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Please read this report very carefully. This is the first time
that any systemic drug has been approved under the new (two years
old) German hospital exemption early access program and there is
more that we don't know about this program than we know.
What Is Hospital Exemption Early Access?
The Paul Ehrlich Institute ((
)) which is the German equivalent of the FDA has just approved a
hospital exemption early access program (similar to compassionate
use) for DCVax-L to treat all glioma patients. This Hospital
Exemption approval was issued under section 4 (
) of the German Medicines Law in which PEI has the authority to
from the requirement that a product must complete clinical trials
establishing safety and efficacy and then gain regulatory approval
before the product can be made available to patients.
DCVax-L can now be provided (it cannot be marketed under this
exemption) by Northwest Biotherapeutics (
) for the treatment of any glioma brain cancers (both glioblastoma
multiforme and lower grade gliomas), both newly diagnosed and
recurrent. The patients may be from Germany or elsewhere. This
approval has a term of five years, and can be re-applied for and
re-issued at the end of that period.
This early access approval goes substantially beyond the scope
of the ongoing phase 3 trial which is studying DCVax-L only in
newly diagnosed glioblastoma multiforme (grade IV glioma) patients.
The exemption allows DCVax-L to be provided not only for this
indication, but also for lower grade (less malignant) gliomas. It
also extends beyond newly diagnosed gliomas (actually glioblastoma
multiform) that are the focus of the phase 3 to include recurrent
gliomas. The early access to DCVax allows patients to receive
DCVax-L for all cases of glioma. This is stunning.
DCVax-L is Also Eligible for Reimbursement
Not only has the product been approved for Hospital Exemption
early access, the German reimbursement authority in a separate
evaluation has made DCVax-L eligible for reimbursement. This
decision was made by the Institut Für Das Entgeltsystem Im
Krankenhaus (InEK) which each January provides a list of products
which are eligible for reimbursement.
The next step in the process is for NWBO to negotiate with
regional health plans for the amount of reimbursement; the
hospitals may or may not participate in the reimbursement
negotiation. In the meantime, patients may self-pay for
We can only guess at the level of reimbursement as there is no
precedent for a product like DCVax approved through this hospital
exemption early access program. The reimbursement negotiations have
not yet taken place and NWBO naturally will not provide any
guidance until negotiations are concluded with the individual
is that the price of the drug will be in line with that of
breakthrough cancer drugs or roughly $50,000 to $100,000 per year.
I want to re-emphasize that the Company absolutely refuses to make
any comment on my price estimate until reimbursement negotiations
are concluded. There is also a complication in pricing in that
DCVax-L treatment is given through a series of injections often
given over more than one year. There is a question as to whether it
will be priced for a course of treatment or per injection.
How The Paul Ehrlich Institute Reached its Decision; How
Big of a Deal Is It?
The approval is the culmination of nearly two years of
regulatory processes and scrutiny, starting with a Scientific
Advice process during 2012, and followed by an application for
Hospital Exemption in December, 2012. The evaluation of NWBO's
application by the German regulatory authorities included
comprehensive and detailed scrutiny of all aspects of the DCVax-L
technology, all DCVax-L clinical data to date, all manufacturing
processes, all product characteristics (including potency,
composition, sterility and other aspects), all frozen storage of
DCVax-L and frozen shelf life, and all distribution and handling of
the DCVax-L products.
The scrutiny of data appears to have included not only that for
the phase 1/2 glioblastoma trials of 20 newly diagnosed GBM
patients who received DCVax-L but also patients given the drug in
the phase 1/2 prostate cancer and phase 1/2 ovarian cancer trials
as well as patients treated with compassionate use.
The Section 4b exemption was implemented in the German drug laws
in July 2011. The approval for DCVax-L is the first such approval
granted by the German regulatory authorities in multiple key ways.
Only two prior approvals have been given in the more than 2-1/2
years since the law was put in place, and those were for two German
companies with tissue engineered products which had already been on
the market commercially under prior laws and were grandfathered for
regulatory purposes, and which did not have pharmacological (i.e.,
drug-like) effects in the patient's body.
Only the German regulator knows the exact number of applications
that have been filed seeking a hospital exemption, but I think that
several dozen applications for early access approval have been
filed. At least a dozen or so have probably been filed by companies
that had cell therapy products on the market commercially before
the new law went into effect, and were grandfathered for a period
(which expired at the end of 2012). Further applications probably
have been filed by companies with new products that have not yet
been on the market commercially.
DCVax-L is the first product of its kind to receive Hospital
Exemption early access approval from the German regulators, in the
following key ways:
• the first immunotherapy;
• the first product which exerts pharmacological (drug-like)
effects in the patient's body;
• the first product that has never previously been on the market
• the first product developed by a non-German company, not
previously under the German regulators' oversight; and
• the first "somatic" cell therapy product (a somatic cell is
any cell of the body other than a reproductive or embryonic
What is the Investment Importance of This?
