NWBO : Northwest Biotherapeutics Stock Analysis and Research Report
2017-11-11 - by Asif, Contributing Analyst
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The Company is focused on developing personalized immune therapies for cancer. Northwest Biotherapeutics has developed a platform technology, DCVax, which uses activated dendritic cells to mobilize a patient's own immune system to attack their cancer.
The Company’s lead product, DCVax®-L, is designed to treat solid tumor cancers in which the tumor can be surgically removed. This product in an ongoing Phase III trial for newly diagnosed Glioblastome multiforme (GBM). 331 patients have been enrolled in the trial, and enrollment is closed. The Company is continuing to collect data “events” in the Phase III trial, and the data set is gradually maturing. The Company is also working on preparations for Phase II trials of DCVax-L for other indications.
The Company’s second product, DCVax®-Direct, is designed to treat inoperable solid tumors. A 40-patient Phase I trial has been completed, and included treatment of a diverse range of cancers. The Company is working on preparations for Phase II trials of DCVax-Direct.
During the three months ended June 30, 2017 and 2016, net cash used in operations was $3.7 million and $14.2 million, respectively. During the six months ended June 30, 2017 and 2016, net cash used in operations was approximately $16.0 million and $31.8 million, respectively. The expenditures in 2017 have included substantial payments for expenses previously incurred in connection with the Phase III clinical trial of DCVax-L.
During the six months ended June 30, 2017, the full repurchase of $11 million of 2014 Notes (the Whitebox bonds), as well as $660,000 of interest payments and $450,000 of cash forbearance payments (in addition to stock forbearance payments) related to those 2014 Notes, was completed through a series of transactions.
During the six months ended June 30, 2017, the company completed equity and debt financings (including the exchange of the 2014 convertible notes) totaling $21.2 million.
During July and August, 2017, the Company raised additional gross funding of $4.64 million through financing transactions.
During the three months ended June 30, 2017 and 2016, the company made cash payments to Cognate BioServices of $0.3 million and $4.8 million, respectively. Also during the three months ended June 30, 2017, Cognate waived $3.75 million of the payables owed to Cognate by the Company as of December 31, 2016 and March 31, 2017. Following this waiver, the Company owed Cognate $21.4 million for unpaid invoices as of June 30, 2017.
The DCVax Technology
The company's platform technology, DCVax, is a personalized immune therapy which consists of a therapeutic vaccine that uses a patient's own dendritic cells, or DCs, the master cells of the immune system, as the therapeutic agent. The patient’s DCs are obtained through a blood draw, or leukapheresis. The DCs are then activated and loaded with biomarkers (“antigens”) from the patient’s own tumor. For DCVax-L, the antigen loading process takes place during the manufacturing of the product. For DCVax-Direct, the antigen loading process takes place in situ after the product is directly injected into the patient’s inoperable tumors. The loading of antigens into the DCs “educates” the DCs about what the immune system needs to target.
Clinical Trials and Early Access Programs
DCVax-L for Operable Solid Tumors: GBM Brain Cancer
The company's lead product candidate is DCVax-L for Glioblastoma multiforme (GBM): the most aggressive and lethal type of brain cancer. With standard of care treatment for GBM today, including surgery, radiation and chemotherapy, the median time to tumor recurrence is about 7 months, and the median survival is about 15 months. There is an urgent need for new and better treatments.
DCVax-L is currently in a 331-patient Phase III trial. Enrollment has closed. Patients in the trial are continuing to be treated, and “events” of tumor recurrence and patient deaths are accumulating and being tracked. The trial includes a crossover option, under which patients who were originally assigned to the placebo arm of the trial have an opportunity, when their tumor recurs, to cross over and start receiving DCVax-L. Patients who were originally assigned to the treatment arm may also continue receiving the DCVax-L treatment after their tumor recurs.
