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I sort of gave my opinion on your questions below, but I have to make one point first. All your concerns matter over a longer term but not right now. Good data / bad data… that’s all that matters. To the degree your concerns have merit, the stock price reflects it. Frankly, other than opinions about Liau’s conference appearances, what new information do we have?
It feels like I’ve given my opinion on many of these issues before. One thing I don’t get is why do people keep talking about the same things when the available information hasn’t really changed. This isn’t just directed at you, LC, but at all of us, who spend too much time on message boards and social media. Read a good book, spend more time with one’s family, find the next investment gem.
Anyway, my (partial) opinions:
What about LP and LG's choices for public relations, do you care about that?
I like Dave Inness. I’m not quite sure what you’re getting at.
The fact there's no CFO or independent chair, does that matter to you?
CFOs matter only a little in clinical stage life science companies. On the finance side, two things matter most: what does your current bank statement read and will your key financing sources back you.
There was a big slip years ago, but I’m not sure how apparent it was. At this point it no longer matters, so I don’t want to bring it up.
Board governance is very important. I’m not going to critique it here. Everyone can judge on their own.
That there seems to be an underlying government theme with this one, bother you?
You mean like U.S government? Well, NW is located right outside of D.C.
That the three investigators surrounding the P5 / Woodford era all had high level government clearances, troubling?
Not bothered… but this whole issue was weird to me. I believe I had good insight and information on all the claims in the report. Some of the report had some merit and some had none. I continued to invest, so that should tell you something.
That a short while ago she PR'd two new hotshots coming onboard who have since disappeared, is a worry?
I know something about one of those hires. The actual facts behind the coming and going was pretty normal. Not going to get into details.
That generations of retail shareholders have been wiped out by reverse splits with very little to show for it, is that a concern?
Yes, this was tragic. Some of it was avoidable but not intentional. Much of it was due to the extreme swings in life science valuations combined with the company having few options for financing.
One of the wonderful aspects of life science investing is the degree of swings in valuation. At one point, the market can value a company at $100M when years remain before critical data is to be released and then 6 months before data release the market values the same company at $1B. The biggest risk one bears in between is financing risk. So, when a guy like me looks at that, and I know I can solve the financing risk problem…what a fat pitch.
That an appearance from the CEO herself is so rare as to be considered "a sighting", should we mind that?
It would be nicer to hear more from her.
Agree for that reason and another. Recently Liau has been saying she sees the future of GBM treatment to be combination approaches including DC vaccines. She wouldn’t be saying that if she thought there wasn’t an approval pathway for dcvax.
Anti PD-1 revenues were over $20 billion in 2020. Consider the strategic value if dcvax combined with checkpoints improves the efficacy of both.
I know they wanted to initiate another direct trial. The first question I ask when considering a direct company investment is "what are the use of proceeds?" So, we talked about it.
Even though the principal investigator believed DCVax Direct showed good promise (a factual statement), I was against another direct trial because NWBO wouldn't get much valuation credit for a phase 2, even if successful. Shareholders would keep getting hit with dilution and, even though I was involved in many of those dilutive transactions, I think the best investments require all long term shareholders do well.
Of course, NWBO management made their own decision and decided to focus on the Ph3 GBM trial.
Agree that the reason for not kicking off another DCVax Direct trial was scarce capital. I would characterize my view as authoritative.
I understand. We're good.
I think jondoeuk is smart and I find his posts interesting. However, I think I know things he doesn't know (and may not care to know).
All small companies have issues and if trial outcomes were obvious, we wouldn't to run them. I believe my expertise is taking information from many sources and figuring out if and how to make a successful investment.
No, you and I have no real disagreement on this point, so we can drop this line of discussion.
More simply put, I learn things from people with different experiences and viewpoints. If I can successfully defend a mental challenge, it improves my thinking.
I get your point but there are therapeutic correlations within similar mechanisms and I've considered it.
But, I've also:
- taken a close look at the data we have and performed statistical tests on it.
- compared the inclusion/exclusion criteria of the DCVax trial and the other GBM trials.
- wondered, if the apparent O/S improvement is due to inclusion/exclusion criteria, why are there differences in the relative survival improvement betweeen methylated and unmethylated?
- if the trial is a failure, why isn't NWBO raising equity?
- if the trial is a failure, why do Liau and other medical professionals involved in the trial seem so energized?
- if the trial is a failure, why is the NW administration so upbeat?
- etc.