This is a stunning coup for Northwest Biotherapeutics. While the
phase 3 trial will still need to be completed and be successful in
order for Northwest to obtain a full approval and marketing
authorization for DCVax-L, it is extremely encouraging that one of
the world's premier regulatory agencies believes that clinical data
created before the phase 3 trial is sufficiently convincing to make
DCVax-L available on an early access basis for all glioma patients.
This is an extremely positive validation of the product and also of
the manufacturing and infrastructure that is in place for
producing, handling and distributing the product.
Stock Market is Uncertain
The early market reaction to the news shows confusion and lack
of understanding of the importance of this news. This is the first
time that investors have had to evaluate a product made available
to patients in this way. Also, there is no counterpart to this
Hospital Exemption approval in the US system. It is a totally new
experience and its importance has not yet sunk in.
As we all know, NWBO has been the subject of ongoing bear raids
led by bloggers who have claimed that there is no credible evidence
that DCVax-L is effective. One particularly negative blogger stated
that the drug is no better than placebo. This action by PEI
shatters their investment conclusions. The bears have feverishly
been tweeting today that this is not important new information and
trying to create negative spin.
What Is The Commercial Opportunity?
Germany has a population of about 82 million which is nearly 25%
of the US population. The incidence of glioblastoma in the German
population is believed to be the same as in the US. Using the
common estimate that there are 12,000 newly diagnosed glioblastomas
per year in the US, this implies that there are about 3,000 in
Germany. At a price of $50,000 to $100,000 per year (again this
price is speculation on my part as reimbursement negotiations have
not yet started), this would represent an annual addressable market
of $150 to $300 million if DCVax-L could be directly promoted to
all physicians (which it can't under a Hospital Exemption). It is
extremely important to understand that the glioblastoma market
addressed through the hospital exemption will be less; I don't have
an estimate at this time.
There are additional patients with other forms of glioma and
recurrent glioma patients that could increase the addressable
hospital exemption market beyond the estimate for glioblastoma; I
don't have an estimate at this time. The Company is emphasizing
that the importance of this hospital exemption approval is the
validation it provides and the opportunity to practice now for
future commercialization; investors should not, repeat should not,
expect a rapid ramp in revenues.
Obviously, there is no historical precedent to gauge the ramp of
revenues as this is the first systemic drug approved under the
section 4 exemption. It will certainly be quite different from (and
much lower than) the sales trajectory of a drug receiving a normal
approval. There are perhaps two divergent and salient points to
consider: (1) a new drug to treat glioblastoma and other gliomas is
urgently needed and patients are desperate for any new therapy that
might help them and (2) there may be greater caution by hospitals
because the drug has not gained access to the market under the
normal approval process and DCVax-L cannot be directly promoted;
again no estimate at this time.
My uninformed judgment is that the sales ramp will be slow and
gradual in 2014. The reimbursement negotiations will slow the
uptake in the early phases until negotiated prices are in place. In
addition, NWBO cannot market DCVax at all under the Hospital
Exemption, and cannot promote the pluses and minuses of DCVax-L
(although of course patients and physicians can spread the word).
Also, because DCVax-L is an autologous product, there are
considerable logistics issues for the Company to handle. Remember
the problems that Provenge encountered. I think this will cause
NWBO to move slowly; they don't want any glitches in the
manufacturing and delivery of the product. They will want to move
slowly and methodically to make sure their logistics processes are
So what is my guess for 2014 German revenues? I would note that
each patient treated could lead to $50,000 to $100,000 of gross
revenues if my speculation on price is correct. I want to
re-emphasize that management absolutely refuses to comment on the
potential price. If my guess is correct, in order to reach
$1,000,000 of sales, 10 to 20 patients would have to be treated. My
guess is that there will be perhaps $1+ million of sales in 2014. I
have minimal confidence in this estimate.
There is an argument that uptake could be more rapid in 2015 as
the initial kinks with the introduction of the product under the
hospital exemption early access approval are worked out. Let's
imagine that you are a newly diagnosed glioblastoma patient
speaking with your doctor who can prescribe DCVax-L under the
hospital exemption early access program. You are told that your
life expectancy is about 14 to 18 months with standard of care.
There is one other option that can be offered to you and that is
DCVax-L. The only data available is from two small phase 1/2 trials
that showed that about half of patients in that trial lived four
years or more. The drug is administered through a series of
sub-cutaneous injections and the side effects are relatively benign
and in no way resemble those of chemotherapy. This is a pretty
I remain a buyer around the current price of $7.90. I think that
it is going to take some time for analysts and the investment
community to get up to speed on this for reasons that I have
detailed. As this happens, I think that the current valuation
There was considerable shorting of the stock last week and one
source I checked shows that there are 4.6 million shares short. I
can see a short squeeze developing as investors analyze and
understand the significance of this news.
I am long NWBO. I wrote this article myself, and it expresses my
own opinions. I am not receiving compensation for it. I have no
business relationship with any company whose stock is mentioned in
This report was previously disseminated through my website
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