There have been some debates about Northwest Biotherapeutics (NWBO) in the past few quarters. But none of them are persuasive. The major reason is that no one can accurately predict if NWBO's cancer vaccine DCVax-L for brain cancer and DCVax-Direct for solid tumors will finally reach the market. The cancer vaccine is a pretty new therapeutic area, and so far, only Dendreon's (DNDN) Provenge for prostate cancer and Bristol-Myers Squibb's (BMY) Yervoy for skin cancer have gained the FDA approval. Although Yervoy is a huge success for BMY, Provenge has been underperforming in terms of market penetration since its launch in April 2010. But there has been a surge of investments in the cancer vaccine area in the past few years and a number of candidates have entered into clinic. But only a few have entered into pivotal Phase III trial, and NWBO is one of the advanced companies in the space of cancer vaccine.
In this article, I will conduct a fundamental analysis on NWBO based on public information. Based on our research and analysis, we think NWBO will have a huge win if its two lead candidates DCVax-L for brain cancer and DCVax-Direct for solid tumors ultimately reach the market.
For those who are not familiar with NWBO, here is the basic information about this small-cap biotech company.
NWBO is a late clinical stage biotechnology company focused on discovery, development and commercialization of immunotherapy products to generate and enhance immune system responses to treat cancers. The Company holds a key technology platform applicable to cancer therapeutics: dendritic cell (DC)-based cancer vaccines (DCVaxTM).
NWBO's DCVax platform technology makes use of the same immune cells as Dendreon's prostate cancer vaccine Provenge does. DCVax uses a patient's own dendritic cells (DCS). The dendritic cells are extracted from the body, loaded with tumor antigens, thereby creating a personalized therapeutic vaccine. Injection of these cells back into the patient initiates a potent immune response against cancer cells, resulting in delayed time to progression and prolonged survival.
NWBO has developed three versions of DCVax products which are complementary. DCVax-L is developed using the patient's own dendritic cells loaded with antigens from the patient's own brain cancer lysate. DCVax-prostate is developed using the patient's own dendritic cells loaded with a recombinant antigen for prostate cancer. The third version of DCVax is called DCVax-Direct, which is developed using the patient's own dendritic cells without any patient tumor tissue. The DCs are activated, but without addition of tumor antigens. The cells adhere to the plastic culture surface, which results in activation. All three versions of DCVax are based on the same DCVax platform technology. Together, these three versions of DCVax can cover almost all solid tumor indications. For example, DCVax-L is used when the patient's tumor can be surgically removed while DCVax-Direct can be used when the patient's tumor cannot be surgically removed.
The Company's lead product candidate is DCVax-L, which targets Glioblastoma Multiforme (GBM), the most lethal form of brain cancer. DCVax-L has entered a Phase III clinical trial, which is designed and powered as a pivotal trial. DCVax-Prostate, which targets hormone independent prostate cancer, has also been cleared by the FDA to commence a Phase III clinical trial, which is also designed and powered as a pivotal trial. The company's third candidate DCVax-Direct has entered into Phase I/II clinical trials.
Current focus is DCVax-L for GBM and DCVax-Direct for solid tumors.
NWBO's DCVax Technology Holds Competitive Advantages
Through over 10 years of extensive lab research and development work, Northwest has developed a superior DCVax technology compared to its competitors.
A key advantage is clinical outcomes: length of overall survival. In NWBO's early stage trial, patients who received DCVax lived much longer than the patients who received Provenge in Dendreon's Phase III trials. Although NWBO's early stage trial results will have to be confirmed in its Phase III trial, the difference in survival with DCVax in NWBO's Phase I/II trial compared with survival with Provenge in Dendreon's Phase III trials was substantial enough to be noteworthy. In NWBO's Phase I/II trial, patients with metastatic, hormone independent prostate cancer (the same patient population as in Dendreon's Provenge trials) who received DCVax had median survival of 38.7 months, while such patients in Dendreon's Phase III trials with Provenge had median survival of about 25.9 months. (The "control group" patients who received current standard of care in Dendreon's trials had median survival of about 19 months.)
