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The Case of Northwest Biotherapeutics

There have been a lot of strong words exchanged about Northwest Biotherapeutics (NWBO), a small Maryland-based company developing a brain cancer vaccine. Over at Fierce Biotech, they’re wondering why this program was picked by the UK authorities as their first official “Promising Innovative Medicine”, given the scarcity of data (and the dismal track record of dendritic vaccines in the field).
Adam Feuerstein has said a bunch of similar things, vigorously, at over the last few months as well. He’s been especially skeptical of the company’s own vigorous PR efforts, and in general tends to be unenthusiastic about small go-it-alone oncology programs. The Feuerstein-Ratain rule, that small-cap cancer trials fail, has been hard to refute.
Well, just the other day Washington Post columnist Steven Pearlstein waded into this story with a piece about how evil short-sellers are hurting promising little biotech companies. That’s pretty much the tone of the whole thing, and he uses Feuerstein and NWBO as his prime example, with not-quite-stated allegations of collusion with short-sellers.
My belief is that this is a load of crap, from someone who doesn’t understand very much about how the stock market works. Small companies that have been unable to interest anyone else in their technologies have a difficult time of it, to be sure. But we don’t need to go to conspiracy theories to explain this. There are indeed short-selling investors who are trying to drive stocks down, but they are absolutely overwhelmed in number by the number of people who are trying to drive stocks up. That’s what a stock market is: differences of opinion, held strongly enough for money to be put down on them.
If you look at Feuerstein’s most recent column on NWBO, you find that only one other company has even applied for the “Promising Innovative Medicine” designation (and that application is in process). So this is not some incredible milestone. And you also find a lot of useful information on the company’s debt structure, the exact sort of thing that an investor in the company should be interested in. Will you get these details by reading press releases from Northwest Biotherapeutics? You will not. You will get them from people who are willing to scrutinize a company, its operations, and its pipeline in detail.
Does Steven Pearlstein think that these details about NWBO’s debt deal are false? He should say so. But he also talks about short-sellers crippling Dendreon, which ignores completely the fact that what’s crippled Dendreon is that their vaccine doesn’t work very well. Wonderful drugs don’t get buried by short-sellers. Drugs get buried by data.
Update: is now seeking a retraction from Pearlstein. One of the key sentences is “Mr. Pearlstein — who said he knew nothing about biotech or medicine . . .” Pretty much had that part figured out already. The letter to the Post goes on to claim a number of other serious deficiencies with Pearlstein’s reporting. It’s going to be interesting to see where this leads. . .

42 comments on “The Case of Northwest Biotherapeutics”

  1. anon says:

    thank you for being the adult in the room…

  2. Hap says:

    Don’t short-sellers get pillaged, badly, when something actually turns out well that they believed would go badly? The antidote to short-sellers, if that were true, would be 1) holding for the medium-to-long term (and buying more when short-sold, if you think the company is misvalued) and 2) the company showing actual (good) data?
    If there were conspiracies against small pharma, why would a bunch of short sellers and stock prognosticators be the primary movers? If bigger pharma (or another interested party) could drive down the stock, either to buy more of it at a lower price than their demand would justify or to prevent a company from getting funding from other sources so as to force it to accept theirs, it would at least make sense. Otherwise, this sounds like an expensive fantasy tale, written poorly, for dumb people (on the other hand, at least it won’t kill anyone, probably).

  3. rtw says:

    This is a company I have been sort of keeping an eye on. Looks promising, but seems to be slow moving towards trials and development. I know a lot of folks that have been diagnosed with Stage IV colon, lung and breast cancers are following this as many believe immunotherapy might be the only real means towards a obtaining really long term remission or a possible cure. For them its a race to stay stable or at least managed until such treatments become “promising” treatments become available to them. Many would be willing to participate in trials if only they would actually offer them.

  4. Anonymous says:

    As a longtime WaPo read and Steven Pearlstein fan, I was absolutely shocked at the column, which in my view was basically totally ignorant. He just doesn’t know anything about science or drug development, but doesn’t seem to think it matters in this case. He is wrong. He screwed this one up big time. I guess everyone makes mistakes, but it was an unusually ignorant presentation of the “facts,” especially for an otherwise super smart guy.

