
pivotal study would need to be conducted to support a marketing
application in the United States.
LEAPS
Our patented T-cell
Modulation Process, referred to as LEAPS (Ligand Epitope Antigen
Presentation System), uses “heteroconjugates” to direct
the body to choose a specific immune response. LEAPS is designed to
stimulate the human immune system to more effectively fight
bacterial, viral and parasitic infections as well as autoimmune,
allergies, transplantation rejection and cancer, when it cannot do
so on its own. Administered like a vaccine, LEAPS combines T-cell
binding ligands with small, disease-associated peptide antigens,
and may provide a new method to treat and prevent certain
diseases.
The ability to
generate a specific immune response is important because many
diseases are often not combated effectively due to the body’s
selection of the “inappropriate” immune response. The
capability to specifically reprogram an immune response may offer a
more effective approach than existing vaccines and drugs in
attacking an underlying disease.
On September 19,
2017, CEL-SCI announced that it has been awarded a Phase 2 Small
Business Innovation Research (SBIR) grant in the amount of $1.5
million from the National Institute of Arthritis Muscoskeletal and
Skin Diseases, which is part of the National Institutes of Health
(NIH). This grant will provide funding to allow CEL-SCI to advance
its first LEAPS product candidate, CEL-4000, towards an
Investigational New Drug (IND) application, by funding GMP
manufacturing, IND enabling studies, and additional mechanism of
action studies. The work is being conducted at CEL-SCI’s
research laboratory and Rush University Medical Center in Chicago,
Illinois in the laboratories of Tibor Glant, MD, Ph.D., The Jorge
O. Galante Professor of Orthopedic Surgery and Katalin Mikecz, MD,
Ph.D. Professor of Orthopedic Surgery & Biochemistry. The grant
was awarded based on published data described below by Dr. Glant's
team in collaboration with CEL-SCI showing that the administration
of a proprietary peptide using CEL-SCI's LEAPS technology prevented
the development, and lessened the severity, including inflammation,
of experimental proteoglycan induced arthritis (PGIA or GIA) when
it was administered after the disease was induced in the
animals.
In July 2014,
CEL-SCI announced that it has been awarded a Phase 1 Small Business
Innovation Research (SBIR) grant in the amount of $225,000 from the
National Institute of Arthritis Muscoskeletal and Skin Diseases,
which is part of the National Institutes of Health. The grant
funded the development of CEL-SCI’s LEAPS technology as a
potential treatment for rheumatoid arthritis, an autoimmune disease
of the joints. The work was conducted at Rush University Medical
Center in Chicago, Illinois in the laboratories of Tibor Glant, MD,
Ph.D., The Jorge O. Galante Professor of Orthopedic Surgery;
Katalin Mikecz, MD, Ph.D. Professor of Orthopedic Surgery &
Biochemistry; and Allison Finnegan, Ph.D. Professor of
Medicine.
With the support of
the SBIR grant, CEL-SCI is developing two new drug candidates,
CEL-2000 and CEL-4000, as potential rheumatoid arthritis
therapeutic vaccines. The data from animal studies using the
CEL-2000 treatment vaccine demonstrated that it could be used as an
effective treatment against rheumatoid arthritis with fewer
administrations than those required by other anti-rheumatoid
arthritis treatments currently on the market for arthritic
conditions associated with the Th17 signature cytokine TNF-a. The
data for CEL-4000 indicates it could be effective against
rheumatoid arthritis cases where a Th1 signature cytokine (IFN-c)
is dominant. CEL-2000 and CEL-4000 have the potential to be a more
disease-specific therapy, significantly less expensive, act at an
earlier step in the disease process than current therapies and may
be useful in patients not responding to existing rheumatoid
arthritis therapies. CEL-SCI believes this represents a large unmet
medical need in the rheumatoid arthritis market.
In February 2017
and November 2016, CEL-SCI announced new preclinical data that
demonstrate its investigational new drug candidate CEL-4000 has the
potential for use as a therapeutic vaccine to treat rheumatoid
arthritis. This efficacy study was supported in part by the SBIR
Phase I Grant and was conducted in collaboration with Drs. Katalin
Mikecz and Tibor Glant, and their research team at Rush University
Medical Center in Chicago, IL.
In March 2015,
CEL-SCI and its collaborators published a review article on vaccine
therapies for rheumatoid arthritis based in part on work supported
by the SBIR grant. The article is entitled “Rheumatoid
arthritis vaccine therapies: perspectives and lessons from
therapeutic Ligand Epitope Antigen Presentation System vaccines for
models of rheumatoid arthritis” and was published in Expert
Rev. Vaccines 1 - 18 and can be found at
http://www.ncbi.nlm.nih.gov/ pubmed/25787143.
In August 2012, Dr.
Zimmerman, CEL-SCI’s Senior Vice President of Research,
Cellular Immunology, gave a Keynote presentation at the OMICS 2nd
International Conference on Vaccines and Vaccinations in Chicago.
This presentation showed how the LEAPS peptides administered
altered only select cytokines specific for each disease model,
thereby improving the status of the test animals and even
preventing death and morbidity. These results support the growing
body of evidence that provides for its mode of action by a common
format in these unrelated conditions by regulation of Th1 (e.g.,
IL12 and IFN-c) and their action on reducing TNF-a and other
inflammatory cytokines as well as regulation of antibodies to these
disease associated antigens. This was also illustrated by a
schematic model showing how these pathways interact and result in
the overall effect of protection and regulation of cytokines in a
beneficial manner.
Using the LEAPS
technology, CEL-SCI has created a potential peptide treatment for
H1N1 (swine flu) hospitalized patients. This LEAPS flu treatment is
designed to focus on the conserved, non-changing epitopes of the
different strains of Type A Influenza viruses (H1N1, H5N1, H3N1,
etc.), including “swine”, “avian or bird”,
and “Spanish Influenza”, in order to minimize the
chance of viral “escape by mutations” from immune
recognition. Therefore one should think of this treatment not
really as an H1N1 treatment, but as a potential pandemic flu
treatment. CEL-SCI’s LEAPS flu treatment contains epitopes
known to be associated with immune protection against influenza in
animal models.
Additional work on
this treatment for the pandemic flu is being pursued in
collaboration with the National Institute of Allergy and Infectious
Diseases (NIAID), part of the National Institutes of Health, USA.
In May 2011 NIAID scientists presented data at the Keystone
Conference on “Pathogenesis of Influenza: Virus-Host
Interactions” in Hong Kong, China, showing the positive
results of efficacy studies in mice of LEAPS H1N1 activated
dendritic cells (DCs) to treat the H1N1 virus. Scientists at the
NIAID found that H1N1-infected mice treated with LEAPS-H1N1 DCs
showed a survival advantage over mice treated with control DCs. The
work was performed in collaboration with scientists led by Kanta
Subbarao, M.D., Chief of the Emerging Respiratory Diseases Section
in NIAID’s Division of Intramural Research, part of the
National Institutes of Health, USA.
In July 2013,
CEL-SCI announced the publication of the results of influenza
studies by researchers from the NIAID in the Journal of Clinical
Investigation (www.jci.org/articles/view/67550). The studies
described in the publication show that when CEL-SCI’s
investigational J-LEAPS Influenza Virus treatments were used
“in vitro” to activate DCs, these activated DCs, when
injected into influenza infected mice, arrested the progression of
lethal influenza virus infection in these mice. The work was
performed in the laboratory of Dr. Subbarao.
Even though the
various LEAPS drug candidates have not yet been given to humans,
they have been tested in vitro with human cells. They have induced
similar cytokine responses that were seen in these animal models,
which may indicate that the LEAPS technology might translate to
humans. The LEAPS candidates have demonstrated protection against
lethal herpes simplex virus (HSV1) and H1N1 influenza infection, as
a prophylactic or therapeutic agent in animals. They have also
shown some level of efficacy in animals in two autoimmune
conditions, curtailing and sometimes preventing disease progression
in arthritis and myocarditis animal models. CEL-SCI’s belief
is that the LEAPS technology may be a significant alternative to
the vaccines currently available on the market for these
diseases.
None of the LEAPS
investigational products have been approved for sale, barter or
exchange by the FDA or any other regulatory agency for any use to
treat disease in animals or humans. The safety or efficacy of these
products has not been established for any use. Lastly, no
definitive conclusions can be drawn from the early-phase,
preclinical-trials data involving these investigational products.
Before obtaining marketing approval from the FDA in the United
States, and by comparable agencies in most foreign countries, these
product candidates must undergo rigorous preclinical and clinical
testing which is costly and time consuming and subject to
unanticipated delays. There can be no assurance that these
approvals will be granted.
MANUFACTURING FACILITY
Before starting the
Phase 3 clinical trial, for reasons related to regulatory
considerations, CEL-SCI needed to build a dedicated manufacturing
facility to produce Multikine. This facility has been completed and
validated, and has produced multiple clinical lots for the Phase 3
clinical trial. The facility has also passed review by a European
Union Qualified Person on several occasions.
CEL-SCI’s
lease on the manufacturing facility expires on October 31, 2028.
CEL-SCI completed validation of its new manufacturing facility in
January 2010. The state-of-the-art facility is being used to
manufacture Multikine for CEL-SCI’s Phase 3 clinical trial.
In addition to using this facility to manufacture Multikine,
CEL-SCI, only if the facility is not being used for Multikine, may
offer the use of the facility as a service to pharmaceutical
companies and others, particularly those that need to “fill
and finish” their drugs in a cold environment (4 degrees
Celsius, or approximately 39 degrees Fahrenheit). Fill and finish
is the process of filling injectable drugs in a sterile manner and
is a key part of the manufacturing process for many medicines.
However, priority will always be given to Multikine as management
considers the Multikine supply to the clinical studies and
preparation for a final marketing approval to be more important
than offering fill and finish services.
