Another look at Northwest Bio's (NWBO) Phase 3 trial - still predicts success

Below is my analysis for trying to predict the outcome of Northwest Bio's (NWBO) Phase 3 trial. I ran this analysis after learning that NWBO have changed their trial's estimated primary completion date at clinicaltrials.gov. The date was moved back from Sept'16 to Nov'16. Now suggesting NWBO believes their trial will reach its primary completion date in Nov'16. I added this new date as an assumption in my model and then re-ran the analysis.

My analysis now gives NWBO's DCVax-L a 14 month mPFS vs 8 month for its control. This gives DCVax-L a 6 month benefit which is larger than the 4 month benefit required to show statistical significance.

This new analysis uses an 8 month SOC PFS assumption and an enrollment ramp assumption (generated by i-hubbers Flipper44 & Rkmatters).

I created this simple model to try and predict how NWBO’s Phase 3 clinical trial is performing.
I consider this model at best a “rough-estimate”, from an engineer’s perspective (not a mathematician). 

I used the Dose-Dense Temozolomide for newly diagnosed Glioblastoma study (D-D) as a foundation for this model. NWBO’s vaccine (DCVax-L) is getting compared to today’s SOC which is this D-D study (Arm1). The D-D study examined an increased chemotherapy dosing schedule to the original Stupp SOC. This study showed no efficacy statistical difference between the two treatments.

My model begins by assuming NWBO’s vaccine is ineffective, meaning that it has the same efficacy as the D-D study. The model uses the D-D study’s Kaplan-Meier chart (K-M) to estimate when NWBO’s trial can be expected to reach its primary completion date. Note, NWBO’s trial has not reached its primary completion dated, it is “on-going” and “nearing completion” according to the company’s more recent statements. In early Oct'16 the trial's primary completion date was moved to Nov'16 suggesting the company expects 248 PFS events to occur around that date.

I made a change to the D-D K-M chart so that it better represents NWBO’s trial patient population. The D-D study included a class of patients know as pseudo progressive (psPD) whereas the NWBO trial has excluded these patients. PsPD patients are believed to be the best GBM survivors and can make-up over 20% of the entire GBM population. So for my analysis I have disregarded the 15% longest survivors from the D-D study, assuming they will mainly be psPD patients.

I used publicly shared enrollment ramps from i-hubbers Rkmatters & Flipper44. With the enrollment ramp information and the PFS rates from the D-D K-M chart I was able to determine patient expected survival times. Using those survival time, I could then calculated the expected trial primary completion date, 248 PFS events. This would be the point at which the trial would end had all patients only received SOC treatment, note the trial has not reached its completion date as of Oct'16. 

Should NWBO's trial reach its primary completion date in November 2016, my model gives NWBO a 14 month advantage over the D-D study.

However NWBO’s advantage is made-up from two portions, its treatment (DCVax-L) and its control. 

To determine the benefit from the treatment portion of the trial an assumption was made about the benefit from the control portion. I have given NWBO's control an 8 months median PFS time which is longer than the D-D study's 5.5 months. 

My reasoning for expecting longer PFS in NWBO's trial is based on the fact their patients have better outcome prognostics ie more tumor removed, higher KPS etc. 

NWBO control patients are likely to see survival times closer to the Celldex's Rintega nGBM trial where all patients received complete tumor resections. Unfortunately Celldex has not shared their trial's K-M PFS data but they have shared their overall survival data. Rintega patient's median overall survival improved by around 40% from historical studies, 21months vs 15 months. Assuming PFS also improves by a similar 40% then NWBO's control can expect to have an 8 month mPFS (5.5 x 1.4 = ~8).

Using NWBO’s trial randomization ratio and an 8 months mPFS assumption for its control I was able to calculated the likely DCVax-L mPFS benefit (1/3 * 8 + 2/3 * DCVax-L = 12).

My model gives DCVax-L a 14 months mPFS vs 8 months for its control. So DCVax-L has a 6 month benefit which is larger than the 4 month benefit required to show statistical significance.

