A neighbor of mine recently participated in a focus group translating a questionnaire designed for patients with growth hormone (GH) deficiency. The yes/no questions ranged from "I feel exhausted all the time even when I haven't done anything," to "I feel as if I'm a burden on everyone." It seemed as if anyone with GH deficiency led a sub-par life. The "cure" if you can call it that is injections of synthetic GH, which seemed simple enough.
But as fate would have it, there was a 53 year old woman in the focus group with them. She has a 21 year old son with GH deficiency. Her description of the problem made the whole affair a lot more dismal. The reason her son has GH deficiency is that he had brain cancer, twice, and when your brain is operated on twice and fried with radiation and chemotherapy, things get damaged, including the pituitary gland, which produces GH. And then there's a catch-22. GH makes things grow. So if it is injected to cure the deficiency, the risk of the cancer reappearing is substantially increased, which is what indeed caused the first recurrence in this case.
The prospect of facing such a sad conundrum led me to a company called Northwest Biotherapeutics (NWBO.OB). A full and exhaustive report was done by Smith on Stocks on every aspect of this company. Here I will be summarizing the more important points of that report and assessing my own conclusions. Since Smith's report, NWBO has gone through several dilutive financings as well as a reverse stock split.
NWBO is, after 15 years of tortured financial history, finally in the end stages of approval for its revolutionary brain cancer vaccine, DCVax-L. A phase III clinical trial was approved with sites enrolling at 41 locations in the US. What is especially noteworthy about this trial on a regulatory angle is that it is proceeding directly from phase I results. Phase II was skipped, for all intents and purposes, with the FDA's nod.
Such leniencies from the FDA are few and far between. The reasons I suspect NWBO got clemency are two. First, the phase I results were unusually promising. According to phase I data, DC Vax-L showed median progression free survival of 25.0 months. Standard of care (SOC) which includes tumor removal followed by radiation or chemotherapy or both, averages 6.9 months. Basically, SOC procedures are needed because the type of brain cancer that DCVax-L targets, glioblastoma multiforme, sends tumor tentacles out that hook into other brain tissues making it impossible to remove the whole thing without irreparably damaging the brain and causing for example, among many other horrible side effects, pituitary damage leading to GH deficiency. DCVax-L primes the patient's immune system to attack the remnants of a tumor, greatly reducing the damaging side effects of SOC. Further, median overall survival for DCVax-L patients in phase I was 36.4 months versus 14.6 for SOC. 55 out of 100 patients given DCVax-L are expected to survive after 3 years, compared with 11 out of 100 for SOC.
The other main reason I suspect NWBO got a get-out-of-phase-II-free card from the FDA is the financial situation. I won't mince words. It's bad. The balance sheet shows a total deficit of $290M, and cash on hand of $111,000. That might look insurmountable, but NWBO has been in this same sort of situation for years. Back at the end of Q1, NWBO had just $37,000 cash with a $3.5 million burn rate. Compared to that, Q3 has been El-Dorado.
The basic assumption I am making here, and which you will have to reach your own conclusion on, is that no one will pull the plug on this company before the DCVax-L trial is completed in 2013. They have been limping along paying investors in stock for too long for someone to call in cash now and pull the plug. Not in the middle of a phase III trial with what looks like the FDA's good graces so far.
Certainly, the company's financial situation has turned off many investors to its stock, and negative sentiment abounds. But those who pay money for a subscription to Sentimentrader know full well that sentiment is a contrarian indicator. That, and there are certain innates that will keep NWBO stock from dipping too far too fast. Linda Powers, NWBO's CEO and head of the venture capital fund Toucan Funds, has been nearly single-handedly keeping the company going since 2004, and owns 54% of the company's stock with no intention of letting her shares go while a phase III trial is underway. Continuing on the theme of cooperation from the FDA, the company plans to seek early product approval for DCVax-L if the results are positive.
The biggest reason why NWBO is so exciting is that DCVax-L is not limited to one type of cancer. DCVax products are manufactured by combining dendritic cells, filtered from a patient's blood, into ground up tumor tissue, essentially weaponizing the patient's immune system, and then injecting it back in. This process is applicable to nearly all cancers, not just glioblastoma multiforme, which is what makes DCVax such a wild card.
The DCVax manufacturing procedures allows for one combining process to suffice for a full treatment schedule of 3 years for one patient, streamlining the process and cheapening production costs significantly over the only other approved therapeutic cancer vaccine, Provenge, by Dendreon (DNDN), which requires several different harvesting and combining sessions.
What I haven't mentioned yet is the "Holy Grail" of cancer vaccines, which is DCVax-Direct. This is another one of NWBO's pipeline products currently entering phase II, directly from successful pre-clinical animal trials, again skipping a phase. DCVax-Direct differs from DCVax-L in that the latter presupposes surgical removal of a tumor and mixing it with dendritic cells. DCVax-Direct is designed for patients where surgery is not an option. The dendritic cells are processed different and injected directly into the tumor, picking up the antigens and attacking there. If this succeeds, it would show that cancer can be attacked without surgery or poisons like radiation or chemotherapy, or at least without excessive amounts of it.
For investors, the truth is, we are now down to the wire. There is a potential cancer cure at the end of the pipeline by a company teetering on the edge of bankruptcy, and even the FDA is (sort of) helping out. If this isn't a Hollywood investment scenario I don't know what is.
I am sure of one thing however, should news on the day that the top line results are released prove positive, NWBO investors are certainly not going to be the only ones celebrating.