Northwest Biotherapeutics nearing crisis point

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Northwest Biotherapeutics’ admission yesterday that its funding situation is nearing crisis point is not the first bit of bad news shareholders have had to contend with over the recent months, but is certainly the most ominous.

The company is working on therapeutic cancer vaccines, a high risk area which despite arousing much excitement, has yet to produce a success story. It is listed in both the UK and US, albeit on lightly-regulated exchanges, and has constantly struggled with limited resources, periodically raising funds in small amounts, often from existing shareholders. Considering its controversial history is littered with litigation, one case stemming from allegations of misleading investors which has prompted an SEC investigation, and the recent departure of its chief finance officer only ten months into the job, the end could be nigh for Northwest.

The company announced yesterday that shareholder and long-time financial backer Toucan Capital had loaned it $1m, which would last until the end of September. The venture capital fund owns 52% of the company, a stake built as a result of several financing rounds, and its managing director, Linda Powers, is now chairperson of Northwest as well.

Funding crisis

The company has been warning of a funding crisis for several months, earlier this year saying that an $8m loan was being negotiated, in two tranches, which would provide enough cash to last the year. In May, a loan of $4.2m from Mr Al Rajhi was announced, an investor who owns a stake of around 10% in the company.

If Mr Rajhi was the potential source of the $8m loan flagged earlier in the year, it appears he is now reluctant to hand over any more cash. The existing loan has a term of six months, meaning he could demand repayment in November. Mr Rajhi has the option to be repaid in stock, but considering the current shape of the company, it seems unlikely to be taken up.

As well as financial worries, the group is being sued by investment bank Soma over claims of unpaid bills, while a patent infringement case with Lonza was only recently settled. The worst period in Northwest's history probably came last year, when a poorly crafted press release caused the market to inaccurately believe the company’s therapeutic brain cancer vaccine had received a marketing license in Switzerland. The resulting surge and swift decline of the share price prompted shareholders to sue, claiming they had been mislead, and a class action suit is ongoing.

Research hope

The group’s research is focused on its therapeutic brain cancer vaccine, DCVax-Brain. Early results have been encouraging; in a phase I trial the median survival has reached 33.8 months compared with patients treated with the standard of care at 17.1 months. Eight of the 19 patients in the trial are still alive having survived for periods between 25 and 92 months.

A phase II trial in glioblastoma multiforme, designed and powered as a pivotal trial, has also commenced, while a phase I/II trial in recurrent ovarian cancer is ongoing, funded by a private philanthropic organisation. Several other trials, including one in prostate cancer, have approval to commence from the FDA, but now look unlikely to continue.

For Northwest, the growing list of cancer vaccine failures, such as Favrille’s SpecifId and Genitope’s MyVax, has probably not helped its case in the eyes of potential investors. (See EP Vantage: Favrille failure puts pressure on other cancer vaccines, May 28, 2008)

With Toucan essentially already owning the company, the stock will be very illiquid, and overall the group does not come accross as an attractive investment opportunity. The chances of Northwest making a name for itself in therapeutic cancer vaccines look very slim.

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