  5. Anonymous says:

    The best, and perhaps only, way to shut down critics and short-sellers is to conduct properly conducted trials. There is nothing like hard factual data to settle an argument.
    However, NWBO goes out of its way to dribble out anecdotal data while avoiding rigorously designed, controlled, statistically powered trials. When that happens a company acquires an unpleasant “aroma” that rapidly turns into a “stench” that attracts short sellers, and the shorts are usually right.
    Either NWBO has the courage to perform some decent trials or else they will wind up as yet another biotech zombie. So far they have not had the courage to back up their rhetoric.

  6. Martin Shrekeli says:

    Adam Feurestein is the Skip Bayless of biotech. He writes outlandish things and profits by people strongly disagreeing with him. He just wants pageviews and interaction, even if its 100% negative feedback. Seriously, he just trolls for reaction. It’s a simple formula.

  7. johnnyboy says:

    @6 hmm, ‘kay. And what are YOU just trolling for, “Martin Shrekeli” ?
    I’m guessing that Pearlstein was probably sitting next to Linda Powers or Melanie Sloan at a DC dinner party, and was deeply concerned at the tales of woe spun out to him. Seriously, wailing about short-sellers is something you expect from crap retail investors, not from a putative authority on business.

  8. Hap says:

    I wonder when Skip Bayless has been right about anything though…at least Feuerstein has gotten something right. My feelings about him are summarized well here.

  9. steve says:

    I think your confounding two things. Short sellers are indeed a bane to small biotechs and can cause huge fluctuations in stock prices for no reason other than the greed of the ones who short. Whether that’s the case for Northwest, whose CEO has always been controversial (to say the least) is a question. They may indeed just have a lousy product. So maybe Pearlstein didn’t pick the best example but he surely highlighted a major problem.

  10. steve says:

    BTW, Pearlstein has some very good rejoinders to Feurestein’s accusations. Too bad Adam was to cowardly to talk to him directly and on the record for the article.

  11. Tyus says:

    Many reasons to doubt dendreon but your link is to actual ex hedge fund person pushing the negative story. As an ex DNDN employee it’s dissapointing that the narrative never includes that the data was good and merited approval. That should be considered irrespective of a crappy business model. Was many reasons to be paranoid while at dndn which is why I followed the Mitch gold model of sell early and often.

  12. Bell4 says:

    Feuerstein may be a lot of things – smart, frank, well-informed, prickly, opinionated, foul-mouthed, usually right, sometimes wrong…but never cowardly. Ever. @6 and @10 don’t sound like they’re interested in Feuerstein’s riposte. The rest of us are waiting expectantly for it. Guaranteed to be a blast…

  13. steve says:

    #12, I would say it’s cowardly to refuse to speak directly to a Pulitzer-prize winning columnist who wants to interview you and instead rely on your editor to give you a thumbs up. If Pearlstein was wrong in his assessment then Feuerstein should have been man enough to tell him to his face where he was wrong; you have to wonder why he refused to talk to him.
    To all, this article might be of interest to all as well

  14. Robert says:

    Well, whoever is on the wrong side of this will not likely fess up when the smoke clears, but will just move on to another battle. In the meantime, damage will be done to bank accounts, reputations & lives.

  15. Anonymous says:

    “Short sellers are indeed a bane to small biotechs and can cause huge fluctuations in stock prices for no reason”
    Short sellers are not a bane to good biotechs, who know what they are doing and just carry on with their work regardless of stock fluctations. But they are a bane to bad biotechs who are just in it for fleecing investors – the Cell Therapeutics, Hemispherx et al of this world. They are also a bane to small investors who go for the hype without doing their due diligence. If you want to talk about cowardice, you could mention the cowardice of losing investors who prefer blaming journalists rather than themselves for their bad decisions.

  16. Proteus says:

    +1 for the point by #11
    DNDN had/has many problems but that huber analysis is crap. (And so is the northwest bio data to date.)
    The failure of Provenge is more due to the cost density (3x $33k over weeks) and community urologists having to risk tens of thousands of dollars they would be reimbursed. The launch of Zytiga, an oral drug with a familiar mechanism and solid data didn’t help at all.
    Adam is no hero, but no fool. Many that complain don’t address points on data, just make ad hominem attacks—which is ironic.

  17. steve says:

    #15, you assume that short sellers aren’t also fleecing investors. As Pearlstein (and many others – see the link I posted) make clear, short sellers manipulate markets of small companies whose stock prices can fluctuate widely because of small volumes. They make fortunes over such manipulation. The idea that they are just efficient investors seeking out poorly run businesses is rather naive.