ARBITRATION
On October 31,
2013, we commenced arbitration proceedings against inVentiv Health
Clinical, LLC, or inVentiv, our former clinical research
organization (CRO), and now part of Syneos Health. The arbitration
claim, initiated under the Commercial Rules of the American
Arbitration Association, alleges (i) breach of contract, (ii) fraud
in the inducement, and (iii) common law fraud. On June 25, 2018,
the arbitrator ruled that inVentiv materially breached its contract
with CEL-SCI and denied inVentiv all but one of its counterclaims
($429,649 for certain unpaid invoices) against CEL-SCI. He awarded
CEL-SCI $2,917,834 in damages. This is a final and binding decision
and to CEL-SCI’s knowledge, marks the first ever decision in
favor of a pharmaceutical/biomedical company against a CRO for
breach of contract. However, pursuant to the terms of an agreement
with an affiliate of Lake Whillans Litigation Finance, LLC, a firm
that produced partial funding for the legal expenses incurred by us
in the arbitration proceedings, all amounts received from inVentiv
by virtue of the arbitration award will be paid to Lake Whillans
Litigation Finance.
The arbitration and
its findings are subject to certain confidentiality requirements
and CEL-SCI is able to disclose only certain information at this
time. Most importantly, the arbitrator concluded as
follows:
●
The arbitrator
found that inVentiv materially breached its contract with
CEL-SCI;
●
The arbitrator
found that inVentiv knowingly misled CEL-SCI with respect to
“enrollment projections,” which, in the
arbitrator’s opinion, was “fraudulent,” but the
arbitrator denied CEL-SCI’s fraud claim as a result of
certain legal “roadblocks”;
●
The arbitrator
assessed inVentiv for the entirety of the arbitrator’s fees
for the arbitration as a result of inVentiv’s “scorched
earth litigation tactics”; and
●
The arbitrator
denied all but one of inVentiv’s counterclaims against
CEL-SCI.
THE
OFFERING
Securities
Offered:
CEL-SCI may offer
from time to time shares of common stock, preferred
stock, convertible
preferred stock rights, warrants, units consisting of one or more
of the foregoing securities, as well as any of these securities
issuable upon the exercise of the warrants, at an initial offering
price not to exceed $100,000,000, at prices and on terms to be
determined at or prior to the time of sale in light of market
conditions at the time of sale. CEL-SCI may not use this
prospectus to complete sales of its securities unless this
prospectus is accompanied by a prospectus
supplement. See the “Plan of Distribution”
section of this prospectus for additional information concerning
the manner in which CEL-SCI’s securities may be
offered.
Common Stock
Outstanding:
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As of August 17,
2018 CEL-SCI had 24,021,058 outstanding shares of common
stock. The number of outstanding shares does not give
effect to shares which may be issued upon the exercise and/or
conversion of options, warrants or other convertible
securities. See "Comparative Share Data" for more
information.
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Risk
Factors:
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The purchase of the
securities offered by this prospectus involves a high degree of
risk. Risk factors include the lack of revenues and
history of loss, need for additional capital and need for FDA
approval. See the “Risk Factors" section of this
prospectus for additional Risk Factors.
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Common
Stock
NYSE American
symbol:
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CVM
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FORWARD
LOOKING STATEMENTS
This prospectus and
the documents that are incorporated or deemed to be incorporated by
reference into this prospectus, contain or incorporate by reference
“forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. You can generally
identify these forward-looking statements by forward-looking words
such as “anticipates,” “believes,”
“expects,” “intends,” “future,”
“could,” “estimates,” “plans,”
“would,” “should,” “potential,”
“continues” and similar words or expressions (as well
as other words or expressions referencing future events, conditions
or circumstances). These forward-looking statements involve risks,
uncertainties and other important factors that may cause our actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements, including, but not
limited to:
●
the progress and
timing of, and the amount of expenses associated with, our
research, development and commercialization activities for our
product candidates, including Multikine;
●
our expectations
regarding the timing, costs and outcome of any pending or future
litigation matters, lawsuits or arbitration proceedings, including
but not limited to the pending arbitration proceeding we initiated
against our former clinical research organization, or
CRO;
●
the success of our
clinical studies for our product candidates;
●
our ability to
obtain U.S. and foreign regulatory approval for our product
candidates and the ability of our product candidates to meet
existing or future regulatory standards;
●
our expectations
regarding federal, state and foreign regulatory
requirements;
●
the therapeutic
benefits and effectiveness of our product candidates;
●
the safety profile
and related adverse events of our product candidates;
●
our ability to
manufacture sufficient amounts of Multikine or our other product
candidates for use in our clinical studies or, if approved, for
commercialization activities following such regulatory
approvals;
●
our plans with
respect to collaborations and licenses related to the development,
manufacture or sale of our product candidates;
●
our expectations as
to future financial performance, expense levels and liquidity
sources;
●
our ability to
compete with other companies that are or may be developing or
selling products that are competitive with our product
candidates;
●
anticipated trends
and challenges in our potential markets;
●
our ability to
attract, retain and motivate key personnel;
●
our ability to
continue as a going concern; and
All forward-looking
statements contained herein are expressly qualified in their
entirety by this cautionary statement, the risk factors set forth
under the heading “Risk Factors” and elsewhere in this
prospectus and in the documents incorporated or deemed to be
incorporated by reference into this prospectus. The forward-looking
statements contained in this prospectus and any document
incorporated or deemed to be incorporated by reference in this
prospectus, speak only as of their respective
dates. Except to the extent required by applicable laws
and regulations, we undertake no obligation to update these
forward-looking statements to reflect new information, events or
circumstances after the date of this prospectus or to reflect the occurrence of
unanticipated events. In light of these risks and uncertainties,
the forward-looking events and circumstances described in this
prospectus and the documents that are incorporated by reference
into this prospectus supplement and the accompanying prospectus may
not occur and actual results could differ materially from those
anticipated or implied in such forward-looking statements.
Accordingly, you are cautioned not to place undue reliance on these
forward-looking statements.
RISK
FACTORS
Investors should be
aware that this offering involves the risks described below, which
could adversely affect the price of CEL-SCI’s common
stock. In addition to the other information contained in
this prospectus, the following factors should be considered
carefully in evaluating an investment in the securities offered by
this prospectus. The risks and uncertainties we
described are not the only ones facing us. Additional
risks not presently known to us, or that we currently deem
immaterial, may also impair our business operations. If
any of these risks were to occur, our business, financial
condition, result of operations and liquidity would likely
suffer. In that event, the trading price of our common
stock would decline, and you could lose all or part of your
investment. Some statements in this Prospectus,
including statements in the following risk factors, constitute
forward-looking statements. See “Forward-Looking
Statements.”
Risks Related to CEL-SCI
CEL-SCI has identified material weaknesses in its internal control
over financial reporting which could, if not remediated, result in
material misstatements in CEL-SCI’s financial
statements.
CEL-SCI’s
management is responsible for establishing and maintaining adequate
internal control over its financial reporting, as defined in Rule
13a-15(f) under the Exchange Act. CEL-SCI’s management
identified material weaknesses in the internal control over
financial reporting as of September 30, 2016. 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 of CEL-SCI’s annual
or interim financial statements will not be prevented or detected
on a timely basis.
CEL-SCI discovered
an error in the way it accounted for the lease for its
manufacturing facility. The accounting error was determined to be a
material weakness in CEL-SCI’s internal control over
financial reporting as of September 30, 2016 relating to
CEL-SCI’s financial close process for non-routine
transactions including the accounting for leases and the assessment
of impairment of long-lived assets. The errors were identified
during the course of the preparation of its financial statements
and other financial data for its fiscal year ended September 30,
2017, as well as its assessment of its disclosure controls and
procedures and internal control over financial reporting as of that
date. This resulted in CEL-SCI filing an amended 10-K/A for the
year ended September 30, 2016, that disclosed these material
weaknesses and the impact of the restatement to the previously
issued financial statements. These material weaknesses continue to
exist at September 30, 2017 and CEL-SCI is in the process of
remediating these material weaknesses.
If the remedial
measures CEL-SCI has begun implementing that are designed to
address these material weaknesses are insufficient to address these
material weaknesses, or if additional material weaknesses or
significant deficiencies in CEL-SCI’s internal control are
discovered or occur in the future, the financial statements may
contain material misstatements and CEL-SCI could be required to
restate its financial results.
We have incurred significant losses since inception, and we
anticipate that we will continue to incur significant losses for
the foreseeable future and may never achieve or maintain
profitability.
We have a history
of net losses, expect 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 our formation
and through June 30, 2018, we incurred net losses of approximately
$317 million. We have relied principally upon the proceeds from the
public and private sales of our securities to finance our
activities to date. To date, we have not commercialized any
products or generated any revenue from the sale of products, and we
do not expect to generate any product revenue for the foreseeable
future. We do not know whether or when we will generate product
revenue or become profitable.
We are heavily
dependent on the success of Multikine which is under clinical
development. We cannot be certain that Multikine will receive
regulatory approval or be successfully commercialized even if we
receive regulatory approval Multikine is our only product candidate
in late-stage clinical development, and our business currently
depends heavily on its successful development, regulatory approval
and commercialization. We have no drug products for sale currently
and may never be able to develop approved and marketable drug
products.
Even if we succeed
in developing and commercializing one or more of our product
candidates, we expect to continue to incur significant operating
and capital expenditures as we:
●
continue to
undertake preclinical development and clinical trials for product
candidates;
●
seek regulatory
approvals for product candidates; and
●
implement
additional internal systems and infrastructure.
To become and
remain profitable, we must succeed in developing and
commercializing our product candidates, which must generate
significant revenue. This will require us to be successful in a
range of challenging activities, including completing preclinical
testing and clinical trials of our product candidates, discovering
or acquiring additional product candidates, obtaining regulatory
approval for these product candidates and manufacturing, marketing
and selling any products for which we may obtain regulatory
approval. We are only in the preliminary stages of most of these
activities. We may never succeed in these activities and, even if
we do, may never generate revenue that is significant enough to
achieve profitability.
Even if we do
achieve profitability, we may not be able to sustain or increase
profitability on a quarterly or annual basis. Our failure to become
and remain profitable could depress the value of our company and
could impair our ability to raise capital, expand our business,
maintain our research and development efforts, diversify our
product offerings or even continue our operations. A decline in the
value of our company could cause our stockholders to lose all or
part of their investment.