Another important advantage for DCVax is its low cost. Since the approval of Dendreon's Provenge in April 2010, sales have been disappointing. One of the major reasons is the high price and concerns about reimbursement mechanics. Provenge is priced at $93,000 for one month of treatment while NWBO's DCVax will be priced in the range of $37,000 per year for up to 3 years of treatments. The pricing of DCVax will also be substantially below the price range of most antibody drugs and targeted drugs for cancer. Such drugs are typically priced at $60,000-80,000 per year, and can easily exceed $100,000 per year. Such drugs also carry significant side effects, and often only extend survival for as little as 10 weeks.
The key to the substantial pricing advantage of DCVax is NWBO's proprietary batch manufacturing process together with its cryopreservation technology for frozen storage of the finished vaccine. NWBO has spent a decade developing and improving its manufacturing and cryopreservation processes. The manufacturing of personalized, living cell products is expensive. But the frozen storage of living cells is quite low-cost - once the specialized freezing technology is worked out for a particular type of cells (the culture conditions, rate of freezing, density of cells and many other factors).
NWBO's manufacturing methods produce - in a single manufacturing run - a large batch of personalized DCVax product for 3 years of treatments that are much less costly than separate manufacturing runs for each treatment. The technology for freezing the master immune cells (dendritic cells) which comprise DCVax enables these cells to remain frozen for years and, when needed, to be thawed and "come back to life" with full potency. This approach makes DCVax an "off the shelf" product for several years of treatments for the particular patient after just one manufacturing run. In contrast, Dendreon must do a separate manufacturing run for each one month of treatments. In addition, Dendreon's Provenge is fresh and not cryopreserved, which limits its shelf life to at most a few weeks.
Manufacturing has been a key commercial bottleneck for cancer immunotherapeutic market. NWBO's cost advantage is a highly differentiating factor key to its product pricing and margins. Using the company's unique batch manufacturing process and cryopreservation technology, it is possible to manufacture 3 years (sometimes even more) of DCVax products from a single manufacturing run, therefore giving NWBO a key commercial advantage.
One more important advantage of DCVax is its simplicity and ease of administration. DCVax is delivered as a small intra-dermal injection under the skin, similar to a flu shot. As such, it can be administered in any physician's office or clinic. There is no lengthy intravenous infusion, with the attendant patient discomfort, cost and need for a specialty infusion center. In contrast, Dendreon's Provenge is delivered by intravenous infusion.
The fourth advantage of DCVax is its higher purity of dendritic cells (greater than 80%). Provenge has less than 15% activated dendritic cells and the rest are various other cell types which are not needed for immunization. Therefore, a much smaller dosage of DCVax is required for vaccination, making intra-dermal injection possible, and reducing side effects.
Table 1: NWBO's DCVax versus Dendreon's Provenge
High Concentration> 80% pure
Low concentration ≤ 15%
intra-dermal, similar to flu shot
IV infusion, invasive, cumbersome
1 manufacturing run=3 year treatment, approximate $37k/year
1 manufacturing run=1 month treatment, $93k for one month
Source: Zacks Investment Research and Company presentation
The DCVax-L Brain Cancer Program: Impressive Clinical Data
Northwest's lead therapeutic program is DCVax-L for GBM. DCVax-L uses the company's DCVax platform in combination with the patient's own glioblastoma tumor cell lysate antigens.
The tumor from surgery is shipped to a manufacturing facility in order to prepare the DCVax-L. The finished DCVax-L is then shipped frozen to the clinic for administration to the patient. DCVax-L is usually manufactured in sufficient quantities for treatment for 3 years. Manufacture of DCVax-L takes approximately 8-10 days to complete (followed by quality control testing for release of the product).
Northwest's clinical collaborators at UCLA completed two Phase I clinical trials to assess the safety and efficacy of DC-based immunotherapy for Glioblastoma multiforme (GBM). In the first Phase I clinical trial, DCVax-L was administered to 12 newly diagnosed and recurrent patients and in the second Phase I clinical trial it was administered to 17 newly diagnosed patients. The patients in both trials were treated with DCVax-L being administered as an adjuvant to the standard of care. Standard of care is defined as surgery followed by 6 weeks of radiation and daily temodar chemotherapy combination and a further 6 months of temodar chemotherapy in monthly cycles.
The data from the two Phase I clinical trials have shown very impressive positive results of DCVax-L.
