S E C U R I T I E S
Company Description
Advaxis, Inc. is a development-stage immune therapy company that is focused on the development of therapeutic cancer
vaccines utilizing attenuated, live Listeria monocytogenes bacteria as a carrier for bioengineered antigens. The Company
exclusively licenses this technology from the microbiology laboratory of Dr. Yvonne Paterson at the University of Pennsylvania.
Advaxis’ anticipates starting three clinical trials in 2010 that advance its previously completed Phase I clinical trial.
Summary
¾ What’s new – Advaxis reported results for its Q4 and fiscal year end, raised additional capital and announced the start of
three of its clinical trials. (See page 2, 10 and 15 for details).
¾ Novel immunological treatment for cancer acts as a differentiator – At the core of Advaxis’ product portfolio is its
patented delivery system that uses attenuated, live Listeria monocytogenes (Lm) as its vector to deliver the antigen fusion
protein Listeriolysin-O (LLO), which elicits a powerful and comprehensive immunological response. While the powerful
immunological response comes from both the innate and adaptive tiers, more importantly, Advaxis’ vaccine elicits an
intratumoral affect. This affect inhibits the regulatory T-cells that are acting to “hide” cancerous cells, thus increasing the
ability of the body’s immune system to fight the existing cancer and improve remission.
¾ Strong IP portfolio - Advaxis has 27 issued and 45 pending patents covering multiple compositions of matter, methods and
uses for live Listeria-based vaccines. We note that recently, the Company successfully defended a patent in Europe.
¾ Large addressable market targeted – According to BCC Research, the estimated global market for immunotherapies will
reach $37.2 billion by 2012, and within that market, the sector with the greatest potential for growth is cancer vaccines.
¾ Near-term capital infusion potential – In September 2009, Advaxis’ signed an equity line of credit for a maximum of $5M
until September 2012. In January 2010, the Company drew down approximately $1.45M. This leaves approximately $3.5M
on the line of credit in which the Company can draw down to help fund its operations.
¾ Valuation – Our Comparison Table on page 16 shows the market placing a median enterprise value on cancer biotech firms
of $115.5M vs. Advaxis’ enterprise value of $27.2M.
Investment Positives
Novel immunological treatment for cancer acts as a differentiator - At the core of Advaxis’
product portfolio is its patented delivery system that uses attenuated, live Listeria
monocytogenes (Lm) as its vector to deliver the antigen fusion protein Listeriolysin-O (LLO),
which elicits a powerful and comprehensive immunological response. We note that the
immunological response comes from both the innate and adaptive tiers. Furthermore, and more
importantly, Advaxis’ vaccine elicits an intratumoral affect, which inhibits the regulatory T-
cells that are acting to “hide” cancerous cells. Consequently, the body’s immune system finally
“sees” the cancer and begins to attack it, thus enabling a more successful remission. This last
step is where many immunological vaccines have failed in the past.
Strong IP portfolio – Advaxis has 27 issued and 45 pending patents covering multiple
compositions of matter, methods and uses for live Listeria-based vaccines. Advaxis is the
exclusive licensee of these patents based on the work of Dr. Yvonne Paterson at the University
of Pennsylvania, and the Company has the rights to an extensive portfolio of intellectual
property, filed both in the U.S. and internationally, pertaining to the use of Listeria and listerial
products used as vaccine vehicles. Lastly, we note that Advaxis recently defended one of its
key patents in European Patent Court against a challenge made by Anza Therapeutics, Inc.,
formerly Cerus Corp.(NASDAQ: CERS). The patent covers the use of bacteria to deliver an
antigen and generate an anti-tumor immune response. Advaxis successfully defended the
challenge, and the ruling cannot be appealed.
Large addressable market targeted – Currently, cancer is the second leading cause of death
by illness in the U.S. The National Cancer Institute expects cancer to take the lead position in
the U.S. within five years. Advaxis is initially targeting cervical cancer by using its unique
immunological treatment. BCC Research estimates that the global market for immunotherapies
will reach $37.2 billion by 2012, and within that market, the sector with the greatest potential
for growth is cancer vaccines.
