We are offering 2,272,727 shares of our
common stock at a price of $6.60 per share to a single existing institutional investor. We also are offering 2,272,727 shares of
our common stock at a price of $7.50 per share pursuant to an overallotment right granted to the investor for a period of one year
from the date of the closing of the sale of the initial 2,272,727 shares offered hereby.
Our common stock is listed on The NASDAQ
Capital Market under the symbol “NWBO”. On April 10, 2014, the closing sale price of our common stock was $6.85 per
share.
RISK FACTORS
Investing in our common stock involves
risk. Before deciding whether to invest in our common stock, you should consider carefully the risks and uncertainties described
below. You should also consider the risks, uncertainties and assumptions discussed under the heading “Risk Factors”
included in our most recent annual report on Form 10-K which is on file with the SEC and is incorporated herein by reference, and
which may be amended, supplemented or superseded from time to time by other reports we file with the SEC in the future. There may
be other unknown or unpredictable economic, business, competitive, regulatory or other factors that could have material adverse
effects on our future results. If any of these risks actually occurs, our business, business prospects, financial condition
or results of operations could be seriously harmed. This could cause the trading price of our common stock to decline, resulting
in a loss of all or part of your investment. Please also read carefully the section above entitled “Cautionary Note Regarding
Forward-Looking Statements.”
Risks Related to our Operations
We will need to raise substantial funds, on an ongoing
basis, for general corporate purposes and operations, including our clinical trials. Such funding may not be available or may not
be available on acceptable terms.
We will need substantial additional
funding, on an ongoing basis, in order to continue execution of our clinical trials, to move our product candidates towards commercialization,
to continue prosecution and maintenance of our large patent portfolio, to continue development and optimization of our manufacturing
and distribution arrangements, and for other corporate purposes. Any financing, if available, may include restrictive covenants
and provisions that could limit our ability to take certain actions, preference provisions for the investors, and/or discounts,
warrants or other incentives. Any financing will involve issuance of equity and/or debt, and such issuances will be dilutive to
existing shareholders. There can be no assurance that we will be able to complete any of the financings, or that the terms for
such financings will be acceptable. If we are unable to obtain additional funds on a timely basis or on acceptable terms, we may
be required to curtail or cease some or all of our operations at any time.
We are likely to continue to incur substantial losses,
and may never achieve profitability.
As of December 31, 2013, we had an aggregate
accumulated cash deficit, since inception of our company, of $177.8 million, and accumulated non-cash (accounting measures) deficit
of $207.1 million, making a combined cash and non-cash accumulated deficit of $384.9 million since our inception. We may never
achieve or sustain profitability.
Our auditors have issued a “going concern”
audit opinion.
Our independent auditors have indicated
in their report on our December 31, 2013 financial statements that there is substantial doubt about our ability to continue as
a going concern. A “going concern” opinion indicates that the financial statements have been prepared assuming we will
continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and
classification of assets, or the amounts and classification of liabilities, that may result if we do not continue as a going concern.
Therefore, you should not rely on our consolidated balance sheet as an indication of the amount of proceeds that would be available
to satisfy claims of creditors, and potentially be available for distribution to stockholders, in the event of liquidation.
Our management and our independent
auditors have identified internal control deficiencies, which our management and our independent auditor believe constitute material
weaknesses.
In connection with the preparation
of our financial statements for the year ended December 31, 2013, and prior years, our management and our independent auditor identified
certain internal control deficiencies that, in the aggregate, represent material weaknesses, including:
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insufficient segregation of duties and oversight of work performed in our finance and accounting function due to limited personnel; and
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lack of controls in place to ensure that all material transactions and developments impacting the financial statements are reflected.
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As part of our independent auditors’
communications with our audit committee with respect to audit procedures for the year ended December 31, 2013, our independent
auditors informed the audit committee that these deficiencies constituted material weaknesses, as defined by Auditing Standard
No. 5, “An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements and
Related Independence Rule and Conforming Amendments,” established by the Public Company Accounting Oversight Board, or PCAOB.