I think most here know how I'm positioned on NW but I appreciate the comments of jondoeuk and other folks that are negative. Often, I prefer to hear the views of someone that disagrees with me. I try and fairly consider the counterpoints (and they always exist) and then ask myself what have I considered that they have not.
thx John
Good work, Sherlock
My background is a BS in engineering, then a Stanford MBA, then worked for 3 hedge funds, one was life science focused.
Then founded my own set of funds, which included the following strategies: fundamental long-short, quantitative long-short, and venture capital. I also structure a lot of investments into private and public companies. The anchor tenant for my fund is often mentioned when people are talking about top global hedge funds. HBO (or some network) made a TV series that, supposedly, was partially based on his fund. I couldn't watch much of it though...too much Hollywood b-s.
As my kids got older, I realized I was spending too much time thinking about things that don't matter, so I gave back most investor money (about $3.5B at its peak). I still have my funds but the money is mostly mine, together a few friends that asked to stay. When I have a good idea, I call my hedge fund friends.
Some of what's written on these boards bewilders me but I occasionally publish in hopes that it may help others a bit.
To summarize the question: Why is NWBO's market cap 3 - 4x high than OTLK's when (a) we don't yet know the DCVax data and (b) DCVax manufacturing will be harder than that for OTLK's bevacizumab?
1. OTLK is not going to change any disease treatment landscape. It's basically a regulatory strategy wrapped into a company. In additional to wAMD, there are two other diseases where they can get approval, but that's it. DCVax, if approved, can be much more important.
2. NWBO, if approved, may be useful in combination with other immunotherapies. This is the most exciting area of cancer therapeutics and DCVax may, therefor, have significant strategic value to the biggest life science firms.
Here’s how I think about dilution:
First, it’s inevitable. Growth companies need cash, and they issue securities to get it. If they sell securities below fair value, that’s the proper definition of dilution and it’s an unfortunate reality of investing in growth.
Always adjust for the cash needed to execute a business plan. It’s really a liability, so add the current enterprise value to the required cash and think of that as the ‘real’ enterprise value.
Compare your future expected enterprise value to the current ‘real’ enterprise value and decide if the upside is worth the risk. In the cash of OTLK, I think the answer is obvious since clinical trial risk is basically gone.
There are different ways OTLK can raise money.
(a) A discounted placement. This is the worst choice, because the stock would get hit the morning of the announcement and it would feel bad. I invest in private placements a lot and many times the stock will fall about 10% - 20% down to the deal price. In the long run, it won’t matter much, but who wants to ruin an otherwise good day.
(b) Use their equity line. They have one in place. They can issue sell orders under their existing equity and if they sell about 5% - 10% of the market volume, investors will hardly notice. The stock will face a slight headwind, but no one will have a bad day.
(c) Issue debt and then pay the debt off using their equity line. There are some investors that will buy debt in companies like OTLK. It will cost the company about 15% - 20% annualized. It’s expensive debt but if the company thinks their stock should be $4, then they can issue debt now and tap their equity line when the stock is around $4. The debt doesn’t represent a big risk since they won’t default with the equity line in place. This is the best option, though a little complicated. I made this suggestion to management.
$1M is a little under 500k shares which is less than 20% of the volume you reference.
I detail my opinions on that here:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=165285161
Trying to keep this board focused on NWBO
Yes, I'm very bullish on OTLK.
When I first established my position at $1, the stock carried clinical trial risk. The trial was very smartly designed, so I thought the probability of success was 80%+ (way better than most clinical stage life science cos).
The data reported a few days ago was solid. 98% approval odds now. Yet the stock opens up 40% and then gives it all back. What gives? From what I've heard, these are the concerns:
1. The trial proved something that was obvious: (a) bevacizumab is as effective as ranibizumab and (b) monthly dosing is better then quarterly dosing. Yes, these points were obvious! That's why I invested! The data are approvable and that's what I care about. The FDA doesn't award degree of difficulty points but there is 12 years of exclusivity.
2. Aflibercept is the best wAMD drug and will go off patent in 2023. Yes, the market will change. But the current market is $13B for wAMD and other applicable diseases. Baby boomers are retiring. Lytenava (the brand name for OTLK's bevacizumab) is intended to replace off label bevacizumab in the US (representing 50% of US patients) and Europe (about 1/3 of EU patients). They only need to get a portion of the off label market (even if the total market shrinks) to achieve $1B peak sales.
3. OTLK only has $37M cash. They will need more $$. Yeah. So? Doesn't every clinical stage company? This is an area I know a LOT about. It will not be a problem. But, one should always adjust market caps for these things. The current market cap is $380M, so add $120M and think of the company as currently worth $500M.