Recent financings provide capital – September 2009, Advaxis’ signed an equity line of credit
for a maximum of $5M until September 2012. In January 2010, the Company drew down
approximately $1.45M, which leaves approximately $3.5M of the line remaining. The
Company also issued about $670K in junior unsecured convertible notes
New clinical trial commencements imminent – 3 clinical trials that advance Advaxis’
original Phase I trial should start this year. Its Phase II trial for CIN and Cervical Cancer
(India) are expected to commence in one month and 4-5 weeks from today, respectively, while
its UK Head and neck cancer Phase I/II trial is expected to commence in Q3/Q4.
Investment Challenges
Shareholder dilution – With no reported revenues, Advaxis is highly dependent on raising
capital. Furthermore, the Company can not start/complete its Phase II clinical trials until it
acquires adequate capital. Lastly, many of the recent financings contain anti-dilution
provisions and some debt are convertible into equity. The Company currently has 127.2M
shares outstanding, 18.3M options, 99.5M warrants, and potentially an additionally 49.7M
shares to issue from convertible debt (all shares are as of October 31, 2010 except for warrants,
which are as of February 2010). Coupled with a dependence on capital to continue operations,
current shareholders could be diluted.
STONEGATE SECURITIES 2
Going concern opinion expressed by auditors and internal controls weakness – Since its
inception, Advaxis has not generated significant revenues and consequently has suffered
significant net losses. As of October 31, 2009, Advaxis reported an accumulated deficit of
$16.6M, and negative working capital of $5.8M. Additionally, as of October 31, 2009,
Advaxis’ auditors continue to express a going concern opinion and Company management has
indicated that it’s internal controls are ineffective.
Attraction of institutional investor capital may prove difficult – Tom Moore, CEO, was
previously the CEO of Biopure Corporation from July 2002 to February 2004 (Other OTC:
BPURQ.PK). During his tenure at Biopure, the SEC alleged that in 2003, he, the head of
regulatory affairs (Howard Richman) and general counsel engaged in misleading public
statements about the status of negative results received from the FDA in regard to the approval
of its key drug Hemopure. Mr. Moore settled with the SEC in February 2007 and is subjected
to a five year injunction from violating antifraud provisions of the federal securities laws and
paid a fine. Importantly, Mr. Moore has stated that he relied on Mr. Richman and was thus also
misled. Given Mr. Richman’s actions since the events at Biopure, Mr. Moore’s statement
appears credible. We note that Mr. Richman was permanently barred from serving as an officer
of a publicly traded company and paid a fine. Moreover, in March 2009, Mr. Richman pleaded
guilty to an obstruction of justice charge for pretending he had terminal cancer and admitted to
impersonating his own doctor to avoid the federal lawsuit filed by federal regulators mentioned
above. While Mr. Richman’s actions lend credibility to Mr. Moore’s statement, institutional
investors may nonetheless be hesitant to commit investment capital to Advaxis. Despite this
opinion, we would note that the Company recently raised a maximum of $5M from Optimus
Capital LLC via an equity line of credit.
Rigorous FDA evaluation and approval process – Pharmaceutical approvals in the U.S. are
stringent and typically unpredictable. What’s more, the clinical trial process is lengthy,
expensive, and often fails at various stages. Recent FDA data show evidence of increased
failure rates with a current 8% probability of a new drug entering Phase I development and its
ability to make it to registration versus a historical 14% probability. Furthermore, the FDA
may require additional testing after successful completion of clinical trials if some required
regulatory criteria are not met. Even if the FDA grants approval, the approval may include
limits on indication uses.
High level of competition may render Advaxis’ technology obsolete – The biotechnology
and biopharmaceutical industries are characterized by rapidly changing markets, technologies,
regulatory standards, and frequent new product introductions. Consequently, changes to any of
the above factors may render Advaxis’ products obsolete, less competitive or less marketable.
News flow dependent – Because Advaxis is an early stage drug development company with no
reported revenues, traditional financial analysis is less relevant. Consequently, we believe, in
general, that companies operating in the realm of this investment landscape are highly
dependent on new flow rather than traditional financial measurement yardsticks. Hence, if
news flow slows down or is not forthcoming, the stock price could drift lower. Additionally,
due to current stock market conditions, investors could avoid these types of investments
causing Advaxis’ stock to decline.
STONEGATE SECURITIES 3
Valuation Summary
Advaxis is a development-stage biotechnology company with a novel immunological cancer
vaccine. At the core of Advaxis’ product portfolio is its patented delivery system that uses
attenuated, live Listeria monocytogenes (Lm) as its vector to deliver the antigen fusion protein
Listeriolysin-O (LLO), which elicits a powerful and comprehensive immunological response.
