Northwest Bio (NWBO) Stock: No BLA Date, And A Major Lawsuit

I see I am 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 appreciate the engagement with them. Enthusiasm, however, 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 dialogic manner, like other companies do with earnings calls. Northwest Bio has never had an earnings call in living memory.

Thus, it was only a chance to look at their press releases that allowed me to come upon some of the latest developments at the company. My last coverage was in November, when they had 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 on that day, the stock crossed $1 on an 11 million volume. It is, however, back to a stagnant range right now.

Perhaps the key reason for this stagnancy is the fact that throughout the press release which discusses updates for 2022 and plans for 2023, the company does not provide a date for a BLA application. All it says is it will “submit an application as soon as possible after the prerequisites and preparations are completed.” NWBO claims that in 2022 it made progress with the application, including “work… on portions of the application package itself.” The company provides multiple prerequisites to submitting a BLA, including obtaining a manufacturing license for its Swanson facility, and a regulatory approval of a Pediatric Investigation Plan (‘PIP’), which they received on an accelerated basis. Companies take around 6 months to prepare a BLA/NDA package; in rare cases, and purely anecdotally, I have seen up to 1 year of delay before filing. However, if NWBO has no definite plans to file in 2023, that will be well beyond the range of NDA/BLA filing times I have seen. There’s no reason for the market to appreciate such 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 filed a major lawsuit against entities that it thinks manipulated its stock through negative coverage over the years. Among the big name market makers who have been named in this securities lawsuit are Canaccord Genuity LLC and Citadel Securities LLC. The specific charge is of spoofing, placing 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 actually is. The small details of the lawsuit complaint I had access to weren’t the court document, but material on the plaintiff law firm’s website, and the only hard fact it presented was this – “Defendants engaged in spoofing on 395 of 1,171 – or nearly 34% – of the trading days during the Relevant Period.” If the company can follow through with this charge by citing actual lists of such baiting orders during the 5-year period they allege these to have taken place, this will be a very winnable lawsuit. These orders are typically placed in the Limit Order Book or Inter-Dealer Quotation System (“IDQS”), and records of who placed such orders, and when, will exist.

Interestingly, here’s a response from one of the defendants:

“This frivolous lawsuit appears to be nothing more than an attempt by Northwest Biotherapeutics to divert attention away from its long history of governance and management failures, SEC charges for financial reporting lapses, and lawsuits from its own shareholders,” a Citadel Securities spokesman said. “We intend to pursue any and all legal action against Northwest Biotherapeutics for making these false and baseless allegations, which only undermine the integrity of our capital markets.”

It is interesting because really frivolous lawsuits usually do not merit a response from such big name companies. This is a lawsuit which will base itself on hard data that can be easily available. As the company’s lawyer says:

“We have the hard data,” said Laura Posner, a partner with Cohen Milstein Sellers & Toll who is representing Northwest. “It’s hard to dispute actual transactions and patterns.”

As the company says:

The company said it found thousands of spoofing episodes involving tens of millions of “baiting orders” over a five-year span, and was able to identify the market participants using trading data.

Northwest Bio stock is not new to controversy. Among others is the infamous case of the FBI agent who was almost invited to investigate the company. That was in 2015, when Neil Woodford, a well-known investor, took a large stake in the company. An outfit called Phase Five Research that was shorting NWBO came out with a damning report about financial impropriety with the company’s dealings with a contract research organization, and Mr. Woodford “pitched the idea of bringing in ex-FBI agent Elliott Leary as an independent director to run a probe into the company’s financial dealings.” That effort ended in a fiasco – for Mr. Woodford – and I am citing this ancient reference only to show that Ms. Linda Powers runs a tight ship, and is a survivor. So it is no surprise that right after having such strong results in hand, she will go after some of her more well-known detractors. 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 $750mn market cap but their problem is that they don’t have cash to remain a going concern. They had $11.7mn in current assets as of September 30, 2022, and their R&D and G&A costs were about $8mn each, per quarter, so right now, after more than 4 months from that last data, they do not have any cash.

If the company can somehow manage to get some cash, and they are able to promptly file a BLA, and, most importantly, if they are able to prove in court some of these allegations, I think NWBO will still have its day.

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