Northwest Biotherapeutics: Responding To Richard Pearson's Article Alleging A Promotion Scheme


I categorically deny all charges that Pearson has raised in his article that I engaged in the promotion of NWBO or any other company.

I categorically deny that I received any compensation to write about NWBO, or any other company.

Pearson presents only circumstantial arguments to support his case. I have asked Pearson for objective evidence that I have been paid to write on companies.

My Relationship with Richard Pearson

On July 7, I was one of the subjects of an article that was titled "Behind the Promotion of Northwest Biotherapeutics" which was published on Seeking Alpha by a person named Richard Pearson. In that article he claimed that I was part of ring of writers that had been put together to promote the stock of Northwest Biotherapeutics (NASDAQ:NWBO). He stated that much of the promotional material that had been published on NWBO (this includes the articles I have written) have been purposely misleading or false. As part of his investigation, Pearson stated that he has shared the contents of this article along with additional materials with the United States Securities and Exchange Commission.

I have never met or talked with Richard Pearson, so all I know about him is what his Seeking Alpha profile says. "I am an activist investor in US and Chinese stocks. I was previously an investment banker in New York Hong Kong and London for 9 years, focused on Equity Capital Markets. I look at both long ideas and short ideas and typically focus on a small number on names where I can spend the time to conduct very deep research. I spend my time living between Los Angeles and Beijing, China."

His Seeking Alpha disclosure on each of his recent articles says "Additional disclosure: The author was previously an investment banker for a major global investment bank and was engaged in investment banking transactions with a wide range of healthcare companies including medical device, pharmaceutical, genomics and biotech companies. The author has not been engaged in any investment banking transactions with US listed companies during the past 5 years. The author is not a registered financial advisor and does not purport to provide investment advice regarding decisions to buy, sell or hold any security. The author currently holds a short interest in NWBO and has provided fundamental and/or technical research to investors who hold a short position.

The author may choose to transact in securities of one or more companies mentioned within this article within the next 72 hours. Before making any decision to buy, sell or hold any security mentioned in this article, investors should consult with their financial adviser. The author has relied upon publicly available information gathered from sources, which are believed to be reliable and has included links to various sources of information within this article. However, while the author believes these sources to be reliable, the author provides no guarantee either expressly or implied."

Pearson Makes Very Serious Allegations Against Me

Pearson alleges that: (1) I am promoting and manipulating the stock of Northwest Biotherapeutics and a host of other companies, (2) my articles are false and materially misrepresent the technology and investment issues associated with NWBO and other companies and (3) I have been paid to write articles by the social media firm MDM.

I strongly deny all of these charges, the most serious of which is that I received money from the social media company MDM to write on their clients. MDM totally denies it. I deny it. Pearson offers no objective evidence to support this charge. Pearson talked to MDM before this article was written and they strongly denied the charge. He did not speak to me before the article was written. He claimed that he sent me an e-mail that he wanted to speak with me, but I did not respond, giving the impression that I was being evasive and defensive. I have no record of any e-mail from Pearson. Given an opportunity to respond to his charges, I would have provided him with the information appearing later in this report and perhaps he would not have gone forward with the article. I completely and utterly deny the charges made against me by Pearson in his article.

Pearson offers no objective evidence to support the extremely serious charge that MDM was paying me to write on their clients. Earlier this year, Adam Feuerstein discovered that some writers were being paid to write articles on Seeking Alpha; this led to these writers being banned from Seeking Alpha. Feuerstein was made aware of the allegation that I was being paid by MDM at about that time. He communicated with me and MDM. I responded, as did MDM, with answers that I provide later in this article. Feuerstein concluded after his examination that I was not writing articles on MDM clients in return for payment.

Feuerstein and I have been fierce adversaries on NWBO and he thinks that I am dead wrong on NWBO (I feel the same about his views), but he has sprung to my defense. He tweeted that he did not believe that I had done anything wrong and also made the same comment in response to the Pearson article; I include his comments later in this article. Most people in Feuerstein's position would have remained silent or used this article to discredit me. Instead Feuerstein offers his support which says a lot about the lack of veracity of the charges Pearson has leveled. (It also says a lot about Adam, but that is for another day).

