Smith On Stocks
Purpose of this Report
I have undertaken a point by point examination of a negative
on Northwest Biotherapeutics (
) by Adam Feuerstein of TheStreet.com. I ordinarily don't respond
to comments that other bloggers make on companies. However, in this
case Mr. Feuerstein accused the company of purposely deceiving
investors on the results of its clinical trials and I could not
stand by and let his comments go unchallenged. I have taken
verbatim quotes from his blog, as I didn't want to be perceived as
twisting his words or meanings, and responded to them.
Explanatory Note: Some of Mr. Feuerstein's comments deal with
the interpretation of data shown in the following graph that is
part of NWBO's investor presentation.
1. Adam Feuerstein
: Powers claims the company's cancer immunotherapy DCVax [
DCVax-L] demonstrated a large and statistically significant
survival benefit in a couple of phase I brain tumor (glioblastoma
multiforme, or GBM) studies. The blue line represents survival of
the 20 GBM patients treated with DCVax; median overall survival is
36.4 months. These data were collected from single-arm studies,
meaning all the patients received DCVax. There was no placebo or
other control treatments to compare against the DCVax survival
: Mr. Feuerstein implies elsewhere in his blog that Northwest was
attempting to portray this as a randomized trial comparing DCVax-L
to a control group of patients and that this was deceitful. This
was clearly not the case, as can be seen from the explicit labeling
on the slide. In the first place, phase I/II trials are by
definition, single arm, non-randomized studies and the graph
clearly states that this data is from a phase I/II trial; this is
clinical trials 101. In addition, the slide specifically states
that the red line is "matched patients" treated at the same
hospital with the same standard of care. The term matched patients
also has a standard meaning. It means that these are patients who
were not in the clinical trial but who have similar characteristics
as the patients who were in the trial (comparable concomitant
treatment, age, gender, physical condition, etc.); this is also
clinical trials 101.
The graph specifies that there were 20 patients in the DCVax-L
arm and 119 in the matched patient group who were treated at the
same hospital and with the same treatment. There would be no reason
to note this if this was a randomized trial and all of the patients
were within the same trial. Moreover, no phase II or phase III
randomized trial would have 20 patients in the drug arm and 119 in
the control arm; again clinical trials 101. This makes it
immediately apparent that the two lines are not data from a single
I see no intent to deceive and no basis for confusion about this
data. I think that all clinicians, regulators and experienced
biotechnology investors would view this for what it plainly says it
is: namely, a comparison of the DCVax-L phase I /II results to
results that were seen at same hospital with patients treated with
standard of care that were not in the DCVax-L phase I/II trial.
They would immediately recognize what the company is doing and none
would think that the two graphs represent data from the same
2. Adam Feuerstein:
The red dotted line in the chart above represents overall survival
data from 119 "matched patients." Northwest Bio claims these
"matched patients" had a median overall survival of 17.0 months,
implying a 19.4-month survival benefit favoring DCVax.
: The 20 patients who received DCVax-L plus standard of care had a
median overall survival of 36.4 months while the data for the 119
matched patients show a median overall survival of 17.0 months.
Based on these data sets, there is indeed a 19.4 month difference
in median overall survival favoring DCVax-L.
Note that the survival benefit favoring DCVax-L may be even
greater than 19.4 months (it could actually be represented as 22.2
months) if the DCVax-L data are compared to the "official" figure
on median survival that was achieved in the pivotal clinical trial
which formed the basis for regulatory approval of what is now the
standard of care for GBM.
The de facto "official" figures come from the survival results
in the 573-patient phase III randomized, controlled trial which was
the basis for regulatory approval of what is standard of care
today. This Stupp protocol consists of surgery, followed by 6 weeks
of radiation plus daily concomitant chemotherapy with temozolamide,
followed by monthly cycles of temozolamide. The phase III pivotal
trial which formed the basis for approval of temozolamide and
established this regimen as the standard of care was led by Dr.
Stupp, and was published in the New England Journal of Medicine in
N Engl J Med 352: 987-96, 2005.
The result of this pivotal trial was that patients who were treated
with the Stupp protocol had median survival of 14.6 months. This
represented improvement of 10 weeks beyond the median survival with
what was standard of care at the time in 2005.