Additionally,
¾ it is a stable vaccine that may be stored frozen; can be grown on completely synthetic
media and
¾ can change the antigen to target any type of cancer or infectious disease
While an approved FDA product is not imminent, the target market opportunity is significant.
According to BCC Research, the estimated global market for immunotherapies will reach $37.2
billion by 2012, and within that market, the sector with the greatest potential for growth is
cancer vaccines.
Our Comparison Table shows the market placing a median enterprise value on cancer biotech
firms of $115.5M vs. Advaxis’ enterprise value of $27.2M.
We outline potential catalysts for Advaxis over the next two calendar years:
STONEGATE SECURITIES 4
Company Overview
Company Background
Advaxis, Inc. is a development-stage biotechnology company that is developing proprietary
Listeria monocytogenes-based cancer vaccines. Advaxis’ technology is based on over 20 years
of research by Dr. Yvonne Paterson, Professor of Microbiology at the University of
Pennsylvania and Chairperson of the Advaxis Scientific Advisory Board. In July 2002,
Advaxis signed an exclusive 20-year licensing agreement with University of Pennsylvania that
is subject to royalty and milestone obligations. Advaxis trades on the OTC BB under the
symbol ADXS.
At the core of Advaxis’ product portfolio is its patented delivery system that uses attenuated,
live Listeria monocytogenes (Lm) as its vector to deliver a tumor associated antigen fused
(TAA) to the protein Listeriolysin-O (LLO), which elicits a powerful and comprehensive
immunological response. To best understand Advaxis’ technology, it is helpful to briefly
review the human immune system.
Tier 1: Innate immune system – is the body’s first line of defense and provides an immediate
response that is non-specific to a pathogen.
Tier 2: Adaptive immune system – is the second line of defense and is supported by the innate
response. This system is not immediate and requires some time to react. It also is antigen
specific meaning that it reacts only to the “foreign invader” that induced the response.
Importantly, the adaptive system retains this response in its memory and is able to exhibit an
increasingly faster and stronger response to combat the pathogen on subsequent exposure. We
also note that there are two pathways that the adaptive system takes to fight invaders.
Exhibit 2: Mapping The Immune System
Immune System
Anatomical
(i.e. Skin)
STONEG A TCompany
Source: E S Reports,
ECUR I T I ECancer
National S Inst., Stonegate Securities 5
Adaptive immune system Exhibit 3: The Body's Immune Response
response - Class II Pathway
(Exogenous)
Antigen-presenting cells (APCs)
roam inside the body and search
for foreign invaders. When they
find an invader, they “eat it”,
break it down, and push pieces of
it to its surface that act as
molecular targets for the immune
system. Here, APCs stimulate T-
cells to action by presenting them Source: Company Reports; Stonegate Securities
with a target.
T-cells come in many forms and two important ones are: 1) Helper or 2) Killer (cytotoxic).
Helper T-cells (CD4+ T-cells) are the “middlemen” of the immune system that assist in the
immune response by secreting chemicals that enable Killer T-cells to battle. Killer T-cells (also
known as cytotoxic T-cells or CD8+ T-cells) destroy infected cells. The destruction of the
infected cells occurs when killer T-cells (CD8+) release cytotoxins that form pores in the
“foreign” cell’s plasma membrane, enabling granzymes to activate a series of enzymes that lead
to the death of the infected cell.
Advaxis engineers a modified Listeria (attenuated version of wild Listeria) to deliver specific
cancer antigens. In turn, the modified Listeria vaccine enlists the immune system to attack the
Listeria bacteria and simultaneously “educate” the immune system to attack specific cancer
cells. Importantly, Advaxis’ vaccines trigger the two tiers of the cellular immune system
response as described above.
Simply put, when Listeria enters the body it elicits an immediate innate immune response.
Then, as the Listeria infects antigen-presenting cells (APCs), these APCs direct the immune
system to attack the Listeria as described in the adaptive immune response. In the ADXS 11-
001 vaccine, the bacterium is engineered to secrete fragments of HPV-E7, a molecule found on
the surface of malignant cervical cells. The immune system is then triggered to recognize these
cancer cells and destroy them. This sequence of events has been compared to offering a
bloodhound the scent of its target. By modifying the Listeria bacteria to carry chemical tags
found in a specific type of cancer, the body directs the immune system to focus its attack on the
cancer.
