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Northwest Bio (NWBO) Converts $11.6 M Debt To Cognate Bioservices

Jul. 31, 2013 9:09 AM ET
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Long/Short Equity, Special Situations, Contrarian

Seeking Alpha Analyst Since 2009

Editor and Publisher ... Henry enters his thirteen (13) year at RegMed Investors which aggregates, curates and creates bottom-line content of regenerative medicine - stem, gene and cell therapy news providing a "vetted" selection of relevant and high-impact synthesis. He was VP - Strategic Planning and Communication at Curis (2001-2002), HQCM focusing on healthcare investments (NYSE:HQH/HQL) from (1985-2001)and founded LifeScience Economics, a healthcare research and analytics firm with offices in Boston, MA and Palo Alto, CA. Past experiences include Thermo Scientific, SWEC following 5 years at the FBI. A former military officer, Henry has been an adjunct professor at Boston University and Golden Gate University where he taught courses in venture capital, corporate finance and strategic development in the universities' graduate business schools.

Conversion Shares Also Subject To 18-Month Lock-Up Agreement

(NWBO agreed to convert the $11.6 M of accounts payable to Cognate into shares of NW Bio common stock at a price of $4.00 per share. These conversions cover accounts payable from Q4 2012 through July of 2013.

To assure that these shares will not be a factor in the market for an extended period of time, the NWBO and Cognate entered into a lock-up agreement to an 18-month lock-up of these conversion shares. On a going forward basis, NW Bio 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.

The Bottom Line: A good but, <inter-company> deal … for the balance sheet but, maybe not the dilutionary affect. Cognate has provided manufacturing and regulatory assistance to NW Bio in the US since 2004, in Israel since 2008 and in Europe since 2010. Interesting … Cognate shares common ownership with NW Bio (by Toucan Capital), and as such is an affiliate of NW Bio under the securities laws. NWBO reduces its cash burn while building its operations in Europe as well as the US; while pursuing 2 major clinical programs (both DCVax-L and DCVax-Direct) simultaneously.

NWBO closed at $3.59 and is DOWN in the pre-market -$0.13 to $3.46. It will probably bottom-out at $3.25. NWBO had a float of 16.33 m shares and an outstanding share count of 30.1 M. I won't rate it with this event until it settles into a new-normal trading activity.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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