The "official" figure then is for median survival of only 14.6
months. By comparing its phase I/II trial results (36.4 months
median progression free survival) with the matched control patients
represented in the red line in the chart (17.0 months of median
survival), the Company used a materially tougher comparison for
DCVax-L than the "official" estimate of 14.6 months (The 2.5 month
difference between a median of 14.6 months and a median of 17
months is equivalent to the whole survival benefit seen with
temozolamide in the Stupp trial). So, using the 17.0 month
matched-patients median as the comparison for DCVax, instead of the
de facto "official" median of 14.months, amounts to treating the
survival extension from temozolamide as double what it was in the
3. Adam Feuerstein
: Northwest Bio actually runs a statistical analysis and finds the
DCVax survival benefit is highly statistically significant with a p
value of 0.0003. Northwest Bio has the chutzpah to claim the
benefit conjured up in this ginned-up survival analysis is
: The Company determined a "p value" for the comparison between the
two sets of patients: those treated in its phase I/II trials and
the 119 matched patients. The slide explicitly stated that the p
value presented was the p value "of this comparison."
The purpose was to give an indication of the significance of the
differences in clinical outcomes (length of survival) of patients
who received DCVax-L compared with matched patients who received
existing standard of care and did not receive DCVax-L. Although p
value is usually associated with results of a randomized controlled
trial, there is nothing about the p value that necessarily limits
it to being used only in this way. It is simply a statistical tool
to enable comparisons. As long as the comparisons are clearly
described, as they certainly are in NWBO's slide, there is nothing
deceitful about using this statistical tool to give an indication
of the magnitude of differences in therapeutic benefit between
patients given DCVax-L plus standard of care as compared to
patients given just standard of care. In fact, it can be
illuminating as it is in this case, as the p value is a strong
The accepted view about the p value is that p=0.05 is the point
at which the difference in the data sets is significant. This is
also the level of p value that regulators generally set for a
product approval. It means that there is one chance in twenty (a 5%
chance) that the outcome occurred by chance. In the case of a p
value of 0.0003 it means that there are 3 chances in 10,000 that
the outcome occurred by chance.
4. Adam Feuerstein
: This DCVax overall survival analysis is sloppy, wrong and wildly
misleading. The 119 "matched patients" were not enrolled in the
DCVax studies. Northwest Bio doesn't tell us how they were chosen
for this faux control group. What was the baseline health of these
patients? We don't know. How was their GBM treated? We don't know.
When were they treated? We don't know. Were other GBM patients
excluded from inclusion in this faux control group? If so, why? We
: The term "matched patients" has a fairly standard meaning. It
means matching the characteristics of the 119 patients to those of
the 20 patients in the DCVax-L trial based on such key elements as:
comparable concomitant therapy, age, gender and physical condition
(Karnofsky score). In addition, the Company specified right on the
slide two critical factors: (1) the matched patients received
treatment at the same hospital and (2) received the same standard
of care treatment as the patients in the DCVax-L phase I/II trial.
The Company has also stated in its presentations that the matching
factors included all available prognostic factors.
This is not of the same precision as a randomized trial, but it
is a reasonable way to present a comparison that provides context
for data from phase I/II trials. For example, ImmunoCellular (
) also displays its single-arm Phase I trial data in comparison to
patients who received only standard of care.
5. Adam Feuerstein
: Linda Powers remains CEO and dominant shareholder through two
intertwined entities she controls -- Toucan Capital and Cognate
BioServices. (The latter is Northwest Bio's manufacturing partner,
which puts more money in her pocket.)
: There seems to be a clear implication that insider dealings have
benefitted Ms. Powers at the expense of shareholders. I have gone
over her financial dealings with the company in considerable detail
in my July 19, 2012 report and also in my January 14, 2013 report.
The bottom line is quite the opposite of this implication of
benefit to Ms. Powers. Without the capital Toucan invested and
without Cognate having continued to manufacture for NWBO for
several years without being paid, which no unrelated party would
have done, NWBO would no longer exist today. NWBO was not able to
finance through the capital markets until very recently because of
the weak financial position of the company and the skepticism of
the investment community about immunotherapy.