We have begun taking appropriate and reasonable steps, and will continue and complete such steps in due course, to make the necessary
improvements to address these deficiencies, but the timing of such steps is uncertain and the availability of funding and resources
for such steps are also uncertain. Our ability to retain or attract qualified individuals to serve on our Board and to take on
key management roles within our company is also uncertain. Our failure to successfully complete the remedies of the existing weaknesses
could lead to heightened risk for financial reporting mistakes and irregularities, and/or lead to a loss of public confidence in
our internal controls that could have a negative effect on the market price of our common stock.
As a development stage company with a novel technology
and unproven business strategy, our limited history of operations makes an evaluation of our business and prospects difficult.
We have had a limited operating history
and we are still in the process of developing our product candidates through clinical trials. Our technology is novel and involves
mobilizing the immune system to fight a patient’s cancer. Immune therapies have been pursued by many parties for decades,
and have experienced many failures. In addition, our technology involves personalized treatment products, a new approach to medical
products that involves new product economics and business strategies, which have not yet been shown to be commercially feasible
or successful. We have not yet gone through scale-up of our operations to commercial scale. This limited operating history, along
with the novelty of our technology, product economics, and business strategy, and the limited scale of our operations to date,
makes it difficult to assess our prospects for generating revenues commercially in the future.
We will need to expand our management
and technical personnel as our operations progress, and we may not be able to recruit such additional personnel and/or retain existing
personnel.
As February 28, 2014, we employed
nine full-time employees and three part-time employees plus manufacturing related employees in Germany. The rest of our personnel
are retained on a consulting or contractor basis. Many biotech companies would typically have a larger number of employees by the
time they reach late stage clinical trials. Such trials require extensive management activities and skill sets, including scientific,
medical, regulatory (for FDA and foreign regulatory counterparts), manufacturing, distribution and logistics, site management,
business, financial, legal, public relations outreach to both the patient community and physician community, intellectual property,
administrative, regulatory (SEC), investor relations and other.
In order to fully perform all these
diverse functions, with late stage trials under way at many sites across the U.S. and in Europe, we will need to expand our management
and technical personnel. However, the pool of such personnel with expertise and experience with living cell products, such as our
DCVax immune cell product, is very limited. In addition, we are a small company with limited resources, our business prospects
are uncertain and our stock price is volatile. For some or all of such reasons, we may not be able to recruit all the management
and technical personnel we need, and/or we may not be able to retain all of our existing personnel. In such event, we may have
to continue our operations with a smaller than usual team of personnel, and our business and financial results may suffer.
We rely at present on third-party contract manufacturers.
As a result, we may be at risk for capacity limitations and/or supply disruptions.
We currently rely upon Cognate BioServices,
Inc., or Cognate, to produce all of our DCVax product candidates in the U.S., and to supervise the production of our DCVax product
candidates outside the U.S. The shareholders of Cognate include Toucan Capital Fund III, L.P., one of our stockholders, and its
affiliates. We have an agreement in place with Cognate pursuant to which Cognate has agreed to provide manufacturing and other
services for five years, in connection with our Phase III clinical trial of DCVax-L in brain cancer, and other programs. The agreement
requires us to make certain minimum monthly payments to Cognate in order to have dedicated manufacturing capacity available for
our products, irrespective of whether we actually order any DCVax products. The agreement also specifies the amounts we must pay
for Cognate's actual manufacturing of DCVax for patients.
Due to the large expansion of our
Phase III trial with DCVax-L for brain cancer, and initiation of the trial in Europe, as well as initiation of our DCVax-Direct
program, and certain advanced product development work, additional services that are required for logistics, distribution and tracking,
and other pending programs, we are seeking to expand our agreements with Cognate accordingly. However, there can be no assurance
that we will be able to complete these expanded agreements, or that we can complete them on terms that are favorable. The agreements
we are pursuing will cover manufacturing and related services for the DCVax-L program, the DCVax-Direct program, ancillary services
and substantial manufacturing capacity expansion. The agreements will involve substantial upfront payments and will be subject
to our July 31, 2013 conversion transaction agreement for payment of at least half of all invoices in common stock of the Company,
and the remainder in cash, at $4.00 per share for an initial period in parallel with the lock-up period under the conversion transaction,
subject to most favored nation treatment with respect to terms provided to other investors or creditors (including with respect
to any warrants). The agreements may cover commercial as well as clinical activities, and will only be terminable early by either
party for uncured material breach by the other party.