STONEGATE SECURITIES 6
How does Advaxis’ vaccine work?
Below in Exhibit 4, we illustrate how Advaxis’ Listeria vaccine is bioengineered and its main
mechanism of action.
Exhibit 4: Mechanism of Action
STEP 1: THE An attenuated, bioengineered Lm bacterium is
CARRIER selected as the delivery vector. The bacterium
Delivery Vector is attenuated by a factor of 10,000 to 100,000
times so it doesn't offer a health risk, but offers
the strong immunicity of a wild Listeria
Advaxis’ Listeria vaccines secrete LLO-antigen fusions that reduce intratumoral regulatory T-
cells (Tregs) and alter the tumor microenvironment in constructive ways that are unlike any
other vaccine vector. Consequently, the immune system is “awakened” and “sees” the once
hidden cancer cells. Furthermore, this action enables the body’s immune system to attack any
future growth of the specific cancer and leads to a more successful remission. This last step is
where many immunological vaccines have failed in the past.
Exhibit 5 illustrates the results from a study that compares two vaccines - one that includes the
LLO fusion protein (ADXS11-001), and
Exhibit 5: Intratumoral Affect
one that does not. The inclusion of LLO
in the vaccine increased the cytotoxic Activated Tumor
Inhibitory T-cells
Vaccine Killing T-Cells (In
(tumor killing) T-cell activation by 400% (in the tumor)
the tumor)
and decreased the inhibitory T-cells by Lm-E7 (- LLO) 9.40% 11.80%
80%. ADXS11-001 (+LLO) 36.80% 1.70%
Source: Company Reports; Stonegate Securities
Other effects
Additionally, Listeria stimulates other non-classical mechanisms that act to support the overall
immune response described above. These include: the stimulation of bone marrow to make
more immune cells, the stimulation of blood vessel cells that allow activated immune cells to
leave the blood and enter tumors, and other supportive effects.
Advaxis works with its patent counsel to surround its product and technology platform with
significant offensive and defensive patent protection. The Company recently defended one of
its key patents in European Patent Court against a challenge made by Anza Therapeutics, Inc.,
formerly Cerus Corp.(NASDAQ: CERS). The patent covers the use of bacteria to deliver an
antigen and generate an anti-tumor immune response. Advaxis successfully defended the
challenge, and the ruling cannot be appealed.
Business Strategy
Advaxis’ business strategy is focused on developing sufficient human clinical data to
demonstrate its effectiveness in combating cancer. Given its early stage business lifecycle, its
business plan has been executed by largely outsourcing virtually all of its major functions.
These include: drug development, manufacturing, R&D, grant applications, and clinical studies
among others. Additionally, the Company is focused on attaining partners to help it conduct its
clinical trials as evidenced by The Cancer Research UK Phase I/II trial, and its GOG/NCI trials.
Longer-term, Advaxis envisions licensing its technology for commercial development. The
Company does not intend to engage in commercial development beyond Phase II clinical trials
without partnerships or license agreements.
Notes Payable (convertible) - June 09 Bridge $ 296.5 Notes Payable - BioAdvanced $ 50.0
12% interest rate; mature Dec 09; Security interest 8% interest rate; matured June 09; lender has
granted in all tangible & intangible assets; 2.5 warrants extended payment until draw down of equity LC
issued per $1 invested - strike @ $0.20, mature 5 yrs;
NP convrt into common or new securities @ a discount Series A Prfd Stock - Equity line of credit $ 1,450.0
- conversion & discount dependent on new financing Definitive agreement signed Sept-09; max $5M; draw in
with different timeframes one or more tranches until Sept-12; 10% int rate payable
in Series A Prfd stk; non-convertible; redeemable by
Notes Payable (convertible)- Oct 09 Bridge Company after 5yrs - 33.75M 3yr warrants issued, strike @
Oct 26 and Oct 30 issue dates; mature 4/30/2010; 2.5 $ 2,147.1 $0.17; warrant exercise proceeds payable in 4yr note @ 2%
warrants issued for every $1 invested strike @ $0.17;
NP conv't with similar terms/conditions as Jun 09 bridge Warrants 99,463.5
Vast majority of warrant strike prices now @ $0.17; 54.6M
Junior Unsecured Notes Payable (convertible) $ 673.5 warrants ('07 PIPE) strike w/ full ratchet anti-dilution trigged
Issued btwn Nov-09 & Feb-10; mature btwn 4/16/10 & if offering below $0.20;
7/30/2010; no repmt made until Jun-09 bridge paid-off;
1.4M warrants strike @ $0.17
Stock Options 18,331.6
Notes Payable - CEO $ 948.0 Wtd avg price @ $0.16; wtd avg life @ 6 yrs
12% interest rate; matures Jan 2010; warrants
issued on 3-3 basis of $ invested in NP; CEO took Other items
subordinated position vs. bridge financing note; with Pmt to U Penn for addt'l IP; there are also various other $ 548.1
accrued interest debt @ ~$1M royalty/fees & milestone pmts due upon commercialization
Pipeline
Advaxis is targeting multiple clinical trials targeting CIN and several HPV-related cancers.