Pearson has made a name for himself by helping to expose that some writers were paid to write articles on companies. In these cases, he had hard evidence in the form of e-mails and contracts that admitted cash transactions and there were actual admissions of wrong doing. He has no such evidence in this case because very simply there is none. I have asked Pearson who or what was his information source for making the accusations that he has leveled. He remains silent. I can only surmise that Pearson had to rely totally on third-hand information and its integrity to infer that MDM was paying me to write about NWBO and other companies.

I have asked Pearson produce objective evidence of any wrongdoing on my part. There has been nothing produced and there will be no evidence produced because there is none. Other than his theories and speculations, he offers no evidence for any of his charges. They are all the speculation and conjecture of a person who by his own admission is short the stock and is working with others that are short the stock.

Adam Feuerstein Springs to My Defense

Pearson alleges that I was being paid by the social media firm MDM to write positive articles on their clients. MDM has denied this and I deny it as well in the strongest possible terms. I will go into this in more detail on my relations with MDM later. However, I think that any refutation that I might make dims in comparison to an assessment of this issue by Adam Feuerstein. Most readers know that Feuerstein and I have had some brutal battles over NWBO, so that he is the most believable person I can think of when it comes to assessing my relationship with the MDM. Here is what Feuerstein wrote.

" Larry - As I stated publicly on Twitter this morning, I believe the personal attack leveled against you in this story is unjustified.

You know that I looked into the connection between your research and MDM biotech clients months ago. We spoke about it. I also spoke to MDM's CEO. I concluded that there wasn't anything relevant to report so I never wrote about it. I strongly disagree with your analysis on most stocks, particularly NWBO. I think you got this one really wrong. However, I also believe you're not a paid shill for NWBO. I believe you when you say you weren't paid by MDM or anyone else to promote NWBO.

Richard's discussion of your NYSE issue was off topic and out of line. It's just not relevant and should not have been used to attack your credibility.

Adam "

What can I add?

What Does Pearson Think Is My Motive?

I think that the first thing that Pearson would want to do would be to establish motive. Pearson doesn't discuss what my motive might be for being paid to write on companies. This is because there is none.

I operate a subscriber-based website so that investors only subscribe if they believe that I do quality research that helps them to make money. I have invested over $25,000 in this website. Why would I write obvious shill articles for a price of $250 per article that he indicated in his article is the going rate? If this were my intention, I would never have gone through the blood, sweat and tears of building my website.

I would also point out that I am 70 years old. Over the course of my career I have done well enough that I can retire. However, I am a very competitive person and the SmithOnStocks website is my last hurrah. I believe that investors will increasingly turn away from Wall Street research to unbiased research provided by third parties and my intent is to provide Wall Street quality research without its inherent bias toward investment banking clients. I believe that my business model has huge potential.

I Have Extensive Experience in Biotechnology Investing

I have been doing research on biotechnology companies for over 30 years which gives me great perspective on how successful technologies and biotechnology companies have been developed. Through hard experience, I understand the potential and also the considerable risks of investing in biotechnology. No one can accuse me of writing about an industry that I don't understand.

In his article on NWBO, which was his first on the company, Pearson offers some analysis which demonstrates to me a lack of expertise in biotechnology. He appears to be a firm believer that any immunotherapy effects seen with DCVax Direct would be the result of the syringe being injected into the tumor and releasing saline implying that the dendritic cell precursors that were also injected had no effect. In 2011, the Nobel Prize was awarded for the discovery that dendritic cells play an integral role in immunotherapy through activating the innate and adaptive immune systems. I totally disagree with his analysis.

Pearson makes a few other references to issues that surround NWBO, and he alleges that I am putting out false and inaccurate information. I have written 239 articles on Seeking Alpha. All of my articles including those on NWBO have been thoroughly discussed on Seeking Alpha. Some readers think my interpretations are right, others think they are wrong, but there is no question that my opinions have been thoroughly vetted. Pearson is the first person to label them outright fabrications intended to manipulate the stock of NWBO. I have over 2400 followers on Seeking Alpha and presumably this is because they find my work credible and valuable. I also make the same presumption about people who have paid to become subscribers to my SmithOnStocks website.