  18. Anti Illegal short says:

    I don’t think author of this commentary understand what is the difference between legal short selling and illegal manipulated short selling.
    I don’t think autor of this commentary understand what is the difference of a proven crime and a suspected crime.
    AF has had daily contact with hedge fund managers of whom many are short sellers. Nobody I guess at this point has hard evidence such as email correspondence or telephone recording which shows his guilty of conspiracy with short selling hedge funds. I bet almost nobody is and will be that dumb but illegal activities can easily go “undetected”.
    Well, from various activities revealed in allegations about AF from CREW and Steven from the Post, AF deserves a thorough investigation from SEC, Justice DEpartment in conjunction with FBI!
    The bottomline in the case of NWBO is the short selling may not be legal short selling

  19. Anonymous BMS Researcher says:

    The overall tone of discussion here is much less civil than the norm for this blog — but it scarcely holds a candle to the flame fest of comments to Feuerstein’s article. I don’t have any specific expertise about the company or its product, but I think Derek’s view is likely a lot closer to medical reality than the views of some investors.
    And flaming critics will not make the drug work any better in the clinical trials. In God we trust, others bring data.

  20. Hap says:

    How does short selling hurt small companies?
    If a comapny has useful products (or data to suggest that it will), then it doesn’t have to get funding from the stock market, although the manipulation may make it harder overall to get funding (by removing an option for funding through the stock market). If a company has such data, then it will likely have access to reasonable sources of VC or investment funding (e.g. not Seaside 88), and it will likely have the chance to prove shorts wrong.
    Shorting ought to have different effects depending on investment timeframe. Short-term investors can get hosed, badly, but that seems like the nature of short-term investing. In the long-term, shorting gives people who think the shorts are wrong an opportunity to purchase stock cheaply; since they’re not selling, the shorting shouldn’t matter.
    So I’m not seeing how shorting hurts anyone who doesn’t (or shouldn’t) know what’s coming to them. If the company comes up with something substantiative, shorting will take lots more money and rapidly become unprofitable. If the company doesn’t come up with anything, then the shorts were right and the money you invested would have been better elsewhere. What’s the problem?

  21. johnnyboy says:

    As Derek has posted in his update, TheStreet has posted a followup and retraction request which is excellent; it contains actual data and information rather than vague accusations, and shows how much of a shoddy hatchet job Pearlstein’s column really was. The LA Times Michael Hiltzik has also published an article pointing out the deficiencies in the column, and in the case against Feuerstein (and Hiltzik is also a “Pulitzer prize-winning” writer, since that seems to be important to you, Steve).
    If you want to talk about market manipulation, you should really wonder what prompted a columnist who admittedly knows nothing about biotech, and who had no knowledge of NWBO or of Feuerstein prior to talking to NWBO’s CEO, to come out blazing against Feuerstein and short-sellers in general. Or what prompted Melanie Sloan’s CREW, a transparency organism that normally focuses on politician shenanigans, to write to the SEC specifically requesting a investigation of a lowly TheStreet reporter. This really smells like a DC-style returning of favors.

  22. Hap says:

    Feuerstein’s not exactly a lowly reporter, if he’s the investigant – I would consider him a rather big target, especially to the people who were part of one of the shoddy biotech gravy trains whose paths he’s interrupted.

  23. johnnyboy says:

    @22 – Oh I know he’s quite prominent in the biotech community; but I meant that for a rather more prominent WaPo columnist, and for a government transparency organization, Feuerstein’s work would normally not register at all. Which makes it all the more curious that they should focus their attentions on him.

  24. Hap says:

    There’s a lot of money in those gravy trains, though, and maybe someone has a friend who has a friend who runs a fund with interests in that area. If you don’t know better, biotech companies trolling the shallow end of the pharma investment pool and ones that aren’t might be hard to tell apart.
    Of course, then, you might want to actually find a disinterested source or two, so if you’re going to be someone’s axe, you don’t end up being used to bang into rebar. Someone in DC ought to understand that.

  25. biotechtoreador says:

    This,, has always struck me as how companies should react to short sellers.
    “The lady doth protest too much, methinks”

  26. steve says:

    I tried to post a few links about short sellers and biotech but the site wouldn’t allow it for some reason. Search “short seller manipulation biotech” and you’ll see recent prosecutions for 23 firms for market manipulation through short selling, a response by BIO (the biotech lobbying group) to SEC rules explaining why it’s necessary to curtail the abuses, etc. Again, the idea that short sellers are just reacting to market forces instead of being a means by which hedge funds manipulate the market is more of an ideal than reality.

