Northwest Biotherapeutics Inc (OTCMKTS:NWBO) just announced a registered direct offering, and the company is down more than 50% on the news. This isn’t the first time we have seen something like this from Northwest, and chances are it won’t be the last, but the decline adds to an already long list of reasons for shareholder dissatisfaction, and sentiment looks to be at an all-time low for the company right now.
Regular readers will know that this is one we have come back to on a number of occasions, and each time we do (and more often than not it is on the back of the company having just paid a visit to the capital markets) we ask the question, what’s next?
Well, it is time to ask the question again
The latest raise is pretty convoluted, but the top line is that Northwest expects to bring in proceeds of $7.5 million by selling 28.8 million shares at $0.26 per share. There is nothing with the SEC just yet, and the offering is subject to a shelf registration that was filed last October, but the arrangement comes as a combination of shares or pre-funded warrants, with the warrants broken into three categories – A, B and C – and priced for exercise at $.26, $1 and $.26 respectively. The $1 class B’s are of some note, as their purpose is not entirely clear in the transaction, but we’re not going to speculate on that here.
Anyway, the offering will close in and around March 22, subject to standard pre-closing conditions.
The company is down because of the dilutive impact of the offering and its pricing, and probably rightly so. Northwest seems to be in a bit of a quandary at the moment, having recently announced a series of loans, and then announcing a note renegotiation, prior to the offering in discussion here. With that said, earlier this year we saw the lifting of the hold that caused sentiment to plunge over the last 12 months, and this (albeit dilutive) period seems to represent activity that might be the beginnings of a longer term turnaround.
So, what is next? Well, if this was another company, we would be able to say with some certainty that this raise is likely designed to get Northwest to a near-term catalyst. With this company, however, it’s not that simple. Northwest likes to raise money, and with very sparse communication between management and shareholders (and that’s putting it nicely) the use of proceeds is not always clear. With that said, the company is about to move into the phase 2 portion of a phase 1/2 trial of DCVax-Direct in solid tumors, and in all likelihood, the capital raised is required to facilitate this transition.
That is just sideline stuff, however. What is really important here is the reporting of topline from the GBM trial. Most reading will know what we are talking about it, but for those not familiar with this one, the FDA lifted a clinical hold on a GBM trial earlier this year (as mentioned already) and at that time, we learned that progression free survival events have been reached, but that we are still waiting for overall survival events to come in. Once they do, there’s a good chance we’ll see some positive data, with this suggestion based purely on how long the trial is taking to complete. Once the data hits press, we think share price will rise, and while Northwest is probably going to have to raise more capital to fund its pipeline and any registration application (and subsequent commercialization run) with the FDA, it will be able to do so at a higher price in the future.
The question now, then, becomes, when will we see the GBM data? And the answer is that we just don’t know. However, the longer it takes, the better, in the sense that the longer the events take to occur, the more of an impact the drug is seemingly having in the patient population (as the patients are surviving).
Unfortunately, of course, the longer it takes, the further we are also likely to see this one decline, as sentiment negativity deepens.
A double edged play as things stand, but one that could really pay off for the more hardy shareholders if the brain cancer numbers go Northwest’s way.
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Disclosure: We have no position in NWBO and have not been compensated for this article.