Our Independent Registered Public Accountants have included in
their report on our financial statements a paragraph stating that
we may be unable to continue as a going concern.
As a result of our
recurring losses from operations, our independent registered public
accounting firm, BDO USA, LLP, has issued a report in connection
with their audit of our financial statements for the year ended
September 30, 2017, that included an explanatory paragraph
referring to our recurring losses from operations and expressing
substantial doubt in our ability to continue as a going concern
without additional capital becoming available. The doubt about our
ability to continue as a going concern could have an adverse impact
on our ability to execute our business plan, result in the
reluctance on the part of certain suppliers to do business with us,
or adversely affect our ability to raise additional debt or equity
capital.
We will require substantial additional capital to remain in
operation. A failure to obtain this necessary capital when needed
could force us to delay, limit, reduce or terminate our product
candidates’ development or commercialization
efforts.
As of June 30,
2018, we had cash and cash equivalents of approximately $2.3
million. We raised approximately $5 million subsequent to June 30,
2018. We believe that we will continue to expend substantial
resources for the foreseeable future developing Multikine, LEAPS
and any other product candidates or technologies that we may
develop or acquire. These expenditures will include costs
associated with research and development, potentially obtaining
regulatory approvals and having our products manufactured, as well
as marketing and selling products approved for sale, if any. In
addition, other unanticipated costs may arise. Because the outcome
of our current and anticipated clinical trials is highly uncertain,
we cannot reasonably estimate the actual amounts necessary to
successfully complete the development and commercialization of our
product candidates.
Our future capital
requirements depend on many factors, including:
●
the rate of
progress of, results of and cost of completing Phase 3 clinical
development of Multikine for the treatment of certain head and neck
cancers;
●
the results of our
applications to and meetings with the FDA, the EMA and other
regulatory authorities and the consequential effect on our
operating costs;
●
assuming favorable
Phase 3 clinical results, the cost, timing and outcome of our
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 we 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 our products, if any of
our product candidates are approved for marketing, including
product manufacturing, marketing, sales and distribution
costs;
●
the revenue, if
any, received from commercial sales of our product candidates for
which we receive marketing approval;
●
the cost of having
our product candidates manufactured for clinical trials and in
preparation for commercialization;
●
our 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 our intellectual property
rights, including litigation costs, and the outcome of such
litigation; and
●
the extent to which
we acquire or in-license other products or
technologies.
Based on our
current operating plan, and absent any future financings or
strategic partnerships, we believe that our existing cash and cash
equivalents and investments will be sufficient to fund our
projected operating expenses and capital expenditure requirements
into the first quarter of 2019. However, our operating plan may
change as a result of many factors currently unknown to us, and we
may need additional funds sooner than planned. Additional funds may
not be available when we need them on terms that are acceptable to
us, or at all. If adequate funds are not available to us on a
timely basis, we 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 we develop or acquire, or delay, limit, reduce or
terminate our sales and marketing capabilities or other activities
that may be necessary to commercialize our product candidates.
Due to
recurring losses from operations and future liquidity needs, there
is substantial doubt about our ability to continue as a going
concern without additional capital becoming available. The
doubt about our ability to continue as a going concern could have
an adverse impact on our ability to execute our business plan,
result in the reluctance on the part of certain suppliers to do
business with us, or adversely affect our ability to raise
additional debt or equity capital.
The costs of our product candidate development and clinical trials
are difficult to estimate and will be very high for many years,
preventing us from making a profit for the foreseeable future, if
ever.
Clinical and other
studies necessary to obtain approval of a new drug can be time
consuming and costly, especially in the United States, but also in
foreign countries. Our estimates of the costs associated with
future clinical trials and research may be substantially lower than
what we actually experience. It is impossible to predict what we
will face in the development of a product candidate, such as
Multikine. The purpose of clinical trials is to provide both us and
regulatory authorities with safety and efficacy data in humans. It
is relatively common to revise a trial or add subjects to a trial
in progress. 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. We expect that we 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.
The extent of our
clinical trials and research programs are primarily based upon the
amount of capital available to us and the extent to which we
receive regulatory approvals for clinical trials. We have
established estimates of the future costs of the Phase 3 clinical
trial for Multikine, but, as explained above, that estimate may not
prove correct.
An adverse determination in any future legal proceedings could have
a material adverse effect on us.
We 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 us, any of which could have a material adverse effect on
our 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. We are committed to
maintaining high standards of corporate governance and public
disclosure. Complying with evolving interpretations of new or
changing legal requirements may cause us to incur higher costs as
we revise current practices, policies and procedures, and may
divert management time and attention from potential
revenue-generating activities to compliance matters. If our 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, our reputation may
also be harmed. Further, our 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, we may have difficulty attracting and
retaining qualified board members and executive officers which
could harm our business.
We have not established a definite plan for the marketing of
Multikine, if approved.
We have not
established a definitive plan for marketing nor have we established
a price structure for any of our product candidates, if approved.
However, we intend, if we are in a position to do so, to sell
Multikine ourselves 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, we believe, focus on selling Multikine to
targeted cancer centers, physicians and clinics involved in the
treatment of head and neck cancer. We have already licensed future
sales of Multikine, if approved, to three companies: Teva
Pharmaceutical Industries Ltd. in Israel, Turkey, Serbia and
Croatia; Orient Europharma Co., Ltd. in Taiwan, Singapore, Hong
Kong, Malaysia, South Korea, the Philippines, Australia and New
Zealand; and Byron BioPharma, LLC in South Africa. We believe 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 we
will be able to find qualified third-party partners to market our
product in other areas, on terms that are favorable to us, or at
all.
We 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, we may experience other limitations involving the
proposed sale of Multikine, such as uncertainty of third-party
coverage and reimbursement. There is no assurance that we can
successfully market Multikine, if approved, or any other product
candidates we may develop.
We hope to expand our clinical development capabilities in the
future, and any difficulties hiring or retaining key personnel or
managing this growth could disrupt our operations.
We are highly
dependent on the principal members of our management and
development staff. If the Phase 3 Multikine clinical trial is
successful, we expect to expand our clinical development and
manufacturing capabilities, which will involve hiring additional
employees. Future growth will require us to continue to implement
and improve our managerial, operational and financial systems and
to continue to retain, recruit and train additional qualified
personnel, which may impose a strain on our administrative and
operational infrastructure. The competition for qualified personnel
in the biopharmaceutical field is intense. We are highly dependent
on our ability to attract, retain and motivate highly qualified
management and specialized personnel required for clinical
development. Due to our limited resources, we may not be able to
manage effectively the expansion of our operations or recruit and
train additional qualified personnel. If we are unable to retain
key personnel or manage our future growth effectively, we may not
be able to implement our business plan.
If product liability or patient injury lawsuits are brought against
us, we may incur substantial liabilities and may be required to
limit clinical testing or future commercialization of Multikine or
our other product candidates.
We face 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 we commercialize any of our product candidates. For
example, we may be sued if our 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 or sale. 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 us
to destroy batches of Multikine, thereby subjecting us to possible
financial losses, lawsuits and harm to our business.
If we cannot
successfully defend ourselves against product liability claims, we
may incur substantial liabilities or be required to limit or cease
the clinical testing or commercialization of our 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 our other product candidates, if
approved;
●
injury to our
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 our resources;
●
substantial
monetary awards to trial participants or patients;
●
product candidate
recalls, withdrawals or labeling, marketing or promotional
restrictions;
●
inability to
commercialize Multikine or our other product candidates;
and
●
a decline in the
price of our common stock.
Although we have
product liability insurance for Multikine in the amount of $10.0
million, the successful prosecution of a product liability case
against us could have a materially adverse effect upon our business
if the amount of any judgment exceeds our insurance coverage. Any
claim that may be brought against us could result in a court
judgment or settlement in an amount that is not covered, in whole
or in part, by our insurance or that is in excess of the limits of
our insurance coverage. Our insurance policies also have various
exclusions, and we may be subject to a claim for which we have no
coverage. We may have to pay any amounts awarded by a court or
negotiated in a settlement that exceed our coverage limitations or
that are not covered by our insurance, and we may not have, or be
able to obtain, sufficient capital to pay such amounts. We
commenced the Phase 3 clinical trial for Multikine in December
2010. Although no claims have been brought to date, participants in
our clinical trials could bring civil actions against us for any
unanticipated harmful effects allegedly arising from the use of
Multikine or any other product candidate that we may attempt to
develop.
Our commercial success depends, in part, upon attaining significant
market acceptance of our product candidates, if approved, among
physicians, patients, healthcare payors and major operators of
cancer clinics.
Even if we obtain
regulatory approval for our 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 we receive approval depends on a number of factors,
including:
●
the efficacy and
safety as demonstrated in clinical trials;
●
the timing of
market introduction of such product candidate as well as
competitive products;
●
the clinical
indications for which the drug is approved;
●
the approval,
availability, market acceptance and reimbursement for the companion
diagnostic;
●
acceptance by
physicians, major operators of cancer clinics and patients of the
drug 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 candidate;
●
the safety of such
product candidate 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 our sales and marketing efforts.
If our product
candidates are approved but fail to achieve an adequate level of
acceptance by physicians, healthcare payors and patients, we will
not be able to generate significant revenues, and we may not become
or remain profitable.
Risks
Related to Government Approvals
Our product candidates must undergo rigorous preclinical and
clinical testing and regulatory approvals, which could be costly
and time-consuming and subject us to unanticipated delays or
prevent us from marketing any products.
Our 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 us to unanticipated delays and may prevent us from
marketing our product candidates. 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
our 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. Our current and future clinical trials
may not be successful.
Although
we are no longer treating patients and simply following the
patient’s per the protocol of the Phase 3 clinical trial for
Multikine, we may experience delays in our the clinical trial and
we do not know whether the clinical trials need to be redesigned.
Clinical trials can be delayed for a variety of reasons, including
delays related to:
●
the availability of
financial resources needed to commence and complete our 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 our 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 we are investigating. Furthermore, we rely on CROs and
clinical trial sites to ensure the proper and timely conduct of our
clinical trials and while we have agreements governing their
committed activities, we have limited influence over their actual
performance.