Ms. Powers, certain non-traditional investors and Cognate were
the only sources of capital available. I might add that all of the
investments of Ms. Powers and her affiliated funds were made at or
above the prices of other investors, and nearly all were at higher
than today's price. In regard to Cognate BioServices, this is a
company owned by Ms. Powers and her funds. It continued to
manufacture product for NWBO's clinical trials even though NWBO was
unable to pay them; as a result, NWBO accrued significant
liabilities to Cognate. The bottom line is that without the
investments of Ms. Powers and the support of Cognate, NWBO would
almost certainly have failed. She now owns or controls about 40% of
the outstanding stock. If you are looking for CEOs with skin in the
game, she has to be at the top of the list.
6. Adam Feuerstein
: Smart investors shun Northwest Bio because Powers spends a
majority of her time promoting the stock instead of directing
credible drug development.
: I am clearly not a smart investor by Mr. Feuerstein's standards
whatever they may be. However, I think that when readers compare my
responses to Mr. Feuerstein's arguments, they will conclude that I
have done considerable due diligence.
I think that this allegation is absolutely wrong. In fact, Ms.
Powers has focused so much on substantive operations, and done so
little promotion up till now, that in my past reports I have
compared her to an empty chair in the public debate among
competitors in this space. NWBO is a small company with limited
human resources. Ms. Powers has been stretched like a rubber band
as she has worked on establishing critical collaborations with
Fraunhofer in Germany and King's College in the UK to establish
manufacturing in Europe and move the phase III clinical trial
forward in Europe and the US. She has also spent an enormous amount
of time on the recently completed restructuring of the balance
sheet, fundraising and up listing from the pink sheets to
In contrast to Mr. Feuerstein's allegation that she has spent
all her time promoting the stock, Ms. Powers has actually been
quite inactive on public promotion. Her presentation at the BIO CEO
conference last week was the first presentation at a significant
investor conference in a couple of years. My experience is that
many CEOs of emerging biotechnology present three to six times per
year. Far from promoting the stock, I think that her pre-occupation
with operational programs has meant that investors have not had the
opportunity to meet her and understand her strategy. She plans to
become more visible and as she does, I think that many investors,
as is the case with me, will be impressed.
7. Adam Feuerstein
: Northwest Bio simply wants you to suspend critical thinking and
believe the 20 handpicked GBM patients selected for treatment with
DCVax by an investigator at a single hospital lived more than twice
as long as 119 other hand-selected patients who weren't enrolled in
the same study.
: Mr. Feuerstein seems to imply that the patients in NWBO's Phase
I/II trial were "handpicked" in the sense of biased selection and
that the patients did not live more than twice as long as the
matched patients. Mr. Feuerstein cites no basis of any kind for
either of these serious accusations. Mr. Feuerstein overlooks the
fact that these data have been reviewed and accepted by both the
FDA and the UK's MHRA (the UK equivalent of FDA), as well as
multiple major partners of NWBO, the German government, and
investigators and IRBs at 41 clinical trial sites.
Mr. Feuerstein also overlooks the fact that, regardless of
whether NWBO's phase I/II trial patients lived more than twice as
long as a group of matched patients, they lived even more than
twice as long compared with the "official" survival data from the
573-patient Stupp trial, as explained above.
There is no substitute for a randomized trial, but this doesn't
mean that there is not a lot of valuable information that can be
garnered from the phase I/II data presented by Northwest.
8. Adam Feuerstein
: Northwest Bio has even shape-shifted the ongoing phase III study
of DCVax in GBM patients to make it look more robust than reality.
The study is designed to enroll 300 GBM patients who have already
undergone surgery, radiation and Temodar therapy. They're then
randomized to receive DCVax or a placebo, with progression-free
survival as the primary endpoint. What the company wishes investors
would forget is that this DCVax GBM study began life as a smaller
phase II study in 2006-2007, which was never conducted or
completed. Instead, the study underwent numerous changes and was
stopped and re-started. Last May, Northwest Bio decided to upgrade
the study and call it a phase III clinical trial.
: In the US and Europe, in order for a trial to be called a phase
III trial, a company must go through a rigorous discussion with and
review by regulators in which there is interaction on trial design,
the statistical analysis plan and other aspects of the trial. The
regulators must be satisfied that there is a sufficient basis for
the trial and that all aspects of the trial are satisfactory before
the regulators will allow a trial to proceed as a Phase III
Regulators must also be satisfied that the manufacturing is at a
level of rigor that it can be relied on to reliably reproduce the
product in the clinical trials and also if it is successful in the
trial and commercialized. This is particularly challenging with a
living cell product.