So, the question for investors: What's $1B in peak sales worth? $2B, $3B, $4B?
OTLK is a great investment.
Here's the article that details the concerns:
https://www.evaluate.com/vantage/articles/news/trial-results/outlook-heads-regulators-eye-friendly-avastin
Yes, correct. I don't see the stock going to $0.10. But, the last time it was under $0.20, I bought millions. If nothing has changed but the price, why wouldn't I buy more?
...and a lot has changed since then. Much higher probability of success.
...and they can't run out of money if I give it to them.
The biggest mistakes in my career happened when I let the market tell me if I was right. The market can/should tell you when to double check your work but nothing more.
I've heard good things about you (no breach of identity) and appreciate your posts here.
Bought ~ $800k in the afternoon
The primary concerns per Evaluate Vantage are shown below in italics.
The dosing schedule seems to be the biggest concern: monthly dosing is better than quarterly. To which I say, of course! OTLK could have done a non inferiority study monthly-vs-monthly (requiring more patients) or a superiority study monthly-vs-quarterly requiring fewer patients. This is a regulatory strategy that the FDA has already approved in OTLK's other disease indications.
Outlook’s job for now is to get ONS-5010 approved, and the Norse Two data might have smoothed the path ahead. The 228-patient study found that the proportion of patients gaining 15 or more letters in best-corrected visual acuity (BCVA) at 11 months, the primary endpoint, was 41% with ONS-5010 versus 23% with Lucentis. The difference was statistically significant with a p value of 0.0052.
ONS-5010-treated patients also gained a mean of 11.2 letters versus 5.8 letters with Lucentis, a secondary endpoint.
However, when asked, Outlook declined to give details of the baseline visual acuity in each arm, and it will be interesting to see if there are any differences here when full data are reported.
A bigger question hovers around the dosing schedules used in Norse Two. ONS-5010 was administered monthly, while Lucentis was given monthly for the first three months, followed by quarterly dosing. Outlook rightly pointed out that this Lucentis dosing schedule is detailed on the drug’s label. However, the label also states that this regimen is not as effective as once-monthly dosing, the recommended schedule, and in fact leads to an average five-letter loss in visual acuity benefit versus monthly dosing.
Finally, the drug to beat these days is not Lucentis but Regeneron/Bayer’s Eylea. If ONS-5010 does make it to market, Outlook could have more cut-price rivals soon: Eylea is set to lose US patent protection in 2023.
ONS-5010 has already shown non-inferiority to Lucentis in the smaller Norse One trial, and Outlook now plans a filing with the FDA in the first quarter of 2022. Perhaps getting approval will be an easier hurdle to clear than marketing the drug, particularly as Outlook only had $37m in cash at the last count.
The fact that the company needs to raise money explains why Outlook’s stock, after soaring 45% in early trading, ended closing up a more muted 7% yesterday – and is down 10% this morning.
Trying to resist off topic posts, but I do think OTLK is a great buy here.
Talking about OTLK
If anyone cares:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=165266679
Truly trying to help out. Probably going to $10+ in a few years but at least worth a trade.
98% probability of approval
Multi billion dollar market
Payers love it => priced below other approved products
Doc's will love it => well understood product => strong sales ramp
Pre filled syringe approval expected soon after product approval => Doc's will love it more.
Funding needs? Yes, but there will not be a near term discounted stock deal. They have an equity line so can tap that gently if needed. Spoke to management. Confident.
Bought another $1M this morning. Market is making a mistake.
Fair question. Before I grow an investment in a small company, I must develop a relationship similar to those I have in my venture portfolio. Must be able to have substantive conversations, discuss concerns and see that my views are fairly considered. After many dozens of management calls and meetings, I’m able to put what I hear in context. How something is said can be almost as important as what is said.
Management didn’t expect data release to take this long. I didn’t either. I think they didn’t fully understand the complexity and the number of people that would necessarily be involved. I think the strategy of getting good journal placement is worth it. It’s costing some dilution, but the data will be criticized by some post release. So, they need a plan to deal with that.
Building credibility will take work... a good journal placement, listing on NASDAQ or NYSE. With these in place, they can add institutions to their holders. Some very credible institutions are aware of the company but want to see the data and a listing. I know this because I introduced them to NW.
The company should transform over the next year. It’s frustrating to wait, but, for me, my NWBO thesis is still valid.
As far as a "tipping point". If the stock went to $0.10, I'd love it. I'd quadruple my position. A fundamental investor wants stocks to have the wrong price...not forever, of course, but they never do.
