Tuesday, March 4, 2014

Tiny Northwest Biotherapeutics aims to dominate brain cancer- 03/05/2014



  1. Sources: Bloomberg, Summer Street Research, Seeking alpha, FDA, NYC's Memorial Sloan Kettering Cancer Center, bcc research

    NWBO is a development stage biotechnology company focused on developing immunotherapy products to treat cancers more effectively than current treatments.
    Revenue was 1.1 million in 2013, increased more than 15 times from 5 years ago.

    Platform technology called DCVax. The vaccines use activated dendritic cells to mobilize a patient's immune systemm to attack cancer.

    Product pipeline
    DCVax-L, a personalized vaccine for patients with GBM, a type of brain cancer. This product is in the mass clinical stage to determine a drug's safety, effectiveness and compatibility with other treatments ( phase 3 trial). Measure of effectiveness: DCVax-L lengthens patients' median overall survival to 36 months, compare with 15 month by Standard of Care Treatment (SOC). Patients' 3 year survival rate increased to 55%, compare with 16% from SOC. GBM has a occurrence rate of 2-3 per 100,000 people. NA and Europe is expected to have 38,000 cases per year. The median cost of cancer chemotherapy was around $10,000 in 2012. Conservatively speaking, Total address markets worth more than 380 million per year. DCVax-L caters to a unmet need and it has higher effectiveness and safety than SOCs. Hence, it will likely be approved by FDA.

    DCVax-Prostate is a vaccine that is developed to cure patients with prostate cancer. The number of prostate cancer is around 152 per 100,000 men each year. DCVax-prostate is also in the mass clinical phase 3 stage. There are only 2 current treatments for prostate cancer, Taxoterre and Provenge. Patients that were tested on DCVax-prostate have median survival of 39 month, compare with 19 and 26 month for those who were treated with Taxoterre and Provenge. Patients who received DCVax-prostate treatments have 64% 3 year overall survival rates compare with 11% and 33% for those who use Taxoterre and Provenge. Total addressable market is 29 billion, and it is expected to reach 50 billion in 2017. DCVax-prostate has shown better results when compared with its competitors, and it is current in the last stage. After FDA approval, it is likely to gain a large chunk of the prostate therapeutics market.

    DCVax-Direct is a vaccine for patients with inoperable tumors. It is in Phase 1/2 trials stage. The trial will test the side effects of DCVax-Direct and test its efficacy in the phase 2 stage. Its future depends on trial results, and the risk is high and hard to measure.

    In Nov, 2013, NWBO's stock offering was made at $4.8 per share, and resulted in gross proceeds of 23.5 million. Total cash balance is around 36 million. TTM OCF was -31.4 million indicates monthly burn rate of around 2.5 million, which means the company will need additional funding at the end of 2014.

    - NWBO products were developed to satisfy unmet needs, and they are addressing to a large untapped market. Its product pipelines have provided better results that their competitors in terms of efficacy and safety.

    - DCVax products may not be approved by FDA, or they could not enroll enough patients.
    - Manufacturing problems have happened to companies that produce dendritic cell vaccines.
    - Dilution costs, early investors' investments might get diluted if the company raises additional fundings.
    - Bankruptcy costs, biotech firms are valued on the potential of their drugs in the market, therefore, stock price is strongly related to trial results. The salvage value of these companies is much less than their market cap. Investors are likely to recover a fraction of their investments if that is the case.

  2. Sources:
    - 2012 10K
    - 2013 Q3 10Q
    - Seeking alpha
    - morningstar.com
    - Thomson One

    Business Overview:
    Northwest Biotherapeutics is a development stage biotechnology company focused on developing immunotherapy products to treat cancers. The company has a broad platform technology with DCVax dendritic cell-based vaccines.

    It generated all of its revenue from research grants and other in FY 2012 and in nine month ended Sep 30, 2013. It had a net loss of 67 million in FY 2012, and 48.9 million in nine month ended Sep 30, 2013.

    Main products include:
    - DCVax-L, one of the star candidates in Northwest's pipeline, is a personalized vaccine designed for patients that are suffering from GBM, a fast-growing brain tumor and also the most common tumor in adults. NWBO is currently conducting the last phase of clinical trials for DCVax-L in around 51 sites across the U.S. and around 30 sites in U.K. and Germany.
    - DCVax-Prostate, a vaccine that is developed to treat patients with late-stage, hormone-independent prostate cancer also in phase III
    - DCVax-Direct, a vaccine that is being developed for patients with inoperable tumors in its phase I/ II trial.