Newly diagnosed GBM patients treated with DCVax-L had a delay in the median time to recurrence or progression of disease from 6.9 months with standard of care treatments to 2 years in patients treated with DCVax-L (p = 0.00001; n=20). DCVax-L increased median overall survival from 14.6 months with standard of care to 3 years in patients treated with DCVax-L (p < 0.0004; n=20).
In addition, according to the latest long-term follow-up data, 33% of the patients had reached or exceeded 4-year survival; 27% of the patients had reached or exceeded 6-year survival, and the longest surviving patient to date had exceeded 10 years. Five of the 20 patients remained alive for periods ranging, to date, from 40 to 128 months, with seven patients having lived for over 45 months without cancer recurrence.
Similarly, in recurrent (late stage) patients, DCVax-L has increased median survival from 6.4 months for those receiving standard of care to 11.9 months for patients receiving DCVax-L.
DCVax-L is well tolerated by all patients. There were no toxicities such as are seen with chemotherapies.
When compared to other two similar brain cancer candidate vaccines ICT-107 and Rindopepimut, DCVax-L also shows favorable or similar efficacy data. Both ICT-107, developed by ImmunoCellular Therapeutics (IMUC), and Rindopepimut, developed by Celldex Therapeutics (CLDX), are targeting patients with newly diagnosed glioblastoma. ICT-107 is in Phase II clinical trial and Rindopepimut is in Phase III clinical trial.
Table 2: Phase I DCVax-L efficacy data are impressive
Standard of care
> 30 months
24-month OS (%)
Source: Zacks Investment Research, PFS*: progression free survival, OS*: overall survival
Top Line Results of Phase III DCVax-L for Brain Cancer Expected by the End of 2014
Based on the positive Phase I clinical data, in December 2006, NWBO commenced recruiting patients with newly diagnosed GBM in a 141 patient Phase II DCVax-L clinical trial. The company planned to carry out the study at 12 to 15 clinical sites. The study was designed as a randomized study in which patients received either DCVax-L in addition to standard of care or standard of care alone. The study was not blinded because there was no available approach for making a placebo that was indistinguishable from the DCVax-L. Almost 50 patients were screened at 4 clinical sites. However, patients were reluctant to enroll in the study when faced with a 33% chance of being randomized into the control arm of the study under which they will receive standard of care alone. In addition, even patients who did enroll were reluctant to stay in the study if they were assigned to the control arm. Since the study was not blinded, patients were able to know which arm of the study they were assigned to. So, the company stopped and undertook a development program to develop a placebo that would be indistinguishable from DCVax-L, and would not show activity of its own.
With the placebo developed, the company redesigned the study as a randomized, placebo controlled, double blinded (2:1) study with a cross-over arm allowing control patients to be treated with DCVax-L in the event that their cancer progresses. The primary end point is progression free survival (PFS) with overall survival (OS) as the secondary end point. The study size has been increased from 141 to 240 patients and is designed to enable the company to petition the FDA for accelerated approval if the study generates results similar to those achieved in the two prior Phase I clinical trials. The company resumed patient enrollment in Jan 2011.
Further in May of 2012, NWBO made the following amendments to its Phase II trial:
- The previous Phase II clinical trial has been designated as pivotal Phase III trial;
- Expanded and enhanced statistical endpoint analyses;
- With the addition of another cohort of patients which can potentially expand the application of DCVax®-L, the trial size has been increased to 312 patients;
- Addition of interim analyses for efficacy;
This Phase III trial of DCVax-L is for newly diagnosed Glioblastoma multiforme (GBM), the most common and most lethal form of brain cancer.
The trial is well under way in the US, with over 50 active sites at present, and is expected to enroll an aggregate total of 312 patients in the US and Europe.
On May 16, 2013, NWBO announced that Phase III clinical trial with DCVax®-L for brain cancer has been initiated at King's College Hospital in the UK. This is one of the first late-stage clinical trials in Europe with active immune therapies. Three other sites in the UK are also preparing to open.
On September 17, 2013, NWBO announced that the German regulatory authority has approved the company's implementation of the three minor amendments required by the authority's initial decision announced in August, and has authorized the company's Phase III GBM clinical trial to open in Germany.
This rapid regulatory response enables NWBO to proceed with its Phase III trial in Germany, where the company plans to include more than 20 top German hospital centers. These German centers will be joining more than 55 clinical trial sites currently operating in the US, as well as sites in the UK, as part of NWBO's international 312-patient, double blind, randomized, placebo-controlled Phase III clinical trial of DCVax®-L for Glioblastoma multiforme (GBM).