Disclosure - I am long NWBO. I do not short stocks.

My small cap Healthcare investment ideas

Here are some Healthcare investment ideas from my Fund holdings as at the end of September 2016:

Note - most of these stocks are very risky. My fund is down 33% ytd with a 9.2% annualized 10 year return.

Novavax (NVAX) Phase 3 RSV Flu trial fails to meet its endpoints

Today, NVAX announced its lead Phase 3 RSV vaccine trial failed to meet its endpoints.
The company says its trial experienced low vaccine attack-rates which hurt its results.

NVAX's cash value is approximately $1.20

Disclosure - I am long NVAX, I do not short stocks

My model predicts success for Northwest Biotherapeutics (NWBO) Phase 3 trial

I created this simple model to try and predict how NWBO’s Phase 3 clinical trial is performing.
I consider this model at best a “rough-estimate”, from an engineer’s perspective (not a mathematicians). This model does not account for an enrollment ramp.

I used the Dose-Dense Temozolomide for newly diagnosed Glioblastoma study (D-D) as a foundation for this model. NWBO’s vaccine (DCVax-L) is getting compared to today’s SOC which is this D-D study (Arm1). The D-D study examined an increased chemotherapy dosing schedule to SOC but ultimately showed no statistical difference between the two treatments.

My model begins by assuming NWBO’s vaccine is ineffective, meaning that it has the same efficacy as today’s SOC. The model uses the D-D study’s Kaplan-Meier chart (K-M) to estimate when NWBO’s trial can be expected to reach its completion date. Note, NWBO’s trial has not reached its completion dated, it is “on-going” and “near completion” according to the company’s more recent statements.

I made a change to the D-D K-M chart so that it better represents NWBO’s trial patient population. The D-D study included a class of patients know as pseudo progressive (psPD) whereas the NWBO trial has excluded these patients. PsPD patients are believed to be the best GBM survivors and can make-up over 20% of the entire GBM population. So for my analysis I have disregarded the 20% longest survivors from the D-D study, assuming they will mainly be psPD patients.

Then I calculated the required PFS rate to reach trial completion. Using that PFS rate, I then extrapolated from the D-D K-M chart to get an expected survival time. Using that survival time, I then estimated a trial completion date. This is the point at which the trial would end had all patients only received SOC treatment.

As of September 2016, my model gives NWBO a 3 month advantage over SOC.

However NWBO’s advantage is made-up from two parts, its treatment (DCVax-L) and its control. Assuming the trial’s control has no advantage then the treatment’s advantage increases. I used NWBO’s trial randomization ratio to allocate proportions.

My model then gives DCVax-L a greater than 4 month advantage verse SOC thereby reaching a demonstrable efficacy level.


Disclosure - I am long NWBO. I do not short stocks.

Omeros Corp (OMER) -> a de-risked revenue producing small biotech

Below is my OMER valuation model with assumptions –> showing over 200% upside potential

Disclosure - OMER is a holding of my Marketocracy Fund. I do not short stocks.

Here are more Healthcare investment ideas from my Fund holdings

Note -most of these stocks are very risky.
My Fund is down 30% ytd with a 10.3% annualized 10 year return

Here are some investment ideas from my July 2016 Healthcare Watchlist

Marketocracy's Fund Managers Report Card for 1H16 -> C+

2016 is shaping-up as a good year for Marketocracy's Fund Managers. According to data just released, a majority 58% of managers (15 of 26) are beating the S&P500 benchmark .

The second quarter was particularly strong for managers as they averaged returns of 4.51% verses 1.90% for the S&P500 index.

However on average managers lagged the performance of the S&P500 over the first half of 2016. Managers returned 0.92% vs 2.69%.


