Northwest Biotherapeutics, Inc (OTCMKTS:NWBO) just filed its 2016 10-K with the SEC, and as we might have predicted, our competitors over at the street (and in particular, one Adam Feuerstein) has followed the submission with a hit piece. We took apart a similar (in inference, not necessarily in content) piece on development stage biotech company Protalix Biotherapeutics Inc (NYSEMKT:PLX) towards the end of last week (here, for any interested readers), in an attempt to add a little balance to a misinterpreted data release. At that time Protalix dipped (almost certainly no the back of said misinterpretation) and, again as we might have expected, Northwest has dipped too.With this in mind, let's take a look at the facts, and in doing so, try and figure out whether there's an opportunity to use this Street-driven dip as a chance to pick up an exposure at a discount.We’re not going to spend too much time on an introduction to the company here. We recommend readers that are unfamiliar with the situation check out our previous coverage to get caught up.As a brief intro, however, this is a biotech play that is trying to get a range of treatments (all rooted in the same technology, and all a type of immuno oncology asset) approved in various cancer related indications. The big one, and the one that has drawn the most attention (and criticism, as it happens) is a brain cancer study looking at a form of the drug called DCVax-L in GBM. The study was on hold (enrollment was, at least) for more than a year between 2015-2017, but the hold was lifted earlier this year and we're now waiting for results (more on this shortly).So, let's take a few of Feuerstein's points and highlight where he's gone wrong.AF's take:"The SEC issued a subpoena to Northwest Bio as part of a broad investigation into the company's business practices dating back to January 2013."Our take:Sure, this is the first time that Northwest has mentioned the word subpoena, but for us, that's no big deal. Markets know why the request was issued, and the company stated in its latest release that everything covered under the subpoena is previously disclosed. Feuerstein seems to be hoping that he can highlight the word subpoena here to spook markets, and to his credit, it's worked. That doesn’t mean spooked is the correct response, however.AF's take:"Northwest Bio's accounting firm issued a "going concern" letter expressing "substantial doubt" about the company's ability to remain in business."Our take:We're not going to waste time on this one. Going concern risk factors are part and parcel of this end of the biotech space. It's purely an accounting reference point. Feuerstein knows this, yet somehow its made number 2 on his list of 10-K concerns. Fear mongering, scraping the barrel – you choose.AF's Take:"Northwest Bio now admits FDA only lifted the long clinical hold on its phase III study of the DCVax-L (the brain tumor vaccine) after the company agreed to stop enrolling patients short of its full enrollment target."Our take:Again, we knew this already. Nothing new. Further, the way The Street has worded it makes it sound far worse than it actually is. Northwest stopped enrollment because it's going to cost time and money to get it started again after such a long hold. The vast majority of the target enrollment number is already on-trial, and the company believes it can hit its pre-specified events tally with those already on board. We're talking a shortfall of 17 patients on a target of 348.AF's take:"The company still refuses to explain the reason (or reasons) for the FDA clinical hold on the DCVax-L phase III study."Our take:The company isn’t refusing to explain anything. It hasn’t explained it, and this has caused frustration for shareholders, but the general consensus is that there's a reason behind the silence. We actually went into a potential scenario late last year that would explain this situation – check it out here.AF's take:"Northwest Bio closed out 2016 with $6.2 million in cash after using $56 million in cash for operations during the year."Our take:Ok, we'll give him this one. Northwest has a habit of cobbling together small raises to jump from period to period, and that's never great. That said, if there's a positive catalyst around the corner (and there might well be) we'd much rather the company raises little now, and much more later at a higher price. Still, as we say, we'll give him this one.AF's take:"In 2016, Northwest Bio paid $14.2 million in cash to Cognate BioServices for DCVax-L manufacturing and other services. Cognate is owned by an investment fund controlled by Northwest Bio CEO Linda Powers. Northwest Bio still owes Cognate $23.4 million for unpaid invoices."Our takeThis doesn’t look great at a glance, but first up, it's nothing new. We knew Powers controls Cognate (through Toucan) and we know that there's been some concerns raised (and this is likely what the subpoena is focused on) concerning the relationship between all parties. We also know (as per the latest 10K) that Northwest has to pay Cognate a minimum amount even if it doesn’t manufacture DCVax. That's why payment was made while the GBM trial was on hold (that, and the fact that patients were still dosing in that and other studies).The $23 million owed – Feuerstein paints this as a bad thing that it's owed to Cognate. Surely it's better this cash is owed to an entity controlled by a shareholder, than a third party entity? A shareholder is able to alter terms so as to protect their (and other shareholders') interest in the primary company. If Northwest owed the $23 million to a non-affiliated party, said party could demand it and sink Northwest. Cognate theoretically could do this, but it's not going to because it's controlled by Powers.After these points, Feuerstein rambles on with a few repeated points, and then closes out with a dilution focus. Again, we can’t really argue with him on the dilution side of things, but again, it's not new information. These things are priced in to the company's share price (or were before the release) and to sell off on an outlet reintroducing them (falsely) as fresh information seems ill informed.So what's the deal now?Well, as many readers will likely have already concluded, the overarching situation hasn’t changed a bit. Sure, the company is picking up a bit of negative press as the shorts look for excuses to highlight its shortcomings (and the latest 10K is one such excuse, apparently), but fundamentally, Northwest is in the same position as it was last week.We're going to let the science do the talking here, and as such, we're looking forward to the phase III results as the next major catalyst, as well as a late May information hold lift that should serve to offer insight into the GBM situation. Any longs that were holding ahead of (and in anticipation of) these catalysts, may well want to pick up a few additional cheap shares on the back of the discount Feuerstein's handed us.We will be updating our subscribers as soon as we know more. For the latest updates on NWBO, sign up below!Disclosure: We have no position in NWBO and have not been compensated for this article.
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