NWBO will now proceed with the final administrative steps with the individual German hospital centers in order for enrollment to begin.
NWBO expects to complete enrollment by the late summer of next year, and potentially reaching top line results by the end of next year.
The company plans to file NDA for DCVax-L in both the U.S. and the European Union if the Phase III trial results are positive. DCVax-L is the company's top priority. DCVax-L received orphan drug status in both the US and EU.
Huge Market Opportunities for DCVax-L
Glioblastoma multiforme (GBM), also called glioblastoma, is the most common and most aggressive type of primary brain tumor and accounts for approximately 50% to 60% of all primary brain tumors.
According to National Cancer Institute (NCI), it is estimated that 22,020 men and women (11,980 men and 10,040 women) will be diagnosed with and 13,140 men and women will die of cancer of the brain and other nervous system each year in the US. Worldwide, approximately 176,000 new cases of brain and other CNS tumors were diagnosed each year, with an estimated mortality of 128,000.
Glioblastomas are among the most aggressively malignant human neoplasms. The median survival time from the time of diagnosis without any treatment is only a little over 1 year. Despite multimodality treatment consisting of open craniotomy with surgical resection of as much of the tumor as possible, followed by concurrent or sequential gamma knife radiotherapy, chemoradiotherapy, targeted therapy, and symptomatic care with corticosteroids, median survival is about 14.6 months. The overall 5-year survival is less than 3% with the standard of care today. Increasing age (> 60 years of age) carries a worse prognostic risk. Death is usually due to cerebral edema or increased intracranial pressure.
It is very difficult to treat glioblastoma due to several complicating factors:
- The tumor cells are very resistant to conventional therapies
- The brain is susceptible to damage due to conventional therapy
- The brain has a very limited capacity to repair itself
- Many drugs cannot cross the blood-brain barrier to act on the tumor
Current treatments for GBM include surgery, radiation and chemotherapy. Such treatments are often used in various combinations and/or sequences and have significant adverse side effects such as bleeding, seizures, nausea and collateral tissue damage. Following initial treatment, virtually all cases of this cancer recur, with a life expectancy of approximately six months following recurrence. Few, if any, effective therapies exist for these patients.
Current options of chemotherapy (including targeted therapy) for glioblastoma are very limited. Although the addition of chemotherapy to radiation improves survival in many cancer types, with glioblastoma, the chemotherapy only adds about 10 weeks of survival in a portion of the patients who take it. Most studies showed no benefit from the addition of chemotherapy to radiation for glioblastoma patients. However, currently, two chemotherapeutic agents (including one targeted therapy) approved by the FDA are frequently used for the treatment of glioblastoma in combination with radiation therapy. They are Temodar (temozolomide) from Merck/Schering Plough for newly diagnosed GBM and Avastin from Roche for recurred GBM.
The current standard of care for GBM was established in a 573 patient study as set out by Stupp, et al. in N Engl J Med 352; 10. The standard of care established in the Stupp trial for GBM patients consists of surgery followed two weeks later by radiation therapy with concomitant daily low-dose Temodar chemotherapy, followed by six monthly cycles of full-dose Temodar chemotherapy. In this study, patients treated with the standard of care had a median time to progression of 6.9 months and median overall survival of 14.6 months. While the group who received the same treatment regimen without Temodar survived for only 12.1 months - a difference of about 10 weeks. This standard of care treatment regime has a 26% survival at two years. In comparison, when DCVax-L was added to this standard of care in NWBO's early stage trials, over 70% of patients survived at two years.
The US FDA recently approved Avastin (bevacizumab) to treat patients with recurred glioblastoma (but not newly diagnosed GBM which is DCVax's initial target) after standard therapy based on the results of 2 studies that showed Avastin reduced tumor size in some glioblastoma patients. In the first study, the efficacy of Avastin was demonstrated by an objective response rate of 25.9%. Median duration of response was 4.2 months. In the second study, the efficacy of Avastin was supported by an objective response rate of 19.6%. Median duration of response was 3.9 months.
A third chemotherapeutic agent on the market for glioblastoma is Bristol-Myers Squibb's Carmustine injection and Eisai's Carmustine wafer, which are less frequently used.