On August 10, 2017
we received a letter from the U.S. Food and Drug Administration
(FDA) stating that the clinical hold that had been imposed on our
Phase 3 cancer study with Multikine has been removed and that all
clinical trial activities under this Investigational New Drug
application (IND) may resume.
It remains possible that the regulatory authorities could determine
that one Phase 3 study is not sufficient to support a marketing
application in the United States. Under this circumstance, at least
one entirely new Phase 3 clinical trial would need to be conducted
to support a marketing application in the United States. If there
is a need to conduct an additional Phase 3 clinical trial, any such
requirement would have significant and severe material consequences
for us and could impact our ability to continue as a going
concern.
We 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 our product candidates in addition to existing treatments
that have established safety and efficacy profiles. Further, a
clinical trial may be suspended or terminated by us, one or more of
the IRBs for the institutions in which such trials are being
conducted, by us upon a final recommendation by the Independent
Data Monitoring Committee, or IDMC, with which we agree 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 our 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 us and
could impact our ability to continue as a going
concern.
If we experience
termination of, or delays in the completion of, any clinical trial
of our product candidates, the commercial prospects for our product
candidates will be harmed, and our ability to generate product
revenues will be delayed. In addition, any delays in completing our
clinical trials will increase our costs, slow our product
development and approval process and jeopardize our ability to
commence product sales and generate revenues. Any of these
occurrences may harm our 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 our product candidates.
We cannot be
certain when or under what conditions we will undertake future
clinical trials. A variety of issues may delay the Phase 3 clinical
trial for Multikine. Early trials for our other product candidates,
or the plans for later trials, may not satisfy the requirements of
regulatory authorities, such as the FDA. We may fail to find
subjects willing to enroll in our trials. We manufacture Multikine
in our own manufacturing facility, but rely on third-party vendors
to manage the trial process and other activities, and these vendors
may fail to meet appropriate standards. Accordingly, the clinical
trials relating to our product candidates may not be completed on
schedule, the FDA or foreign regulatory agencies may order us to
stop or modify our research, or these agencies may not ultimately
approve any of our 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 our
product candidates. The data collected from our clinical trials may
not be sufficient to support regulatory approval of our various
product candidates, including Multikine. Our failure to adequately
demonstrate the safety and efficacy of any of our product
candidates would delay or prevent regulatory approval of our
product candidates in the United States, which could prevent us
from achieving profitability. Although we had positive results in
our Phase 2 trials for Multikine, those results were for a small
sample set, and we will not know how Multikine will perform in a
larger set of subjects until we are well into, or complete, our
Phase 3 clinical trial.
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 3 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,
disgorgement or civil or criminal penalties. Any agency or judicial
enforcement action could have a material adverse effect on
us.
The requirements
governing the conduct of clinical trials, manufacturing and
marketing of our 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.
We have only
limited experience in filing and pursuing applications necessary to
gain regulatory approvals. Our lack of experience may impede our
ability to obtain timely approvals from regulatory agencies, if at
all. We will not be able to commercialize Multikine and other
product candidates until we have obtained regulatory approval. In
addition, regulatory authorities may also limit the types of
patients to which we or our third-party partners may market
Multikine or our other product candidates. Any failure to obtain or
any delay in obtaining required regulatory approvals may adversely
affect our or our third-party partners’ ability to
successfully market our product candidates.
Even if we obtain regulatory approval for our investigational
products, we will be subject to stringent, ongoing government
regulation.
If our
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 4 clinical trials, and surveillance of the
safety and efficacy of the investigational products. We 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;
●
product advertising
and promotion;
●
product
manufacturing, including good manufacturing practices
●
record keeping
requirements;
●
registration and
listing of our establishments and 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.
We and any of our
third-party manufacturers or suppliers must continually adhere to
federal regulations setting forth 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 our facilities, or the facilities of our contract
manufacturers or suppliers, cannot pass a pre3-approval plant
inspection or fail such inspections in the future, the FDA, EMA or
other national regulators will not approve our marketing
applications for our product candidates, or may withdraw any prior
approval. In complying with cGMP and foreign regulatory
requirements, we and any of our 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 our
product candidates meet applicable specifications and other
requirements.
If we do not comply
with regulatory requirements at any stage, whether before or after
marketing approval is obtained, we may be subject to, among other
things, license suspension or revocation, criminal prosecution,
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 we seek
approval. This could materially harm our financial results,
reputation and stock price. Additionally, we may not be able to
obtain the labeling claims necessary or desirable for product
promotion. If we or other parties identify adverse effects after
any of our products are on the market, or if manufacturing problems
occur, regulatory approval may be suspended or withdrawn. We may be
required to reformulate our products, conduct additional clinical
trials, make changes in product labeling or indications of use, or
submit additional marketing applications to support any changes. If
we encounter any of the foregoing problems, our business and
results of operations will be harmed and the market price of our
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 our product candidates. If
we are slow or unable to adapt to changes in existing requirements
or the adoption of new requirements or policies, or if we are not
able to maintain regulatory compliance, we may lose any marketing
approval that we may have obtained, which would adversely affect
our business, prospects and ability to achieve or sustain
profitability. We cannot predict the extent of adverse
government regulations which might arise from future legislative or
administrative action. Without government approval, we will be
unable to sell any of our product candidates.
Our product candidates may cause undesirable side effects or have
other properties that could delay or prevent their regulatory
approval, limit the commercial profile of an approved label, or
result in significant negative consequences following marketing
approval, if any.
Undesirable side
effects caused by our product candidates could cause us 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 our clinical trials could reveal a high and
unacceptable severity and/or prevalence of these or other side
effects. In such an event, our trials could be suspended or
terminated and the FDA or comparable foreign regulatory authorities
could order us to cease further development of, or deny approval
of, our 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 our business, financial condition and prospects
significantly.
Additionally if one
or more of our product candidates receives marketing approval, and
we or others later identify undesirable side effects caused by such
products, a number of potentially significant negative consequences
could result, including:
●
regulatory
authorities may withdraw approvals of such product;
●
regulatory
authorities may require additional warnings on the
label;
●
we may be required
to create a medication guide outlining the risks of such side
effects for distribution to patients;
●
we could be sued
and held liable for harm caused to patients; and
●
our reputation may
suffer.
Any of these events
could prevent us from achieving or maintaining market acceptance of
the particular product candidate, if approved, and could
significantly harm our business, results of operations and
prospects.
We rely on third parties to conduct our preclinical and clinical
trials. If these third parties do not successfully carry out their
contractual duties and meet regulatory requirements, or meet
expected deadlines, we may not be able to obtain regulatory
approval for or commercialize our product candidates and our
business could be substantially harmed.
We have relied upon
and plan to continue to rely upon third-party CROs to prepare for,
conduct, monitor and manage data for our preclinical and clinical
programs. We rely on these parties for all aspects of the execution
of our preclinical and clinical trials, and although we diligently
oversee and carefully manage our CROs, we directly control only
certain aspects of their activities and rely upon them to provide
timely, complete, and accurate reports on their conduct of our
studies. Although such third parties provide support and represent
us for regulatory purposes in the context of our clinical trials,
ultimately we are responsible for ensuring that each of our studies
is conducted in accordance with the applicable protocol, legal,
regulatory, and scientific standards, and our reliance on the CROs
does not relieve us of our regulatory responsibilities. We and our
CROs acting on our 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 our products in clinical development. Regulatory authorities
enforce these GCPs through periodic inspections of trial sponsors,
principal investigators, and trial sites. If we or any of our CROs
fail to comply with applicable GCPs or other applicable
regulations, the clinical data generated in our clinical trials may
be determined to be unreliable and we may therefore need to enroll
additional subjects in our clinical trials, or the FDA, EMA or
comparable foreign regulatory authorities may require us to perform
an additional clinical trial or trials before approving our
marketing applications. Moreover, if we or any of our CROs,
principal investigators, or trial sites, fail to comply with
applicable regulatory and GCP requirements, then we, our CROs,
principal investigators, or trial sites may be subject to
enforcement actions, such as fines, warning letters, untitled
letters, clinical holds, civil or criminal penalties, and/or
injunctions. We cannot assure you that upon inspection by a given
regulatory authority, such regulatory authority will determine that
any of our clinical trials comply with GCP regulations. In
addition, our clinical trials must be conducted with product
produced under GMP regulations. Our failure to comply with these
regulations may require us to delay or repeat clinical trials,
which would delay the regulatory approval process.
If any of our
relationships with our third-party CROs terminate, we may not be
able to enter into arrangements with alternative CROs or to do so
on commercially reasonable terms. In addition, our CROs are not our
employees, and except for remedies available to us under our
agreements with such CROs, we cannot control whether or not they
devote sufficient time and resources to our 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 our clinical
protocols, regulatory requirements or for other reasons, our
clinical trials may be extended, delayed or terminated, and we may
not be able to obtain regulatory approval for or successfully
commercialize our product candidates. As a result, our results of
operations and the commercial prospects for our product candidates
would be harmed, our costs could increase and our 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 our ability to meet our desired clinical
development timelines. Though we diligently oversee and carefully
manage our relationships with our CROs, there can be no assurance
that we will not encounter similar challenges or delays in our
clinical development in the future or that these delays or
challenges will not have a material adverse impact on our business,
financial condition and prospects.
We have 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 we 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 Biologics License Application, or 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 we have
received orphan drug designation for Multikine for the treatment of
squamous cell carcinoma of the head and neck, we 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. In addition, exclusive
marketing rights in the United States may be limited if we seek
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 we are
unable to assure sufficient quantities of the product to meet the
needs of patients with the rare disease or condition. Further, even
if we obtain 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.
Our 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.
