TheStreetSweeper issues an alert about a desperate situation occurring at Northwest Biotherapeutics (NWBO). The biotech’s recently hyped effort – early Phase 1 data for its experimental cancer tumor injectable shows 27 of 39 patients remain alive after up to 18 months after injection - comes at a heavy, perhaps even fatal cost.
NWBO retained the services of Cognate BioServices to conduct clinical trials and associated work. Now, Cognate has hit up NWBO for $8.2 million and the biotech is coming up short. It still owed Cognate $5.8 million as of March 31.
This is just the latest in a series of stunning negatives, including:
*1. Cash has plummeted to just $3.2 million.
*2. Cash burn hit ~$17 million.
*3. Working capital deficit soared to $86 million.
*4. CEO Linda F. Powers’ company bio doesn’t mention it, but Ms. Powers was Enron’s senior vice president for global operations, though she wasn’t implicated in the scandal. She controls NWBO’s major funding sources Toucan Capital and Toucan Partners, holders of ~4% of outstanding shares.
*5. Expensive lawsuits have gone in NWBO’s favor and against it, such as a class-action securities lawsuit alleging the company issued misleading press releases. NWBO agreed to settle for $1 million. NWBO has also received demand letters from shareholders seeking access to books with the intention of investigating possible mismanagement and breaches of fiduciary duty. One demand has been settled, two more remain under discussion.
*6. Market value is $760 million. With just 12 full-time employees, the company last year spent $85.6 million in R&D and $16.9 million in general and administrative costs.
*8. Serious doubts exist about NWBO’s survival, according to its SEC filings:
“Because of recurring operating losses, net operating cash flow deficits, and an accumulated deficit there is substantial doubt about the Company’s ability to continue as a going concern.”
*9. NWBO’s 10-K filing warns: “We will need to raise substantial funds, on an ongoing basis…”
Indeed, it adds: “Any financing will involve issuance of equity and/or debt, and such issuances will be dilutive to existing shareholders.”
*10. Operating losses exceeded its abysmal revenue – a $194,000 research grant - by a factor of 117:
The recent NWBO stock chart:
It looks like NWBO may have to reel out another potentially dilutive stock offering or increase debt if it hopes to survive another quarter.
TheStreetSweeper expects NWBO stock will get hammered back to around the $5-$6 pre-rally level, especially considering that we believe an offering is imminent.
* Important Disclosure: The owners of TheStreetSweeper hold a short position in NWBO and stand to profit on any future declines in the stock price.
Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to [email protected] or [email protected].