We have entered into an agreement
with King’s College London to manufacture DCVax for our clinical trial and our compassionate use cases. Cognate will manage
and supervise the processing in London. In addition, our partner, Fraunhofer IZI Institute in Germany, has received approval and
certification from the regional and national regulatory agencies in Germany for the manufacture of DCVax for GBM. We anticipate
that the manufacturing facilities in the U.K. will eventually obtain the necessary approvals, and that the German and U.K. facilities’
will be able to supply DCVax products for anywhere in Europe; however, this may not turn out to be feasible, for regulatory, operational
and/or logistical reasons.
Problems with the manufacturing facilities
or processes of Cognate, or of our partners in the U.K. and/or Germany, could result in a failure to produce, or a delay in producing
adequate supplies of our DCVax product candidates. A number of factors could cause interruptions or delays, including the inability
of a supplier to provide raw materials, equipment malfunctions or failures, damage to a facility due to natural disasters or otherwise,
changes in FDA or European regulatory requirements or standards that require modifications to our manufacturing processes, action
by the FDA or European regulators, or by us that results in the halting or slowdown of production of components or finished products
due to regulatory issues, our manufacturers going out of business or failing to produce product as contractually required, and/or
other similar factors. Because manufacturing processes for our DCVax product candidates are highly complex, require specialized
facilities and personnel that are not widely available in the industry, involve equipment and training with long lead times, and
are subject to lengthy regulatory approval processes, alternative qualified production capacity may not be available on a timely
basis or at all. Difficulties, delays or interruptions in the manufacturing and supply of our DCVax product candidates could require
us to stop enrolling new patients into our trials, and/or require us to stop the trial or other program, increase our costs, damage
our reputation and, if our product candidates are approved for sale, cause us to lose revenue or market share if our manufacturers
are unable to timely meet market demands.
The manufacturing of our product candidates will have
to be greatly scaled up for commercialization, and neither we nor other parties in the industry have experience with such scale-up.
As is the case with any clinical trial,
our Phase III clinical trial of DCVax-L for GBM involves a number of patients that is a small fraction of the number of potential
patients for whom DCVax-L may be applicable in the commercial market. The same will be true of our other clinical programs with
our other DCVax product candidates. If our DCVax-L, and/or other DCVax product candidates, are approved for commercial sale, it
will be necessary to greatly scale up the volume of manufacturing, far above the level needed for the trials. Neither we nor our
contract manufacturers have experience with such scale-up. In addition, there are very few consultants or advisors in the industry
who have such experience and can provide guidance or assistance, because active immune therapies such as DCVax are a fundamentally
new category of product in two major ways: these active immune therapy products consist of living cells, not chemical or biologic
compounds, and the products are personalized. To our knowledge, no such products have successfully completed the necessary scale-up
for commercialization without material difficulties. For example, Dendreon Corporation has encountered substantial difficulties
trying to scale up the manufacturing of its Provenge® product for commercialization.
The necessary specialized facilities, equipment and personnel
may not be available or obtainable for the scale-up of manufacturing of our product candidates.
The manufacture of living cells requires
specialized facilities, equipment and personnel which are entirely different than what is required for the manufacturing of chemical
or biologic compounds. Scaling up the manufacturing of living cell products to volume levels required for commercialization will
require enormous amounts of these specialized facilities, equipment and personnel — especially where, as in the
case of our DCVax product candidates, the product is personalized and must be made for each patient individually. Since living
cell products are so new, and have barely begun to reach commercialization, the supply of the specialized facilities, equipment
and personnel needed for them has not yet developed. It may not be possible for us or our manufacturers to obtain all of the specialized
facilities, equipment and personnel needed for commercialization of our DCVax product candidates. This could delay or halt our
commercialization.
Our technology is novel, involves complex immune system
elements, and may not prove to be effective.
Data already obtained, or in the future
obtained, from pre-clinical studies and clinical trials do not necessarily predict the results that will be obtained from later
pre-clinical studies and clinical trials. Over the course of several decades, there have been many different immune therapy product
designs — and many product failures and company failures. To our knowledge, to date, only one active immune therapy,
Provenge, has been approved by the FDA. The human immune system is complex, with many diverse elements, and the state of scientific
understanding of the immune system is still limited. Some immune therapies previously developed by other parties showed surprising
and unexpected toxicity in clinical trials. Other immune therapies developed by other parties delivered promising results in early
clinical trials, but failed in later stage clinical trials.
