Date: Dec 08, 2015 Author: John Carroll Source: Fierce Biotech (
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Northwest Biotherapeutics ($NWBO) is defying its big investor Neil Woodford, bypassing his candidate to run an independent investigation into allegations of financial misdeeds at the biotech and instead opting to engage a pair of attorneys to run the probe.
In a release early Tuesday, Northwest said that the biotech had appointed two independent directors--Jerry Jasinowski and Robert Farmer--to a "special committee" that would oversee an investigation of the allegations run by Irvin Nathan (who describes himself as a white collar defense attorney on his profile) and Steven Kaplan of Arnold & Porter LLP.
Investors weren't in a forgiving mood after Northwest's latest controversial move today. Shares dropped 11% in premarket trading.
A few days ago Woodford pitched the idea of bringing in ex-FBI agent Elliott Leary as an independent director to run a probe into the company's financial dealings. Leary is a managing director at Freeh Group International Solutions, a risk management firm run by former FBI director Louis Freeh, which was "engaged" by Woodford's fund in relation to its investment.
Woodford, a star fund manager who helped revive the biotech investing sector in the U.K. with his bullish comments on the industry's future prospects, has been forced to defend the decision to grab a 28% stake in Northwest. Northwest shares have been badly battered in recent months.
"It is too early to pass judgment on Northwest, but we have hit a bump in the road that needs to be addressed," Woodford wrote in a recent blog post. Responding through a spokesperson this morning, Woodford's group told FierceBiotech: "We are pleased the company agrees with our recommendation to appoint a new non-executive director and undertake a special investigation of the allegations."
In an unusual separate statement this morning, Northwest outlined why Woodford's candidate was snubbed.
"These reasons include the Board's understanding that Mr. Leary has never served on any board, has no biotech experience and no pharma experience other than certain government investigations, has no experience working with companies subjected to stock manipulation, has no experience interacting with investors or helping with corporate fundraising, has not worked with companies on developing business plans or strategies, has never been asked to go on the board of any other company where he has conducted investigations, and does not anticipate playing an ongoing role on NW Bio's board after the investigation is completed and indicated he would probably resign at that time," the company asserted. Northwest added that the Freeh Group was also not independent enough to be involved, claiming that it is affiliated with a law firm that has ties to competitors.
Soon after Woodford gambled an extra $30 million on Northwest, bringing his total wager to $95 million, Bethesda, MD-based Northwest was hit by a report from Phase Five Research, which has been shorting the biotech's stock and stands to profit from the drumbeat of allegations that have helped drive down the company's stock. In part, the Phase Five report repeated some of the earlier work done by TheStreet's Adam Feuerstein, who has been dogging the company for the past two years over Northwest's financial ties to Cognate BioServices, a contract research company that was formed by Northwest CEO Linda Powers' Toucan Capital venture group.
According to Phase Five, Northwest has paid Cognate more than $300 million over the years, at least some of which is outlined in public regulatory filings. Phase Five also outlined financial ties between Northwest and Navid Malik, an analyst at Cenkos Securities who was suspended, with pay, a few days ago while the firm explored a claim that Malik had received $5 million in Northwest stock after putting out a "bullish" report on its prospects. Malik is now a nonexecutive director at Northwest.
"As we announced last week, we welcome Mr. Woodford's recent call for an investigation to address the allegations in a recent anonymous internet report and lawsuit, and we agree with Mr. Woodford that the investigation needs to be fully independent," Jasinowski said in a statement. "We are particularly pleased that after considering various possibilities, we have selected accomplished, experienced, respected and fully independent parties to assist us in the investigation."
