Expert Financial Analysis and Reporting

Purpose of New Financing

Northwest Biotherapeutics just announced a financing in which a single institutional investor bought $15 million of stock at a price of $6.60 which is an 8% discount to the closing price on April 9^th. The same investor has the right to purchase an additional $17 million of stock at $7.50 over the next 12 months, which is tantamount to a warrant.  At this point, we don’t know the name of the investor.

The purpose of this financing is to allow the purchase of new manufacturing facilities in Europe beyond that now provided by Fraunhofer in Germany and King’s College in the UK. These latter two facilities are capable of manufacturing product for the treatment of hundreds of patients in the phase 3 clinical trials. Importantly, this new expansion could allow for the treatment of thousands of patients. This seems a clear signal that NWBO expects significant demand for DCVax-L under the German hospital exemption early access program.

I estimate that each patient treated could give rise to $50,000 of revenues. Hence, for every 100 patients treated, this would give rise to $5 million of revenues and 1000 patients would give rise to $50 million. At this point, NWBO has not given specific guidance on either the price of DCVax-L or the number of patients that might be treated in Germany. Bear in mind that foreigners can come to Germany for this treatment, but would obviously have to pay out of pocket.

I think that we will see an announcement within one or two months that patient treatment under the hospital exemption has begun and this could be followed in another month or two by the announcement of reimbursement and price levels for that reimbursement. I anticipate considerable positive news flow out of Germany and Europe. Right now investors are either confused or skeptical that this German program is nothing more than the older “named patients” compassionate use. I think as information builds, investors will get a clear understanding that this  German approval is almost tantamount to a full approval and has the potential to create considerable revenues.

Comments on DCVax Direct

Turning now to DCVax Direct, the abstract on the ASCO poster will be available on April 21^st. I think that while the abstract is likely to be positive that some investors could be expecting too much. The product is being used in inoperable tumors. In order to have much hope of having a major impact on survival, it is critical to resect the tumor mass and reduce the tumor burden. When this can’t be done the outlook is bleak as chemotherapy, radiation, targeted therapy and combinations thereof are marginally effective if the tumor can’t be operated on.

There is little hope for inoperable tumors (pancreatic cancer is one). While patients may be given drug therapy or radiation, this is more to just give the patient some hope in a desperate situation. In many cases, the patient is just given palliative care or sent to a hospice.

What should we look for in this paper? As I understand the trial, patients are first given drug therapy or radiation to “soften up” the tumor. This is then followed by the injection of DCVax Direct into the main tumor mass and possibly into some metastases. In speaking to an investigator who is familiar with but not directly involved in the trial, he said that at this stage, if the drug is having an effect, he would expect to see necrotized or dead tissue in the cancer lesions. This should then be followed at a later data with tumor shrinkage which is likely to be a partial remission rather than a complete remission.

Viewed in the way that I have outlined this, I think that these early trial results should be viewed as positive if there is tumor cell death and necrotization of tumor tissue. However, I am concerned that investors might be expecting something more dramatic. I also think that the use of chemotherapy and radiation will allow bears to argue that any effects seen were due to this treatment and not DCVax Direct.

Positive on the Stock

I continue to see dramatic, asymmetric upside potential for this stock and recommend purchase. The Company has enormously improved its fundamental outlook and financial situation over the last year, but this has been obscured by a fierce assault on the stock by bears that is led by Adam Feuerstein- eleven negative blogs in five weeks. The latter can’t go on for that much longer.