Pearson Portrays Me as a Shady, Manipulative Figure

Pearson places great emphasis on an NYSE action that occurred in 1999 and led to a suspension of my registered representative license. That suspension expired over a decade ago and there is no restriction of any sort now nor has there been for the last decade. I have written a very detailed account of the suspension in the Seeking Alpha profiles section, and I strongly encourage everyone to read my account. The issues that led to the suspension were not intended to and did not benefit me financially and no investors were negatively affected in any way by these issues.

Pearson has chosen to frame my whole career that has spanned over 40 years by that one issue. It is the only blemish of an otherwise highly distinguished career of which I am proud. One mistake does not negate 40 years of achievement. I note that Bill Clinton was nearly impeached and was disbarred over the Monica Lewinsky affair. However, society rightfully has not framed his career with this one mistake, but has focused on his full body of work.

Pearson states that I am barred from the securities industry. That is not true. I received a suspension and that suspension ended nearly ten years ago. I am free to seek a licensure with the same consideration of any other person if I care to re-enter the industry. However, at my age this is not going to happen.

The MDM Relationship Fully Explained

The heart of the Pearson argument against me is in regard to the relationship I had with MDM. The major source of all of his allegations is that I have written on a number of MDM clients. This circumstantial observation appears to be the basis of his charges against me although there may also be other unnamed sources.

Let me tell you how the relationship with MDM started. Pearson correctly points out in his article that the SmithOnStocks website was operated and maintained by BlueLine International until sometime in the summer of 2012. This is roughly correct. At that time, Blue Line went suddenly and unexpectedly bankrupt. My website was a mess and was being hacked on a regular basis. I first turned to a local consulting firm to keep the site operating; this was in the summer of 2012. However, they concluded and I concurred that the whole website had to be reconstructed. It was approximately in the third quarter of 2012 that I began to speak with MDM about rebuilding my website.

They helped with the redesign of the website that turned out to be a gigantic task. The website was completely messed up, and I should have just started over and built a new website. Because of the considerable time involved in this reconstruction, I spent a lot of time with MDM and got to know them. MDM is a social media, investor relations and website construction firm. I paid MDM to design my website and establish social media connections. There was no money paid directly or indirectly to induce me to cover their clients. If you look at my stock picking record on the companies I chose to write about who were MDM clients it is quite impressive. I might add that MDM now has no involvement with the SmithOnStocks website. It is maintained and operated by another firm that specializes in website maintenance.

I spent a lot of time with the MDM people and came to believe that they have a valuable product and I came to have trust in the people I was dealing with. They also had extensive contacts with emerging biotechnology companies on which I am focused. MDM introduced me to some of their clients with the hope that I would write on them. There is nothing sinister in this. I am constantly introduced to new companies by investor relations firms in the hope that I will find the company interesting. This is what investor relations firms do. They routinely try to get Wall Street analysts and prominent bloggers to look at their companies and hopefully write on them

Pearson is correct that I have written on six MDM clients. I will go into this in more detail in a moment, but I would emphasize that I have written in total on 44 companies on my website. My focus is on emerging biotechnology companies -- which are also possible clients for MDM -- so we cross paths frequently.

Pearson focuses very hard on Northwest Biotherapeutics, which is a client of MDM and implies that the only reason that I wrote on the Company was because it was a client of MDM. This led him to conclude that I was hired by MDM to promote NWBO. This is absolutely incorrect. I want to explain my involvement with NWBO in great detail.

