Replies to post #46219 on NorthWest Biotherapeutics Inc (NWBO)

[gnawkz]

To clarify a few points below on why I believe ARGS and NWBO are not comparable.

With regards to factual items about ARGS:

1. ARGS only recently began construction on their new manufacturing facility for commercial production. Thus, it is impossible for them to begin scaling their current production. This new manufacturing facility is designed to replace whatever facility they are currently using. Thus, it is logical to conclude that ARGS's current facilities do not have the capabilities to scale or expand production and is at capacity. Hence, ARGS's need to purchase additional land for a brand new manufacturing facility. (Source: ARGS Most Recent 10-K, pg. 21).

With regards to NWBO and Cognate, expansion of manufacturing capabilities is taking place at the Memphis facility. Thus, the Memphis facility definitely has the potential of producing initial commercial volumes of the DCVax products. This facility is owned, managed, and operated by Cognate.

As ARGS has just initiated construction of their new manufacturing facility, I cannot see how ARGS can be further along than NWBO.

Not comparable.

2. ARGS's does not contract out manufacturing services. ARGS's contracts out the development of automated production process to 2 independent firms, Invetech and Saint-Gobain. Invetech is responsible for creating the automated production process and equipment for creating ARGS's product. Saint-Gobain is responsible for creating all of the disposables that will be utilized by the process to produce cell therapies. That is completely different from contracting out manufacturing services. ARGS, not the 2 partners, will be responsible for setup, execution, maintenance, and future development of their manufacturing processes. (Source: ARGS Most Recent 10-K, pg. 12)

NWBO contracts out manufacturing services to Cognate. Cognate is responsible for not only developing the automated production process, but also its setup, execution, maintenance, and future development.

In my opinion, this is extremely beneficial to NWBO as Cognate will continue to invest and improve the manufacturing process. This is possible as Cognate has a separate cash account from NWBO and different business objectives. Hence why as shareholders we continue to hear improvements in the overall production and delivery process. ARGS does not have this luxury. ARGS will be constrained by their cash resources and once the production system is sufficient to pass FDA guidelines. I believe additional investments will cease until ARGS sales have increased to a point it can sustain operations.

Thus not comparable between NWBO and ARGS.

For your other comments, I've stated in my previous post where I've listed out all of my points that the only truly unproven portion is Cognate's ability to produce commercial volumes. This is something NWBO has stated Cognate and them are working towards and preparing for. In one of their past prospectus, NWBO has stated that Cognate's Memphis facility has the space to increase capacity to service 5,000 patients annually. This capacity increase will occur on an as needed basis. DNDN launched their Provenge product with an initial manufacturing capacity of 2,000 patients annually. This is the link to the filing where these numbers are stated: http://www.sec.gov/Archives/edgar/data/1072379/000114420412067286/v329695_424b4.htm

Cognate has the space to expand (primarily clean room), ARGS clearly did not. The only thing that has not been proven for Cognate and NWBO is that all of the equipment needed to expand capacity to service at least 2,000 patients annually is in place.

For ARGS and other BioTech companies, I find it difficult to believe that outside cell therapy contract manufacturers would shoulder so much business risk for the opportunity to produce treatments that have yet to record sales. It makes no sense to build out a large production line for a product that has not yet been approved for the marketplace. Thus why all of these BioTech companies are forced to build their own manufacturing facilities and contract out the development of the equipment and processes. Hence why I believe NWBO's situation is so unique and such a large competitive advantage.

[CherryTree1]

It is not unusual for 2 different high tech companies to partner especially when it come to separating product development from product manufacture because the skill set needed to run each is so different. Here is a perfect example where another high tech company, IBM, just recently spun off its semiconductor manufacturing operations. It actually paid global foundries (a completely separate and distinct company) $1.5 billion to take it over.

http://www.pcworld.com/article/2836012/globalfoundries-to-take-over-ibms-semiconductor-unit-in-13-billion-deal.html

Other examples include HP (server development), Intel (processor chip development) and board manufactures like Foxconn who are different business that partner together or
GM and Delphi, etc. . . .
Who manufactures the cell phone for Sprint or AT&T or T-mobile?

It is the same kind of thing going on between NWBO and Cognate. It is not an unusual relationship. It is very common in high tech industries, practical and makes business sense.

Relative to the other post, the only reason I picked 4Q2014 is because it is the data we have been discussing (the URL links we have both been pointing to). Again if you think a different quarter or a full year's worth of data tells a different story by all means present it.

Yes that is correct, the accumulated deficit for NWBO is (520,521) vs (204,170) ARGOS. Accumulated deficit is the negative balance of retained earning account. It is an owners equity negative for NWBO and ARGOS too, but more negative for NWBO. When a business generated more net losses than profits over the life of the business, it has negative retained earnings, which it reports as an accumulated deficit in the stockholders' equity section of its balance sheet:

                                                   NWBO          ARGS 
 Accumulated deficit                               (520,521)       (204,170) 
 

However, look at the additional paid-in capital. It contributes to surplus account in the shareholders' equity section of a company's balance sheet. The account represent the excess paid by an investor over the par-value price of a stock issue. Additional paid-in-capital can arise from issuing either preferred or common stock. The 485,615 for NWBO vs 235,627 for ARGOS pretty much counter balances the negative impact of the accumulated deficit:

                                                    NWBO            ARGS 
 Additional paid-in capital                         485,615         235,627

One could argue that there is also Property, plant and equipment advantage for NWBO, but then there is a disadvantage when it come to cash:

                                             NWBO          ARGS 
 Property, plant and equipment, net          39,999           5,514 
 Cash and cash equivalents                   13,390          37,224

That is why I included a line-by-line comparison of the entire financial statement. Different companies will employee different strategies so some lines on the finacial statement may look good relative to ARGS and others look bad. To get a complete picture one needs to look at the net of all these individual contributors which is the line at the very bottom, the total liabilities and owners equity (the company's or shareholder assets) which is pretty much the same for both companies:

                                                NWBO            ARGS 
 Total liabilities and stockholders' equity      56,456         64,367

There was also another response back to you that I read which stated over the past 9 months ARGS paid $15.5 million for developing automated production and that NWBO paid $28.4 million to Cognate for the same, but that in the end NWBO appears to have far more robust and scalable capability via Cognate (and they don't have to run the manufacturing operations themselves). I have not tried to validate those figures, but if they are correct they too show that ARGS did not save 100's of millions over NWBO.

Hope that helps.