  27. Hap says:

    As opposed to “pump and dump”, which is common enough to have its own terminology? I haven’t heard of selling the bejesus out of a stock being banned, however.
    How does shorting a stock hurt companies (well, companies with something to sell other than fantasy) and the market?

  28. steve says:

    It takes 10 years to get a product on the market; clinical trials take a year or two before results are known. Heavily shorting a stock with high volatility (as with most small cap biotechs) puts huge downward pressure on the stock price, prevents the company from raising additional capital and becomes a self-fulfilliing prophecy by eventually putting the company out of business. Again, the idea that good companies don’t get shorted, that the market is efficient and unmanipulated is just a fantasy. Biotechs are highly vulnerable because of their long product development cycle and cash intense requirements.

  29. matt says:

    @steve #9,10,13,17,26,28: is that you, Steven Pearlstein? You asked why Feuerstein didn’t respond to Pearlstein, “too cowardly” you said. The latest letter from makes clear what Pearlstein should have said in his article but neglected to do: Feuerstein’s boss had reserved the right to reply in his behalf. As for Pearlstein’s “very good rejoinders to Feuerstein’s accusations”, it’s clear you are as ignorant as Pearlstein about the danger of running a Phase III trial that looks only at progression-free survival as an endpoint. It is certainly true, as Feuerstein pointed out, that the FDA has asked for more than that before. Maybe they will be satisfied with only PFS in this case, who knows. If NWBO ever actually finishes its trial…
    The letter from the brings up another very interesting angle, the rather large amount of paid reporting and message board posting on NorthWest Bio. (I’ll include the link, but Corante/spamfilter will probably choke on it… Do you, Steve, hold shares in NorthWest Bio, or stand to gain if warrants are exercised for NWBO, or have any relationship at all with MDM Worldwide or Redfish Creative, or have other relationships to principals at NorthWest Bio? Not that this message board doesn’t get trolls from many other PR departments, and penny stock pumpers, and so on. It tends to be very obvious.
    Here’s a newsflash: companies aren’t prevented from raising capital because the stock price is getting shorted. Companies are prevented from raising capital when potential investors look to see why a stock is getting hammered (that’s called due diligence), and find they agree with the negative vision of the company’s potential. It’s not that Feuerstein and shorts are ruining these companies, it’s that he is raising legitimate issues, and these issues explain why those companies are struggling. Of course, after he’s published an article, given that he has expertise in the field and is often right, there may be a jump in people looking to short a stock.
    While you are shedding big crocodile tears for NorthWest Bio, you are ignoring the fact that its price was pumped up for a time by unscrupulous paid “investment advisors.” And you are ignoring (as Feuerstein enumerated) that NorthWest Bio’s latest financing round essentially paid its latest group of investors to short its stock (temporarily) for profit. You are ignoring the very real shortcomings in its Phase III trial design, very real questions concerning its therapeutic strategy, and some questions about whether its management was aware about all the dishonestly positive manipulation going on in its behalf. It’s rather sad, the company that Pearlstein has chosen to keep.
    Pearlstein’s take on Dendreon is similarly clueless. The most marked result in a PhIII trial should not be in the control group. If the company chooses to detail the method of action for a drug, clinical results should not directly contradict that. I would look forward to further, more detailed results to put these questions to rest, but I think the market will move on to less questionable medicines.
    Full disclosure: I don’t have any position, short or long or baby-bear-just-right, on any of these companies.

  30. Hap says:

    1) There are lots of places for biotechs to get money, not just the stock market. The people who are likely to invest will likely be doing actual investigation into a company, and shorting will probably make them more likely to invest rather than less if the company’s fundamentals are good, because the alternate sources of funding are worse. It would, however, make that funding more expensive, since it would cost more equity to get it, although the funding would probably more secure, since the investors want their money aback and don’t want the company to fail if they can avoid it. Of course, the solution to avoiding shorting as a method of fund manipulation, particularly for small biotechs trying to develop products, is probably not to offer stock. If they’re working close enough to the edge of available funds that shorting distorts their ability to get working capital, then they’re walking dead, anyway.
    2) There have been far greater and numerous opportunities to manipulate stock by trying to stimulate interest than in trying to diminish it (the pervasiveness of “pump and dump” as a term of art), yet shorting and not longing seems to be the target. Hyping a stock with PR and without products also hurts companies spending cash on developing tech or products and not spending money on stock advocacy – the ones more likely to produce actual useful things – so the argument that shorting distorts the market overly neglects that fact that going long also does so more often and probably more destructively.
    3) Given 1) and 2), shorting doesn’t become a fulfilled prophecy unless they have no product. In that case, shorting is irrelevant to the prophecy – having no products other than hype ought to be enough to kill a company. That seems like the way a market is supposed to work – investment flows from useless companies to useful ones. It doesn’t always work, but shorting seems to make it more likely to work, not less.
    I don’t have any stock (that I know of) in any of the relevant companies.

