Cleveland BioLabs, Inc. (NASDAQ: CBLI) is a biopharmaceutical company engaged in the development of techniques to activate the immune system to address medical needs. The company’s proprietary platform of toll-like immune receptor activators has applications in radiation mitigation, oncology immunotherapy, and vaccines.
CBLI conducts business in the United States and Russia. The company’s Russian operations include a wholly-owned subsidiary, BioLab 612, LLC, and Panacela Labs, Inc., a joint venture company founded in 2011 by CBLI and Rusnano.
CBLI was formed in 2003 as a spin-off from The Cleveland Clinic, and is headquartered in Buffalo, New York.
CBLI’s most advanced product candidate is Entolimod, which is being developed as a radiation countermeasure and an immunotherapy for oncology. The company’s remaining pipeline products are detailed below:
Source: Company Reports
Generally speaking, CBLI’s development efforts are related to apoptosis, a regulated form of cell death that can occur in response to internal stresses or external events such as exposure to radiation or toxic
Rusnano is a private equity and venture capital vehicle created by the Russian government to commercialize developments in nanotechnology.
chemicals. Among other things, apoptosis is largely responsible for the lethality of high-dose radiation exposure. However, it also serves as a defense mechanism which allows the body to eliminate defective cells such as those with cancer-forming potential. The company has developed strategies to target the molecular mechanisms controlling apoptotic cell death for therapeutic benefit. These consist of:
- Temporary and reversible suppression of apoptosis in normal cells to protect healthy tissues using compounds called Protectans. All the pipeline products listed above are classified in this category.
- Reactivation of apoptosis in tumor cells to eliminate cancer using compounds called Curaxins. The primary compound under consideration is known as CBL0137, which is being developed a former subsidiary of CBLI, Incuron, LLC.
Entolimod Biodefense is the company’s most advanced Protectan product candidate. It is being developed as a radiation countermeasure to prevent death from Acute Radiation Syndrom (ARS). The company’s pivotal study demonstrated that non-human primates given a single dose of entolimod were three times more likely to survive after being given a 70 percent lethal dose of total body irradiation.
Entolimod Oncology consists of the company’s efforts to develop entolimod to treat cancer by activating the innate adaptive immune response in patients. CBLI has exclusive worldwide development and commercialization rights for entolimod.
CBLB612 is a proprietary compound based on a natural activator of another tissue-specific component of the innate immune system. Preclinical studies have shown that CBLB612 stimulates white blood cell regeneration. The company has licensed CBLB612 to Zhejiang Hisun Pharmaceutical Co., Ltd. for the territories of China, Taiwan, Hong Kong, and Macau, but holds rest-of-world development and commercialization rights.
Mobilan is the lead product candidate of the company’s joint venture, Panacela. It is being developed for the treatment of prostate cancer. Panacela holds exclusive worldwide development rights for Mobilan. As of December 31, 2016, CBLI owned 67.57 percent of Panacela.
CBL0137 is a small molecule with a multi-targeted mechanism of action that is being developed by Incuron. This product may be broadly useful for the treatment of many different types of cancer. As noted above it is categorized as a Curaxin. The company sold its equity interest in Incuron in 2015, but retained certain royalty interests relating to future sales.
The market for radiation countermeasures has grown substantially, primarily due to the perceived threat of chemical, biological, radiation, and nuclear attacks. In addition to the U.S. government, which maintains a national stockpile of emergency products, potential customers include state and local governments, foreign governments, NGOs, multinational corporations, security companies, healthcare providers, and nuclear power facilities.
Due to the limitations of the two currently approved treatments to deal with a large-scale radiation event, CBLI believes that entolimod is a compelling product candidate.
CBLI divested its interest in Incuron, LLC, which was formed in 2010 to develop CBL0137 and its predecessor. CBLI retains a royalty on the future commercialization, licensing or sale of the CBL0137 technology and future change of control transaction of Incuron.
It is not feasible or ethical to test entolimod as a radiation countermeasure in humans. It is being developed under the FDA’s Animal Rule.