Below we illustrate the Company’s programs. We note that the CIN, Cervical Cancer
(GOG/NCI), Cervical Cancer (India) and Head and Neck Cancer are trials that are building on
Advaxis’ 2007 completed Phase I trial (first one listed below).
Exhibit 7: Clinical Trial Program
Product Cancer Pre- Phase Phase Phase
Name Indication Stage Sponsor Clinical I II III
ADXS11 -001 Cervical cancer Late Advaxis
ADXS11 -001 Cervical dysplasia (CIN) Early Advaxis
ADXS11 -001 Cervical cancer Late GOG/NCI
ADXS11 -001 Cervical cancer Late India
ADXS11 -001 Head & neck cancer Late CRUK
ADXS31 -164 Breast cancer Late US
ADXS31 -142 Prostate cancer Late Advaxis
Source: Company Reports, Stonegate Securities
Pre-clinical results
In pre-clinical studies involving animals that have been injected with cancer cells to generate a
5mm tumor, results showed that administering different Lm vaccines in many cancer models
led to complete tumor clearing of pre-existing tumors in approximately 75% of the animals.
The pre-clinical trial demonstrated:
STONEGATE SECURITIES 10
The results are also impressive when compared with other live vaccines in an independent
animal trial. The National Cooperative Drug Discovery Group at the National Cancer Institute
asked several labs to provide their most effective cancer vaccine to participate in a comparison
test. As indicated in Exhibit 8, ADXS 11-001 outperformed the participants that included
Vaccinia, DNA and peptide vaccines.
Exhibit 8: NCI Tumor Vaccine Test
ADXS11-001 50 - 100
LmE7 0
Vac-SigE7 0 - 25
Vac E7 0
E7-DNA 0
E7-DNA in SBAS2 0
Db peptide in SBAS2 0
Source: Company Reports, Stonegate Securities
Toxicity was limited to flu-like symptoms comprised of fever, chills and nausea. Higher fever
and hypotension occurred in Cohort III; however, the patients’ side effects, including the
hypotension, promptly responded to symptomatic treatment with non-prescription non-steroidal
anti-inflammatory drugs (NSAIDs) and anti-emetics without the need for early antibiotics.
Although the trial was not designed to evaluate efficacy, RECIST criteria survival data from 13
eligible patients were analyzed. The overall median survival for patients in the Advaxis trial
was 347 days, and over two years for two patients who are alive at the time of this writing.
This is particularly noteworthy given that the survival of patients in the metastatic, refractory or
recurrent ICC is only three to six months. Additionally, we note that 4 of 13 (30%) evaluable
patients experienced tumor reduction.
