Expert Financial Analysis and Reporting

Key Points:

• Lifting of the partial hold removes a cloud that has been overhanging the Company for the past 18 months.
• We may see topline data on the phase 3 trial by mid-summer or possibly in a late breaker paper at ASCO in May.
• Linda Liau, principal investigator on the phase 3 trial, is encouraged that the overall death rate in the trial appears to be meaningfully less than would be expected based on historical results for standard of care.

Partial Hold on Trial Is Lifted

Northwest issued a press release on February 6, 2017 in which it stated that a partial clinical hold that was initiated by the FDA nearly 18 months ago had been lifted. This news is difficult to put in perspective because we do not know why the hold was initiated in the first place. Whatever the reason for the FDA initiating and then ending the partial hold, this can only be taken as good news. It lifts a cloud that has been hanging over the Phase 3 trial for these many months. Naysayers as well as investors who are positive on the Company have been asking repeated questions such as did the FDA think it was futile to continue, were there side effect issues, was the trial badly conducted, was the data integrity compromised, etc. We now can assume that these serious concerns were overblown and that this is a well conducted trial and that we can look forward to topline data, which, if positive, should result in approval.

The partial hold prevented new patients from entering the trial, but allowed those who had completed screening to enter the trial. As a result, 331 patients were ultimately enrolled in the trial. The Company announced some months ago that it was going to complete the analysis of the trial based on these 331 patients because it felt that the time and expense of adding 17 patients would be prohibitive.

Company Comments on Progression Free Survival in the Phase 3 Trial

The primary endpoint of the trial is progression free survival (PFS). The statistical design of the trial was based on a threshold of 248 PFS events. The Company has indicated that this number apparently has now been reached. The Company and investigators remain blinded and do not know the distribution of PFS events between the DCVax-L arm and the control arm.

Company Comments on Overall Survival

The secondary endpoint of the trial is overall survival and this calls for 233 patient deaths. This number has not been reached and it appears that the company is waiting for the 233^rd death to occur before locking and analyzing the database. Management said that based on the pace of deaths occurring during the last six to eight months, they anticipate that it will be several months until the trial reaches 233 deaths. I am guessing that this means we might see the topline data as a late breaker at ASCO in May 2017 or perhaps in the summer.

This all indicates that at least 98 patients (29% of patients enrolled) and perhaps meaningfully more remain alive. Let’s think about this. Recall that recent well controlled, randomized phase 3 trials have demonstrated that the median or average survival time for patients given standard of care is about 16 months. Put another way, half of the patients are expected to die within 16 months of treatment. The vast majority of patients enrolled in this trial are far beyond the 16 month threshold and some are far beyond three, four, five or even more years.

For various reasons, enrollment in the trial has taken place over nearly ten years. Because of the partial hold which began in August of 2015, I would estimate that the last patient enrolled in the trial began treatment more than one year ago. The delay caused by the partial hold likely has resulted in a much more mature data set that should be biased toward more patient deaths rather than less.

Investors should also be aware of other issues that make not having reached the median overall survival threshold appear to be promising. The first patient in this trial was dosed nearly ten years ago in 2007. There were some fits and starts in the enrollment process based in part on financial issues that caused the trial to be suspended in 2009 and then restarted in 2011. However, when the trial was restarted, enrollment was initially slow because of a pervasive skepticism about immuno-oncology. This changed quickly as investigators became excited about the promise of immuno-oncology so that beginning in late 2013, enrollment really took off.

It is difficult to try to figure out an enrollment curve based on this. However, it indicates that a small, but meaningful group of patients were treated in the 2007 to 2009 time period and probably somewhat more in the 2011 to 2013 time frame. Almost all of these patients (I don’t know the number) would be expected to be dead by now if treated with SOC.

The bulk of patients were treated in the 2014 to early 2016 time frame. This means that almost all of these patients have meaningfully surpassed the 16 month threshold. All of this adds to the argument that the trial has a more mature data set that should bias the outcome toward a higher death rate. Intuitively, 29% of patients remaining alive at this point in the trial suggests to me that DCVax-L may be having a positive effect on survival. This is suggestive of a long survival tail that is a trademark of immuno-oncology therapies. It will be interesting to see the final survival rate for the trial.

Linda Liau’s Comments on PFS and OS

Linda Liau, the principal investigator on the trial thinks that the death rate is encouraging. Here is what she said in the press release: “It is gratifying to have the hold removed from the trial and exciting to see this trial now moving towards completion, although of course the longer it takes for PFS and OS events to accrue, the better the patients in the trial are doing.”

The credentials of Dr. Liau are extremely impressive and it is heartening that she is convinced that DCVax-L is an active and effective drug. She was the co-discoverer of DCVax-L but has purposely taken no financial interest in the development of the drug that would bias her thinking. She is biased by the positive clinical experience she has had with the drug that includes results seen in phase 1/2 trials and compassionate use. I would urge you to read a recent report I wrote that summarized her thinking on DCVax-L and why she is so optimistic. The December 21, 2016 report is entitled “ Northwest Biotherapeutics: DCVax-L Viewed Through the Eyes of Dr. Linda Liau, Lead Investigator on the Phase 3 Trial of DCVax-L (NWBO, $0.35, Buy).

Another Issue to Consider in the Age of President Trump

I would point out that the trial design allows patients on the control arm to be given DCVax-L once they progress. Hence a meaningful number of patients in the control arm have received DCVax-L. According to Linda Liau, the principal investigator on the trial, over 86% of all patients in the trial have received DCVax-L. If DCVax-L is effective in extending survival, this could be the reason that the patient death event number has not been reached because both arms of the trial might be seeing increased survival due to the administration of DCVax-L.

On a cautionary note, such a crossover could confound the analysis of the benefit of DCVax-L in the historical approach to a phase 3 trial. One could imagine a situation in which the DCVax-L arm and the control arm have both extended median overall survival meaningfully beyond the 16 or so months expected. In this situation, there might not be a statistically significant difference in survival in the trial between the two arms even though everyone seems to be living longer who received DCVax-L.

What would the FDA do if the overall survival data looked positive for the trial as a whole when judged against historical controls, but there was no statistically significant difference between the two arms? Six months ago, my unequivocal answer would have been that the FDA would apply puristic statistical analysis standards and would not approve DCVax-L. However, we are now in the age of President Trump who promises to choose an FDA commissioner who will take a more “common-sense” approach to drug approval. Hence, if the results for DCVax-L in both the drug and possibly the control arm look promising as judged against historical results, I think the chances for approval would be reasonably good. Key to this decision is the benign safety profile of DCVax-L, which means that even a modest benefit might significantly tip the risk reward equation in the favor of DCVax-L.