Expert Financial Analysis and Reporting

ImmunoCellular (IMUC.OB) has issued a press release stating that Manish Singh has resigned as CEO. He will be succeeded in the interim by Dr. John Yu, a founder of the company. The reasons for the resignation were not explained, but there may be some relationship to recent activity on the part of bloggers questioning the accuracy of company press releases and public statements. In an 8-K, there was a disclosure that there is a disagreement regarding whether Mr. Singh is entitled to severance, which implies that  he may have been forced to resign.

Bloggers have pointed out inconsistencies in information released on phase I trials of ICT-107. In a May 31, 2012 press release, the company announced that some treated patients were out as far as 66 months. However, according to SEC filings the trial began in May 2007 and enrollment of the first patient was begun in August of 2007 according to a press release. The period from the enrollment of the first patient in August 2007 until May 2012 is only 57 months so this information appears to be inconsistent.

In and of itself, this is not terribly disturbing if this is the only error. However, it naturally raises the concern that this may not be the only inaccuracy. For example, bloggers raised questions that patients who were reported as being enrolled in the phase I trial were actually patients who were screened for enrollment. If so, this would appear to overstate the number of patients enrolled. The company has not responded publicly to this question.

In doing my major report on Northwest Biotherapeutics (NWBO.OB), I had a good deal of interaction with the managements of Northwest and ImmunoCellular. I was drawn to these two companies by their leadership position in dendritic cell cancer vaccines for glioblastoma. The companies use different approaches for loading dendritic cells with cancer antigens. NWBO uses a tumor lysate obtained from the actual glioblastoma tumor tissue while IMUC uses a fixed set of six antigens that it believes are common to all glioblastoma tumor tissues. Both approaches led to intriguing phase I data.

It seemed to me that while both approaches could work, the tumor lysate approach is intuitively more appealing. Mr. Singh was adamant in public presentations that the tumor lysate approach was inferior. I just didn’t think there was enough data to say one way or another. I do note that Dr. Yu, the founder of ImmunoCellular and chief investigator for ICT-107, has begun a phase I trial of a dendritic cell cancer vaccine for glioblastoma using tumor lysate comparable to the Northwest approach.

One of my questions on ICT-107 was that it can only work in a certain immune type (HLA A1 and A2) and not in the rest of the population. Mr. Singh has repeatedly said that 75% of the US population was HLA A1/A2, but some academics have reported that it may only be around 50%. The IMUC numbers on enrollment/ screening are more consistent with the lower number.

I do not see the issues that I have pointed out as being sufficient to conclude that the chances for ICT-107 to fail in the trial are meaningfully increased. However, I would be more concerned if this proves to be only the tip of the iceberg and the company has to restate additional data presented in prior releases.

In looking at Northwest and ImmunoCellular, I decided to recommend Northwest and not ImmunoCellular, even though the technology and phase I results for both companies were interesting. The reason was that I found that management at Northwest, while enthusiastic about DCVax-L, were balanced in what they said about their product and DCVax-L. I felt that Mr. Singh was less balanced in his approach.

What does this mean for Northwest Biotherapeutics? The issues related to Mr. Singh and ImmunoCellular are company specific and there are no implications for reported results for DCVax-L or the conduct of its clinical trials.

I think that this could help the stock of Northwest, however, and I reiterate my Buy recommendation. Apparently swayed by the enthusiastic comments of Mr. Singh, some bloggers seemed to go out of their way to criticize NWBO. They characterized the Northwest approach as using a crude tumor lysate instead of an elegant second generation technology like ICT-107. Because Northwest was not releasing information on enrollment (many companies don’t), some bloggers implied that Northwest might be having trouble enrolling patients. I think that not well documented or well thought out criticisms of NWBO have hurt the stock. I think that the departure of Mr. Singh may lead to a significant drop in blogging criticism of Northwest.