Exhibit 9: Survival - ADXS11-001 vs. GOG Historical Data
12-Month Median
Still Alive
Survival Survival
(Days)
(%) (Days)
GOG Standard 5 180 NA
ADXS11-001 Phase I 53 347 1,000+
Clinical Trial
Source: Gynecologic Oncology Group (GOG), Advaxis, Inc., Stonegate Securities
STONEGATE SECURITIES 11
Other vaccines in the Advaxis pipeline
Advaxis technology can bioengineer dual antigen systems that have the capability of attacking
two different cancer targets using a single vaccine. Recently, Advaxis announced the Company
is a recipient of a $210,000 grant from the U.S. National Institutes of Health (NIH) to develop a
single Lm vaccine that delivers two different antigen-adjuvant proteins to attack two separate
and distinct tumor targets. Further research is Exhibit 11: Other Vaccines in the Pipeline
focused on a dual delivery system using a tumor
cell surface marker to kill tumor attack tumor Antigen Indication
cells, combined with anti-angiogenesis to impair HWM-MAA Anti-angiogenesis, melanoma
p53 Many types of cancer
a tumor’s ability to grow by reducing its blood WT-1 Lymphomas; leukemias
supply. PSCA Prostate cancer
Telomerase Many types of cancer
In Exhibit 15 (see appendix on page 15), we Survivin Ovarian cancer
provide an estimated timeline as it relates to
Advaxis’ clinical trials. Source: Company Reports, Stonegate Securities
Industry Overview
Industry Background
The goal of immunology research is to develop methods that exploit the natural tendency of the
human body to defend itself against disease. Researchers once believed that the immune
system was limited to combating infectious diseases caused by bacteria and viruses; however,
years of research have created some successful examples of immunotherapies for cancer. The
launches of Merck (NYSE: MRK) and Sanofi Pasteur MSD's Gardasil® (FDA approved in
2006) and GlaxoSmithKline’s (NYSE: GSK) Cervarix® (approved in EU in 2007) have
significantly boosted clinical interest in cancer vaccines. BCC Research estimates that the
global market for immunotherapies will reach $37.2 billion by 2012, and within that market,
the sector with the greatest potential for growth is cancer vaccines.
Prophylactic vaccines (Gardasil® and Cervarix®) control the cancer vaccine sector, and
research firm Espicom Business Intelligence expects that portion of the market to reach $4
billion by 2011. While there are currently no sales in the therapeutic market (where Advaxis is
positioned), Espicom is optimistic regarding the potential of that market, forecasting sales to
reach $5 billion by 2012. The optimism is largely predicated on the recent changes in the
landscape of the therapeutic cancer vaccine market, which is shifting from a product pipeline
filled with vaccines in Phase I and II stages, to a more mature pipeline with multiple products
in Phase III trials (see Exhibit 14 on page 14). The Phase III candidates are targeting high
profile cancers, including melanoma, prostate, non-small lung, renal cell, and colorectal
cancers.
STONEGATE SECURITIES 12
Because cancer disproportionately strikes older people, demographic trends present a strong
push for long-term growth. In the U.S., the Census Bureau estimates that there are about 303M
people. Of this, approximately 13% is aged 65+ with expansion to about 20% in 2030. In
2006, people over 65 accounted for over one-third of the U.S.’s total consumption of
prescription medicines. Additionally, world population stands at about 6.6B with projections
by the United Nations to reach 9.1B in 2050. The percentage of people aged 60+ will increase
from 11% in 2006 to 22% in 2050. The prediction for Europeans aged 60+ is to move from
21% of the population in 2006 to 34% by 2050, and developing countries’ forecast is to move
from 8% in 2006 to 20% in 2050.
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
2006 2030 2006 2050
Age <65 Age 65+ Age <60 Age 60+
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
2006 2050 2006 2050
Age <60 Age 60+ Age <60 Age 60+
Source: US Census Bureau, United Nations, Stonegate Securities
Advaxis’ primary focus is on cancer and pre-cancer conditions relating to the human papilloma
virus (HPV). This is an enormous market with limited treatment alternatives. An estimated
95% of cervical cancers are associated with HPV. These proteins interfere with normal cell
functions that generally inhibit cell growth. At some point in their lives, 80% of sexually active
men and women are infected by genital HPV. Unfortunately, the immune system often fails to
recognize the HPV-infected cells, enabling the cancer to develop. The World Health
Organization estimates there are 630 million HPV-infected individuals worldwide.
Advaxis’ lead product candidate ADXS11-001 targets cervical cancer, the second leading cause
of cancer death for women, and cervical intraepithelial neoplasia (CIN), a condition that is
characterized by the presence of abnormal cells on the cervix that can develop into cancer.
According to the National Cancer Institute (NCI), in 2009 an estimated 11,270 women will be
diagnosed with cervical cancer. The NCI projects that in 2009 another 1.7 million women will
be diagnosed with CIN. Exhibit 13: Estimates of New Cases 2009 (U.S. only)
There is currently no FDA- Cervical Cancer 11,270
approved therapeutic for CIN (low grade) 1,400,000
cervical cancer, and although CIN (high grade) 330,000
CIN can be treated with Loop Prostate Cancer 192,280
Electrosurgical Excision Breast Cancer 192,370
Procedure (LEEP) or with Head and Neck Cancer 55,000
Ovarian Cancer 21,550
cryotherapy, the recurrence Pancreatic Cancer 42,470
rates following these
Sources: National Cancer Institute; American Academy of Otolaryngology; Dept. Health
treatments vary from 10% to and Human Services; Stonegate Securities
15%.
