On Oct. 16, Northwest Biotherapeutics (NWBO) shares plunged 30% for no apparent reason. It wasn't a particularly volatile trading session for biotech stocks and the company issued no news releases that day, or even the day before, which would have easily explained the stock's big decline.

Northwest Bio, however, was quick to blame short sellers for the sudden collapse in its stock price. In an email sent to shareholders a few days later, Northwest Bio said the "unusual activity" on Oct. 16 reflected an "orchestrated campaign to drive the stock price lower, including questionable short-selling activity." The company offered no evidence to support its accusation, but pledged to intensify its investigation of the short-selling.

Recently a simpler explanation surfaced to explain the Oct. 16 drop in Northwest Bio's stock price. It involves unusually frank comments made the day prior that raised concerns about the conduct and outcome of a phase III study investigating the company's experimental brain cancer vaccine DCVax-L.

The comments were not made by short-sellers betting against Northwest Bio, but by Dr. Linda Liau, a distinguished UCLA neurosurgeon and brain tumor expert who serves as the principal investigator for Northwest Bio's DCVax-L phase III study.

On Oct. 15, Liau gave a lecture on cancer immunotherapy and brain tumors to her UCLA colleagues. Liau devoted most her presentation to DCVax-L.

Discussing the DCVax-L phase III study, Liau said all enrolled brain tumor patients were living longer, which she described as a "good thing." But then Liau noted that patients living longer "was not really helping our study" because it hurts the chance of showing a difference in survival between the DCVax-L and placebo arms of the study. Without that difference, the study fails.

Liau's comments about the patients enrolled in the DCVax-L phase III study were unusually transparent because investigators typically say very little or nothing about the outcome of ongoing studies in which they're involved. Drug companies often lock up investigators with confidentiality agreements so any disclosure of information from ongoing studies is tightly controlled.

But here was Liau, the brain tumor expert most closely aligned with Northwest Bio, explaining to an audience of fellow doctors that the phase III study of DCVax-L she was supervising as principal investigator might be in trouble.

Liau, perhaps realizing she spoke too openly about the DCVax-L study, goes on to say that she doesn't have any data from the study because it's still ongoing and blinded.

In light of Liau's remarks, the 30% drop in Northwest Bio's stock price the following day is hardly surprising.

A video of Liau's UCLA lecture on Oct. 15 was posted on UCLA's YouTube channel. Liau did not respond to an email sent on Feb. 3 asking for a further explanation of her remarks. On Feb. 4, the video of Liau's DCVax-L lecture was removed from YouTube. On Feb. 5, the video was re-posted to YouTube but with Liau's presentation edited out.

Here's a screen grab from the deleted YouTube video of Liau making her DCVax-L presentation on Oct. 15:

The story took a bizarre twist this week when her employer, UCLA Jonsson Comprehensive Cancer Center, disavowed Liau's lecture entirely.

"Any comments that have been made about this research did not pertain to patients currently enrolled in the [Northwest Bio]-sponsored phase 3 trial," said UCLA spokesman Reggie Kumar, when asked to clarify Liau's comments about DCVax-L and the ongoing phase III study.

Prior to issuing that statement, UCLA's Kumar was sent a transcript of Liau's Oct. 15 remarks in which she talks in detail about DCVax-L and patients enrolled in the phase III study. Kumar hung up the phone in response to additional questions about Liau's remarks.

Les Goldman, Northwest Bio's spokesman, did not respond to questions about Liau's DCVax-L comments, or why the company blamed short-sellers for its sagging stock price.

Northwest Bio has been trying to complete the DCVax-L phase III study for 10 years. In August, screening for new patients needed to enroll into the study was halted without explanation from the company.

Northwest Bio's stock price is down 85% from its all-time low reached last July. At Monday's $1.94 close, the stock trades at a new all-time low.


Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.