News Column

The Buffalo News, N.Y., David Robinson column

June 15, 2014

By David Robinson, The Buffalo News, N.Y.



June 15--Cleveland BioLabs' shareholders are getting restless.

That's not surprising. The Buffalo drug development company's stock is down to 50 cents a share -- from a five-year high of $8.40 in March 2011 -- after the Defense Department funding that it was counting on to help turn its anti-radiation sickness drug into a revenue producer was turned down in January.

The company is trying another path to convince federal regulators to allow its Entolimod drug to be stockpiled for emergency use, like a terrorist attack or nuclear power plant accident. But even if that effort succeeds, it won't happen until sometime next year.

By then, it may be too late. The company is due to run out of cash by spring.

"I am a very concerned shareholder," long-time investor Jeffrey Chokel told Cleveland BioLabs' executives during the company's annual shareholder's meeting last week.

"I think, more important than why the stock has tanked, is what you're going to do about it going forward," he said. "Are you going to do the right things to make sure the market appreciates the value that's there?"

Right now, the market isn't showing much love for Cleveland BioLabs, which lost $3.5 million during the first quarter despite some aggressive steps to cut costs that slashed its cash burn rate from $1.7 million a month to around $1 million.

And Chokel worries that, if Cleveland BioLabs goes to Wall Street to try to raise more cash in the coming months, the terms will be a very bitter pill for the company's shareholders to swallow.

"History has shown that Wall Street will take you to the cleaners," said Chokel, an investor from suburban Cleveland who has owned Cleveland BioLabs shares for eight years. "Until you get the stock price up, you can't go to the market to raise more money."

Yakov Kogan, Cleveland BioLabs' chief executive officer, said he thinks the company's efforts eventually will push the stock back up, although he also cautions that a turnaround is likely to take time. That's because the company's plan is to keep plugging away with important clinical studies on Entolimod and a handful of other drugs that have shown early promise as cancer treatments.

The more data the company can compile on the drugs through the studies, the stronger the scientific foundation it will be able to present to Wall Street or potential partners in the pharmaceutical industry when it knocks on their doors seeking financing. Promising clinical results also could give its share price a boost.

"By generating solid clinical results it will be of value to the company in the near term, as well as the long term," Kogan said.

"We just need enough time for the data to be generated, analyzed and presented," Kogan said. "We are not rushing to raise money before certain milestones are met."

An important part of that effort centers around a meeting the company has scheduled with U.S. Food and Drug Administration officials for next month about the potential stockpiling of its Entolimod drug for emergency use through a process, known as a Pre-Emergency Use Authorization. That's the company's best hope for turning Entolimod -- the most advanced of Cleveland BioLabs' drug candidates -- into a revenue producer.

Chokel, however, thinks that may come too late.

"That won't even be applied for until the first quarter of 2015," he said. "At that point, you may be out of money."

That's why Chokel questions the wisdom of Cleveland BioLabs' strategy of pursuing further development of four other cancer drugs. Despite the promise they've shown in early studies, they all are several years -- and several successful clinical trials -- away from hitting the market.

"The other four are cash users," he said. "I'm not saying they're not great programs, but I'm concerned about what this does to the share price."

Kogan said the company is funding much of the development of its cancer drugs through grants from Russian investors and Russian government agencies, that aren't diluting the holdings of its shareholders. In all, the company's Russian ties have brought in $23 million in funding. "We have developed a unique ability to tap into the Russian market," Kogan said.

The company also is looking for partners to help fund its drug development efforts, which would give Cleveland BioLabs more financial breathing room.

That wasn't enough to satisfy Joseph Weiss, a shareholder from Clarence and a local angel investor in companies such as Kinex Pharmaceuticals and Empire Genomics.

"What you're doing here is a couple of yards and a cloud of dust, but you're going to run out of time," said Weiss, a former Clarence Town Board member.

"I think we need a grandstand play here," Weiss said. "We need something that lights it up a little bit."

But Weiss isn't sure that Cleveland BioLabs' management is up to the task.

"I don't think you've got a salesman in the whole group," he said.

email: drobinson@buffnews.com

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