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• UK designates DCVax-L as first drug to be considered for early access approval under recently enacted EAMS program.
• Earlier this year, Germany granted approval to DCVax-L under its early access program.
• Early access means that DCVax-L can be prescribed prior to formal approval that might come in 2016. I expect revenues from German sales in 2014.
• These actions by regulatory agencies are unsurpassed validation for the potential of the DCVax-L technology, in my opinion.
• On another positive note, the phase 2 trial of DCVax Direct should begin in 4Q,  2014.

 Investment Perspective on Late Breaking News

One of the problems in drug development is that for serious or life threatening diseases, promising new medicines are denied to patients (other than those in clinical trials) until the medicines have gone through a rigorous clinical trial process and gained regulatory approval. This is a process that can take years and in a disease like glioblastoma multiforme in which median overall survival (time at which half the patients die) is about 15 months, patients can’t wait that long. Desperate patients have been demanding access to promising new drugs while they are still in clinical trials, but regulatory agencies have resisted until recently.

There is a downside to releasing drugs to the public too early. The therapeutic effects and side effects of drugs may not be accurately determined in early phase 1 and 2 trials. Promising early results often are not replicated in larger phase 3 trials. Another strong reason is that only in the phase 3 trial can the contribution of the drug be measured in a controlled manner so that we can determine what improvement the drug brings to standard of care. Until recently, regulators have erred on the side of demanding that pivotal trials be completed and reviewed by regulators before making new drugs broadly available despite the outcry of advocacy groups. While these are valid reasons, this long accepted practice is changing.

The Europeans appear to be ahead of the US in altering this thought process and quite importantly tiny Northwest Biotherapeutics’ DCVax-L has become the poster child for early access to drugs still in clinical trials. Earlier this year the Paul Ehrlich Institute or PEI (the German equivalent of the FDA) announced that DCVax-L had been chosen for its Hospital Exemption Early Access program which was initiated three years ago. DCVax-L was the first systemic therapy to be given early access approval and was the first product developed by a non-German company to be so designated. This means that the product can be prescribed in Germany before the completion of the phase 3 trial in late 2015 and potential approval in 2016. I expect to hear by this fall that prescribing has begun.

The Medicines and Healthcare Products Regulatory Agency or MHRA (the UK equivalent of the FDA) began a similar early access program in April of 2014 called the Early Access to Medicines Scheme or EAMS. It was announced on September 16^th that DCVax-L is the first product selected for the first step of a two-step process that could lead to early patient access. It is highly encouraging that two of the most respected regulatory agencies in the world have selected DCVax-L as the first systemic therapy in the case of Germany to be selected and the first drug of any kind in the case of the UK to be considered for their early access programs.

In an unrelated announcement, the Company stated in a presentation on the 16^th that it had completed enrollment of phase 1 part of the phase 1/2 trial of DCVax Direct in inoperable tumors. The planned enrollment was 36 but 40 patients were actually enrolled.  Most of the patients had been enrolled by June, and the trial calls for an eight month treatment regimen (six injections over eight months). This suggests that Phase I patients should complete the six injections by March 2015. Because the trial is open label, we may see more data before the trial is completed.

The design of the trial, which was approved by the FDA, allows the phase 2 trial to begin before phase 1 is completed. Northwest will begin enrolling patients this fall. This will be a 24 patient trial that will focus on one particular cancer, rather than covering many types of cancers as was done in Phase I.  Potential cancer targets include sarcoma, pancreatic or colon cancer patients. In the phase 1 trial, injections were made only in one lesion (tumor). Since the DCVax-Direct treatment was so well tolerated in phase 1, the Company is considering making injections in multiple lesions in the phase 2 trial. It seems plausible that injecting multiple lesions would enhance the therapeutic effect.

Remember that these patients have inoperable tumors without viable treatment options and are inexorably headed toward hospice. So far, the Company has reported striking results in the phase 1 trial in a sarcoma patient and pancreatic cancer patient and encouraging effects in other patients. If similar results are seen in a meaningful number of phase 2 patients, it could lead to rapid regulatory consideration. The phase 2 will also be open label so that we may begin hearing of clinical outcomes in 2H, 2015 or possibly sooner.

