Cleveland BioLabs, Inc. (NASDAQ:CBLI) has become our new profile after the company released information on April 17, 2017 that the European authorities had accepted the company’s pediatric investigation plan (PIP) and the company will be able to commercialize its new radiation treatment, Entolimod. The new procedure is the submission of a Marketing Authorization Application (MAA) that normally takes 30 days.

Additionally, the company also communicated on the same date that the FDA had completed its review of a side-by-side analytical comparison of two formulations of the same drug, and has approved the an in vivo biocomparability study of these formulations in nonhuman primates (NHP).

Due to this information, the market has taken a bullish approach to the stock. The stock price jumped from $1.5 to $5.28 in the last three days. Have a look:


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Business

Cleveland BioLabs is a biopharmaceutical company founded in June 2003. The company is a spin-off company from The Cleveland Clinic. It is headquartered in Buffalo, New York. The company claims in its annual report that it is affiliated with Roswell Park Cancer Institute. In addition, Cleveland owns several subsidiaries “to best capitalize on our unique ability to leverage financial and clinical development resources in Russia” according to the last 10-k, Incuron LLC and Panacela Labs, LLC. Cleveland owns several drug candidates, but Entolimod is the most important one.

Entolimod: is a “Toll-like receptor 5“, being developed as a radiation countermeasure for prevention of death from Acute Radiation Syndrome (“ARS”) and as an oncology drug. The company met with the FDA for the first time in 2014, according to which we found out that the investigations are at an early stage in the United States, and the company will be able to have the first results in the last part of 2017:

“To establish the comparability of the older formulation and the new formulation, the FDA has requested that we first perform a side-by-side analytical comparability study between the two entolimod drug formulations. Thereafter, the Agency has requested that we conduct an in vivo study in non-human primates (“NHP”) to establish bio-comparability. The side-by-side analytical comparability analysis of the two formulations of entolimod was completed in the fourth quarter of 2016. The report of these results is in preparation. We expect to submit it to the FDA in the first quarter of 2017. Once the FDA has reviewed this data and provided its consent, the bio-comparability study will commence. Once initiated, we expect the NHP study will require approximately 6 months to complete.” Source

Additionally, we could read in the same document that the company has received funding from the United States Government. For some investors, this information will be very relevant. So, we note it here:

“In September 2015, we announced two awards totaling approximately $15.8 million in funding from the United States Department of Defense (“DoD”), office of Congressionally Directed Medical Research Programs to support further development of entolimod as a medical radiation countermeasure. These awards will fund additional preclinical and clinical studies of entolimod, which are needed for a BLA.” Source

CBLB612: is a synthetic molecule that activates the Toll-like heterodimeric receptor 2/6 (“TLR2/TLR6”) and stimulated white blood cell generation in preclinical studies. This drug has completed its Phase 2.

Mobilan:Panacela Labs, Inc. has been engaged in two studies in the Russian Federation.

The following is a picture that describes the state of the candidates being developed by the company. Investors should remark that the company owns two drugs in Phase 2 as well as the Entolimod-Biodefense that is in Phase 3:

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Recent news and Balance sheet – Is the market reaction excessive?

The recent news that made the stock price jump were of course celebrated by the CEO, Yakov Kogan, PhD. He used the following words:

“We are excited to have received a positive opinion from the EMA on our PIP. In addition, we have held a series of encouraging meetings with the EMA concerning our MAA submission. We look forward to continuing our discussions with the agency as we move forward with the MAA” Source

Additionally, he said the following about the FDA announcement:

“We are excited to have received agreement from the FDA to commence the in vivo biocomparability study. Following completion of the in vivo study and discussion of the submitted study results with the FDA, we expect the agency to resume the review of our pre-EUA dossier.” Source

We checked the stock’s trading history and can see that investors were much more bullish on the company in 2007 to 2008. The stock traded over the $270 mark when its drugs were just in Phase I studies.

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However, if you are a clever investor, you should have figured out that the last rationale was not fair since the amount of shares outstanding in 2007 and now are not the same. Fair enough, let me tell you that the amount of shares at that time was about 1 million and now is about 11 million. This means that the share price of that time should be now about $22 ($240 * 1 million shares/11 million shares). But, the share price is $5.04 now. So, these traders right now are not overreacting to the information more than those who traded shares in 2007.

In addition to this, the balance sheet looks very clean right now. The company showed in the last 10-k that it had about $15 million in total assets and only $3 million in total liabilities. It is also remarkable that the company has no long term debt, and 99% of its assets are short-term investments or cash on hand.

Conclusion

Cleveland BioLabs is very close to commercializing its new drug Entolimod and has other drugs in Phase 2. We checked to see if the market over-reacted. We believe that this is not the case, since the the same company with the drugs still in Phase 1 a few years ago, was worth four times more than what it is worth now. Additionally, the company has no long term debt and tons of cash on the balance sheet. Do your own research and try to keep yourself informed about this company with our subscription services, since this looks like a company that has potential.

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Disclosure: We have no position in CBLI and have not been compensated for this article.