The trial was on partial clinical hold for screening of new patients for enrollment; however, the patients already in the trial continued to be treated in accordance with the trial protocol, without interruption. In December 2016, the Company announced that to date the regulators had not agreed to remove the partial hold, and the Company had determined that it would not enroll the last 17 of the planned 348 patients. Thereafter, in February 2017, the FDA lifted its hold. The Company had self-imposed a hold on screening in countries outside the US, this remains in place in agreement with the regulators, and the Company will not enroll the last 17 patients as announced in December 2016.
The Company plans to conduct Phase II trials of DCVax-L in combination with other agents, such as checkpoint inhibitors, as resources permit. Such combination trials may include DCVax-L and Pembrolizumab (Keytruda) for colorectal cancer, as the Company has previously reported. Certain preparatory work will be required and regulatory approvals will have to be obtained for these trials.
“Information Arm” Outside the Phase III Trial
In parallel with the Phase III trial of DCVax-L for GBM, the company accepted a total of 55 patients into an “Information Arm” outside of the trial, who failed to meet the eligibility requirements for the trial. Most of these patients were actual or potential “rapid progressors” (patients in whom the brain cancer is already appearing to re-grow by the time the patient finishes the 6 weeks of daily radiotherapy and daily chemotherapy following surgical removal of the tumor). These patients were generally treated with the same DCVax-L product as in the Phase III trial, on the same treatment schedule, at the same medical centers, in the same time period, and the data were collected and maintained by the same Contract Research Organization (CRO) as is managing the trial. Among these patients, about 20 of them apparently met the “progression” (tumor re-growth) criteria at two time points, both at the end of the 6 weeks of daily radiation and chemotherapy and 8 weeks later, and about 25 of the patients apparently met the “progression” criteria at one of the two time points. The company plan to continue following the patients, and report on further results.
DCVax-L Early Access Programs
In March 2014, the company received approval from the German regulatory authority of a “Hospital Exemption” for DCVax-L for glioma brain cancers under Section 4b of the German Drug Law outside of its Phase III trial. Since then, Northwest Biotherapeutics has undertaken program development and preparation activities, including an annual filing for a potential reimbursement score. The company undertook treatment of 9 patients under the Hospital Exemption. The company did not undertake new Hospital Exemption patients while the Phase III trial enrollment was on partial hold. The company do not plan to undertake new Hospital Exemption patients while the company complete the accumulation of data events, and analysis and reporting of the data, for the Phase III trial.
As previously reported, Northwest Biotherapeutics has also treated a substantial number of compassionate use patients, under an Expanded Access Protocol in the US. Northwest Biotherapeutics has also been exploring other early access program opportunities outside the US.
DCVax-Direct for Inoperable Solid Tumor Cancers
The company's DCVax-Direct product offers a potential new treatment option for inoperable tumors. This can potentially apply to a wide range of clinical situations: for example, situations in which patients' tumors are considered inoperable because the patient has multiple tumors, or their tumor cannot be completely removed, or the surgery would cause undue damage to the patient and impair their quality of life.
A large number of patients with a variety of cancer types are faced with this situation, because their tumors are already locally advanced or have begun to metastasize by the time symptoms develop and the patients seek diagnosis and treatment. For these patients, the outlook today is bleak and survival remains quite limited.
DCVax-Direct is administered by direct injection into a patient's tumors. It can potentially be injected into any number of tumors, enabling patients with locally advanced disease or with metastases to be treated. With image guidance, DCVax-Direct can also be injected into tumors in virtually any location in the body.
The company conducted a 40-patient Phase I trial of DCVax-Direct at MD Anderson Cancer Center and at Orlando Health, mainly during 2013-2015, and Northwest Biotherapeutics is still following patients from this trial. The patients enrolled in this trial had failed other treatments, and had multiple tumors and actively progressing disease. In spite of this heavy disease burden, the treatment regimen in this first clinical trial was very conservative: only one tumor was injected in each patient, and most of the patients received only 3 treatments over the course of 2 weeks, with some receiving a 4th treatment at week 8 and beyond.
