BOSTON (TheStreet) -- This week's Biotech Stock Mailbag is open for business.
"They" refers to Northwest Biotherapeutics (NWBO) , which raised another $35 million in two separate deals announced earlier this week. The larger financing has U.K. investor Neil Woodford taking a $25 million stake in Northwest through the purchase of 4.32 million shares priced at $5.75. Woodford was a long-time money manager at Invesco before striking out on his own to start his own $5 billion C.F. Woodford Equity Income Fund.
As I noted on Twitter Wednesday night, Woodford's $25 million investment represents just 0.5% of his fund's assets, so he's not exactly making a huge commitment. But $25 million is better than nothing, particularly given the paucity of interest from institutional investors in owning Northwest shares. Franklin Resources is the only other large investor with an actively managed portfolio invested in Northwest. In the third quarter, Franklin reduced its stake in the company again and now holds just over 1 million shares, according to WhaleWisdom. The remaining $10 million raised Wednesday comes from a mortgage Northwest took out on a newly purchased U.K. manufacturing facility.
While we're discussing Northwest's financial situation, the 10-Q covering the third quarter, filed Wednesday night, included some interesting news nuggets.
Cognate BioServices, the privately held manufacturing services company majority owned by Northwest CEO Linda Powers, continues to benefit from its ties to Northwest. In the third quarter, Northwest recorded $16.9 million in cash and non-cash charges related to services provided by Cognate, or 74% of Northwest's R&D expenses for the quarter, according to the 10-Q. For the nine months of 2014, 71% of Northwest's R&D expenses of $64.2 million have flowed to Cognate, according to the company's 10-Q.
Northwest pays Cognate in a mixture of cash and stock. On top of these payments for services rendered, Northwest's board of directors issued 8 million shares of common stock and 3.8 million warrants to Cognate on Nov. 12. At Wednesday's closing price, the stock and warrants awarded to Cognate, majority owned by CEO Powers, were worth nearly $61 million. On the same day, Northwest's board gave out 10.5 million "restricted stock units" to company employees and directors.
Notably absent from Northwest's 10-Q was any revenue recorded from "Hospital Exemption" compassionate use of the experimental brain-tumor (glioblastoma multiforme, or GBM) vaccine DCVax-L in Germany.
Northwest said money raised in this week's financing will be used to "expand and accelerate" the phase III study of DCVax-L. This is the same study Northwest has been unable to complete after seven years of enrolling brain tumor patients. It's also the same phase III study Northwest radically redesigned in August -- a sign of trouble.
Northwest is also planning new mid-stage studies of its second cancer vaccine product DCVax-Direct. Earlier this month, the company reported preliminary results from a phase I study of DCVax-Direct presented at the Society for Immunotherapy of Cancer (SITC) annual meeting. In June, M.D. Anderson Cancer Center rebuked Northwest for making promotional and unjustified claims about results from this study.
According to a poster of the phase I study presented at the SITC meeting, a patient with advanced metastatic ovarian cancer treated with injections of DCVax-Direct showed a "mixed response to therapy," including reductions in the size of some tumors but the subsequent growth of a new lesion. A second patient with advanced sarcoma had a DCVax-Direct injected tumor grow, shrink and then grow again, according to the phase I poster. The poster concludes, "Intra-tumoral injection of activated, autologous dendritic cells [DCVax-Direct] is safe and feasible." The phase I study of DCVax-Direct says nothing about confirmed tumor responses in any of the patients treated.