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Expert Financial Analysis and Reporting

Northwest Biotherapeutics:  Two Recent Press Releases Indicate that Manufacturing is on Track to Support Commercialization of DCVax-L (NWBO, Buy, $0.55)

Clinical Data Offers Much Hope that Phase 3 Trial of DCVax-L in Newly Diagnosed Glioblastoma Multiforme Will Be Successful

Northwest continues to guide that the long anticipated release of topline data from the phase 3 trial of DCVax-L in newly diagnosed glioblastoma (ndGBM) will be after Labor Day and likely in September. This trial is unusual in that it has run for over 13 years and the last patient was enrolled nearly five years ago. This allows an unusual insight into patient survival even though results remain blinded. The five year survival rate for ndGBM patients treated with SOC is about 5% so we would expect that if DCVax-L provided no benefit that only 5% of patients in the trial would have survived five years. However, a look at the blinded data suggests that patients in the trial are living meaningfully longer than would be expected with SOC.  See my report of January 16, 2020 Why I Believe there is a High Probability for Approval of DCVax-L for a detailed discussion of the blinded data.

I am not alone in hypothesizing that DCVax-L provides a meaningful survival benefit when added to SOC. The lead US investigator in the phase 3 trial, Dr. Linda Liau and the lead European investigator Dr. Keyoumers Ashkan, also believe this to be the case. See my report Two Lead Investigators on DCVax-L Phase 3 Trial Believe That It Could be a Major Therapeutic Advance in Treating Glioblastoma Multiforme

While there are very good reasons to believe that the results in the phase 3 trial will lead to worldwide regulatory approval, clinical trials can often produce totally unexpected results. One cannot rule out a “Black Swan” event that neither the two lead investigators or me anticipate that could throw a negative light on the trial results.

Late Breaking News

It has just been reported that Dr. Linda Liau and Dr. Marnix Bosch will present a paper on the phase 3 results at the Society for Neuro-Oncology on Friday November 20, 2020. See this link.

Highlighting Manufacturing Preparation Causes Sharp Surge in Stock

Two press releases related to manufacturing this week were the catalyst for a major move in the stock. The company has been relatively silent on manufacturing but these releases are the first insight into what has been more than two years of diligent preparation for commercial production of DCVax-L. If DCVax-L is approved, there should be adequate production capacity to meet commercial demand.

NWBO is sometimes compared to Dendreon because both have developed dendritic cell vaccines. Because manufacturing issues crippled the introduction of Dendreon’s Provenge, some investors were concerned that somehow this might be an issue for DCVax-L. In actuality, the technologies and manufacturing for DCVax-L and Provenge are very, very different. The issues that plagued Provenge should not be extrapolated to DCVax-L.

The strength in the stock may also have been bolstered by covering of short positions. As those of you who have followed my work on NWBO know, I believe the stock has been the victim of a massive stock manipulation scheme for years that has involved extensive use of illegal naked shorting. These announcements were unexpected and caught the wolfpack with their pants down. It has been the practice of the wolfpack to double down and I would not be surprised to see them attack the stock after this runup. If so, this could a factor in the near term. However, near term stock fluctuations are not something I am focused on. If the DCVax-L  trialis judged a success and leads to approval there is massive upside in the stock so my focus is on topline data for DCVax-L, not day to day trading swings.

Manufacturing is as Critical to Approval as Clinical Data

In order to gain approval for a BLA (in the US) or MAA (Europe), a drug sponsor must demonstrate in clinical trials that the drug is safe and effective and an improvement on standard of care. Most of investor attention focuses on this, but equally important is a section in regulatory filings called chemistry, manufacturing and control (CMC). The sponsor has to demonstrate to regulatory agencies that it can reliably reproduce the drug from one production run to the next and also have tests in place to monitor and  assure quality. It is not infrequently the case that a problem with CMC can meaningfully delay or even block approval. These press releases are encouraging in that they show that NWBO has been paying careful attention to CMC issues and is working to have production in place to support commercialization. However, it is more difficult than is the case of clinical data for an outsider to really understand what NWBO has done and assess how the regulatory agencies will evaluate the CMC section.

Northwest has made two important press releases in the last week which relate to manufacturing that increase my confidence that the Company has been carefully preparing for CMC issues and that it is working to have sufficient manufacturing capacity at approval to support commercialization. There are two production facilities that can potentially manufacture DCVax-L. The Sawston facility in the UK is leased by NWBO while Cognate is a contract manufacturer independent of NWBO. (Cognate was at one time owned by NWBO.) Unexpectedly, NWBO announced the acquisition of Flashworks which has developed an automated production system. Based on the very limited information released so far, I conjecture that this  might result in Sawston eventually being able to supply much of world demand. The Flashworks acquisition offers the promise also of dramatically lowering the cost of production.

Substance of Press Releases on Manufacturing

In the first press release, it was disclosed that NWBO anticipates completion of the initial (phase 1) buildout of the Sawston, UK manufacturing facility in mid-October. In my opinion, NWBO has accelerated completion in anticipation that the phase 3 data on the DCVax-L will be positive and allow the filing of a BLA and MAA. The press release stated “ “This buildout is the culmination of several years of design, development and preparatory activities, including clean room suites, quarantined storage, quality control testing suites, controlled cryostorage (freezing) facilities for the finished products, as well as specialized systems (for example, for full air changes every 60 seconds in the clean room suites, and precise monitoring of particle counts in the clean room air.)”

In the next press release, NWBO announced that it had acquired a company called Flaskworks which was described as having a breakthrough system to close and automate the manufacturing of cell therapy products such as DCVax-L. Flaskworks was previously owned by Corning Incorporated and its technical founders who have joined NWBO  as part of the acquisition. The manufacturing of cell therapy products as now practiced is a very labor intensive process requiring highly skilled technicians. The process  involves steps in which the product is open to the air that necessitates expensive “clean room” facilities with specialized infrastructure and specialized operating systems for sterile air and water, and personnel working in sterile lab suits. The Flashworks process automates many of the steps in the process and greatly reduces the number of personnel involved.

It will potentially turn open steps in the manufacturing process into closed steps, not open to the air which will reduce the need to build and operate extremely costly clean room suites and the need for personnel to work in sterile lab suits. The Flaskworks system is designed to fundamentally change the manufacturing process from artisan hand work to assembly line-like automation. Technicians will oversee the automated systems (potentially multiple systems per technician) rather than making the products themselves. This seems to me to have the potential to greatly reduce the cost and time required for a full buildout of Sawston to support worldwide commercialization.

The Flaskworks announcement is a totally unexpected bolt from the blue. If management’s statements are accurate this is a huge development that can scale up very quickly to much larger production runs than current technology at a dramatically lower cost of manufacturing. I have no reason to doubt management’s assessment, but I have no way of confirming it either. I would also point out that in order to use the Flaskworks system, the Company will need to do a bridging study (as the Company noted in its announcement) that provides convincing evidence that the product it produces is therapeutically equivalent to the one used in clinical trials. I am not sure how this equivalency study would be designed and how long it might take. I would guess that it is not something that can be done in a few months but I will need guidance from management to make an accurate forecast.

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