Northwest has passed muster on all these fronts and has obtained
regulatory approval of its current trial as a Phase III trial from
regulators in two different countries: the US and the UK. Contrary
to Mr. Feuerstein's assertion, a company cannot just choose to
"call" its trial whatever it wants. In order to be in a Phase III
trial, a company must obtain regulatory approval.
9. Adam Feuerstein
: The Company can call the study whatever it wants, but the fact
remains the only prior data on DCVax in GBM comes from 20 patients,
all enrolled at a single center. There is no survival benefit, no
credible data to believe DCVax is having any benefit for
: The Company is calling the trial now in progress a phase III
trial because it has been approved as such by the FDA and the UK's
Mr. Feuerstein cites no basis of any kind for his claim that
"there is no survival benefit" from DCVax-L and "no credible data
to believe that DCVax is having any benefit." Mr. Feuerstein's
unsupported claim stands in stark contrast to actions by regulators
in both the US and UK, the Fraunhofer Institute, Kings College,
Sarah Cannon Research Institute, the German government and the
investigators and IRBs at 41 medical centers across the US serving
as sites in NWBO's Phase III trial, and multiple other parties.
Their approval or involvement with NWBO's programs can only be
interpreted as their viewing the data on the survival benefit as
NWBO has clearly stated in all of its regulatory filings and in
its investor slide presentations that its prior data comes from a
phase I/II trial of 20 patients from a single center. It has never
called this anything else. The data from the phase I/II trial
provides, I believe, credible evidence of a delay in disease
progression and survival benefit.
10. Adam Feuerstein
: The last cancer-focused company to jump from a tiny phase I study
right into a large phase III was Celsion (CLSN_) and that didn't
turn out well. Wall Street largely shunned Celsion until the very
end because no one believed its data, which sounds a lot like
: Although it is relatively rare for a company to go directly from
small Phase I/II trials to a large Phase III trial as NWBO has
done, there are several factors which seem to make it a reasonable
business judgment by NWBO. First, it is likewise relatively rare
for an experimental cancer treatment to show such a large
difference in clinical outcome (such a large extension of survival)
as DCVax-L showed in NWBO's Phase I/II trials. In metastatic
disease, improvement of 4.0 months in median overall survival is
considered quite good. DCVax-L showed a 17.0 month or more
Second, the fact that the time to tumor recurrence and overall
survival time were both extended in patients treated with DCVax-L
provides some added comfort about the clinical effects seen. Third,
other parties have done some work that provides some corroboration.
Dr. Keith Black, who is now associated with IMUC, conducted a
clinical trial at Cedars Sinai with essentially a copy of DCVax-L,
and obtained largely the same clinical results as shown in NWBO's
phase I /II trials. Those results were published.
In addition to these factors, NWBO has carefully designed its
Phase III trial to take special account of the fact that the
Company has gone directly from a small Phase I/II trial directly
into the large Phase III trial. This was explained in detail in the
same slide deck from which Mr. Feuerstein selected the slide above,
and Ms. Powers specifically discussed these special points about
the Phase III trial design in her presentation of the slides at the
Bio CEO conference in early February.
The key to success in a phase III trial is powering the trial
appropriately. The most critical assumption is the difference in
the expected outcome in the treated group from the control group.
This assumption forms the basis for the size and powering of the
trial. NWBO has been conservative on this critical point in their
phase III trial design: they have designed the trial so that to
satisfy the primary endpoint, the results only have to be 1/3 as
good as the results in NWBO's Phase I/II trials i.e., a 6-month
extension of progression free survival, rather than an 17-month or
more extension as was seen in the Phase I/II trials as compared
with standard of care.
NWBO has also built at least two further important protections
into their Phase III trial design. First, NWBO has powered the
trial for the secondary endpoint of overall survival in addition to
the primary endpoint of progression free survival. Second, NWBO has
built in an interim analysis for size of the trial in addition to
two interim analyses for efficacy. This allows NWBO to increase the
trial size if needed in order to have sufficient powering.