Despite these challenging circumstances, clinical effects seen in various patients include examples of tumor necrosis (i.e., cell death) in the injected tumors, shrinkage or stabilization in some non-injected tumors, stabilization of disease and survival times beyond what was expected. Northwest Biotherapeutics is continuing to collect follow-up data, and anticipate continuing to report on it.
This Phase I trial was designed to be very informative: the company treated numerous diverse types of cancers (sarcoma, pancreatic, colorectal, lung, melanoma and others); the company tested three different dose levels and various methods of image-guided administration; the company collected both imaging and biopsy data, and correlated them with clinical effects in patients; the company evaluated both local effects in the injected tumors and systemic effects in the non-injected tumors; the company evaluated potential endpoints for future trials; and most importantly, the company evaluated safety.
In the Phase I stage of the DCVax-Direct Phase I/II trial, the safety profile was excellent (as has also been the case over the years with DCVax-L). Typically patients develop a fever after the injections, to a limited extent and for a limited duration, and they do not generally experience any significant toxicities.
Based upon the data and experience to date, Northwest Biotherapeutics is planning to proceed with at least two Phase II trials of DCVax-Direct in different cancers, if resources permit. In the Phase II trials, the company plan to inject multiple tumors, rather than just one tumor, and the company plan to administer more treatments than in the Phase I trial.
Target Markets for DCVax Products
Since its DCVax-L product is potentially applicable to all types of operable solid tumors, and its DCVax-Direct product is potentially applicable to all types of inoperable solid tumors, the company believe that the potential markets for DCVax products are particularly large. According to the American Cancer Society, 1 in 2 men, and 1 in 3 women in the U.S. will develop some form of cancer in their lifetime. There are nearly 1.5 million new cases of cancer per year in the U.S., and nearly 600,000 deaths from cancer. The statistics are similar in Europe and elsewhere..
Brain cancers fall into two broad categories: primary (meaning the cancer first originates in the brain) and metastatic (meaning the cancer first appears elsewhere in the body, but subsequently metastasizes or spreads to the brain). In the U.S. alone, on an annual basis, there are some 40,000 new cases of primary brain cancer (including about 12,000 cases of GBM, the most severe grade of primary brain cancer), and 160,000 new cases of metastatic brain cancer. The numbers are similar in Europe and elsewhere.
In addition, brain cancer is a serious medical problem in children 18 years and under. It is the second most frequent type of childhood cancers (after leukemias) and, following progress in reducing death rates from leukemias, it is now a leading cause of childhood cancer deaths.
Very little has changed in the last 30 years in the treatment and clinical outcomes for GBM. With typical standard of care treatment today - surgery, radiation and chemotherapy - patients still generally die within a median of about 15 months from diagnosis. There is an urgent need for new treatment options.
Manufacturing of DCVax
The company use a batch manufacturing technology for its DCVax products, and the company believe this manufacturing approach is a key part of the practicality of its product and its economic feasibility. Generally, Northwest Biotherapeutics is able to produce enough doses for the patient’s treatment regimen through just one manufacturing process. When a batch of DCVax product has been made, the company then cryopreserve it.
Both of these technologies, the personalized batch manufacturing for each patient and the cryopreservation, are essential elements of its manufacturing model and product economics. Together, they enable it to usually incur the high costs of manufacturing just one time for each patient, and then store the multi-year or multi-dose quantity of product, frozen, in single doses. This makes DCVax effectively an “off the shelf” product for the patient after the initial manufacturing, even though it is personalized, and the company anticipate that this will enable the pricing of DCVax to be in line with other new cancer drugs. The company also believe that both economies of scale and automation will further enhance the product economics. The manufacturing process today is also rapid: about 8 days for DCVax-L, and 7 days for DCVax-Direct, followed by quality control and release testing.
