Expert Financial Analysis and Reporting

Before I Get Into This Article, a Word to My Subscribers

I want to apologize to my subscribers for a software error that resulted in seven e-mails being sent out to alert subscribers that I had published a new company report today. There should have been just one. We have just implemented this e-mail alert system and missed this bug. This will not happen again. My usual writing program usually results in perhaps two to six e-mails per week and it is rare that I will send as many as three in a day.

Overview

Adam Feuerstein has just published his seventh or eighth or ninth negative blog on Northwest Biotherapeutics in the last month. I am losing count. It carries the alarming headline “Northwest Bio Warns FDA May Throw Out Phase III Brain Cancer Study”. In this article as in previous ones, he has presented a speculative theory that is just that, his speculative theory. His headlines are misleading in that he attempts to attribute statements to management that were never made. I am getting tired of writing responses, but the extremely serious claims and accusations that he makes can’t go unanswered.

This latest article relates to the risk factors section in the 10-K. As everyone knows, lawyers write risk factors that try to cover any possible event. I remember one that recently warned that the Company’s production facility which was in a west coast city was at risk of being destroyed by a tsunami. Lawyers get paid a lot of money to include all plausible and some implausible  risk factors they can think of and they continually add to the language in risk factors paragraphs. After reading the risk factors section of most companies, one wonders why anyone would ever want to buy a stock.

Feuerstein singles out and attempts to sensationalize one risk factor in the 2013 10-K. He wrongly states that the Company “snuck a brand new risk nugget about the brain cancer vaccine DCVax into its annual report filed with the Securities and Exchange Commission on Tuesday”. This is clearly wrong as the exact same language was included in a prospectus for a successful equity offering in November 2013 which raised $27 million. It was not snuck into the 2013 10-K; it has been in the public domain for some time.

At the heart of the Feuerstein argument is that the FDA will not accept progression free survival as the primary endpoint of the phase 3 trial for DCVax-L. I think that he is not aware that progression free survival and overall survival correlate very well in judging the efficacy of a new drug in an an aggressive cancer like glioblastoma multiforme. In this article, I provide some persuasive documentation that progression free survival is an excellent primary endpoint for this phase 3 trial. I urge you to read my arguments that appear toward the end of this note.

My bottom line on this latest Feuerstein blog is that it presents no new information in regard to whether the phase 3 trial will be successful and if the FDA will then approve the drug on the basis of a successful trial. This belies the headline of his blog which to repeat says “Northwest Bio Warns FDA May Throw Out Phase III Brain Cancer Study”.

Feuerstein Claims a Change in a Risk Factors Paragraph of 2013 10-K Suggests That FDA May Throw Out Phase 3 Trial of DCVax-L

Feuerstein’s newest theory is based on a risk factor paragraph that appears in the most recent 2013 10-K and reads as follows:

“Our products and our ongoing development activities are subject to regulation by regulatory authorities in the countries in which we and our collaborators and distributors wish to test, manufacture or market our products. For instance, the FDA will regulate the product in the U.S. and equivalent authorities, such as the EMA will regulate in Europe. Regulatory approval by these authorities will be subject to the evaluation of data relating to the quality, efficacy and safety of the product for its proposed use, and there can be no assurance that the regulatory authorities will find our data sufficient to support product approval of DCVax-L. In addition, the endpoint against which the data is measured must be acceptable to the regulatory authorities. The primary endpoint of our Phase III trial is progression free survival. Sometimes regulators have accepted this endpoint, and sometimes not. There can be no assurance that the regulatory authorities will find this to be an approvable endpoint for Glioblastoma multiforme cancer.”

In my experience, language changes occur in the risk factors section in nearly every 10-K for both large and small companies. There is nothing particularly sinister about this and usually reflects an attempt by lawyers to cover and highlight every possible risk factor. Hence, the section on risk factors almost always expands. The section that is bolded is new relative to the 2012 10-K; please note that the bolding was added by Feuerstein and did not appear as such in the 10-K.