In many drug development programs, phase I and phase IIa trials
may not provide a clear insight into the differences in treatment
effect between drug and control. Companies usually are looking for
signals of activity in phase I and focus most heavily on safety and
dosing. They then proceed to phase II trials to try to determine in
a much larger population the difference in effect between drug and
control in order to design and power the phase IIb or phase III
trials. While this is the usual approach, there is no regulatory or
clinical requirement to do a phase II. If a sponsor has reasonable
confidence in their estimate of the difference in therapeutic
effect and is confident on safety, there is nothing wrong with
proceeding directly from small Phase I/II trials to a large phase
III. I do acknowledge that this is not the usual course of action,
but in NWBO's situation it may be a reasonable business judgment,
especially with the conservative assumptions and additional
protections they have built into their Phase III trial design.
: I'm skeptical about ImmunoCellular but with an open mind waiting
for data at year's end from the first adequately designed study of
ICT-107. Northwest Biotherapeutics is much more difficult to take
seriously given the company's checkered past and present.
: Of all the comments that Mr. Feuerstein has made, I find this to
be the most puzzling as to why he is open-minded about IMUC and
close-minded about NWBO. Let me go through some important points to
1. Both ImmunoCellular and Northwest Biotherapeutics are basing
their studies on small phase I/II data sets. There were 16 patients
in the ICT-107 study and 20 in the trials of DCVax-L. The results
(as reported by the companies in their investor presentations) were
remarkably similar as progression free survival was 16.9 months for
ICT-107 and 26.4 months for DCVax-L. Median overall survival was
38.4 months for ICT-107 and 36.4 months for DCVax-L.
2. Both IMUC and NWBO are comparing the results of their phase I
or I/II trials to the clinical results in matched patients treated
with standard of care. The companies use different methods of
portraying the comparison but both are doing so. Mr. Feuerstein was
fiercely critical of the chart in which NWBO compared its Phase
I/II data with matched controls.
3. NWBO is now in a Phase III trial while IMUC is in a Phase II
trial. In his presentation at the BIO CEO conference in early
February, the CEO of ImmunoCellular described the ongoing 124
patient ICT-107 trial as a phase II trial and stated that he
believed the company would have to do a confirmatory phase III
trial before seeking regulatory approval. Mr. Feuerstein did not
indicate whether he believes this is a phase II or phase III trial,
but other bloggers have mistakenly stated that it is a phase III
4. NWBO's current 312 patient phase III trial is nearly three
times the size of IMUC's current 124 patient phase II trial. There
is a widespread misconception about the patient size of the IMUC's
current trial. Because ICT-107 only works in a certain immune type
(HLA A1 and A2 positive) it is not applicable to the entire
glioblastoma population. In the phase I/II trial of ICT-107, the
company screened 278 patients, but only 124 patients were
randomized and enrolled in the trial. Over 50% of patients screened
were excluded, primarily because of the immune typing issue. Some
investors have not understood that this is a 124 patient trial, not
5. NWBO's phase III trial has a better chance of reaching
statistical significance because it is so much larger. The size of
IMUC's trial (number of patients) is relatively small in relation
to the anticipated difference in treatment outcome (6 months of
additional survival), and may be underpowered.
6. NWBO's trial has been approved as a Phase III trial by two
different regulators: the US FDA and UK MHRA. IMUC's trial has only
been approved as a phase II trial by one regulator (the FDA).
7. NWBO has extensive collaborations with large marquee partners
in both the US and Europe, which provides significant third party
validation. There is no such validation for IMUC's technology.
8. NWBO has completed phase I/II trials in two other cancers
besides brain cancer (prostate and ovarian) cancers, and both of
these trials had encouraging or striking results. IMUC has not
conducted any other clinical trials with any other product besides
the one 16-patient Phase I trial in brain cancer with ICT 107.
9. NWBO has received more regulatory approvals for more and
larger trials than IMUC. NWBO received an extraordinary scope of
approval from FDA for its first-in-man, combined phase I and II
trial of its DCVax-Direct product for direct injection of dendritic
cell precursors into any type of solid tumor that is inoperable.