To date, we have only completed early
stage trials with our first product (DCVax-L) in limited numbers of patients. Although the results of those trials were quite positive,
those results may not be achieved in our later stage clinical trials, such as the 312-patient Phase III trial we are now conducting
for GBM, and our product candidates may not ultimately be found to be effective. Further, although we have not seen toxicity with
our DCVax-L product in the early stage clinical trials, toxicity may be seen as we treat larger numbers of patients in late stage
clinical trials. If such toxicity occurs, it could limit, delay or stop further clinical development or commercialization of our
DCVax-L product.
We have just begun our first-in-man
Phase I/II clinical trial with our third product – DCVax Direct — after prior early stage trials with DCVax-L and DCVax-Prostate.
We do not yet know what efficacy or toxicity DCVax-Direct may show in human patients. This product may not ultimately be found
to be effective, and/or it may be found to be toxic, which could limit, delay or stop clinical development or commercialization
of DCVax-Direct.
Clinical trials for our product candidates are expensive
and time consuming, and their outcome is uncertain.
The process of obtaining and maintaining
regulatory approvals for new therapeutic products is expensive, lengthy and uncertain. Costs and timing of clinical trials may
vary significantly over the life of a project owing to any or all of the following non-exclusive reasons:
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the duration of the clinical trial;
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the number of sites included in the trials;
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the countries in which the trial is conducted;
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the length of time required and ability to enroll eligible patients;
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the number of patients that participate in the trials;
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the number of doses that patients receive;
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the drop-out or discontinuation rates of patients;
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per patient trial costs;
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third party contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner;
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our final product candidates having different properties in humans than in laboratory testing;
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the need to suspend or terminate our clinical trials;
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insufficient or inadequate supply or quality of necessary materials to conduct our trials;
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potential additional safety monitoring, or other conditions required by the FDA or comparable foreign regulatory authorities regarding the scope or design of our clinical trials, or other studies requested by regulatory agencies;
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problems engaging independent review Boards, or IRBs, to oversee trials or in obtaining and maintaining IRB approval of studies;
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the duration of patient follow-up;
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the efficacy and safety profile of a product candidate;
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the costs and timing of obtaining regulatory approvals; and
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the costs involved in enforcing or defending patent claims or other intellectual property rights.
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Late stage clinical trials, such as
our Phase III clinical trial for GBM patients, are especially expensive, typically requiring tens of millions of dollars, and take
years to reach their outcomes. Such outcomes often fail to reproduce the results of earlier trials. It is often necessary to conduct
multiple late stage trials (including multiple Phase III trials) in order to obtain sufficient results to support product approval,
which further increases the expense. Sometimes trials are further complicated by changes in requirements while the trials are under
way (for example, when the standard of care changes for the disease that is being studied in the trial). Accordingly, any of our
current or future product candidates could take a significantly longer time to gain regulatory approval than we expect, or may
never gain approval, either of which could delay or stop the commercialization of our DCVax product candidates.
We may be required to suspend
or discontinue clinical trials due to unexpected side effects or other safety risks that could preclude approval of our product
candidates.
Our clinical trials may be suspended
at any time for a number of reasons. For example, we may voluntarily suspend or terminate our clinical trials if at any time we
believe that they present an unacceptable risk to the clinical trial patients. In addition, the FDA or other regulatory agencies
may order the temporary or permanent discontinuation of our clinical trials at any time if they believe that the clinical trials
are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk
to the clinical trial patients.
Administering any product candidate
to humans may produce undesirable side effects. These side effects could interrupt, delay or halt clinical trials of our product
candidates and could result in the FDA or other regulatory authorities denying further development or approval of our product candidates
for any or all targeted indications. Ultimately, some or all of our product candidates may prove to be unsafe for human use. Moreover,
we could be subject to significant liability if any volunteer or patient suffers, or appears to suffer, adverse health effects
as a result of participating in our clinical trials.
We have limited experience in conducting and managing
clinical trials.
