Will a defiant Northwest Bio shy away from a financial investigation by an FBI vet?
- Last week, major U.K.-based biopharma investor Neil Woodford demanded that the immuno-oncology biotech Northwest Biotherapeutics open itself up to an independent investigation of its finances, including the financials of CEO Linda Powers and the firm's corporate governance.
- Woodford, who is known for his intimate involvement with major British pharma companies such as AstraZeneca and GlaxoSmithKline, recently became a 28% stakeholder in the firm (he's funneled $95 million into the company). His concerns are based on a recent report from a known short-seller group called Phase Five Research alleging shoddy financial ties between Northwest and several other entities that are linked with Powers.
- In a letter filed with the SEC, Woodford even recommended his own lead investigator: FBI veteran Elliott Leary.
- Powers responded on Monday morning by saying that the firm "welcomes Neil Woodford's call for an independent investigation of allegations in a recent anonymous internet report on NW Bio" and that the company is in the process of interviewing Leary for a role as an additional independent director on its board—but nothing is set in stone quite yet. Northwest shares have fallen from a high of $12.24 over the summer to about $4.70 in recent days.
Northwest Bio has consistently been hammered by critics such as The Street's Adam Feuerstein, who has pointed to the relationship between Powers and Northwest and the CRO Cognate BioServices (which was itself created through a Powers-run venture capital firm called Toucan Capital) and said that something smells fishy.
The Phase Five report alleges that Northwest has funneled $300 million to Powers and Powers-controlled private companies, all while seeking approval for a phase 3 cancer vaccine called DCVax that critics say is unlikely to ever see the light of day.
Woodford's involvement in the embattled firm lends it some much-needed heft. But it now seems that he wishes to proceed cautiously with his investment in a time when major pharma companies such as Valeant are under the microscope over alleged malfeasance.
Powers, for her part, is remaining defiant and welcoming Woodford's call for an investigation. She told the Wall Street Journal over the weekend that the claims against Northwest amount to mud-slinging.
"We also welcome Mr. Woodford's proposal for an independent investigation of claims made in a recent internet report," she added in a statement on Monday. "Most of those claims have been recycled over and over, and the internet report was anonymous.
"However, the Company and the Board take such claims seriously, the Board has already been meeting to address the report, and the Board plans to meet again this week in regard to moving forward on an independent investigation such as Mr. Woodford has proposed."
The question is whether or not the company will ultimately approve Woodford's choice of Leary to lead the investigation. Leary is a senior exec at the risk management group Freeh Group International Solutions. Chances are that Woodford won't be willing to accept many other candidates for the position, and that any attempts by Northwest to push a different investigator will come across as an attempt to avoid a truly independent investigation.