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 we obtain marketing
approval. Our current and future arrangements with healthcare
professionals, principal investigators, consultants, potential
customers and third-party payors may expose us 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 False Claims Act;
●
federal civil and
criminal false claims laws, including the federal False Claims 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 civil monetary
penalties statute, which imposes penalties against any person or
entity who, among other things, is determined to have presented or
caused to be presented a claim to a federal health program that the
person knows or should know is for an item or service that was not
provided as claimed or is false or fraudulent;
●
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 willfully embezzling
or stealing from a health care benefit program, willfully
obstructing a criminal investigation of a healthcare offense and
knowingly and willfully falsifying, 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. 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;
●
HIPAA, as amended
by the Health Information Technology for Economic and Clinical
Health Act of 2009, or HITECH, and their respective implementing
regulations, which impose 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 federal
Physician Payments Sunshine Act and its implementing regulations,
which imposed annual reporting requirements for certain
manufacturers of drugs, devices, biologicals and medical supplies
for payments and “transfers of value” provided to
physicians and teaching hospitals, as well as ownership and
investment interests held by physicians and their immediate family
members; and
●
analogous state and
foreign laws, such as state anti-kickback and false claims 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 or 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.
Efforts to ensure
that our 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 our business practices may not comply with
current or future statutes, regulations or case law involving
applicable fraud and abuse or other healthcare laws. If our
operations are found to be in violation of any of these laws or any
other governmental regulations, we 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 our
operations, all of which could significantly harm our business. If
any of the physicians or other healthcare providers or entities
with whom we expect to do business, including our 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 our business.
Failure to obtain or maintain adequate coverage and reimbursement
for our product candidates, if approved, could limit our ability to
market those products and decrease our ability to generate
revenue.
Sales of our
product candidates will depend substantially, both domestically and
abroad, on the extent to which the costs of our product candidates
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. We anticipate 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. If coverage and reimbursement are not available, or
are available only to limited levels, we may not be able to
successfully commercialize our product candidates. Even if coverage
is provided, the approved reimbursement amount may not be high
enough to allow us to establish or maintain pricing sufficient to
realize a return on our investment. It is difficult to predict at
this time what third-party payors will decide with respect to the
coverage and reimbursement for our product candidates.
Healthcare legislative reform measures may have a material adverse
effect on our business and results of operations.
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 we may otherwise
receive for our product candidates. For example, in March 2010, the
Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act, or collectively, the
Affordable Care Act, was passed, which substantially changes the
way health care is financed by both governmental and private
insurers, and significantly impacts the U.S. pharmaceutical
industry. The Affordable Care Act, among other things, addressed a
new methodology by which rebates owed by manufacturers under the
Medicaid Drug Rebate Program are calculated for drugs that are
inhaled, infused, instilled, implanted or injected, increased the
minimum Medicaid rebates owed by manufacturers under the Medicaid
Drug Rebate Program and extended the rebate program to individuals
enrolled in Medicaid managed care organizations, established annual
fees and taxes on manufacturers of certain branded prescription
drugs, and established the Center for Medicare and Medicaid
Innovation with broad authority to test and implement new payment
models under Medicare and Medicaid, which are designed to reduce
expenditures while preserving and enhancing quality of
care.
In addition, other
legislative changes have been proposed and adopted in the United
States since the Affordable Care Act was enacted. On August 2,
2011, the Budget Control Act of 2011 among other things, created
measures for spending reductions by Congress. A Joint Select
Committee on Deficit Reduction, tasked with recommending a targeted
deficit reduction of at least $1.2 trillion for the years 2013
through 2021, was unable to reach required goals, thereby
triggering the legislation's automatic reduction to several
government programs. This includes aggregate reductions of Medicare
payments to providers of 2% per fiscal year, which went into effect
in April 2013 and, due to subsequent legislative amendments to the
statute, will remain in effect through 2024 unless additional
Congressional action is taken. On January 2, 2013, former President
Obama signed into law the American Taxpayer Relief Act of 2012,
which, among other things, further reduced Medicare payments to
several providers, including hospitals, imaging centers and cancer
treatment centers. On April 16, 2015, former President Obama signed
into law the Medicare Access and CHIP Reauthorization Act of 2015,
or MACRA. Among other things, MACRA creates incentives for
physicians to participate in alternative payment models under
Medicare that emphasize quality and value in place of the
traditional, volume-based fee-for-service program. We expect that
additional state and federal healthcare reform measures will be
adopted in the future, any of which could limit the amounts that
federal and state governments will pay for healthcare products and
services, which could result in reduced demand for our product
candidates or additional pricing pressures.
Foreign governments often impose strict price controls, which may
adversely affect our future profitability.
We intend to seek
approval to market Multikine in both the United States and foreign
jurisdictions. If we obtain approval in one or more foreign
jurisdictions, we 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, we may be required to conduct
clinical trials that demonstrate our 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, we may be
unable to achieve or sustain profitability.
Risks
Related to Intellectual Property
We may not be able to achieve or maintain a competitive position,
and other technological developments may result in our proprietary
technologies becoming uneconomical or obsolete.
We are 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 our
compounds, compositions and processes, through research financed by
us, or as a result of possible third-party licensing arrangements
with pharmaceutical or other companies, is not assured. We 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 or cure and treat
viruses, such as HPV or H1N1. Many of these companies have
financial, research and development, and marketing resources which
are much greater than ours 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 our other product candidates, if
approved, will be reduced or eliminated if our competitors develop
and obtain approval for products that are safer or more effective
than our 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, we do not know whether:
●
we were the first
to make the inventions covered by each of our issued patents and
pending patent applications;
●
we were the first
to file patent applications for these inventions;
●
others will
independently develop similar or alternative technologies or
duplicate any of our technologies;
●
any of our pending
patent applications will result in issued patents;
●
any of our patents
will be valid or enforceable;
●
any patents issued
to us or our collaboration partners will provide us with any
competitive advantages, or will be challenged by third
parties;
●
we will be able to
develop additional proprietary technologies that are
patentable;
●
the U.S. government
will exercise any of its statutory rights to our intellectual
property that was developed with government funding;
or
●
our business may
infringe the patents or other proprietary rights of
others.
Our patents might not protect our technology from competitors, in
which case we may not have any advantage over competitors in
selling any products that we may develop.
Our commercial
success will depend in part on our ability to obtain additional
patents and protect our existing patent position, as well as our
ability to maintain adequate intellectual property protection for
our technologies, product candidates, and any future products in
the United States and other countries. If we do not adequately
protect our technology, product candidates and future products,
competitors may be able to use or practice them and erode or negate
any competitive advantage we may have, which could harm our
business and ability to achieve profitability. The laws of some
foreign countries do not protect our proprietary rights to the same
extent or in the same manner as U.S. laws, and we may encounter
significant problems in protecting and defending our proprietary
rights in these countries. We will be able to protect our
proprietary rights from unauthorized use by third parties only to
the extent that our 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
our technologies are covered by U.S. and foreign patents. In
addition, we have a number of new patent applications pending.
There is no assurance that the applications still 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 us. Disputes
may arise between us 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 we
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
us 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
us. We are 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 our intellectual property is protected as trade secrets or
confidential know-how, not as a patent.
We consider
proprietary trade secrets and/or confidential know-how and
unpatented know-how to be important to our business. Much of our
intellectual property pertains to our manufacturing system, 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 us 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 our ability to keep
our trade secrets and know-how confidential.
To protect this
type of information against disclosure or appropriation by
competitors, our policy is to require our employees, consultants,
contractors and advisors to enter into confidentiality agreements
with us. However, current or former employees, consultants,
contractors and advisers may unintentionally or willfully disclose
our 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 our application for product
candidate approval may require the disclosure of some or all of our
proprietary information. In such a case, we must decide whether to
disclose the information or forego approval in a particular
country. If we are unable to market our product candidates in key
countries, our opportunities and value may suffer.
Failure to obtain
or maintain trade secrets and/or confidential know-how trade
protection could adversely affect our competitive position.
Moreover, our 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, our competitors could limit our use of such
trade secrets and/or confidential know-how.
We may be subject to claims challenging the inventorship or
ownership of our patents and other intellectual
property.
We may also be
subject to claims that former employees, collaborators or other
third parties have an ownership interest in our patents or other
intellectual property. We may be subject to ownership disputes in
the future arising, for example, from conflicting obligations of
consultants or others who are involved in developing our product
candidates. Litigation may be necessary to defend against these and
other claims challenging inventorship or ownership. If we fail in
defending any such claims, in addition to paying monetary damages,
we may lose valuable 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
our business. Even if we are successful in defending against such
claims, litigation could result in substantial costs and be a
distraction to management and employees.
Risks
related to our Common Stock
You may experience future dilution as a result of future equity
offerings or other equity issuances.
We expect that
significant additional capital will be needed in the future to
continue our planned operations. To raise additional capital, we
may in the future offer additional shares of our common stock or
other securities convertible into or exchangeable for our common
stock. We cannot assure you that we will be able to sell
shares or other securities in any other offering at a price per
share that is equal to or greater than the price per share paid by
investors in this offering. The price per share at which
we sell additional shares of our common stock or other securities
convertible into or exchangeable for our common stock in future
transactions may be higher or lower than the price per share in
this offering. To the extent we raise additional capital
by issuing equity securities, our stockholders may experience
substantial dilution. If we sell common stock, convertible
securities or other equity securities, your investment in our
common stock will be diluted. These sales may also result in
material dilution to our existing stockholders, and new investors
could gain rights superior to our existing
stockholders.
Our outstanding options
and warrants may adversely affect the trading price of our common
stock.
As of the August
17, 2018, there were outstanding warrants and options which allow
the holders to purchase 18,453,936 shares that may be issued upon
the exercise of outstanding warrants, with a weighted average
exercise price of $4.81 per share, and 3,072,164 shares that may be
issued upon the exercise of outstanding options, with a weighted
average exercise price of $7.43 per share. The outstanding
options and warrants could adversely affect our ability to obtain
future financing or engage in certain mergers or other
transactions, since the holders of options and warrants can be
expected to exercise them at a time when we may be able to obtain
additional capital through a new offering of securities on terms
more favorable to us than the terms of the outstanding options and
warrants. For the life of the options and warrants, the
holders have the opportunity to profit from a rise in the market
price of our common stock without assuming the risk of
ownership. The issuance of shares upon the exercise of
outstanding options and warrants will also dilute the ownership
interests of our existing stockholders.
Our ability to utilize our net operating loss carryforwards and
certain other tax attributes may be limited.