STONEGATE SECURITIES 13
Additionally, many head and neck cancers are also related to the human papilloma virus. The
American Academy of Otolaryngology estimates that 55,000 people in the U.S. will develop
some form of head and neck cancer in 2009. An estimated 25% of head and neck cancers
express HPV antigens. Studies suggest that HPV may also play a role in cancers of multiple
areas of the body including the lung, prostate and other areas.
Competition
The biotechnology and biopharmaceutical industries are characterized by intense competition,
rapid technological change and a high degree of uncertainty. Furthermore, the industry is fairly
fragmented with various sized companies attempting to develop and commercialize new
treatments for cancer. Although therapeutic vaccines have shown great promise in clinical
trials, these results have not yet translated into approved therapies. Therapeutic cancer vaccine
companies are using a variety of vectors that have very different mechanisms of action. The
advantages of Listeria monocytogenes over other vectors are listed on page eight.
Exhibit 14 lists several immunotherapy companies with therapeutic cancer vaccines that are in
late-stage trials. We note that none of these companies employs Listeria as a delivery vector.
Exhibit 14: Therapeutic Cancer Vaccines in Late-Stage Clinical Trials
Antigenics' patient-specific cancer vaccine, Oncophage® is currently approved in Russia for the
Oncophage® approved in Russia; adjuvant treatment of kidney cancer patients. In October 2008, Antigenics submitted a marketing
Antigenics, Inc QS-21 in Phase III trials for authorization application to the European Medicines Agency (EMEA) requesting conditional
(AGEN) treatment of melanoma and non- approval for Oncophage in earlier-stage, localized renal cell carcinoma. Antigenics’ QS-21 is an
small cell lung cancer immune adjuvant in Phase III trials including non-small cell lung cancer, melanoma and malaria
Biovest International develops personalized immunotherapies for cancers of the blood system.
Biovest is the holder of a Cooperative Research and Development Agreement (CRADA) with the
Biovest International Phase III trials for treatment of non- National Cancer Institute for the commercialization of BiovaxID, a personalized biologic
(BVTI.OB) Hodgkin's lymphoma therapeutic cancer vaccine for the treatment of non-Hodgkin’s lymphoma. This therapy, referred to
as BiovaxID, is currently in a phase III pivotal trial at 24 major medical institutions in the US.
GenVec’s lead product, TNFerade™, is currently in a pivotal, Phase III clinical study (PACT) in
GenVec Phase III trials for advanced locally advanced pancreatic cancer. TNFerade has also been and is currently being evaluated for its
(GNVC) pancreatic cancer potential use in the treatment of several other cancers, including esophageal cancer, rectal cancer,
and head and neck cancer.
Provenge, which is used to fight advanced prostate cancer, will possibly become America's first
approved cancer vaccine either later this year or sometime in 2010. The FDA has stated that
Dendreon Two Phase III trials completed Provenge would be approved if the vaccine met survivability endpoints in the recently completed
(DNDN) targeting advanced prostate cancer IMPACT trial. Results from an integrated analysis of two Phase III studies of PROVENGE, D9901
and D9902A, demonstrated a survival advantage for patients randomized to PROVENGE versus
those randomized to placebo.
Onconthyreon just announced positive results of a study involving patients who received treatment
Phase IIb trials for advanced non- with the cancer vaccine, Stimuvax, for between 2 and 8.2 years as part of the Phase IIb trial in
Onconthyreon's small cell lung cancer and Phase III patients with stage IIIb/IV non-small cell lung cancer. Merck KGaA is responsible for the world-
(ONTY) trials for non-small cell lung cancer wide development and commercialization of Stimuvax under license from Oncothyreon and is
and breast cancer currently conducting Phase III trials of Stimuvax in both NSCLC and breast cancer.