Investment Thesis

Northwest has been the target of one of the most aggressive and sustained bear attacks on a stock that I have witnessed in my career. There has been enormous shorting activity from both regular shorting and naked shorting. Bearish skepticism has legitimacy in that it is based in part on the long history of failures for cancer vaccines dating back over the last decade that has caused investors to be exceedingly skeptical on the prospects for any cancer vaccine to be successful. Because of this headwind, NWBO has struggled to obtain financing. Critics like Adam Feuerstein, who has written 19 negative blogs on the company since the beginning of March 2014, have declared that DCVax-L is a placebo, scoffed at the phase 1/2 data on DCVax-L and have labeled management as stock promoters.

Investors have been confused and made hesitant about investing in Northwest because of the concerns raised by the bears, their stridency and their unceasing attacks. For much of the last half year, the bearish view has held sway. However, I think that the action of German regulators in granting patients early access to DCVax-L was a watershed positive event. And now, the UK regulators seem about to follow suit and grant similar early access in the UK. These actions by regulatory agencies are unsurpassed validation for the potential of the DCVax-L technology, in my opinion.

I believe that the actions of UK and German regulators have substantially strengthened the bullish case for the stock of which I am a proponent. I have maintained that the biological hypothesis behind the drug and the striking phase 1/2 data on DCVax-L (even though it deals with only 20 patients) suggests that DCVax-L could be a breakthrough drug for glioblastoma. The bears have scoffed at this bullish view and in a recent Seeking Alpha article I was accused of stock promotion because of my more positive view.

I feel vindicated that the German and UK regulators have taken the same view as me. To be in their company is comforting. It is apparent that they believe that the phase 1/2 data is so striking that it should be considered as a signal that DCVax-L has the potential to be a paradigm changing drug in glioblastoma multiforme. The Germans have already made DCVax-L available for early access and the British seem poised to follow suit. In Germany, I expect reimbursement guidelines to be in effect and for revenues to begin in 2014. The first realization of revenues by an emerging n biotechnology company is always a watershed event from an investment viewpoint.

The action of the German and UK regulators does not mean that we can assume that the phase 3 trial will be successful. There are many things that can go wrong in a clinical trial and that can sometimes lead to a failure even if the drug is ultimately shown to be effective and safe. However, the German and UK regulatory actions should be taken as a powerful validation of the promise that DCVax-L may become an important new drug and a paradigm changer in the treatment of glioblastoma. I think that this substantially undermines the bear thesis although I have no doubt that they will put a negative spin on this very positive UK announcement.

When the German early access approval was announced in March of 2014, I expected that the stock would trade up sharply and gain considerable momentum. With the announcement, the stock did begin to trade up. However, in a blog Feuerstein minimized the German approval as compassionate use, which it is not. Older compassionate use programs are restrictive and limit patients treated while the German program and soon the UK program make DCVax-L widely available. Also, most compassionate use programs provide either no revenues or no meaningful revenues to the Company and sometimes do not even cover costs. The German approval was accompanied by a separate decision by the central reimbursement authority in Germany, making DCVax-L eligible to seek reimbursement from insurers at a negotiated full price (not just cost reimbursement). I note that the anti-PD1 drugs, nivolumab of Bristol-Myers (BMY) in Japan and pembrolizumab of Merck (MRK) in the US, were just introduced at around $150,000 for annual treatment.

Feuerstein speciously labeled the announcement of the German early access program as a smokescreen to hide what he perceived as a fatal event in the phase 3 trial of DCVax-L. He hypothesized that an interim analysis for efficacy had been performed on the phase 3 trial and showed that the drug was ineffective. He further speculated that management had seen the results, saw they were discouraging, decided not to release them to investors and changed the trial design in a desperate effort to make the trial successful. For experienced biotechnology investors this speculation was completely implausible. Companies are completely blinded to trial efficacy results and the actions that Feuerstein suggested would have immediately caused the trial to be deemed ineligible for regulatory purposes.

Despite the absurdity of the argument, the idea took hold among some investors that NWBO was withholding efficacy results from investors. The bears hammered away on this point in several articles. This led to an unprecedented statement by the obviously outraged Chairman of the Data Monitoring Committee; this is an independent committee of leading physicians and academics charged with monitoring safety and efficacy in the phase 3 trial that has no connection to Northwest. The Chairman sharply rebuked Feuerstein. He said that there had been no interim analysis for efficacy of the phase 3 trial. He said that the DMC has not provided any access for the Company to any clinical trial data. He said “that it is surprising and troubling to see inaccurate claims being made by commentators (Feuerstein) who seem to lack a fundamental understanding of clinical trial monitoring.  I have been on DMCs for more than 60 clinical trials, and I have never experienced this type of attack.”

