NorthWest Biotherapeutics Inc (NWBO)

[Poor Man -]

Midnight Writer Post — One More Silver Dollar

Well, I've got to run to keep from hidin'
And I'm bound to keep on writin’
And I've got one more silver dollar
But I'm not gonna let 'em catch me, no
Not gonna let 'em catch the midnight writer

Listening to Stockton Rush of OceanGate and how he went about attracting investors and marketing to customers, and frankly, listening to his self deception, I began to think about how certain management characteristics can ultimately impact the end result of what an executive is attempting to achieve. Rush was also an extremely bright and competent individual and graduate of Princeton, much like the author of EU Patent Law and NAFTA, and I suspect secret architect for the James Webb Telescope.

Here's my thoughts on the subject. Based on varied assumptions, one can estimate a tangible value for DCVax as a platform technology. We can easily agree this company is worth somewhere north of $20 billion subsequent to U.K. approval. But my own experience tells me that several intangible characteristics of management make a substantial difference between maximizing the potential value of the enterprise, and whether the final deal at signing is higher or lower than $20 billion; or even whether the deal eventually succeeds or implodes.

Not only do certain characteristics determine management’s own actions and behaviors, but character traits will define the reputation of management. In turn, this influences the approach that a potential buyer or partner will follow and the deal structure and terms they will accept. It’s fairly obvious that BP has taken a very cautious approach with Linda and Les, and want to see tangible results before agreeing to sign on the dotted line.

So here are the five basic characteristics that I believe will determine whether shareholders will receive the best possible deal versus the possibility of receiving something less.

1) Competency — Capacity to do complete successfully or efficiently. Do Linda and Les have the competency to correctly understand, negotiate and implement the optimal deal structure with another party for the asset they control? And will those deal terms bring the most value to shareholders? I give them a "B+" in this category. Neither has negotiated with Big Pharma in connection with a multi $ billion deal. However, both are experienced business people and lawyers, and have demonstrated fairly decent transaction experience; the sale of Sawston to cite one example. They also did a nice job building and developing Cognate and Advent, albeit at the expense of NWBO shareholders.

2) Integrity — Doing the right thing in the right way. Does management have sufficient integrity to exercise their fiduciaries responsibilities without creating additional conflicts of interest and/or exploiting their existing conflicts of interest. Not surprisingly, I give them a firm “D” in this category given all the issues they’ve had with Toucan, SEC, Nasdaq and Advent.

3) Trustworthiness — To be seen as Honest and Credible. Does management at BP companies actually trust that Linda and Les are transparent? Can they expect them to follow through on what's ultimately agreed and will they subsequently act in good faith. Closely linked to Integrity, I give them a solid "C". I tend to believe they’ll honor what they sign, but the lack of communication over the years and some of their statements does raise questions about their overall trustworthiness.

4) Judgement — Ability to make considered and sensible decisions. Does management possess the judgement to know what's good and bad or right and wrong when they negotiate terms with Big Pharma? Do they listen to outside advisors? Do they possess the knowledge to understand what’s in the best interest of shareholders and properly weigh all their alternatives? I grade them at "B-." They’re too conflicted and misaligned to apply the best possible judgement. But they do have enough business experience to avoid major systemic errors with either on commercial or legal decisions.

5) Reasonableness — Capacity to make fair and sensible decisions. Does the CEO understand what's reasonable and realistic? Or is management delusional per their understanding of a variety of business and industry considerations? In other words, are they over-selling their position and asking for too much. I would give them a "B" for this category. Toucan has invested in a number of biotechs and been in this space for a couple of decades. I suspect they understand what’s reasonable to expect from Big Pharma. Meaning they wouldn’t hold out for terms they have little hope of being accepted.

In conclusion, certain key characteristics of management have tangible effect. In my opinion, an “A” grade would mean a deal valued at between $15 and $20 per share, equal to between a $25 and $30 billion market cap. But management’s average grade came to “C+.” Albeit passable — Got me through vocational school! — this grade is consistent with the anticipated smaller license deal that will translate into a stock price of between $4 and $6 per share, and maybe a few dollars higher over the course of the year. Not bad, and a 10 bagger from here. But still a much smaller deal than what we had expected, especially for those that see this as “Trillion Dollar” company.

Character makes a difference in the value of your investment.

And remember, everyone is lying!

PM