Expert Financial Analysis and Reporting

Substance of 8-K Regulatory Document

Northwest issued an 8-K today in response to shareholders’ questions about an issue that has been raised due to some postings on message boards. Negative blogs have contended that NWBO has included the clinical data from 32 pseudo-progressors in the clinical data base of 331 patients enrolled in the phase 3 trial. In response, here is what the 8-K stated:

“The Company has received a number of shareholder inquiries asking for clarification whether the 331 patients enrolled in its Phase III DCVax®-L Trial includes the 32 patients in a Pseudo-Progressor arm or those 32 patients are in addition to the 331 patients enrolled.”

The Company is clarifying that the 32 patients in the Pseudo-Progressor Arm are in addition to the 331 patients enrolled in the Main Arm of the Trial and are not included in the 331.  The Company notes that there are 90 patients in other separate arms of the Trial in addition to the 331 patients in the Main Arm, making a total of 421 patients.  The 90 patients include the 32 patients in the Pseudo-Progressor Arm, 55 patients in the Information Arm, and 3 patients who were enrolled at the very beginning of the Trial when it was randomized but not yet blinded.  The Trial was blinded after those initial patients were enrolled.  In addition to these 421 patients, the Company has treated a substantial number of patients on a compassionate basis under an Expanded Access Protocol.”

Naysayers on the message boards were falsely claiming that the 32 psuedoprogressors were included in the 331 patients who comprise the phase 3 trial. These patients are known to initially show what appears to be an increase in the size of the glioblastoma lesions. However, this appearance is actually due to inflammation and scarring, or due to an influx of immune cells and, in the latter case, can be indicative of a strong immune response to the tumor so that these patients experience markedly better outcomes. The naysayers were alleging that these 32 patients were part of the 331 and that NWBO was doing this to bias the outcome toward the positive. NWBO needed to set the record straight with this 8-K.

Issues to Consider

This is the first time that NWBO has publicly stated that 421 patients were treated in the course of running the phase 3 trial, although the Company has made a number of public statements over the last couple of years about the Information Arm patients comprising 55 of the 90 patients beyond the 331 enrolled, and the existence of the 32 pseudo-progression patients has also been well known and discussed on the message boards.

Only data on 331 will be analyzed to judge if the trial is successful; these patients met the criteria for enrolling in the phase 3 trial. The others were excluded from entering in large part because of psuedoprogression or rapid progression. It is universal practice for trials to set up exclusion criteria such as this. I mention this because the same people who were wrongly claiming that the psuedoprogressors were included in the 331 and attacking the Company for including these patients will now likely try to spin this exclusion of patients negatively attack the Company for excluding them.

The question they will pose is why exclude anyone? Why not treat all comers? The answer is that the primary endpoint of this trial is progression free survival. The rapid progressors excluded from the trial all showed evidence of progression before they could enter the trial. In essence, they would have been deemed to have failed the trial before they received the first dose. Pseudoprogressors were excluded because there was no conclusive way to tell the difference from rapid progressors. This is a shame because these patients are those who were most likely to benefit so this penalized trial results.

Who Are These Naysayers and What is Their Goal?

Because they write under pseudonyms, we don’t know who they are. However, it is a well-established tactic of wolfpack short sellers to have employees troll the message board with the intent of damaging credibility of a company. They post wrong information as in this case and put a negative spin on every piece of news coming out of the company. One short seller explained this strategy as being designed to make the Company and its management appear so toxic that investors will be frightened away from investing. Another key objective is to persuade mainstream media that Northwest and the DCVax-L technology are a hoax. As has been the case for nearly four years, we see the wolfpack again and again employing this manipulation technique against NWBO.

More Patients Have Been Treated with DCVax-L Than Was Previously Thought

The mention for the first time of the 421 patients whose treatment was connected with the phase 3 trial program is very interesting. It probably will provide a more extensive insight into how the drug performs in other glioblastoma sub-groups. The Company also mentioned that there were as substantial number of patients who were treated under a compassionate use protocol. This will provide still more data.

My Investment Thoughts

I am frequently asked why I have written so much on NWBO especially given the catastrophic decline in stock price. Why not just walk away? The answer is that I believe that the Company has been the victim of an enormous injustice in which the wolfpack has acted in concert to try to destroy the Company for the wolfpack’s financial benefit. Their ultimate goal is to bankrupt the Company so that they do not have to cover legal shorts and illegal naked shorts.

Like all experienced biotechnology investors, I have my concerns about whether this trial will be successful if for no other reason than that it is such a high risk paradigm shifting drug approach that it makes trial design and execution difficult. I have always acknowledged that there is a reasonable chance for success but also for failure, as is commonplace in biotechnology. What has aroused my hackles is the attempt by the wolfpack trying to drive NWBO into bankruptcy to prevent this trial from being completed. This attack has been criminal in my opinion and in my own small way I have tried to fight back.

Even if this trial were to fail, it could provide valuable insights into the use of cancer vaccines to treat glioblastoma and this would be to the benefit of society. I applaud the courage of NWBO management in fighting against the enormous wolfpack resources employed against it. Against staggering odds, it looks like they are bringing the phase 3 trial to the finish line. Unfortunately, this could only be done with substantial dilution to shareholders thanks to the success of the wolfpack in demolishing the stock price and forcing the Company to finance at distressed levels. While the wolfpack has been successful in many ways they have failed in their primary strategy of trying to block the completion of the phase 3 and driving NWBO into bankruptcy. Like all investors involved in this story, I eagerly await the release of topline phase 3 data which I am guessing could be available by mid-summer with some chance at ASCO in May.