While Feuerstein is right that this addition to the risk factors was not included in the 2012 10-K, he is apparently unaware that the same language had previously been used in an offering document. In the November 21, 2013 prospectus in which Oppenheimer was the lead manager in an equity offering that raised $27 million, the exact same risk factor language that appeared in the 2013 10-K also appeared on page S-13 of that document. The link to the prospectus is as follows:  http://www.sec.gov/Archives/edgar/data/1072379/000114420413063416/v361160_424b5.htm

The November 21, 2013 prospectus uses identical language to that in the 2013 10-K. It states:

“Our products and our ongoing development activities are subject to regulation by regulatory authorities in the countries in which we and our collaborators and distributors wish to test, manufacture or market our products. For instance, the FDA will regulate the product in the U.S. and equivalent authorities, such as the EMA will regulate in Europe. Regulatory approval by these authorities will be subject to the evaluation of data relating to the quality, efficacy and safety of the product for its proposed use, and there can be no assurance that the regulatory authorities will find our data sufficient to support product approval of DCVax-L. In addition, the endpoint against which the data is measured must be acceptable to the regulatory authorities. The primary endpoint of our Phase III trial is progression free survival. Sometimes regulators have accepted this endpoint, and sometimes not. There can be no assurance that the regulatory authorities will find this to be an approvable endpoint for Glioblastoma multiforme cancer.”

Clearly, the addition of language in the 2013 10-K relative to the 2012 10-K cannot be taken as a recent and alarming addition as Feuerstein so clearly implies and the Company did not sneak it into the 2013 10-K. It has been in the public domain for at least five months and was considered by sophisticated institutional investors before they participated in the November equity offering.

Is Progression Free Survival an Approvable Primary Endpoint for DCVax-L?

This issue is one that Feuerstein has raised numerous times before. The FDA has stated that in general it would like to see median overall survival used as an endpoint in clinical trials for oncology drugs as it considers this the gold standard endpoint. The DCVax-L trial was started in 2008 at a time when this position of the FDA was not well established and there was not as much clarity on using median overall survival as the primary endpoint.

Feurstein correctly points out that the primary efficacy endpoint used in the phase 2 trial of ImmunoCellular’s ICT-107 was median overall survival. However, he fails to mention that in recent presentations, IMUC has suggested that progression free survival may be a better way to interpret the results of that trial than overall survival. I shortly go into the reasons why IMUC and key opinion leaders are now leaning that way.

Feuerstein also fails to mention that the FDA approved Avastin for use in recurrent glioblastoma multiforme solely on the basis of progression free survival. Indeed, as the product label clearly shows, the studies that led to Avastin’s approval showed no improvement in median overall survival. The link to the Avastin label is as follows:  http://www.gene.com/download/pdf/avastin_prescribing.pdf

In rapidly progressing cancers, there are credible opinion leaders who believe that progression free survival is a very good endpoint. In a recent article in Neuro-Oncology, the authors concluded:

“In glioblastoma, PFS and OS are strongly correlated, indicating that PFS may be an appropriate surrogate for OS. Compared with OS, PFS offers earlier assessment and higher statistical power at the time of analysis.” The link to the article is as follows: http://neuro-oncology.oxfordjournals.org/content/early/2014/02/24/neuonc.not236

Another recent video also goes into a discussion about using progression free survival as an endpoint in metastatic melanoma, which like glioblastoma multiforme is a rapidly progressing cancer. This is an interesting discussion and the link is: http://ecancer.org/video/2318/analysis-of-progression-free-survival-versus-overall-survival-in-melanoma.php

Concluding Thoughts on Progression Free Survival as an Endpoint

As the previous paragraphs clearly indicate, there is strong support for using progression free survival as the primary end point in glioblastoma multiforme. This is because of the strong correlation between progression free survival and overall survival in very aggressive cancers like GBM. Advocates point out that this allows a good drug to be more quickly made available to help people. Feuerstein is obsessed with the point that progression free survival is not a viable primary endpoint, but others with infinitely better scientific credentials disagree.

Finally, I would also point out that the phase 3 study for DCVax-L has median overall survival as a secondary endpoint and the Company says that the trial is powered to show significance in median overall survival. It is highly probable that FDA will have a pretty clear read on the effect of DCVax-L on median overall survival if and at the time that the phase 3 trial is successful in reaching the primary endpoint of progression free survival.