I first recommended NWBO in a report published on my website on April 26, 2012. This was about six months before I hired MDM to reconstruct my website as Pearson acknowledges in his report. Following detailed research that I had done on Dendreon (NASDAQ:DNDN) and its then recently launched dendritic cell cancer vaccine Provenge; I thought that therapeutic dendritic cell cancer vaccines could be a paradigm changing technology for the treatment of cancer. This is explained in great detail in my initiation article of April 26, 2012. The link is

This initial report details why I recommended NWBO. For anyone who has a shadow of a doubt about my research objectivity, please read that article. It goes into the investment thesis in great detail. I go to great lengths to explain that there is the potential for significant upside, but strongly make the point that there is a risk of losing all of one's investment in NWBO stock. Biotechnology investments are inherently risky, especially for paradigm changing technologies such as that of Northwest Biotherapeutics. At the same time, I initiated coverage of ImmunoCellular Therapeutics (NYSEMKT:IMUC) with a Buy as it is also developing dendritic cell cancer vaccines with a slightly different approach. It has never been a client of MDM. I went to a sell on IMUC in an article on Seeking Alpha published on December 16, 2013 before the ICT-107 trial results were published; this was because of concerns about the design of the trial. The link is

You can access all of my reports on Northwest Biotherapeutics on this link.

I invite everyone, especially Pearson, to read these reports. You will find them carefully researched and objective in laying out the risks and rewards of investing in Northwest Biotherapeutics. When you read these articles, I think that you will conclude that I have extensive knowledge of the products that NWBO is developing. I believe that many will conclude as I do that this technology has the potential to change the paradigm of cancer treatment. However, I consistently point out that as with all biotechnology drug development efforts that there is a significant chance of failure, and I consistently warn investors of the potential risk that they could lose all of their investment.

My initial report on NWBO was at a price of $3.52 (this is adjusted for a reverse stock split). The stock is up 90% to $6.71 as of the close on July 8 as I wrote this report. This is after a massive bear raid that has been ongoing throughout 2014.

MDM did introduce me to its clients. This was to be expected as we were both focusing on emerging biotechnology firms and through the website relationship I developed a great deal of respect for their work. The first company they introduced me to was Advanced Cell Technology (ACTC), their biggest and most important client. Because of the early stage of development of the company, I elected not to pick up coverage. They later introduced me to their second largest client Amarantus (OTCPK:AMBS), which I also elected not to cover.

Let me go over five companies that MDM introduced me to and which I decided to pick up coverage. In each case my interest was to find companies that could make money for investors. May I remind you that I run a subscriber-based website in which my only interest is to find good ideas for my subscribers? May I also remind you that investing in emerging biotechnology stocks is a high risk exercise and there is a large failure rate? Here is my experience with five biotechnology companies that MDM introduced me to and that I decided to write on.

Trius Pharmaceuticals was the first company. I wrote a report and recommended the stock at a price of $5.05 on May 30, 2012. It was acquired by Cubist in September 2013 for $13.48 plus some contingency value rights that may be worth $2.00. This success was very important in building my Seeking Alpha following.

Neuralstem (NYSEMKT:CUR) is a company that I first called on over 15 years ago and I have had a long relationship with the Company since then. I had not followed the company closely for some years and MDM set up a meeting. I was impressed at the progress of the company. Small studies have indicated that its neural stem cells slow or stabilize the degeneration of muscle function in ALS patient. Despite intensive effort by the pharmaceutical industry, a plethora of drug candidates has never been able to achieve this in clinical trials. I recommended the stock on November 5, 2012, at a price of $0.90. It closed on July 7th at $3.55 which is up 394% from my initial recommendation.

OncoSec Medical (NASDAQ:ONCS) is an immunotherapy company that injects a cytokine into tumor lesions. (Pearson might like this company with his interest in syringe immunotherapy). I took a hard look at the company and wrote a detailed report. The stock was at $0.32 when I wrote my report. I recommended that investors should not buy the stock due to competition from Bristol-Myers. I was wrong to not issue a buy as the stock has since doubled to $0.63. I remain concerned about this stock.

My recommendations on InSite Health (IHSV) and NovaBay (NYSEMKT:NBY) were less successful. I recommended InSite on the basis that there was the potential for success in a very important phase 3 trial in blepharitis, but the trial failed. I initiated coverage at a price of $0.30. In a report on my website issued on March 5, 2014 my latest rating on the stock was neutral and the stock was at $0.30. The link to the report is

However, InSite has just announced that it is filing an NDA on DexaSite for blepharitis, and I am thinking about getting involved again.