The best performing 2016 Marketocracy managers:
#1 Bruce Pile with 27.77%    (@ a 15yr annual return of 7.5%)
#2 Chris Rees with 19.11%   (@ a 15yr annual return of 8.2%)
#3 Rex Jacobsen with 13.94%   (@ a 14yr annual return of 11.2%) 



The best long-term Marketocracy performers (since their fund inception):
#1 Todd Hagopian (28.0% annual return over 5 years)
#2 Justin Uyehara  (25.6% annual return over 13 years)
#3 Sam Miklosko  (20.8% annual return over 7 years)



Below is a detailed look at all the managers' 2016 performances:

My Fund:
My small-cap focused Healthcare Fund is performing poorly year to date. I am at the bottom of the rankings list, highlighted in yellow.

My fund is down a large 34.45% ytd. It lags the returns of equivalent benchmarks such as the IBB down 20% and the XBI down 18%. My fund's longer-term performance remains strong having returned 10% annualized over the past 10 years.

The recent biotech sector sell-off had a very adverse affect on my fund. I primarily hold small-cap stocks which unfortunately were among the worst affected in the sell-off. Heavy losses from my larger core-holdings also significantly contributed to my under-performance. My positions in Northwest Biotherapeutics (NWBO) and TG Therapeutics (TGTX) fell 94% and 61% respectively over the past 12 months.

I continue to hold both these stocks because I believe their recent sell-off was over-done and the stocks are now under-valued. Both stocks have late-stage cancer treatment candidates that offer tremendous promise with block-buster market potential. Important catalysts, later this year, have the potential to sharply shift investor sentiment in both of these stocks.  

The biotech sector is showing signs of a recovery which is encouraging. I remain optimistic about being invested in this space despite the rocky past 12 months. Over the longer-term I believe this sector will continue to be prosperous.



Disclosure - Marketocracy Funds are available for investment through SMAs.
I do not short stocks.

Novavax (NVAX) is nearing a pivotal PH3 data read-out -> updated - P3 failed to meet its endpoints

Novavax's lead vaccine candidate is for the indication of RSV Flu in older adults. This program is at a Phase 3 stage in clinical development. A data read-out is anticipated in 3Q16. I am expecting a positive result here which will be transformational for this small biotech company. A positive Phase 3 result here will help validate NVAX's vaccine platform technology from which its other vaccine candidates are also built, de-risking the stock..
 
My price target for NVAX is $13 - $16 which presents around 150% upside.

Below is my valuation model with assumptions. It only considers NVAX's lead vaccine candidate, RSV F for older adults.

For my model, I have chosen a conservative vaccine sales price of $80 which less than similar vaccines like Pneumovax and Prevnar which sell for around $100 and $200. Using a market penetration rate of 40% and an 80% likelihood of clinical success and then discounting 50% I calculate peak sales at over $600M. Applying an x8 Price to Sales ratio gives NVAX a Market Cap of $5.0B which is well above its current $1.8B valuation. Note my model only considers NVAX's lead indication. 

I see NVAX as a very attractive investment idea.
The company has a promising vaccine platform that has been used to produce several different vaccine candidates. These candidates have produced positive clinical data and have received FDA Fast Track designations .
NVAX's vaccine candidates are for the following indications; RSV Flu (elderly, maternal, & pediatric), seasonal influenza, RSF/seasonal Flu combo, Ebola, Avian flu (H7N9), and MERS.

NVAX’s most lucrative vaccine candidate is for the RSV indication. Currently there are no FDA approved vaccine's for this indication making this space an area of unmet need. RSV Flu is a common respiratory disease, according to the company, severe cases put a large burden on the healthcare system with over 200k hospital admissions and causing 16k deaths. The total cost burden on major markets NVAX estimates at approximately $88B.

NVAX is leading the race to provide a treatment for this RSV Flu indication. Other companies addressing this indication are GSK and Medimmune with candidates at the Phase2 clinical stage. NVAX's vaccine is the first to demonstrate efficacy in this indication. In  Phase2 testing, their vaccine's immunization efficacy was measured at 41% with p=0.041. These results compare very favorably to approved vaccine Prevnar which showed a lower immunization efficacy of 31% with p=0.008.

NVAX has benefited from funding support from organizations like BARDA and the Gates Foundation. They are now in a strong financial position with over $430M in cash. These reserves will be adequate to advance their various vaccine candidates well into the future.