Under Section 382
of the Internal Revenue Code of 1986, as amended, if a corporation
undergoes an “ownership change” (generally defined as a
greater than 50% change (by value) in its equity ownership over a
three-year period), the corporation’s ability to use its
pre-change net operating loss carryforwards and other pre-change
tax attributes to offset its post-change income may be limited. As
a result of our public offerings and other transactions, we may
experience ownership changes in the future based on subsequent
shifts in our stock ownership, some of which are outside our
control. As a result, our ability to use our pre-change net
operating loss carryforwards and other pre-change tax attributes to
offset U.S. federal taxable income may be subject to limitations,
which could result in increased tax liability to us.
Since we do not intend to pay dividends on our common stock, any
potential return to investors will result only from any increases
in the price of our common stock.
At the present
time, we intend to use available funds to finance our operations.
Accordingly, while payment of dividends rests within the discretion
of our board of directors, no common stock dividends have been
declared or paid by us and we have 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
our common stock. Any return to our investors will therefore be
limited to appreciation in the price of our common stock, which may
never occur. If our stock price does not increase, our investors
are unlikely to receive any return on their investments in our
common stock.
The price of our common stock has been volatile and is likely to
continue to be volatile, which could result in substantial losses
for our shareholders.
Our stock price has
been, and is likely to continue to be, volatile. As a result of
this volatility, you may not be able to sell your shares at or
above its current market price. The market price for our common
stock may be influenced by many factors, including:
●
actual or
anticipated fluctuations in our financial condition and operating
results;
●
actual or
anticipated changes in our growth rate relative to our
competitors;
●
competition from
existing products or new products or product candidates that may
emerge;
●
development of new
technologies that make our technology less attractive;
●
changes in
physician, hospital or healthcare provider practices that may make
our product candidates less useful;
●
announcements by
us, our partners or our 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 or that we provide to the public;
●
actual or
anticipated changes in estimates as to financial results,
development timelines or recommendations by securities
analysts;
●
variations in our
financial results or those of companies that are perceived to be
similar to us;
●
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 been advised that it is not in compliance with certain
continued listing standards of the NYSE American.
On July 12, 2018,
CEL-SCI received a letter from the NYSE American, its current
listing exchange, which advised CEL-SCI that, based upon its
quarterly report for the quarter ended March 31, 2018, CEL-SCI was
noncompliant with certain continued listing standards of the NYSE
American. CEL-SCI can maintain its listing by submitting a plan of
compliance by August 13, 2018. This plan must advise of actions
CEL-SCI has taken or will take to regain compliance with the
continued listing standards by January 14, 2019. CEL-SCI submitted
its plan on July 30, 2018. On August 16, 2018 the Exchange notified
CEL-SCI that it accepted its plan of compliance and granted CEL-SCI
until January 14, 2019 to regain compliance with the continued
listing standards. Although, the NYSE American will not normally
remove the securities if an issuer has a market capitalization of
at least $50 million if CEL-SCI does not make sufficient progress
under the plan to reestablish compliance by January 14, 2019, the
staff of the exchange may initiate proceedings to delist
CEL-SCI’s securities from the NYSE American. CEL-SCI may
appeal a delisting determination in accordance with the rules of
the exchange.
The letter from the
NYSE American has no immediate effect on the listing of
CEL-SCI’s securities on the exchange.
Under our amended bylaws, stockholders that initiate certain
proceedings may be obligated to reimburse us and our officers and
directors for all fees, costs and expenses incurred in connection
with such proceedings if the claim proves
unsuccessful.
On February 18,
2015, we 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 us, or
any of our officers or directors, including any derivative claim or
claim purportedly filed on our 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 us and any of our officers or
directors named in the action, for all fees, costs and expenses of
every kind and description that we or our officers or directors may
incur in connection with the claim. In adopting Article
X, it is our 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
●
only the directors
or officers named in the action would be allowed to
recover.
The fee-shifting
provision contained in Article X of our 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 our ability to invoke our fee-shifting bylaw in
connection with claims under the federal securities laws, including
any claims related to this offering, 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 our fee-shifting bylaw in connection
with such claims, if any, will depend in part on future
developments of the law. We cannot assure you that we will or will
not invoke our fee-shifting bylaw in any particular dispute,
including any claims related to this offering. In addition, given
the unsettled state of the law related to fee-shifting bylaws, such
as ours, we may incur significant additional costs associated with
resolving disputes with respect to such bylaw, which could
adversely affect our 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, therefore,
may dissuade or discourage stockholders (and their attorneys) from
initiating lawsuits or claims against us or our directors and
officers. In addition, it may impact the fees, contingency or
otherwise, required by potential plaintiffs’ attorneys to
represent our stockholders or otherwise discourage
plaintiffs’ attorneys from representing our stockholders at
all. As a result, this bylaw may limit the ability of stockholders
to affect our management and direction, particularly through
litigation or the threat of litigation.
The provision of our 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 us and our
directors and officers.
Article X of our
amended 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 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 us or our directors or officers, and may have the effect of
discouraging lawsuits with respect to claims that may benefit us or
our stockholders.
COMPARATIVE
SHARE DATA
|
|
Shares outstanding
as of August 17, 2018
|
24,021,058
|
The number of
shares outstanding as of August 17, 2018 excludes shares which may
be issued upon the exercise of the options or warrants described
below.
|
|
|
Shares issuable
upon exercise of Series N warrants
|
85,339
|
A
|
|
|
|
Shares issuable
upon exercise of options granted to CEL-SCI's
officers,
directors, employees, consultants and third parties
|
3,070,164
|
B
|
Shares issuable
upon exercise of Series S warrants
|
327,729
|
C
|
Shares issuable
upon exercise of Series V warrants
|
810,127
|
D
|
Shares issuable
upon exercise of Series W warrants
|
688,930
|
E
|
Shares issuable
upon exercise of Series X warrants
|
120,000
|
F
|
Shares issuable
upon exercise of Series Y warrants
|
26,000
|
G
|
Shares issuable
upon exercise of Series Z warrants
|
264,000
|
H
|
Shares issuable
upon exercise of Series ZZ warrants
|
20,000
|
H
|
Shares issuable
upon exercise of Series AA warrants
|
200,000
|
I
|
Shares issuable
upon exercise of Series BB warrants
|
16,000
|
I
|
Shares issuable
upon exercise of Series CC warrants
|
680,480
|
J
|
Shares issuable
upon exercise of Series DD warrants
|
1,360,960
|
J
|
Shares issuable
upon exercise of Series EE warrants
|
1,360,960
|
J
|
Shares issuable
upon exercise of Series FF warrants
|
68,048
|
J
|
Shares issuable
upon exercise of Series GG warrants
|
400,000
|
K
|
Shares issuable
upon exercise of Series HH warrants
|
20,000
|
K
|
Shares issuable
upon exercise of Series II warrants
|
600,000
|
L
|
Shares issuable
upon exercise of Series JJ warrants
|
30,000
|
L
|
Shares issuable
upon exercise of Series KK warrants
|
395,970
|
M
|
Shares issuable
upon exercise of Series LL warrants
|
26,398
|
M
|
Shares issuable
upon exercise of Series MM warrants
|
893,491
|
N
|
Shares issuable
upon exercise of Series NN warrants
|
539,300
|
O
|
Shares issuable
upon exercise of Series OO warrants
|
60,000
|
P
|
Shares issuable
upon exercise of Series PP warrants
|
1,674,500
|
Q
|
Shares issuable
upon exercise of Series QQ warrants
|
31,063
|
Q
|
Shares issuable
upon exercise of Series RR warrants
|
583,057
|
R
|
Shares issuable
upon exercise of Series SS warrants
|
1,013,162
|
S
|
Shares issuable
upon exercise of Series TT warrants
|
1,875,860
|
T
|
Shares issuable
upon exercise of Series UU warrants
|
187,562
|
U
|
Shares issuable
upon exercise of Series VV warrants
|
3,900,000
|
V
|
Shares issuable
upon exercise of Series WW warrants
|
195,000
|
V
|
A.
As of July 27,
2018, 85,339 Series N warrants entitle the holders to purchase one
share of the Company's common stock at a price of $3.00 per share
at any time prior to February 18, 2020.
B.
The options are
exercisable at prices ranging from $1.59 to $415 per share. CEL-SCI
may also grant options to purchase additional shares under its
Incentive Stock Option and Non-Qualified Stock Option
Plans.
C.
The Series S
warrants may be exercised at any time on or before October 11, 2018
at a price of $31.25 per share. As of August 17, 2018, 792,940
Series S Warrants had been exercised. The remaining 327,729 Series
S warrants entitle the holders to purchase one share of CEL-SCI's
common stock at a price of $31.25 per share.
D.
The Series V
warrants were immediately exercisable at a price of $19.75 and
expire on May 28, 2020.
E.
The Series W
warrants are exercisable at a price of $16.75 and expire on October
28, 2020.
F.
The Series X
warrant are exercisable at a price of $9.25 per share at any time
on or before January 13, 2021.
G.
The Series Y
warrant are exercisable at a price of $12.00 per share at any time
on or before February 15, 2019.
H
The Series Z
warrants may be exercised at any time on or before November 23,
2021 at a price of $13.75 per share. The Series ZZ warrants may be
exercised at any time on or before May 18, 2021 at a price of
$13.75 per share.
I.
The Series AA
warrants may be exercised at any time on or before February 22,
2022 at a price of $13.75 per share. The Series BB warrants may be
exercised at any time on or before August 22, 2021 at a price of
$13.75 per share.
J.
The Series CC
warrants may be exercised at any time on or before December 8, 2021
at a price of $5.00 per share. The Series DD warrants may be
exercised at any time on or before December 10, 2018 at a price of
$4.50 per share. The Series EE warrants may be exercised at any
time on or before December 10, 2018 at a price of $4.50 per share.
The Series FF warrants may be exercised at any time on or before
December 1, 2021 at a price of $3.90625 per
share.
K.
The Series GG
warrants may be exercised at any time on or after August 23, 2017
and on or before August 23, 2022 at a price of $3.00 per share. The
Series HH warrants may be exercised at any time on or before
February 16, 2022 at a price of $3.125 per
share.
L.