An initial recommendation was made on NovaBay at a price of $1.40. The recommendation was on the basis of three clinical trials going on with their lead drug auriclosene. One trial failed and another was successful. My last rating on NovaBay was neutral in the same March 5, 2014 report cited above with the stock at $1.30. This company has an extremely important trial event coming up as it will shortly announce the results of a randomized phase 2 trial of auriclosene in viral conjunctivitis. If successful, it would transform NBY in an extremely positive way. However, I have concerns about the trial design that keeps me on the sidelines. With success in this trial, I would likely get re-involved.

I think that the recommendations of IHSV and NBY while not successful were not unusual in biotechnology. About 50% of late stage trials fail. However, after the trial failures with IHSV and NBY, I went to neutral and investors could make up their own mind on whether they should stay with the stock. They had not incurred any great loss as of that time. This can be seen in the previously cited March 5, 2014 report published on my website.

Those five companies were introduced to me by MDM, However, MDM did not introduce me to Agenus (NASDAQ:AGEN), which is now an MDM client. AGEN is a company whose CEO, Garo Armen, I have known for many years and for whom I have great respect. My reason for picking up coverage was that Agenus is developing a cancer vaccine for glioblastoma multiforme. I had a keen interest in this area as this is the principal therapeutic target for the cancer vaccines of NWBO and IMUC.

At about the same time, I picked up coverage of Celldex (NASDAQ:CLDX) in large part because they also have a cancer vaccine that is targeted at glioblastoma multiforme. I felt that this would give me a unique insight into this highly promising but competitive therapeutic arena. I recommended AGEN at a price of $3.91 and the recent close was $3.60. I continue to have a buy. I introduced MDM to Agenus as AGEN told me that they were looking for a social medial firm to help them. They subsequently became a client of MDM. I received no compensation or inducement from MDM for the introduction.

Pearson Ignores The Other 38 Companies That I Have Written On

If you read the Pearson article, you would think that the companies I write about are the MDM clients that I just described. Having one recommendation in this one subset of companies quadruple in price, one triple and one double out of six companies is not a record I am ashamed of. I am ignoring OncoSec on which I issued a neutral opinion only to see it double. In this small sub-segment of my 44 company universe, this is a pretty fair record.

I would like to point out some of my other successes. Eight of the 44 companies I have written about and recommended have been acquired. This is a very strong validation of the quality of my stock picks. The increase in price from the time I recommended purchase to the time that they were acquired was as follows:

  • Santarus, up 1696%, acquired by Salix (SALX)
  • Adolor, up 208% acquired by Cubist (CBST)
  • Trius, up 171%, acquired by Cubist
  • Inhibitex, up 144%, acquired by Bristol-Myers (NYSE:BMY)
  • Anadys, up 109% acquired by Roche (RHBBY)
  • Cadence Pharmaceuticals, up 97%, acquired by Mallinckrodt (NYSE:MKC)
  • MAP Pharmaceuticals, up 95%, acquired by Allergan (NYSE:AGN)
  • Somaxon, up 28%, acquired by Pernix

I did a complete analysis of how all of my recommendations performed in a report published on my website on March 5, 2014. This is a laborious process that I undertake once a year. However, it gives a fair picture of the breadth of my coverage and how my recommendations had done at that point in time. The title of the article is "Current Recommended Stocks and an Analysis of Past Recommendations, March 5, 2014". The link to the article is

Disclosure: The author is long NWBO. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: My only source of revenues from my articles is from subscription revenues from my website. I do not receive any compensation from companies or investor relations firms to write articles. I do not receive any direct or indirect compensation from hedge funds, other investment managers or any entity to write articles. I consider direct compensation to be cash compensation that is directly or indirectly tied to my writing articles. I also do not receive compensation in the form of content. I believe that it is not uncommon for some writers to receive content from hedge funds, other investment managers or any entity that are critical components of the articles that they write. I consider this as non-cash compensation. I do not receive advertising revenues from my website so there is no incentive to be sensational in order to create page hits. I only get paid if my subscribers believe that my articles are of value to them and they then decide to subscribe to my services.