I estimate NVAX's vast pipeline of vaccines may eventually yield well over $1B in peak sales. Its current low Market Cap of $1.8B lies well below its true potential and now offers investors a very attractive entry point.

Disclosure - NVAX is a core holding of my Marketocracy fund. I do not short stocks 

ResApp Health (RAP.AX) - Not at its peak after a 1500% rise over the past 9 months

ResApp is a small Australian company developing an exciting iPhone App to detect respiratory disease.
This App aims to compete against today's respiratory disease diagnostic tools such as the stethoscope, imaging (x-ray/CT scan), blood and or sputum test.

I ran a Times Revenue Multiple valuation model for this stock using their research data and got a share price target of  $0.85 - $0.66. This presents an attractive over 150% upside from today's price.

Clinical results to date suggest this App has a very high chance of winning FDA approval. This App was able to correctly detect lower respiratory tract involvement in 97% of cases initially missed by experienced clinicians using a stethoscope. The App was also able to differentiate between viral and bacterial pneumonia with around 90% accuracy.

MD take-up of this new diagnostic tool will likely be modest since doctors have used the stethoscope for a very long time. However the uptake in the telehealth market will likely be very high. For my modeling I have given 10% market penetration by MDs and 80% by telehealth markets. 
Coming catalysts include an imminent telehealth partnership announcement, an initiation this quarter of a pivotal clinical study, and a FDA decision in Q4'16.
The risks with this investment include the potential for a similar App competitor to emerge.

Below are information slides from ResApp's last investor presentation:

This is ResApp's 12-month share price chart -

This investment should only be considered by risk adverse investors. Considering the already staggering share price increase large price retractions are possible.
My pricing model says there is still significant upside potential here.


Disclosure - I have no position in this stock but may initiate a long position in the coming weeks

Dipexium Pharmaceuticals (DPRX) - High likelihood of clinical success with big upside

Disclosure - I have no position but may initiate one before PH3 results

My CorMedix (CRMD) valuation model shows up to 160% upside

I have no position in CRMD but may open a long position.

Acadia Pharmaceuticals wins FDA approval and sets its drug price

The FDA has approved Nuplazid, Acadia atypical anti-psychotic drug for treating Parkinson's Disease Psychosis. Nuplazid is set for commercial launch in the US this June with a price tag of $1,950 per month.

In light of these recent developments I have updated my Acadia valuation. My new price target for ACAD is $48-$63 per share which presents over 100% upside.

I used the Times Revenue Multiple Valuation method.
Below is my model with assumptions:

I wrote about ACAD and its drug candidate back in April 2015.

I continue to view ACAD as an excellent long-term investment opportunity.



Disclosure - ACAD is a core holding of my Marketocracy Fund. I do not short stocks.

My Neuren Pharma valuation model after their negative PH2 TBI results

This is Neuren's PH2 TBI results Press Release



Disclosure – NEU.AX is a very small AU/NZ biopharma company that carries substantial risk. While its potential returns may be high its losses may also be high.
I am long NEU.AX.
I do not short stocks.

Neuren Pharmaceuticals (NEU.AX) - Awaiting TBI Phase 2 results

Clinical results are now imminent for Neuren's Phase2 trial in TBI (Traumatic Brain Injury - moderate to severe). Positive results in this indication would significantly boost Neuren's market value. This indication has a large 1 million US & EU potential patient population and its without an FDA approved disruptive drug.

Below is my Valuation Model with assumptions. It shows NEU.AX undervalued by as much as 200%.

Last year, I wrote about Neuren's drug here.


This next slide is from Neuren's latest investor presentation:

The status of Neuren's second TBI trial (mild or concussion) has become uncertain. This latest investor presentation does not provide a program timeline update, results were expected in 2Q16. The presentation states enrollment is proving difficult and the trial is under review.

Disclosure – NEU.AX is a very small AU/NZ biopharma company that carries substantial risk. While its potential returns may be high its losses may also be high.
I am long NEU.AX.
I do not short stocks.