The Series II
warrants may be exercised at any time on or after September 14,
2017 and on or before September 14, 2022 at a price of $3.00 per
share. The Series JJ warrants may be exercised at any time on or
before March 8, 2022 at a price of $3.125 per share.
M.
The Series KK
warrants may be exercised at any time on or after November 3, 2017
and on or before November 3, 2022 at a price of $3.035 per share.
The Series LL warrants may be exercised at any time on or before
April 30, 2022 at a price of $3.59375 per share.
N.
The Series MM
warrant are exercisable at a price of $1.86 per share at any time
on or before June 22, 2022.
O.
The Series NN
warrant are exercisable at a price of $2.52 per share at any time
on or before July 24, 2022.
P.
The Series OO
warrants may be exercised at any time on or before July 31, 2022 at
a price of $2.52 per share.
Q.
The Series PP
warrants may be exercised at any time on before February 23, 2023
at a price of $2.30 per share. The Series QQ warrants may be
exercised at any time on or before August 22, 2022 at a price of
$2.50 per share.
R.
The Series RR
warrants may be exercised at any time on or before October 30, 2022
at a price of $1.65 per share.
S.
The Series SS
warrants may be exercised at any time on or before December 18,
2022 at a price of $2.09 per share.
T.
The Series TT
warrants may be exercised at any time on or after August 6, 2018
and on or before February 5, 2023 at a price of $2.24 per
share.
U.
The Series UU
warrants may be exercised at any time on or after December 11, 2018
and on or before June 11, 2020 at a price of $2.80 per
share.
V.
The Series VV
warrants may be exercised at any time on or after January 2, 2019
and on or before January 2, 2024 at a price of $1.75 per share. The
Series WW warrants may be exercised at any time on or after January
2, 2019 and on or before June 28, 2023 at a price of $1.625 per
share.
MARKET
FOR CEL-SCI’S COMMON STOCK
Our common stock is
publicly traded on the NYSE American under the symbol
“CVM”. The following table sets forth, for the periods
indicated, the high and low intraday sale prices of our common
stock as reported by the NYSE American.
|
|
|
|
|
|
FY 2018
|
|
|
Fourth
Quarter (through August 17, 2018)
|
$1.29
|
$0.82
|
Third
Quarter (through June 30, 2018)
|
$3.66
|
$0.83
|
Second
Quarter (through March 31, 2018)
|
$2.50
|
$1.30
|
First
Quarter (through December 31, 2017)
|
$2.14
|
$1.60
|
|
|
|
FY 2017
|
|
|
Fourth
Quarter (through September 30, 2017)
|
$3.69
|
$1.57
|
Third
Quarter (through June 30, 2017)
|
$4.00
|
$1.50
|
Second
Quarter (through March 31, 2017)
|
$4.50
|
$1.75
|
First
Quarter (through December 31, 2016)
|
$7.75
|
$1.50
|
|
|
|
FY 2016
|
|
|
Fourth
Quarter (through September 30, 2016)
|
$13.50
|
$6.00
|
Third
Quarter (through June 30, 2016)
|
$15.00
|
$11.00
|
Second
Quarter (through March 31, 2016)
|
$16.50
|
$9.00
|
First
Quarter (through December 31, 2015)
|
$18.75
|
$9.00
|
(1)
Prices reflect a
25-for-1 reverse stock split which became effective on the NYSE
American on June 15, 2017.
As of August 17,
2018, there were 24,021,058 outstanding shares of our common stock
outstanding held by approximately 750 holders of
record.
Holders of common
stock are entitled to receive dividends as may be declared by the
Board of Directors out of legally available funds and, in the event
of liquidation, to share pro rata in any distribution of
CEL-SCI’s assets after payment of liabilities. The Board of
Directors is not obligated to declare a dividend. CEL-SCI has not
paid any dividends on its common stock and CEL-SCI does not have
any current plans to pay any common stock dividends.
The provisions in
CEL-SCI’s Articles of Incorporation relating to
CEL-SCI’s preferred stock would allow CEL-SCI’s
directors to issue preferred stock with rights to multiple votes
per share and dividend rights which would have priority over any
dividends paid with respect to CEL-SCI’s common
stock. The issuance of preferred stock with such rights
may make more difficult the removal of management, even if such
removal would be considered beneficial to shareholders generally,
and will have the effect of limiting shareholder participation in
certain transactions such as mergers or tender offers if such
transactions are not favored by incumbent management.
The market price of
CEL-SCI’s common stock, as well as the securities of other
biopharmaceutical and biotechnology companies, have historically
been highly volatile, and the market has from time to time
experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies.
Factors such as fluctuations in CEL-SCI’s operating results,
announcements of technological innovations or new therapeutic
products by CEL-SCI or its competitors, governmental regulation,
developments in patent or other proprietary rights, public concern
as to the safety of products developed by CEL-SCI or other
biotechnology and pharmaceutical companies, and general market
conditions may have a significant effect on the market price of
CEL-SCI’s common stock.
PLAN
OF DISTRIBUTION
CEL-SCI may sell
shares of its common stock, preferred stock, convertible preferred
stock, rights, or warrants, units consisting of any of the
foregoing, as well as any of these securities issuable upon the
exercise of warrants in and/or outside the United
States: (i) through underwriters, placement agents, or
dealers; (ii) directly to a limited number of purchasers or to a
single purchaser; or (iii) through agents. The
applicable prospectus supplement with respect to the offered
securities will set forth the name or names of any underwriters or
agents, if any, the purchase price of the offered securities and
the proceeds to CEL-SCI from such sale, any delayed delivery
arrangements, any underwriting discounts, commissions, and other
items constituting underwriters' or placement agents’
compensation, the public offering price and any discounts or
concessions allowed or reallowed or paid to dealers and any
compensation paid to an underwriter or a placement
agent. The public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed
from time to time.
Notwithstanding the
above, the maximum commission or discount to be received by any
NASD member or independent broker-dealer will not be greater than
10% in connection with the sale of any securities offered by means
of this prospectus or any related prospectus supplement, exclusive
of any non-accountable expense allowance. Any securities
issued by CEL-SCI to any FINRA member or independent broker-dealer
in connection with an offering of CEL-SCI’s securities will
be considered underwriting compensation and may be restricted from
sale, transfer, assignment, or hypothecation for a number of months
following the effective date of the offering, except to officers or
partners (not directors) of any underwriter or member of a selling
group and/or their officers or partners.
CEL-SCI’s
securities may be sold:
●
As the result of
the exercise of warrants or rights, or the conversion of preferred
shares, at fixed or varying prices, as determined by the terms of
the warrants, rights or convertible securities.
●
At varying prices
in at the market offerings.
●
In privately
negotiated transactions, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices.
If underwriters are
used in the sale, the offered securities will be acquired by the
underwriters for their own account and may be resold from time to
time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The securities may be
offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or
underwriters with respect to a particular underwritten offering of
securities will be named in the prospectus supplement relating to
such offering and, if an underwriting syndicate is used, the
managing underwriter or underwriters will be set forth on the cover
of such prospectus supplement. Unless otherwise set
forth in the prospectus supplement, the obligations of the
underwriters to purchase the offered securities will be subject to
conditions precedent and the underwriters may be obligated to
purchase all the offered securities if any are
purchased.
If dealers are
utilized in the sale of offered securities in respect of which the
prospectus supplement
is delivered, CEL-SCI will sell the offered securities to the
dealers as principals. The dealers may then resell the
offered securities to the public at varying prices to be determined
by the dealers at the time of resale. The names of the
dealers and the terms of the transaction will be set forth in the
prospectus supplement relating to the securities sold to the
dealers.
If an agent is used
in an offering, the agent will be named, and the terms of the
agency will be set forth, in the prospectus
supplement. Unless otherwise indicated in the prospectus
supplement, an agent will act on a best efforts basis for the
period of its appointment.
The securities may
be sold directly by CEL-SCI to institutional investors or others,
who may be deemed to be underwriters within the meaning of the
Securities Act of 1933 with respect to any resale of the securities
purchased by the institutional investors. The terms of
any of the sales, including the terms of any bidding or auction
process, will be described in the applicable prospectus
supplement.
CEL-SCI may permit
agents or underwriters to solicit offers to purchase its securities
at the public offering price set forth in a prospectus supplement
pursuant to a delayed delivery arrangement providing for payment
and delivery on the date stated in the prospectus
supplement. Any delayed delivery contract will contain
definite fixed price and quantity terms. The obligations
of any purchaser pursuant to a delayed delivery contract will not
be subject to any market outs or other conditions other than the
condition that the delayed delivery contract will not violate
applicable law. In the event the securities underlying
the delayed delivery contract are sold to underwriters at the time
of performance of the delayed delivery contract, those securities
will be sold to those underwriters. Each delayed
delivery contract shall be subject to CEL-SCI’s
approval. CEL-SCI will pay the commission indicated in
the prospectus supplement to underwriters or agents soliciting
purchases of securities pursuant to delayed delivery arrangements
accepted by CEL-SCI.
Notwithstanding the
above, while prospectus supplements may provide specific offering
terms, or add to or update information contained in this
prospectus, any fundamental changes to the offering terms will be
made by means of a post-effective amendment.
Agents, dealers and
underwriters may be entitled under agreements entered into with
CEL-SCI to indemnification from CEL-SCI against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments made by such agents, dealers
or underwriters.
DESCRIPTION
OF SECURITIES
Common Stock
CEL-SCI is
authorized to issue 600,000,000 shares of common stock, (the
"common stock"). Holders of common stock are each
entitled to cast one vote for each share held of record on all
matters presented to shareholders. Cumulative voting is
not allowed; hence, the holders of a majority of the outstanding
common stock can elect all directors.
Holders of common
stock are entitled to receive such dividends as may be declared by
the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution
of CEL-SCI's assets after payment of liabilities. The
board is not obligated to declare a dividend. It is not
anticipated that dividends will be paid in the foreseeable
future.
Holders of common
stock do not have preemptive rights to subscribe to additional
shares if issued by CEL-SCI. There is no conversion,
redemption, sinking fund or similar provision regarding the common
stock. All of the outstanding shares of common stock are
fully paid and non-assessable.
