Here's a more balanced journalistic perspective on NWBO - more in line with Larry's (Smith on Stocks) style. :)
The Street Register - Northwest Biotherapeutics, Inc (NASDAQ:NWBO): Our Interpretation Of The Latest 8-K By Mike Robinson - September 8, 2016
We’ve covered Northwest Biotherapeutics, Inc (NASDAQ:NWBO) a number of times across the last twelve months, in an attempt to serve up some clarity in what has otherwise been one of the most opaque late stage drug development campaigns of the last half decade. We’ve had very little to go on, with the company essentially closing shutters on its investor relations channels and releasing only the necessary regulatory information by way of quiet, and sparse, SEC submissions.
Well, we’ve just got an update on one of the issues that has been hanging over the company for a while, and it’s worth addressing to see where it leaves Northwest operationally, and what it might mean for the company’s prospects going forward.
First, for those not yet familiar with Northwest, let’s run a quick recap.
The company is an oncology focused junior biotech, with a late stage trial ongoing in glioblastoma multiforme – an aggressive (and the most common) form of brain cancer. This trial is currently the source of much shareholder frustration, since the FDA suspended enrollment a little over twelve months ago. The suspension isn’t really what’s causing the frustration, however – it’s more the fact that Northwest has as yet declined to serve up any insight into why the suspension is in place, or what it means for the trial going forward. For a more in depth discussion on this, take a look at some of our previous NWBO discussions here and here.
The most recent update still doesn’t address the trial in question, but it does clear up some listing issues, and more importantly, offers some insight into what’s going on behind the scenes.
Here’s our interpretation.
By way of a brief introduction to the situation, Northwest got into some trouble with NASDAQ after it started paying one of its contract manufacturing organizations (CMOs) in stock. Now, there’s no real issue with this (so long as the issuer stays within certain cap regulations outlined with the exchange), but this situation is different. Why? Because Cognate is owned by a fund called Toucan, and Toucan is – in turn – owned by a woman called Linda Powers, who also happens to be the CEO of Northwest.
When word initially got out about this arrangement there was a bit of an outcry, but it took NASDAQ a little while to get involved. It did, however, launching an investigation into the relationship and the acceptability of it early this year.
In April, NASDAQ notified Northwest that its issuances were against the rules, and requested that the company put forward a remediation plan to regain compliance. Essentially, it came down to a rule whereby a company cannot issue shares to a single entity exceeding 20% of those outstanding. Northwest argued that the shares were issued in batches, but there’s a provision that allows for these batches to be aggregated in special circumstances for the purpose of the calculation. NASDAQ applied this provision, and requested a fix.
Long story short, Cognate has agreed to return (and in turn, Northwest cancel) a large number (nearly 9 million restricted and 6.8 million issued as part of warrants) of the shares issued as part of the invoice payment agreement.
We see two major benefits from this resolution. This first is obvious – the cancelling of the shares removes previously accounted for dilution (something that NWBO has been criticized heavily for over the last twelve months). This is a bonus for shareholders that have had to sit back and accept dilution while the company has remained quiet as to exactly what that dilution is set to fund.
The second, and perhaps more importantly looking at things from a long term perspective, is that the willingness of Cognate to accept a reduction in its share holdings, and further, the removal of some anti dilution provisions associated with warrants it holds,*****suggests it believes Northwest isn’t going to dilute too much more before it starts bringing in cash. This, and that it expects this cash to be substantial, and relatively near term.*****
Bottom line here is that the two/three entities involved could have put forward some weak or convoluted amendment proposal to NASDAQ, and crossed its fingers it would pass regulation. It didn’t however. Cognate (read: Powers) went all out to get this sorted, and in a way that looks favorable to shareholders. This suggests she has faith in Northwest’s prospects going forward.
Of course, we could argue that a delisting would have been disastrous, and that Powers didn’t want to take any chances, but we’ll give them the benefit of the doubt on this occasion.
Subscribe below and we will update you on NWBO as this saga unfolds.
Disclosure: We have NO position in NWBO and have NOT been compensated for this article.
AI
