Seeking Alpha
Long-term horizon, biotech, gold & precious metals, restaurants
Profile| Send Message| ()  

There's a man in my neighborhood that has ALS. Diagnosed 2 years ago, he can no longer move his arms or keep his head up. He can still walk and talk, but he and everyone in our neighborhood knows that the clock is ticking. Recently I naively went up to him to tell him news about some new Phase II ALS trial that was beginning enrollment and that he should look into it, as if I knew about it before he did. He smiled kindly, and said that it was no use. The trial was enrolling thousands of miles away, and it would require him to leave his job, his family, find a new place to live, look for a new job, and all the rest of the logistical nightmare, all while suffering from worsening ALS. Why not call up the contacts and get them to add him on locally? The company is spending all the money anyway, why not a little extra? Because that's against FDA regulations. Why not move and do it anyway? Your life is at stake, is it not? Yes, but he may only end up getting a placebo, because double-blinded trials for dying patients are FDA regulations for quicker approval. So he has to sit there and deteriorate. Ever wonder why it takes such a long time for some companies to enroll patients? Location restrictions and placebo regulations are two very big reasons.

Several months ago I wrote an article about Northwest Biotherapeutics (NWBO), its therapeutic GBM brain cancer vaccine DCVax-L, and its battles with the FDA and regulatory agencies in Europe, slamming the whole clinical trial process and hoping NWBio could pull through. I explained why former Congressman Ron Paul's Compassionate Freedom of Choice Act of 2012 (column 3) allowing dying patients to try out whatever drugs they wanted whether approved or not, would never pass, and indeed it has not even gotten close. Such freeing legislation is too much of a threat to the FDA's iron grip on the medical industry, and Big Pharma's control over a grossly outsized portion of market share. With the FDA keeping smaller companies at bay with wildly expensive regulations, Big Pharma's place is assured at the top.

I've been following the NWBio debate back and forth for a long time now and I haven't explicitly taken a side other than to say that DCVax-L looks promising while excoriating the FDA. The debate is mostly over the company's lopsided balance sheet that is chronically low on cash and its unusually protracted Phase III DCVax-L trials going on for 11 years already. These points are what the naysayers like to site. The pro camp responds with the positive results of the Phase I trial and the median survival of 3 years compared to 14 months for standard of care. Last week, NWBio came out with a tear-jerking press release clearly trying to pull some investor heart strings telling the story of its second DCVax-L patient to survive past the 10-year mark since his first treatment in 2003. GBM typically kills within a year. The naysayers respond that the enrolled patients are biased towards younger GBM patients who have better chances of survival anyway.

There seems to be something of a war going on between ImmunoCellular Therapeutics (IMUC) supporters and NWBio supporters, both development stage companies racing towards GBM vaccines, with both sides accusing the other of taking too long in clinical trials, not enrolling fast enough, diluting, not having a big enough market cap, skewing p-values and statistical data etc. (For an excellent piece on the statistics war going on, see here. Author is long NWBO.) But this war is misplaced. If we think about it from the perspective of a GBM patient, the DCVax-L trial is double-blinded placebo-controlled, the same logistical difficulties exist for every patient who is not local, GBM kills fast (mean survival is only 2 to 3 months), and there are only something between 6200-9500 people (2 to 3 per 100,000) diagnosed in the entire country annually. That means if you want to enroll and you are not local, you have to be willing to uproot yourself on the real risk that you will only get a placebo and die anyway, just so the FDA can get a more statistically favorable p-value and look stricter so people think they're doing a good job and protecting all of us from dangerous medicine with statistically questionable p-values. No wonder it's almost impossible to get GBM volunteers.

The point is neither company is to blame for long drawn-out GBM trials. The FDA is. The FDA makes enrollment extremely difficult by twisting arms and threatening not to approve drugs and put small biotechs out of business if they don't listen. Sure, you have an option of foregoing placebo control and just giving all patients the vaccine and seeing what happens, but then you have to enroll a bunch more patients and spend even more money and risk going bankrupt if you want approval that way.

While assigning blame is one thing and hurling insults at one company or another is missing the real culprit, reality is still reality and investment decisions must be made within that framework. That said, the naysayers have a point that NWBio's balance sheet is chronically undercapitalized and has only stayed afloat thanks to repeated last minute dilutions, annoyingly enough for NWBO investors. One of the most persistent attacks has been that NWBio has never gotten an institutional investor on board, and has had to resort to dilutions instead of direct offerings to stay on life support.

That has now changed. On April 17, NWBio announced that it had finally found an institutional healthcare investor to buy 2,564,103 shares of the company at $3.90 a piece including warrants, giving the company an additional $9.15M in liquid assets.

Will that money alone carry it through to the end of DCVax-L's Phase III expected in the first half of next year? Considering NWBio's cash burn rate last quarter, probably not, but the curse of being a biotecha non grata among institutional healthcare investors has finally been broken. That, and the $9.15M plus the $7.35M already on its balance sheet means the company hasn't had this much cash since way back in 2001 when it had $15M. So no, it's still not enough, but would an institutional buyer put up $9M expecting the company to go bankrupt right before the final trial is finished? I seriously doubt it.

The long-term investment picture for NWBO is the same as it has been for a long time. If DCVax-L fails, the company probably will, too. If it succeeds, gains will be in the thousands of percent, a binary curve if ever there was one. We'll all find out by the first half of next year, with an interim analysis for efficacy of DCVax-L by Q3 of this year.

Despite all the bad blood going around, if and when DCVax-L is finally approved, even IMUC investors will be cheering. Perhaps then they could both focus their sites on the FDA and lobby for the passage of Ron Paul's Compassionate Freedom of Choice Act to end all this clinical trial placebo nonsense.

Source: With A New Institutional Investor On Board, Northwest Biotherapeutics Breaks The Curse