Preferred Stock
CEL-SCI is
authorized to issue up to 200,000 shares of preferred
stock. CEL-SCI's Articles of Incorporation provide that
the Board of Directors has the authority to divide the preferred
stock into series and, within the limitations provided by Colorado
statute, to fix by resolution the voting power, designations,
preferences, and relative participation, special rights, and the
qualifications, limitations or restrictions of the shares of any
series so established. As the Board of Directors has
authority to establish the terms of, and to issue, the preferred
stock without shareholder approval, the preferred stock could be
issued to defend against any attempted takeover of
CEL-SCI. As of July 27, 2018, no shares of preferred
stock were outstanding.
Rights Agreement
In November 2007,
we declared a dividend of one Series A Right and one Series B
Right, or collectively the Rights, for each share of our common
stock which was outstanding on November 9, 2007. When the Rights
become exercisable, each Series A Right will entitle the registered
holder, subject to the terms of a Rights Agreement, to purchase
from us one share of our common stock at a price equal to 20% of
the market price of our common stock on the exercise date, although
the price may be adjusted pursuant to the terms of the Rights
Agreement. If after a person or group of affiliated persons has
acquired 15% or more of our common stock or following the
commencement of a tender offer for 15% or more of our outstanding
common stock (i) we are acquired in a merger or other business
combination and we are not the surviving corporation, (ii) any
person consolidates or merges with us and all or part of our common
shares are converted or exchanged for securities, cash or property
of any other person, or (iii) 50% or more of our consolidated
assets or earning power are sold, proper provision will be made so
that each holder of a Series B Right will thereafter have the right
to receive, upon payment of the exercise price of $100 (subject to
adjustment), that number of shares of common stock of the acquiring
company which at the time of such transaction has a market value
that is twice the exercise price of the Series B
Right.
The description and
terms of the Rights are set forth in a Rights Agreement between the
Company and Computershare Trust Company, N.A., as Rights
Agent.
Distribution of Rights
Initially,
stockholders will not receive separate certificates for the Rights
as the Rights will be represented by outstanding common stock
certificates. Until the exercise date, the Rights cannot be bought,
sold or otherwise traded separately from the common stock.
Certificates for common stock carry a notation that indicates that
Rights are attached to the common stock and incorporate the terms
of the Rights Agreement.
Separate
certificates representing the Rights will be distributed as soon as
practicable after the earliest to occur of:
●
15 business days
following a public announcement that a person or group of
affiliated or associated persons has acquired beneficial ownership
of 15% or more of our outstanding common stock, or
●
15 business days
(or such later date as may be determined by action of our board of
directors prior to such time as any person or group of affiliated
persons has acquired 15% or more of our common stock) following the
commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result in
the beneficial ownership by a person or group of 15% or more of our
outstanding common stock.
The earlier of such
dates described above is called the “distribution
date.”
Until the
distribution date (or earlier redemption or expiration of the
Rights), the surrender for transfer of any certificates for common
stock outstanding as of the record date, even without such
notation, will also constitute the transfer of the Rights
associated with the common stock represented by such certificate.
As soon as practicable following the distribution date, separate
certificates evidencing the Rights will be mailed to holders of
record of the common stock as of the close of business on the
distribution date and such separate right certificates alone will
evidence the Rights.
Exercise and Expiration
The holders of the
Rights are not required to take any action until the Rights become
exercisable. The Rights are not exercisable until the distribution
date. Holders of the Rights will be notified by us that the Rights
have become exercisable. The Rights will expire on October 30,
2020, unless the expiration date is extended or unless the Rights
are earlier redeemed by us as described below.
Redemption
At any time prior
to the distribution date, our board of directors may redeem the
Rights in whole, but not in part, at a price of $0.0001 per Right.
Subject to the foregoing, the redemption of the Rights may be made
effective at such time, on such basis and with such conditions as
our board of directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only entitlement of the
holders of Rights will be to receive the redemption
price.
Exchange Option
At any time after a
person or group of affiliated persons has acquired 15% or more of
our common stock or following the commencement of a tender offer
for 15% or more of our outstanding common stock, and prior to the
acquisition by such person of 50% or more of the outstanding common
stock, our board of directors may exchange the Rights (other than
Rights owned by such person or group which have become void), in
whole or in part, at an exchange ratio of one share of common stock
per Right (subject to adjustment).
Other Provisions
The terms of the
Rights may be amended by our board of directors without the consent
of the holders of the Rights, except that from and after such time
a person or group of affiliated persons has acquired 15% or more of
our common stock no such amendment may adversely affect the
interests of the holders of the Rights.
Until a Right is
exercised, the holder of the Right, as such, will not have any
rights as a stockholder, including, without limitation, the right
to vote or to receive dividends.
The Rights may have
certain anti-takeover effects. The Rights will cause substantial
dilution to a person or group that attempts to acquire us on terms
not approved by our board of directors. However, the Rights should
not interfere with any merger or other business combination
approved by a majority of our board of directors because the Rights
may be redeemed by us at any time prior to the distribution date.
Thus, the Rights are intended to encourage persons who may seek to
acquire control of us to initiate such an acquisition through
negotiations with our board of directors. However, the effect of
the Rights may be to discourage a third party from making a partial
tender offer or otherwise attempting to obtain a substantial
position in the equity securities of, or seeking to obtain control
of, us. To the extent any potential acquisition is deterred by the
Rights, the Rights may have the effect of preserving incumbent
management in office.
Attorneys’ Fees in Stockholder Actions
Our bylaws include
a fee-shifting provision in Article X for stockholder claims.
Article X provides that in the event that any stockholder initiates
or asserts a claim against us, or any of our officers or directors,
including any derivative claim or claim purportedly filed on our
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 us and any of our officers or directors named in the
action, for all fees, costs and expenses of every kind and
description, including but not limited to all reasonable
attorneys’ fees and other litigation expenses, that we or our
officers or directors who were named in the action may incur in
connection with such claim.
Our fee-shifting
provision is not limited to specific types of actions, but is
rather potentially applicable to the fullest extent permitted by
law. There are several types of remedies that a stockholder may
seek in connection with an action or proceeding against us,
including declaratory or injunctive relief, or monetary damages. If
a stockholder is not successful in obtaining a judgment that
substantially achieves in substance, such as in the case of a claim
for declaratory or injunctive relief, or amount, such as in the
case of a claim for monetary damages, our and our officers’
and directors’ litigation expenses may be shifted to the
stockholder.
Fee-shifting
provisions 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 our ability to invoke
our fee-shifting bylaw in connection with claims under the federal
securities laws, including claims related to this offering, would
be pre-empted by federal law. Similarly, it is unclear how courts
might apply the standard that a stockholder must obtain a judgment
that substantially achieves, in substance and amount, the full
remedy sought. The application of our fee shifting bylaw in
connection with such claims, if any, will depend in part on future
developments of the law. We cannot assure you that we will or will
not invoke our fee-shifting bylaw in any particular dispute,
including any claims related to this offering.
If a stockholder
that brings any such claim is unable to obtain the required
judgment, the attorneys’ fees and other litigation expenses
that might be shifted to such a stockholder are potentially
significant. This fee-shifting bylaw, therefore, may dissuade or
discourage stockholders (and their attorneys) from initiating
lawsuits or claims against us or our directors and officers. In
addition, it may impact the fees, contingency or otherwise,
required by potential plaintiffs’ attorneys to represent our
stockholders or otherwise discourage plaintiffs’ attorneys
from representing our stockholders at all. As a result, this bylaw
may limit the ability of stockholders to affect the management and
direction of our company, particularly through litigation or the
threat of litigation.
Warrants Held by Private Investors
See
“Comparative Share Data” for information concerning
CEL-SCI’s outstanding options and warrants.
Transfer Agent
Computershare,
Inc., of Denver, Colorado, is the transfer agent for CEL-SCI's
common stock.
EXPERTS
The financial
statements as of September 30, 2017 and 2016 and for the years then
ended incorporated by reference in this Prospectus have been so
incorporated in reliance on the report of BDO USA, LLP, an
independent registered public accounting firm, (the report on the
financial statements contains an explanatory paragraph regarding
the Company's ability to continue as a going concern) incorporated
herein by reference, given on the authority of said firm as experts
in auditing and accounting.
INDEMNIFICATION
CEL-SCI's bylaws
authorize indemnification of a director, officer, employee or agent
of CEL-SCI against expenses incurred by him in connection with any
action, suit, or proceeding to which he is named a party by reason
of his having acted or served in such capacity, except for
liabilities arising from his own misconduct or negligence in
performance of his duty. In addition, even a director,
officer, employee, or agent of CEL-SCI who was found liable for
misconduct or negligence in the performance of his duty may obtain
such indemnification if, in view of all the circumstances in the
case, a court of competent jurisdiction determines such person is
fairly and reasonably entitled to
indemnification. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers, or persons controlling CEL-SCI
pursuant to the foregoing provisions, CEL-SCI has been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
ADDITIONAL
INFORMATION
CEL-SCI is subject
to the requirements of the Securities Exchange Act of l934 and is
required to file reports, proxy statements and other information
with the Securities and Exchange Commission. Copies of
any such reports, proxy statements and other information filed by
CEL-SCI can be read and copied at the Commission’s Public
Reference Room at 100 F Street, N.E., Washington, D.C.,
20549. The public may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission maintains an Internet
site that contains reports, proxy and information statements, and
other information regarding CEL-SCI. The address of that
site is http://www.sec.gov.
CEL-SCI will
provide, without charge, to each person to whom a copy of this
prospectus is delivered, including any beneficial owner, upon the
written or oral request of such person, a copy of any or all of the
documents incorporated by reference below (other than exhibits to
these documents, unless the exhibits are specifically incorporated
by reference into this prospectus). Requests should be directed
to:
CEL-SCI
Corporation
8229 Boone Blvd.,
#802
Vienna,
Virginia 22182
(703)
506-9460
CEL-SCI CORPORATION
SHARES
COMMON STOCK
PROSPECTUS SUPPLEMENT
AEGIS CAPITAL CORP.
December , 2019