On April 17, 2017, CBLI announced that the U.S Food and Drug Administration (FDA) had completed its review of two formulations of entolimod. The FDA has subsequently authorized the company to initiate an in vivo biocomparability study of these formulations in non-human primates. The objective of this study is to compare the historical drug formulation used in prior studies to the to-be-marketed drug formulation of entolimod submitted for pre-Emergency Use Authorization (pre-EUA).
If the FDA approves the pre-EUA application, federal government agencies may procure entolimod for stockpiling so that the drug is available to distribute in the event of an emergency, prior to the drug being formally approved under a Biologics License Application. While pre-EUA approval does not constitute full licensure, it would allow the company to generate revenue from the sale of entolimod. Furthermore, CBLI believes that pre-EUA status could generate sales to foreign governments.
CBLI also announced that the European Medicines Agency (EMA) has accepted the company’s pediatric investigation plan, which would allow the company to apply for marketing authorization for entolimod as a radiation countermeasure in the EU.
Full-Year Earnings Review
CBLI reported fourth quarter and full-year results on February 22, 2017. Revenue for the year ended December 31, 2016, increased 30 percent to $3.5 million. Changes in revenue were attributable to contracts with the Department of Defense and the Russian Ministry of Industry and Trade.
Operating expenses decreased 27 percent to $9.9 million, driven by declines in research and development as well as general and administrative expenses. Research and development expenses fell primarily due to a narrowed focus on the entolimod biodefense application, while general and administrative expenses fell primarily due to lower personnel and outside professional costs.
Cash used in operating activities decreased significantly, from $12.1 million to $5.0 million. As of December 31, 2016, the company listed cash and short-term investments of $15.2 million, which the company believes is sufficient to fund operations for at least 12 months.
- Agreements and approvals to expand sales domestically and internationally;
- Exercise of warrants and further equity offerings to raise cash;
- Threats to global security including the possibility of a radiological attack; and
- Significant advances in the company’s technology.
- The company will require significant additional financing to achieve its stated objectives. Debt financing may restrict the company’s operations and equity financing may lead to further shareholder dilution;
- There is no guarantee that the company will be able to develop and commercialize its current pipeline of product candidates. Further, the company may not be able to secure the necessary regulatory approvals in a timely manner;
- The company is dependent on government funding, which carries additional risks not present in the commercial marketplace;
- The company has material operations in Russia that are subject to a variety of political risks; and
- The company’s stock price remains volatile and subject to speculation.
As of April 18, 2015, shares of CBLI closed at $3.49, retreating more than 27 percent on the day, yielding a market capitalization of $38.4 million. Following the company’s announcement on April 17, 2016, shares hit an intraday high of $4.88 before settling at $4.80, a 208 percent increase from the prior closing price of $1.56. In the past year, the stock has traded as low as $1.22. Over the same period, CBLI’s annualized daily volatility was 132 percent. Daily trading volume generally fell between 5,000 and 100,000 shares. However, the trading volume increased significantly in the two days following the announcement of the in vivo study, totaling 39.0 million and 7.4 million shares on April 17, 2017, and April 18, 2017, respectively.
The recent announcements regarding CBLI’s FDA and EMA applications are positive developments for the company’s primary product candidate, entolimod. As noted above, if the company receives approval for its pre-EUA application, CBLI may begin marketing to federal government agencies. However, there is no guarantee that the company’s application will proceed as planned. Other material uncertainties include the company’s future sources of financing and political risks related to its Russian operations.
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 Rusnano is a private equity and venture capital vehicle created by the Russian government to commercialize developments in nanotechnology.
 CBLI divested its interest in Incuron, LLC, which was formed in 2010 to develop CBL0137 and its predecessor. CBLI retains a royalty on the future commercialization, licensing or sale of the CBL0137 technology and future change of control transaction of Incuron.
 It is not feasible or ethical to test entolimod as a radiation countermeasure in humans. It is being developed under the FDA’s Animal Rule.