Northwest Bio (NWBO) Stock: No BLA Date, And A Major Lawsuit
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I see I’m the only one covering Northwest Biotherapeutics (OTCQB:NWBO) on Seeking Alpha these days. The last 10 articles are all mine. The last time someone else covered NWBO was 30 months ago. NWBO followers are an enthusiastic lot. I cover NWBO because I value the connection with them. However, enthusiasm cuts both ways. Enthusiasm can make you very knowledgeable about something, but it can also produce tunnel vision. If there was no such tunnel vision, we would realize that Northwest Bio, being a public company, has a duty to keep its investors informed about the company in a timely, clear and dialogical manner, like other companies with earnings calls. Northwest Bio has never had an earnings call in living memory.
So it was just a chance to check out their press releases that allowed me to catch up on some of the latest developments at the company. My last coverage was in November, when they just published the long-awaited phase 3 data in the prestigious and peer-reviewed JAMA Oncology. The data was outstanding, and for a brief period that day the stock crossed $1 on volume of 11 million. However, it is now back to a stagnant streak.
Perhaps the most important reason for this stagnation is the fact that throughout the press release that discusses updates for 2022 and plans for 2023, the company does not provide a date for a BLA filing. All it says is that it will “submit an application as soon as possible after the prerequisites and preparations have been completed.” NWBO claims to have made progress on the application in 2022, including “working… on portions of the application package itself.” The company provides multiple prerequisites for submitting a BLA, including obtaining a manufacturing license for its Swanson facility, and regulatory approval of a Pediatric Investigation Plan (‘PIP’), which they receive on an accelerated basis has. Companies take approximately 6 months to prepare a BLA/NDA package; in rare cases, and purely anecdotally, I have seen up to 1 year of delay before submission. However, if NWBO has no definite plans to file in 2023, that would be well outside the range of NDA/BLA filing times I’ve seen. There is no reason for the market to appreciate such a delay from a company that has taken two decades to produce phase 3 data.
Another piece of news is that after having such strong data in hand, the company has filed a major lawsuit against entities it thinks have manipulated its stock through negative coverage over the years. Among the major market makers named in this securities suit are Canaccord Genuity LLC and Citadel Securities LLC. The specific charge is fraud, the placing of a large number of orders that are never intended to be executed, but which make it appear that the market is more interested in a stock than it really is. The small details of the lawsuit complaint I had access to were not the court document, but material on the plaintiff’s law firm’s website, and the only hard fact it offered was this – “Defendants engaged in spoofing on 395 of 1,171 – or almost 34% – of the trading days during the relevant period.” If the company can follow up on this charge by citing actual lists of such lures during the 5-year period they claim they occurred, it will be a very winnable lawsuit. These orders are typically placed in the limit order book or Interdealer Quotation System (“IDQS”), and records of who placed such orders, and when, will exist.
Interestingly, here is a response from one of the defendants:
“This frivolous lawsuit appears to be nothing more than an attempt by Northwest Biotherapeutics to deflect attention from its long history of governance and management failures, SEC charges for lapsed financial reporting, and lawsuits from its own shareholders,” A Citadel Securities spokesperson said. “We intend to pursue any and all legal action against Northwest Biotherapeutics for making these false and unsubstantiated allegations, which only undermine the integrity of our capital markets.”
This is interesting because really frivolous lawsuits usually don’t deserve a response from such big name companies. This is a lawsuit that will base itself on hard data that may be readily available. As the company’s lawyer says:
“We have the hard data,” said Laura Posner, a partner with Cohen Milstein Sellers & Toll who represents Northwest. “It is difficult to dispute real transactions and patterns.”
As the company says:
The company said it found thousands of scam episodes involving tens of millions of “lure orders” over a five-year period, and was able to identify the market participants using trading data.
Northwest Bio stock is not new to controversy. Among other things, the infamous case of the FBI agent who was almost invited to investigate the company. It was in 2015, when Neil Woodford, a well-known investor, took a large stake in the company. An outfit called Phase Five Research that shortlisted NWBO came out with a damning report on financial impropriety with the company’s dealings with a contract research organization, and Mr. Woodford “raised the idea of bringing in ex-FBI agent Elliott Leary as an independent director. to investigate the company’s financial dealings.” That effort ended in fiasco – for Mr. Woodford – and I mention this old reference only to show that Ms. Linda Powers runs a tight ship and is a survivor. So it’s no surprise that just after having such strong results in hand, she would go after some of her more famous rivals. The list of defendants includes Citadel Securities LLC, Canaccord Genuity LLC, G1 Execution Services, LLC (a subsidiary of Susquehanna International Group), GTS Securities LLC, Virtu Americas LLC (including Knight Securities), Instinet, LLC, and Score Priority Corp .
NWBO has a market cap of $750 million, but their problem is that they don’t have the cash to stay a going concern. They had $11.7 million in operating assets as of September 30, 2022, and their R&D and G&A costs were around $8 million each per quarter, so right now, after more than 4 months from the last data, they have no cash.
If the company can somehow manage to get some cash, and they can file a BLA right away, and, most importantly, if they can prove some of these allegations in court, I think NWBO will still have its day have.
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