Argos Therapeutics (ARGS) - my price target is $19-$13

Below is my valuation model with assumptions – 

This is their 12 month chart -

This is their Phase3 ADAPT trial design -

Disclosure - ARGS is a holding of my Marketocracy Fund.
I do not short stocks.

Medical Stocks Watchlist - Apr 2016

Northwest Biotherapeutics (NWBO) - huge upside potential with high risk

The Risks -

NWBO has suffered from the current biotech sell-off and may continue to drop in value should this sector continue to drop.
NWBO like other small biotech companies will require more funding and may continue raising capital under dilutive terms.
There is uncertainty with the timeline of the NWBO’s DCVax-Direct Phase 2 trials.
There is also uncertainty what direction major stakeholder Neil Woodford will now take that his relationship with NWBO management appears strained.
NWBO is increasingly targeted in the media despite its very low valuation.



Below is in article format from my interview with Forbes.com.

2015 was a very damaging year for Northwest Biotherapeutics (NWBO). Since I nominated NWBO as a best investment idea for Forbes.com the stock has dropped 75% of its value, down from$7 to $1.50. The stock initially rose to over $12 in July 2015 before then dropping steadily to today’s all-time lows.

NWBO is a small biotechnology company and like most of its peers carries a very risky profile. Small biotechnology companies are lightly traded and can easily be misunderstood so they are susceptible to wild share-price volatility.

I don’t believe NWBO’s current low valuation is justified. Most of its sell-off can be attributed to perceived troubles with its lead Phase 3 clinical trial. I don’t agree this trial is in real trouble and expect to see a recovery once its suspension is lifted and management explains what happened.


NWBO is working on ways to make the body's immune system more effective in fighting cancer. They have two promising vaccine candidates for treating solid tumor cancers.

DCVax-L is their lead candidate for treating newly diagnosed Glioblastoma (GBM) patients; this program is at an advanced Phase 3 stage.

DCVax-Direct, their second candidate, is for treating various inoperable cancers. This program is at an advanced Phase 1/2 stage.

NWBO’s approach to treating cancer is exciting and unique because, they claim their personalized dendritic cell vaccine platform can educate and direct the human immune system to identify, find, and destroy all cancer cells' antigens.

Cancers are known to each carry hundreds to thousands of different antigens so it makes sense that attacking all of them is your best approach at defeating the cancer.

There are other companies developing dendritic cell based vaccines but their treatments are designed to attack a single or several cancer cell antigens so their approaches will likely have limited successes with the fight against cancer.

Celldex’s (CLDX) recently failed GBM vaccine Rintega targeted a single cancer antigen. Immunocellular Therapeutics’s (IMUC) GBM vaccine ICT-107 targets 6 cancer antigens and will likely fare better than Rintega.


NWBO’s major problem began in August 2015 when new patient screening was temporarily suspended for its lead Phase 3 trial while a regulatory review was taking place.

Management unfortunately cannot say much about this trial while regulators are investigating. But leaving investors' questions unanswered has caused many to assume the worst and the stock has continued to decline in value.

Nevertheless, I think the Phase 3 trial is unlikely to have serious problems since regulators are allowing NWBO to continue to treat patients while they are reviewing it. Regulators typically halt troubled trials while reviews take place.

NWBO have performed very strongly in past studies. In a Phase 1/2 of 21 patients, DCVax-L produced excellent safety and efficacy data; no chemo/radiation like side effects with around 24 months of Progression Free Survival (PFS), that’s a 3-fold improvement on historical standard of care (SOC). To meet its Phase 3 primary endpoint DCVax-L has to improve PFS by 4 months. I think DCVax-L has a high probability of clinical success.

Some patient data is also available from DCVax-L‘s Phase 3 trial and it is also very encouraging. NWBO is running a Phase 3 “Info Arm” for progressive GBM patients that are not eligible for their main Phase 3 trial. Median Overall Survival of 25 of these patients (rGBM) is 8 months better than the expected SOC survival.