Clearly, there are unmet medical needs for the treatment of glioblastoma. DCVax may be able to address these unmet medical needs in a unique way. DCVax is specifically designed to target glioblastoma cells by activating the patient's own immune system. So far, data from DCVax are encouraging for the treatment of glioblastoma compared to marketed products and products under development.
The glioblastoma market is a multibillion dollar business. Worldwide sales of Temodar reached $1 billion in 2009. If DCVax ultimately reaches the market, it will command a huge market share of the GBM market due to its outstanding efficacy data and safety profile in our view. Peak sales could reach $1 billion for DCVax-L. This market potential means a lot to a small biotech company like Northwest, even if it turns out to be a few hundred million dollars in sales.
DCVax®-Direct Phase I/II Trial Initiated for All Solid Tumors
Through over 10 years of research and development, NWBO has developed a unique DCVax-Direct technology with potential for any solid tumors. DCVax-Direct uses the DCVax platform to activate DCs in a manner suitable for direct injection into solid tumors. DCVax-Direct is designed to treat cancer patients whose tumor tissue is not available as their tumors are considered to be inoperable. The patient's dendritic cells are activated, but without addition of cancer antigens. The cells adhere to the plastic culture surface, which results in activation.
In multiple pre-clinical studies of various cancers in animals, direct injection of DCVax-Direct into some of the tumors in each animal resulted in complete clearance of all tumors in 80% to 100% of all of the animals in the various studies - both the tumors that were injected and the tumors that were not injected, indicating a systemic immune response. Further, the tumors were cleared relatively rapidly: within weeks after the DCVax-Direct injections. Equally as important, sixty days after the tumors were cleared from the animals in these pre-clinical studies, the animals were re-injected with the same tumor cells that readily established tumors at the outset of the studies. This time, tumors failed to establish, indicating immune memory.
On June 13, 2013, NWBO announced that its 60-patient Phase I/II clinical trial of DCVax-Direct for all inoperable solid tumor cancers has been initiated at The University of Texas MD Anderson Cancer Center in Houston, Texas.
On September 24, 2013, NWBO announced that the MD Anderson Cancer Center Orlando has become the second site participating in the Phase I/II clinical trial of DCVax-Direct. MD Anderson-Orlando is one of the predominant cancer centers in the Southeast United States. The wide range of cancers treated at the institution makes it an excellent fit for this Phase I/II trial which is very broadly targeted, enrolling patients with all types of solid tumors for which surgery is not possible.
These two prominent centers bring a very strong combined patient flow, which will help accelerate the enrollment of the trial. In addition, other trial sites in the US and Europe are in various stages of preparation.
DCVax-Direct offers a potential new treatment option for the many clinical situations in which patients' tumors are considered inoperable either because of the location or type of cancer, or because of the spread of multiple tumors. A large number of patients with lung, colon, pancreatic, liver, ovarian, melanoma, head and neck, and other cancers such as sarcomas face this situation today, and it carries a bleak prognosis.
It is anticipated that multiple other leading centers in both the US and UK will be joining as trial sites as well. Since the company's announcement of plans for this trial, NWBO has received inquiries from both patients and medical centers across the country seeking to participate.
The trial is expected to enroll groups or "cohorts" of patients with numerous different types of cancers, including pancreatic, colon, liver, melanoma, and various other cancers.
The trial is a combined Phase I and II trial. In the Phase I stage, the trial will test various dose levels of DCVax-Direct. The trial will then proceed directly into the Phase II stage to test the efficacy of the DCVax-Direct treatment. The primary endpoint for measurement of efficacy will be tumor regression (i.e., shrinkage or elimination).
As is standard with Phase I/II trials, this trial will not be blinded - the clinical results in patients will be seen as the trial progresses. Accordingly, it is anticipated that early results of the trial may be emerging in early 2014.
This endpoint of tumor regression is a particularly important one clinically: once tumors are established, if they cannot be surgically removed, it is very difficult to stop their growth and their spread. This endpoint is also important from a regulatory standpoint: it is the endpoint used most frequently for FDA-granted accelerated approval. Further, this endpoint is a rapid one: typically, if tumor regression is going to occur, it is anticipated to be seen within a few months after treatment - far sooner than other clinical trial endpoints such as progression free survival or overall survival (OS).