Paraphrasing the great George W. Bush, predicting clinical trial outcomes is how "I put food on my family".
I've heard nothing new from management. Same story as it ever was (at least over the last 6 months). Same confidence. Current primary endpoint highly likely to be significant.
Yes, waiting on data is frustrating. But I don't read the wait as prognostic. I don't care about death crosses, weirdly wedges, of crazy crosses. I don't give the stock price much thought.
Nice. I bought more last week. Haven't sold.
Looks solid.
I still see $10+ in a few years. With clinical trial risk behind us... compelling
Adverum (potential OTLK competitor) eyes disaster
Despite insisting that diabetic macular oedema and wet AMD had different causes, and that no cases of low eye pressure had been observed in wet AMD patients at any dose, Adverum has also abandoned ADVM-022’s pivotal trial, Optic, in this disease.
Adverum plans to start a new phase 2 trial in wet AMD next year, using lower doses. But SVB Leerink analysts feel that there is no viable path for ’022 in wet AMD, an indication with very low tolerance for safety events and numerous highly effective therapies.
Yes, I was talking theoretically.
The question that started the message chain was "where is the money to run the company coming from these days". Some seemed concerned the company would run out of money.
I was trying to convey that, at this point, that's not a risk to worry about. Funds may come from warrants or from debt issuances, but not from new equity issuances. If from debt issuances, the purchasers are confident.
A material debt issuance, as you know, will be reported* in an 8k. It should be within 4 days of the event but if a company is raising funds from a series of investors then the issuance won't be closed until the issuance is complete. So, in your example, NW may have raised funds before quarter end but won't close out the raise for several days into the next quarter. Once closed, we will then see the 8k.
Warrant exercises do not require an 8-k for the reason you gave.
* Unless the event occurred within 4 days of a 10Q/10K filing, in which case the event can be reported on the Q/K instead.
No contact with any law firms re stock price manipulation.
I'm not a big fan of the illegal short, "wolf pack", stock manipulation claims. I come from the large hedge fund world and, in the main, my colleagues and I just work incredibly hard to try and get the fundamentals right. 100% of the time I secure borrow before shorting. Sometimes I lose the borrow and my prime calls me and says I have to cover.
Market makers have different rules and I've never been in that business.
I've discussed the illegal short issue but I'm still to be convinced. So far it doesn't enter into my analysis.
I'm not saying they were given private info. They may have been, but I'm not making that claim.
What I'm saying is a new debt investor must be confident that the probability of a failed trial is low. They aren't taking trading positions. They can't change their mind and get out before TLD. Reasonable profit/loss estimates:
Successful trial: +25%
Failed trial: -75%
Return est = ps * 0.25 - pf * 0.75
So, to make an estimated 10% return, the probability of failure (pf) must be about 15%.
LC, see responses below:
Thanks for the feedback. And roughly what percentage to you and your friends own of the entire warrant lot?
We're a bit over 100M shares total
What's the advantage to NWBO in not converting fully to the underlying shares if you believe the dilutive warrants are already baked into the share price?
It would be better for NW but worse for us. Would require more capital and would eliminate the slight protection I get with the warrants (e.g. I can only lose down to ~0.20 pps). I do think warrants are fully reflected in the stock price.
I'd like to ask you, LC, a question. Assume a successful DCVax L trial. What's a reasonable total capitalization estimate? Then tell me what the stock price will be with 2B shares o/s? Please give me a fair minded estimate so we're not wasting time.
So you think only you would need to file a 13g or others too?
I would be the only one that would file.
Do you believe Powers intends to offer current warrant holders some kind of new deal?
No more deals for warrant holders.
yes, total a bit over
100M shares
agreed. fingers crossed hoping for a party
Early nineties. Lived in Menlo Park.
I can't speak for all of them. But among the people I know, most warrants remain unexercised. I exercised some warrants late last year and hold the underlying shares.
A friend of mine had some expiring warrants (about 15% of his warrant position overall). Those were exercised for cash. He sold some of the exercise shares (at my urging since he's elderly and one can never be sure in life sciences).
As for my remain warrant holder brethren, one of the smaller holders exercised and sold. Another sold all his warrants to me last year. The second largest holder (next to me) has all his warrants except he exercised one due to upcoming expiry. I don't know if he holds his exercise shares. I do know he asks me for NW updates every week.
Net net...still bullishly positioned.
If I exercise all my warrants, I will have to file a 13(g). But I still have time before I deal with that.