SHANGHAI – Shanghai's Cellular Biomedicine Group Inc. (CBMG) has added a cancer vaccine to its pipeline, a Gvax vaccine it intends to combine with a PD-1 drug in a U.S. phase II study for non-small-cell lung cancer (NSCLC). That moves CBMG, a company that started out to prove the efficacy of stem cells in clinical trials in China, further into immunotherapy territory and into the U.S. for the first time.

It also is another step forward in its efforts to rehabilitate a battered reputation.

The CD40LGVAX vaccine was purchased for $2.5 million cash up front and $1.75 million in CBMG common stock. CBMG may also need to pay a total of $25 million in future milestones and royalty payments.

The license was bought from Blackbird Biofinance and the University of South Florida, giving CBMG global rights to the technology, know-how and progeny manufacturing rights with access to the University of South Florida's master vaccine bank.

The company said CD40LGVAX has shown good phase I results in NSCLC, and plans are to combine the vaccine with a checkpoint inhibitor, anti-PD1 monoclonal antibody Opdivo (nivolumab) from Bristol-Myers Squibb Co., in a phase I lead-in trial with three patients.

A randomized phase II trial will follow to evaluate safety and efficacy of the CD40LGVAX/Opdivo combination in stage IV unresectable NSCLC patients.

Those trials are expected to be under way in the latter half of 2015, and it will be the first time CBMG conducts trials in the U.S. The firm will seek to do trials in China as well.

"Fundamentally, it would transform CBMG into a global player with leading comprehensive cancer treatment programs," said William Cao, CEO of CBMG.

The inventor of CD40LGVAX, Scott Antonia, is department chair and program leader of thoracic oncology and program leader of the immunology program at Moffitt Cancer Center. He is also a professor of oncology at the University of South Florida College of Medicine.

Antonia was brought in as a CBMG scientific advisor focusing on immuno-oncology at the end of April, the same time that Guoping Fan, professor in the Department of Human Genetics, David Geffen School of Medicine at University of Los Angeles (UCLA) and a member in the Eli and Edythe Broad Center of Regenerative Medicine and Stem Cell Research, was asked to offer his expertise in the area of stem cells.

The two experts reflect the company's technology in two cell platforms: immune cell therapy for treatment of a broad range of cancers using Tcm, TCR clonality, chimeric antigen receptor T cell (CAR T) and anti-PD-1 technologies and a second platform consisting of human adipose-derived mesenchymal progenitor cells (haMPC) for treatment of joint and autoimmune disease.

SHORT SELLER ATTACK

Those two scientific advisors also came on board what some called a sinking ship, joining just weeks after a short seller attack resulted in CBMG losing 30 percent of its stock value in one week. The shares dived from $36.16 on April 2 to $25.22 on April 7. As a result, 18 law firms sought out shareholders to join a class action lawsuit focusing on the claims of false stock promotion.

The short seller's screed made allegations against the company's executives, its CAR T technology and financial reporting, pointing to the company's bloated market cap of near $500 million as disproportionate to the value of the company's technology.

CBMG is one of a few Chinese biotechs listed on Nasdaq. It entered via a reverse merger, a popular route for some Chinese companies before bad apples like the now infamous Sino-Forest Corp., which lost billions in shareholder value, gave Chinese companies doing reverse mergers a bad name.

But other factors also made CBMG ripe for a short seller attack. It listed on Nasdaq June 18, 2014, but got to a half-billion capitalization in a very short period of time, perhaps riding the overall immuno-therapy wave that has seen companies like Juno Therapeutics Inc. become the largest U.S.-based biotech IPO in 15 years. (See BioWorld Today, Dec. 22, 2104.)

While the company's lead candidate is an autologous stem cell therapy for knee osteoarthritis, it was the CAR T therapy, a hot technology industry wide, acquired from the People's Liberation Army General Hospital, reportedly for a modest price, that was at the center of the storm. (See BioWorld Today, July 23, 2014.)

A main point of the short seller attack was the value of that technology given its price and trial results where some patients died, although the treatment was being tested on patients with advanced tumors. The CBMG denial of the claims made by the short seller are posted on the CBMG website.

With the June 22 deadline set by the court to recruit plaintiffs in the class action suit behind it, CBMG issued a notice Tuesday stating only one shareholder, who purchased 100 shares the day before the attack was published, will sue. The company's release went on to say, "We attribute the overall lack of response to the lawyers' notices to the positive support of the majority of our long-term shareholders."

In part due to a steady public relations campaign that has put Cao on a road show of public events from ChinaBio Partnering Forum in Shanghai to the Annual World Stem Cells & Regenerative Medicine Congress in London, the stock (NASDAQ:CBMG) closed Monday at $37.85, about $2 above pre short seller attack levels.