This trial starts with 36 patients, and includes dose escalation
and confirmation, and efficacy endpoints, not just safety. NWBO
also received FDA approval some time ago for a 612-patient
randomized, controlled phase III trial in prostate cancer. IMUC has
received only small phase I trial approvals beyond its current
phase II trial with ICT 107. IMUC received FDA approval of a small
phase I trial in recurrent GBM brain cancer (the same type of brain
cancer as is already addressed in its current trial), and a
20-patient phase I trial in ovarian cancer.
10. NWBO's product lines have broader applicability to diverse
cancers than IMUC's products. NWBO's DCVax-L is applicable to all
solid tumor cancers that can be surgically resected. NWBO's
DCVax-Direct is applicable to all solid tumor cancers that are
inoperable - and FDA has approved it that broadly for trials.
IMUC's products hopefully will eventually be shown to apply to
several cancers, but as of now, IMUC's ICT-107 is only applicable
to brain cancer and ICT-140 is only applicable to ovarian cancer.
IMUC's ICT-121 targeting a single biomarker believed to be on
cancer stem cells may eventually be applicable to many cancers but
that is unclear as of now.
11. NWBO is positioned to be able to apply for product approval
in both the US and Europe, while IMUC is only positioned in the US.
NWBO is not only conducting its phase III trial in Europe, it has
also established a manufacturing capability in Germany and the UK,
a process that took more than two years, while IMUC is
manufacturing only in the US.
In view of the above factors, I find it difficult to understand
why Mr. Feuerstein is open-minded about IMUC as a company and
close-minded about NWBO. I would also expect that Mr. Feuerstein
would be more positive on DCVax-L than ICT-107, but for unexplained
reasons he is more positive on ICT-107. I draw the opposite
conclusion and find DCVax-L to be the product more likely to be
successful in the current clinical trials.
While I favor the chances for success of DCVax-L over ICT-107
based on everything I know, investors should not think that I am
slamming ICT-107. The most important thing to remember is that both
ICT-107 and DCVax-L have shown unusual, powerful median overall
survival and median progression free survival benefits in
glioblastoma, an extremely aggressive cancer in which the average
patient dies in about 14 months. There is a large unmet medical
need for new and better treatments for brain cancer, and as I have
previously written, both drugs have the potential to be successful
in their clinical trials and subsequent commercialization. If their
clinical trials are successful, both drugs have blockbuster
potential. It is not a zero sums game between the two products.
I have no issue with Mr. Feuerstein taking the position that the
phase III trial of DCVax-L is a risky undertaking and could fail. I
agree. Glioblastoma is a tough disease and dendritic cell cancer
vaccine technology is in its infancy and there is much to learn
about how to use it. However, clinical trial risk is not unique to
DCVax-L as risk of failure is inherent in all clinical trials. I
have seen phase III trials conducted by big pharma and big bio fail
after years of clinical trials and the expenditures of hundreds of
millions and in some cases a billion dollars. The recent failure of
bapineuzumab for Alzheimer's' disease comes to mind.
The reason that I have gone to great lengths in this note to
critique Mr. Feuerstein's comments is that they were made with no
discernible effort at fairness and balance. I think that authors
who are advising investors have an obligation to present both the
negatives and positives of an investment case. It offends my sense
of fairness when an article like his only presents negative
statements in the worst possible light and without any apparent
basis. I felt obligated to give investors a balanced perspective on
the issues that Mr. Feuerstein raised.
I am not trying to convince investors that the phase III trial
of DCVax-L will be successful. My argument is that there is
reasonable chance for success and investors seem to be just
beginning to realize this. If the trial fails, the disappointment
is likely to cause the stock to fall precipitously. There is a
chance that investors could lose most of their investment. I am
willing to accept this risk because I perceive the upside in the
chance of success to be so great that the risk of losing all of my
money is acceptable in the risk/ reward evaluation.
If in the case of extreme success in which phase I results are
replicated in the phase III trial, based on comparisons with
comparable company situations, I could see a market capitalization
of as much $1 billion or more. In the event that the results are
much less robust but still positive, the market capitalization
might still reach $500 million. The current market capitalization
is about $90 million. The upside for the stock price in these two
scenarios could be on the order of $15 to $35. This must be weighed
against the risk of losing $3.50 (all of your current investment)
if the trials are so disappointing that clinical development of
DCVax-L is discontinued and all pipeline projects are discontinued.
This is obviously the extreme worst case.
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
P&G: Limited Upside Potential With Attractive