  31. biotechtoreador says:

    #28: I think you must have meant
    Heavily buying a stock with high volatility (as with most small cap biotechs) puts huge upward pressure on the stock price, aids the company in raising additional capital and becomes a self-fulfilliing prophecy by eventually putting the investors out of business.
    There, fixed that for you.

  32. steve says:

    #29, thanks for the compliment but I’m not Steve Pearlstein. There are actually other Steve’s in the world. I work with small biotech startups, though I have no relationship to Northwest, Pearlstein or Feuerstein. I’ve just seen this type of stock manipulation up close and personal and know that a lot of big players manipulate small stocks by shorting the hell out of them and then either buying the stock at a low price and watching it go up again or just driving the company out of business. As I mentioned, SEC just sued 23 firms for doing this; I tried to post the link as well as some others but the site didn’t let me. Just Google “SEC short market manipulation” (without the quotes) and it will be about the fourth article from the top.

  33. Hap says:

    Have you any examples of companies that have been driven out of business by shorting?

  34. MCF says:

    Derek’s original posting states that “…only one other company has even applied for the “Promising Innovative Medicine” designation (and that application is in process). So this is not some incredible milestone.” The PIM scheme has only been in place for about 6 months, so uptake may simply be slow as companies wait to see if it’s truly valuable. Also, the MHRA charges 4000 pounds to review the PIM designation application, and small biotechs with limited funding may not feel like spending their money on that.

  35. Hap says:

    “companies driven out of business by shorting” = company with something useful or being otherwise sound but were driven out of business by shorting. (Companies that don’t have anything that die when people are shorting them could be dead because the company isn’t good and people correctly realized that fact rather than dying because of shorting directly.)

  36. biotechtoreador says:

    “I’ve just seen this type of stock manipulation up close and personal”
    I’d argue there is no manipulation with NWBO.
    More aggregious examples tend to occur by those pumping stocks, see for example, CYTR and GALE:
    It’s unfortunate that less sophisticated (retail) investors are less likely to short stocks and more likely to lose money in schemes like the above, or by heeding sell side analysts whose firms are paid banking fees by biotech.

  37. steve says:

    There’s no getting around the fact that biotech stocks are a favorite for hedge fund manipulation through shorting. Even Jim Cramer, in a famous CNBC video, admits this is the case and that he did it routinely Dendreon is a classic example and the short manipulation (prior to the failed launch, which is another story) almost killed it. See (And no, for all you conspiracy theorists out there, I haven’t worked for Dendreon either).

  38. steve says:

    BTW, stating the (accurate) fact that there are also pump and dump schemes doesn’t negate the widespread manipulation by shorts anymore than saying that there are home burglaries negates the existence of bank robberies.

  39. Hap says:

    No, but the presence of a term of art for “pump and dump” (and lack thereof for shorting) says something about relative frequencies of modes of manipulation and that your emphasis on shorting as a method of manipulation is almost certainly misplaced.
    Also, as noted at the end of the post, Dendreon is a bad example of the productive end of small pharma – having lots of advocacy for a product that doesn’t work (marginally better than control is not working) and is too expensive is not an endorsement of your position. Feeding lots of money to biotechs that are much better at patient PR and complaining that the FDA has it in for them than actually making good products is a way to get more biotechs that can complain about the FDA and be good at PR.

  40. steve says:

    There’s also the term “naked short” which shows the frequency of that scheme for all terms are worth. The issue of Dendreon had nothing to do with efficacy but all to do with manipulation; read the book.

  41. Buysider says:

    Good biotech doesn’t care about the mark-to-market before the company has a product to market.
    It is a shame that phase III studies cost so much more than the past, and that companies that otherwise would be angel/VC funded now come out to the public markets too early for funding.

  42. Buysider says:

    Good biotech doesn’t care about the mark-to-market before the company has a product to market.
    It is a shame that phase III studies cost so much more than the past, and that companies that otherwise would be angel/VC funded now come out to the public markets too early for funding.

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