Current treatments for solid tumors typically involve cytotoxic therapy aimed at killing tumor cells. Such treatments include radiation therapy, chemotherapy, or other cell killing treatments such as cryotherapy.
These treatments can still be used along with DCVax-Direct as they can potentially prepare the tumor tissue for the injection of DCVax-Direct. The ability to still use conventional cytotoxic agents along with
DCVax-Direct will enable DCVax-Direct to be adopted in the market without requiring any change of existing clinical practice if so desired.
DCVax-Direct is the company's third major product line in addition to DCVax-L and DCVax-Prostate.
New financing Boosts Balance Sheet
On Nov. 20, 2013, Northwest Biotherapeutics, Inc. (NWBO) announced the pricing of an underwritten public offering of 4.9 million units at a public offering price of $4.80 per unit, resulting in gross proceeds of $23.5 million.
Each unit consists of one share of common stock, and a warrant to purchase 0.5 shares of common stock at an exercise price of $6.00 per share. The warrants are immediately exercisable and expire on the fifth anniversary of the date of issuance. The shares of common stock and warrants are immediately separable and will be issued separately.
The offering is expected to close on November 25, 2013, subject to the satisfaction of customary closing conditions. Northwest has granted the underwriters a 30-day option to purchase up to 734,374 additional shares of common stock and/or additional warrants to purchase up to 367,187 shares of common stock to cover over-allotments, if any.
This financing is important to NWBO. It not only provides much needed cash for advancing its clinical programs, but also validates the company's technology.
Also on July 31, 2013, Cognate BioServices agreed to convert an aggregate of $11.6 million in accounts payable into shares of common stock at a conversion price of $4.00 per share, which resulted in the issuance in August 2013 of an aggregate of 2.9 million shares of common stock. The conversion shares are subject to a lock-up period of 18 months from the date of their issuance. Under the lock-up, the shares cannot be sold or traded.
On a going forward basis, NWBO and Cognate agreed to establish a regular ongoing arrangement for payment of at least half of each invoice in stock, and the remainder in cash, at $4.00 per share. The arrangement will continue until terminated by mutual agreement.
Net cash outflows from operations were $23.2 million for the nine months ended September 30, 2013.
As of September 30, 2013, NWBO had cash and cash equivalents of $2.9 million. Current cash balance combined with proceeds from the new financing will last through 2Q14.
Valuation Attractive At This Time
We have an Outperform rating on NWBO shares and our 12-month price target is $7.50 per share. Our call is based on the key progress the company has made in the last few months.
Northwest is engaged in the business of developing cell-based immunotherapies for the treatment of various cancers. This is a relatively new area and has come to investors' attention due to recent two developments: the first in class immunotherapeutic drug Provenge from Dendreon was approved by the FDA in April 2010 and the 2011 Nobel Prize in Physiology or Medicine was awarded to the discovery of dendritic cells as immune master cells.
NWBO's batch manufacturing process and cryopreservation technology allow for sharp price reduction of DCVax products. In addition to the cost reduction, DCVax is also superior in terms of ease of administration, and higher concentration of DCs.
Both DCVax-L and DCVax-Prostate are in late stage of development and both, if approved, have blockbuster potential. The company needs to find a partner for DCVax-Prostate. In addition, NWBO initiated a Phase I/II clinical trial for its third candidate DCVax-Direct for solid tumors.
Currently, the company shares are trading at about $5.00 per share which values the company at about $210 million based on 42 million shares outstanding. This is certainly a discount. Most small biotech companies of development stage are valued from $50 million to $500 million depending on how advanced the pipeline is and which indications the company is targeting. NWBO is a late stage development biotech company, and its lead candidate DCVax-L is under a Phase III clinical trial. Another lead candidate DCVax-Prostate is also cleared for a Phase III trial. Market potential is huge for either product.
Also NWBO's DCVax-Direct, which is already in Phase I/II clinical trial, has the potential to treat various types of solid tumors. Both brain cancer and solid tumor markets are huge.
Our price target of $7.50 per share values NWBO at $315 million in market cap. Apparently, risk is high for NWBO at this stage. Both clinical trial outcome and regulatory path are uncertain for its candidates. Another major concern is cash burn. As the company moves forward with the Phase III of DCVax-L and Phase I/II DCVax-Direct, R&D expense will be soaring. We will keep a close eye on the company's balance sheet. That said, return should also be high.