STONEGATE SECURITIES 14
Appendix
Exhibit 15: Clinical Trial Estimated Timeline
Product
Candidate Indication (Sponsor) 2010 2011 2012 2013 2014 2015 2016 2017
Source: Company Reports, Stonegate Securities estimates based on Company input and FDA averages
STONEGATE SECURITIES 15
Comparison Table
Exhibit 16: Comparative Analysis
Advaxis Inc (OTCBB: ADXS)
(all figures in $M expect per share information)
Hi $ 1,184.2 $ 839.2
Low $ 29.5 $ 26.1
Average $ 451.5 $ 324.7
Median $ 164.5 $ 71.4
Universe:
Hi $ 4,735.1 $ 4,054.2
Low $ 29.5 $ 26.1
Average $ 761.5 $ 627.5
Median $ 145.8 $ 115.5
STONEGATE SECURITIES 16
Balance Sheets
Long-Term Liabilities
Notes payable 19.6 4.8
Commonp stock
y warrants - - 11,961.7
Total Long-Term Liabilities 19.6 4.8 11,961.7
Stockholders' Equity
Issued shares 108.0 109.3 115.6
Additional paid-in capital 16,276.6 16,584.4 754.8
Accumulated
y deficit (12,116.6) (17,533.0) (16,603.8)
Total Stockholders' Equity (deficit) 4,268.0 (839.3) (15,733.3)
Total Liabilities and Stockholders' Equity $5,460.4 $1,331.0 $2,714.3
Ratios
Liquidity
Current Ratio 3.6x 0.0x 0.1x
Quick Ratio 3.4x 0.0x 0.1x
Working Capital $3,069.2 ($2,066.9) ($5,789.6)
Leverage
Debt To Equity 2.3% nm nm
Debt To Capital 2.3% nm nm
Capital Usage -Annualized
A/R Turns nm nm nm
Inv Turns nm nm nm
A/P Turns nm nm nm
STONEGATE SECURITIES 17
Income Statements
Advaxis Inc (OTCBB: ADXS)
Consolidated Statements of Income (in thousands $, except per share amounts)
Fiscal Year: October
Q1 E Q2 E Q3 E Q4 E
FY 2007 FY 2008 FY 2009 Jan-10 Apr-10 Jul-10 Oct-10 FY 2010 E
Revenues
Revenues $ 154.2 $ 65.7 $ 29.7 $ 43.7 $ 43.7 $ 43.7 $ 43.7 $ 174.9
Total revenue 154.2 65.7 29.7 43.7 43.7 43.7 43.7 174.9
Cost of revenues
Cost of sales - - - - - - - -
Total cost of revenues - - - - - - - -
Gross (loss) profit 154.2 65.7 29.7 43.7 43.7 43.7 43.7 174.9
Operating expenses
Research and development 2,128.1 2,481.8 2,315.6 1,000.0 1,200.0 1,150.0 1,200.0 4,550.0
General and administrative 2,629.1 3,035.7 2,701.1 650.0 650.0 700.0 725.0 2,725.0
-
Total operating expenses 4,757.2 5,517.5 5,016.7 1,650.0 1,850.0 1,850.0 1,925.0 7,275.0
Income (loss) from operations (4,603.0) (5,451.8) (4,987.0) (1,606.3) (1,806.3) (1,806.3) (1,881.3) (7,100.1)
Pre-tax income (loss) (5,146.8) (5,414.0) 7.2 (1,648.5) (1,842.6) (1,842.6) (1,917.6) (7,251.3)
Net income (loss ) to common $ (5,146.8) $ (5,414.0) $ 929.2 $ (1,648.5) $ (1,842.6) $ (1,842.6) $ (1,917.6) $ (7,251.3)
EPS (loss) $ (0.11) $ (0.05) $ 0.01 $ (0.01) $ (0.01) $ (0.01) $ (0.01) $ (0.04)
Average shares outstanding 46,682.3 108,715.9 118,264.2 119,446.8 170,641.3 202,347.7 204,371.2 174,201.8
STONEGATE SECURITIES 18
Cash Flows
STONEGATE SECURITIES 19
Important Disclosures and Disclaimer
(a) Stonegate Securities, Inc. (“Stonegate”) expects to receive or intends to seek compensation for
investment banking or other business relationships with the covered companies mentioned in this
report in the next three months.
(b) The Research Analyst principally responsible for the preparation of this report has received compensation that
is based upon, among other things, Stonegate’s investment banking revenues.
(c) Within the last twelve months, Stonegate has received compensation for investment banking services from
the Company and has a non-exclusive placement agency agreement in place as of 6/24/2009; Stonegate is
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Price Chart - Stonegate does not have, nor has previously had, a rating for any securities of the Company.
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STONEGATE SECURITIES 20