The company contract out the manufacturing of its DCVax products to Cognate BioServices. Although there are many contract manufacturers for small molecule drugs and for biologics, there are very few companies who specialize in manufacturing living cell products. Manufacturing of cellular products is fundamentally different than production of small molecules or biologics, and the regulatory requirements are very difficult to meet. Cognate BioServices has long specialized in the production of cellular products, and has a leading track record with such products.
The company's DCVax programs require a large amount of capacity in these specialized manufacturing facilities, and generally require that the large capacity be dedicated exclusively to its programs. Most medical products, including other types of cellular products, are made in batches on a pre-scheduled basis. In contrast, its products are fully personalized and can only be made in individual personalized batches, not large-scale batches of standardized products, and its products are made on demand, on an ongoing basis. So, the manufacturing suites generally must be dedicated entirely to NW Bio’s products.
Cognate BioServices’ manufacturing facility for clinical-grade cell products is located in Memphis, Tennessee. Cognate BioServices' facility is approximately 80,000 square feet and contains substantial buildout expansion space in addition to the portions currently built out and in use. The current manufacturing facilities are sufficient to produce DCVax for at least several thousand patients per year. The expansion space will allow it to procure significantly increasing capacity when needed for commercial readiness. Northwest Biotherapeutics is also developing a facility for manufacturing in the U.K. for the European market. It is necessary for it to have manufacturing operations in Europe to meet the logistical requirements for European patients relating to the collection, delivery and processing of the patient’s blood draw containing the immune cells (for which the time window is too limited to reach the US manufacturing facility).
Intellectual Property and Orphan Drug Designation
Northwest Biotherapeutics has an integrated strategy for protection of its technology through both patents and other mechanisms, such as Orphan Drug status. As of December 31, 2017, Northwest Biotherapeutics has over 160 issued patents and more than 70 pending patent applications worldwide, grouped into 12 patent families. Of these, 144 issued patents and 61pending patent applications relate to its DCVax products. In the United States and Europe, some of its patents and applications relate to the composition and use of products, while other patents and applications relate to other aspects such as manufacturing and quality control. For example, in the United States, Northwest Biotherapeutics has four issued and seven pending patent applications that relate to the composition and/or use of its DCVax products. The company also have other U.S patents and applications that cover, among other things, quality control for DCVax and an automated system which the company believe will help enable the scale-up of production for large numbers of patients on a cost-effective basis. Similarly, in Europe, Northwest Biotherapeutics has five patents issued by and five pending patent applications with the European Patent Office ("EPO") that cover its DCVax products, and other patents and applications that cover aspects such as manufacturing and quality control, and the automated system. In Japan, Northwest Biotherapeutics has six issued patents and three pending patent applications relating to its DCVax products, as well as manufacturing related patents. Patents have been granted and are pending in other foreign jurisdictions which may be potential future markets for its DCVax products.
During 2016, nine new patents were issued to it as part of its worldwide patent portfolio (including a European patent validated into 25 patents in various European countries, a second European patent validated into 20 patents in various European countries and 7 other foreign patents). The newly issued patents cover a variety of subject matter, such as the machine and system to manufacture DCVax-Direct in Europe and India, and certain other processes and methods for manufacturing and for enhancing the potency of dendritic cells.
The expiration dates of the issued U.S. patents involved in its current business range from 2022 to 2028. The expiration dates of the issued European patents involved in its current business range from 2022 to 2028. For some of the earlier dates, the company plan to seek extensions of the patent life, and believe Northwest Biotherapeutics has reasonable grounds for doing so.
In addition to its patent portfolio, Northwest Biotherapeutics has obtained Orphan Drug designation for its lead product, DCVax-L for glioma brain cancers. Such designation brings with it a variety of benefits, including potential market exclusivity for seven years in the U.S. and ten years in Europe if its product is the first of its type to reach the market.
This market exclusivity applies regardless of patents, (i.e., even if the company that developed it has no patent coverage on the product). In addition, the time period for such market exclusivity does not begin to run until product sales begin. In contrast, the time period of a patent begins when the patent is filed and runs down during the years while the product is going through development and clinical trials.
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