    - Clinics, hospitals, pharmacies and cancer centers

    Financial Overview:
    - FCF: -31.5m in Q3 2013, remained negative in the past 5 years
    • FCF as % of Rev: -30 in 2012; -1476 in 2011
    • FCF as % of OCF: around 100% in the past 5 years
    • Use of FCF:
    o No dividends payment, acquisition or shares repurchase
    o Debt repayment: 2 million in 2013
    o Use cash to reinvest in business, mainly to conduct research and development
    - R&D expenses: 3745% of revenue in 2012, % dropped because of a significant sales increase in 2012, the absolute dollar amount increased in the past five years.
    - Profitability: ROA: -1970, EBITDA and operating margin were both negative, although it has an improving trend
    - Financial position: After the equity offering in November 2012, equity became positive from a negative balance in 2012. NWBO is expected to have 27.6 m cash (including $5.5 million grant from the German government for partial funding of the DCVax-L phase III trial in Germany) and 4.3 m debt. Though still under pressure, we can see an improvement in its balance sheet
    compared to 37 thousand cash and 57 m debt in 2011.

    What can go wrong?
    - Revenue:
    • Potential failures in clinical trials, considering limited experience in conducting and managing clinical trials
    • Lack of effective marketing or sales force with technical expertise
    • Fierce competition in biotech industry and most competitors have more resources
    • The fact that Regulatory approval of product candidates may be withdrawn at any time
    • Only dependent on the success of DCVax platform technology. If the platform fails or not commercially viable, will go bankrupcy
    - Expenses:
    • Reimbursement for expensive cancer treatment become more challenge
    • Manufacturing and handling of the DCVax products is more costly than most other biologics, which may add extra expenses
    - FCF:
    • Ability to get additional financing for general corporate purposes and operations, including the clinical trials

    Overall speaking, as a start-up biotech company, although has positive potential candidate pipeline, NWBO is experiencing large risk of default. Long-term hold for risk-seeking investors.

  3. Stone Yan 8:51 PM Today•Comments off
    Northwest Biotherapeutics

    Data source: 10-K in 2012, Seekingalpha articles, MorningStar. com, Thomson Reuters database

    Business structure

    • Dendritic cell-based cancer vaccines, DCVax
    • Monoclonal antibodies for cancer therapeutics


    • The company is a development stage company, has yet to generate significant revenues
    • In 2012, 0.77 million USD (Research grants and other 772)

    Free cash flow

    • Negative FCF and CFO
    • -23 million in 2012; -2987% of Rev
    • -15 million in 2011
    • Borrow money to pay back debt and support R&D spending
    • R&D spending $28.9 million in 2012; $13.5 million in2011


    • Phase III Clinical 2 DCVax-L/ DCVax-Prostate
    • Phase II Clinical 2 DCVax-Direct
    • Phase I Clinical 4
    • Discovery 2
    • Discontinued 1

    Potential star products

    • DCVax-L. GBM. not more than 15 months to approximately 3 years
    • 38,000 cases per year EU and US; Billion-dollar sales market.
    • Competition. Much superior than ICT-107/ ImmunoCellular

    What could go wrong

    • Possibility that the DCVax platform fails to show significant benefits in clinical trials.
    • Possibility of future dilution. If the company fails to find partner / secondary offering.
    • Possibility of future competition. a superior product occur

  4. Source: Reuter article, seeking alpha, 10-q
    --NWBO is a development-stage company. The Company focuses on developing immunotherapy products to treat cancers more effectively than current treatments without toxicities and on a cost-effective basis, in both the United States and Europe.
    Drug development: 100%
    0.8 in 2012, 0 revenue growth from 2008 to 2011, 7,620% growth in 2012
    --Operating income:
    -43.8 in 2012, -26.8 in 2011, -15.4 in 2010
    --Net income:
    -67.3 in 2012, -32.8 in 2011, -27.4 in 2010
    --CFO: -22.8 in 2012, -14.7 in 2011, -6.4 in 2010
    --CFF: 30.1 in 2012, 14.6 in 2011, 6.5 in 2010

    The key to survive is DCVax-L, which is a personalized vaccine designed for patients that are suffering from GBM. The company is currently conducting the last phase (phase III) of clinical trials for DCVax-L.

    The trial is being conducted in around 51 sites across the U.S. and around 30 sites in U.K. and Germany.

    According to estimation from Seeking alpha, In Europe and North America, there are almost 2-3 cases of GBM per 100,000 people each year. This means that around 38,000 cases per year can be expected just from Europe and North America.

    Currently, the company has partnership with a German research institute and a teaching hospital in London.

    19 Nov, 2013, public offering of common stock @ $4.80 per unit, proceeds of $23.5 million.
    $5.5 million grant from Saxony Bank of Germany
    The total cash balance: $36 million. a cash burn rate of $2.5 million per month, the company can survive till the end of 2014.

    What could go wrong?
    Many major companies have worked on dendritic cell vaccines, and have either failed or voluntarily abandoned because they could not enroll enough patients or ran into manufacturing problems.