I think that with the PEI and MHRA actions that we can dismiss the cornerstone arguments of the bears that DCVax-L is a placebo, has no meaningful clinical data and that NWBO management has withheld interim efficacy results from the phase 3 trial. I think that it also gives great credibility to management in pulling off these early access coups and scooping the entirety of the biopharma industry. Given a choice between the judgments of these highly respected regulatory agencies and the (ever changing) arguments of the bears, I think investors should come away much more confident that DCVax-L has a good chance of being successful in its phase 3 trial.

The UK’s Early Access to Medicines Scheme

The Medicines and Healthcare Products Regulatory Agency (MHRA) is the UK equivalent of the FDA. In April of 2014, it launched the Early Access to Medicines Scheme (EAMS). The intention of EAMS is to make promising new drugs for serious diseases available more quickly. This is a two-step process that starts with the designation of a drug as a Promising Innovative Medicine (PIM). The criteria for a PIM designation are: (1) the product is for a serious disease or condition with high unmet medical need, (2) the product is likely to offer a major advantage over treatments available today, and (3) the potential adverse effects of the product are outweighed by the potential benefits.

The PIM designation follows an assessment of early clinical data. It is meant as a signal to companies that they are on the right track and that the product could be a candidate for early patient access under EAMS. The PIM designation allows for the sponsoring company to apply for step 2 of EAMS which is the Scientific Opinion. DCVax-L has now become the first product ever to earn this PIM certification. It is important to understand that the designation is for all malignant gliomas and goes beyond newly diagnosed patients with glioblastoma multiforme. GBM is the most severe type of glioma or brain tumor and newly diagnosed GBM patients are the subjects of the phase 3 trial. This PIM certification includes recurrent glioblastomas and less malignant gliomas as well as newly diagnosed GBM.

The second step under the EAMS is MHRA’s determination of a Scientific Opinion about the efficacy and safety of a product based on available clinical data. A positive or negative Scientific Opinion will be judged by the same three criteria as for the PIM designation, as well as a fourth criterion: the Company’s ability to manufacture the product to rigorous GMP (clinical grade) standards. Northwest has been particularly astute in establishing such facilities in the UK and Germany, a process that has been ongoing for four and one-half years. In this regard, Northwest has a major advantage over most other US companies involved in living cell therapies. A complete description of the EAMS can be found at this link.

In the case of DCVax-L, the MHRA will consider clinical data on 20 patients treated in the phase 1/2 trial. In addition, it will be shown data on 55 patients in the information arm outside the phase 3 trial who were either rapid progressors or pseudoprogressors. These patients were excluded from the phase 3 trial;  this data is not blinded and was just recently released. The Company has indicated that it believes the result from these 55 patients adds further support for the case for DCVax-L.

If the Scientific Opinion of MHRA is positive, the product candidate may then be prescribed by physicians and provided to patients before the product is formally licensed and while it is still in clinical development. The goal of the MHRA is to deliver the Scientific Opinion within 90 days after a party submits an application for step 2 of the EAMS process.

Northwest Biotherapeutics has not commented on when it will submit the application for the Scientific Opinion but I would think that it would be quite soon. It submitted similar information to the Paul Ehrlich Institute. As I previously noted, Germany enacted a similar program to the Early Access Medicines Scheme about three years ago called the Hospital Exemption program. In March of 2014, DCVax-L was the first systemic therapy approved under the German program. For a detailed account of this approval, please refer to this link

In granting approval for early access to all glioma patients, I think that PEI looked only at phase 1/2 data of DCVax-L on 20 patients and possibly at some compassionate use data. As was just noted, the MHRA will have the opportunity to look at additional data from 55 patients treated in the information or compassionate use arm outside the phase 3 DCVax-L trial.

So what are the chances that the Scientific Opinion will be positive? I think that they are very good. I don’t think that MHRA would have designated DCVax-L as the first drug given a PIM designation without having gone over the available clinical data and coming away impressed. Also, we have the precedent of the PEI having seen the available clinical data and then approving the drug for early access. Hence, I think we could see the approval of the Scientific Opinion by early 2015.

One of the more striking components of the press release from MHRA was the statement that “A drug like Kalydeco which is used to treat cystic fibrosis would have been an appropriate candidate for the Early Access to Medicines Scheme had it existed when the drug was developed meaning that it may have been made available to patients sooner.” The MHRA seems to be viewing DCVax-L as a potential breakthrough therapy for glioblastoma just as Kalydeco was proven to be for cystic fibrosis.