Two European medical bodies have also been impressed with NWBO’s clinical data. The German FDA equivalent has already approved DCVax-L for compassionate use even before final Phase 3 results. The UK medical board is also considering early approval of DCVax-L.

I continue to view NWBO as an attractive long-term investment. I am very encouraged by their clinical results so far but the risks with this investment have dramatically increased over the past 7 months so while I continue to hold the stock I am not adding to my position until management can answer some of my questions.
 
There may be good legal reasons for management to remain quiet considering the regulatory situation. But there is no doubt that management's silence has shaken investors' confidence and severely damaged their share price. Here's what I would like to know before I think about adding to my position.

1. How many patients are enrolled in the DCVax-L Trial?

2. How many patients have been treated in European compassionate trials?

3. Are the compassionate trials suspended?

4. What is the timeline for DCVax-Direct?



My price target for NWBO is $11-$16 which makes this stock a 10-bagger candidate. In my pricing model I have only considered DCVax-L for GBM patients. I have given the vaccine between 55% and 75% chance of clinical success and a 40% market penetration. I estimate peak sales near $250M in the US and EU. Then using a price/sales multiple of 8 and discounting I get a market cap close to $2B which is in-line with valuations for its Immunotherapy peers like KITE $2.6B, BLUE $2.0B, & JUNO $4.4B.

At today’s valuation of $140M, NWBO is heavily over-sold but with high risks.

This is the link to my interview in Forbes.com


Disclosure - NWBO is a core holding of my Marketocracy Fund.
I do not short stocks.

TG Therapeutics (TGTX) - undervalued by as much as 300% by my modelling

I have updated my pricing model for TG Therapeutics (TGTX). My new price target has increased to $26-$39 giving TGTX over 300% upside from today's share price.

For the risk-adverse investor this is a very attractive investment opportunity.

I have made the following changes to my model:

- added the TG-1303 program, this is a pivotal Phase 3 trial now actively recruiting.
- price for TG-1303 is estimated at $80,000 per year. This places it conservatively between the price of Gazyva + chemo & Imbruvica (~$50k & ~$100k).
- 10% market penetration used for TG-1303, the CLL space is crowded however TG-1303's best-in-class safety profile and excellent efficacy should enable it to win sizable market share.
- lowered market penetration estimate for TG1101 & Ibrutinib to 15% from 25% because of the emergence of Acalabrulim. Acalabrulim will be a direct competitor and is showing comparable efficacy and safety profiles to TG1101.
- added royalties and milestone payments.
- added the breakdown of patients between USA & EU and pricing estimates between USA and EU
- lowered price/sales ratio to 8 from 10, considering the change to negative in biotechnology sentiment.
- No value assigned for the sort indication in Multiple Sclerosis (MS). This is a very lucrative indication that alone would be valued higher than all its other current programs.

Below is my model with its detailed assumptions:

Next, from a TGTX PR -> 2016 Goals:

TGTX's Phase3 Trial designs:

Disclosure - TGTX is a core holding of my Marketocracy Fund. This Fund is available for investment.
I do not short stocks.

Medical Stocks Technical Watchlist - Feb 2016

LABD

BIS

NAII

ARGS

SCAI

CERS

SPHS

IPCI

My latest medical stocks technical watchlist is very short since this sector is in sharp decline. This year the IBB Biotech Index is already down a staggering 25% so I am not confident buying into this market. Biotech stocks began declining around Aug 2015 and are now down around 38%. 

My fund is now holding close to maximum cash and waiting for improvements in market sentiment to open new positions.

Acadia Pharmaceuticals (ACAD) - attractive low-risk biotech investment opportunity

My price target for ACAD is now $39-$57 per share which presents over 150% upside potential.

I used the Times Revenue Multiple Valuation method.
Below is my Valuation Model with assumptions:

I wrote about ACAD and it drug candidate back in April 2015.

I continue to view ACAD as an excellent low-risk investment opportunity.



Disclosure - ACAD is a core holding of my Marketocracy Fund. This Fund is available for investment.
I do not short stocks.