We rely on third parties to assist
us, on a contract services basis, in managing and monitoring all of our clinical trials. We do not have experience conducting late
stage clinical trials by ourselves without third party service firms, nor do we have experience in supervising such third parties
in managing late stage, multi-hundred patient clinical trials, other than our current Phase III trial for GBM. Our lack of experience
and/or our reliance on these third party service firms may result in delays or failure to complete these trials successfully and
on time. If the third parties fail to perform, we may not be able to find sufficient alternative suppliers of those services in
a reasonable time period, or on commercially reasonable terms, if at all. If we were unable to obtain alternative suppliers of
such services, we might be forced to delay, suspend or stop our Phase III trial for GBM.
We may fail to comply with regulatory requirements.
Our success will be dependent upon
our ability, and our collaborative partners’ abilities, to maintain compliance with regulatory requirements in multiple countries,
including current good manufacturing practices, or cGMP, and safety reporting obligations. The failure to comply with applicable
regulatory requirements can result in, among other things, fines, injunctions, civil penalties, total or partial suspension of
regulatory approvals, refusal to approve pending applications, recalls or seizures of products, operating and production restrictions
and criminal prosecutions.
Regulatory approval of our product candidates may be withdrawn
at any time.
After any regulatory approval has
been obtained for medicinal products (including any early approval such as our Hospital Exemption approval in Germany and/or our
reimbursement eligibility determination in Germany), the product and the manufacturer are subject to continual review, including
the review of adverse experiences and clinical results that are reported after our products are made available to patients, and
there can be no assurance that such approval will not be withdrawn or restricted. Regulators may also subject approvals to restrictions
or conditions, or impose post-approval obligations on the holders of these approvals, and the regulatory status of such products
may be jeopardized if such obligations are not fulfilled. If post-approval studies are required, such studies may involve significant
time and expense.
The manufacturer and manufacturing
facilities we use to make any of our products will also be subject to periodic review and inspection by the FDA or EMA, as applicable.
The discovery of any new or previously unknown problems with the product, manufacturer or facility may result in restrictions on
the product or manufacturer or facility, including withdrawal of the product from the market. We will continue to be subject to
the FDA or the European Medicines Agency, or EMA, requirements, as applicable, governing the labeling, packaging, storage, advertising,
promotion, recordkeeping, and submission of safety and other post-market information for all of our product candidates, even those
that the FDA or EMA, as applicable, had approved. If we fail to comply with applicable continuing regulatory requirements, we may
be subject to fines, suspension or withdrawal of regulatory approval, product recalls and seizures, operating restrictions and
other adverse consequences.
Our Operations Under Early Access
Programs Such As the Hospital Exemption in Germany May Not Be Successful
There is not much accumulated
or available experience, information or precedents in regard to early access programs such hospital exemption programs and/or similar
programs, especially for new types of treatments such as immune therapies. Our DCVax-L product for glioma brain cancers is one
of the first products to receive a Hospital Exemption approval in Germany. Establishing operations under this Hospital Exemption
will require us to establish and implement new operational, contractual, financial and other arrangements with physicians, hospitals,
patients and others. We may not be successful in establishing and implementing such arrangements, and/or such arrangements may
not be financially satisfactory or viable.
We May Not Be Successful In
Negotiating Acceptable or Viable Reimbursement
The reimbursement eligibility
determination that we have received in Germany for our DCVax-L product for brain cancer allows us to negotiate reimbursement arrangements,
but does not ensure a positive outcome. We must negotiate with hospitals and multiple Sickness Funds in Germany. Reimbursement
at the current stage of our DCVax-L programs is extraordinary, and we do not have substantial precedents to refer to. Our DCVax-L
product involves a different cost structure than traditional drugs and may require different reimbursement arrangements. The reimbursement
arrangements also may be applied on a patient by patient basis. We may not be successful in negotiating or obtaining acceptable
or viable reimbursement terms.
Our product candidates will require
a different distribution model than conventional therapeutic products, and this may impede commercialization of our product candidates.
Our DCVax product candidates consist of
living human immune cells. Such products are entirely different from chemical or biologic drugs, and require different handling,
distribution and delivery than chemical or biologic drugs. One crucial difference is that the biomaterial ingredients (immune cells
and tumor tissue) from which we make DCVax products and the finished DCVax products themselves are subject to time constraints
in the shipping and handling. The biomaterial ingredients come from the medical centers to the manufacturing facility fresh and
unfrozen, and must arrive within a certain time and in usable condition. Performance failures by the medical center or the courier
company can result in biomaterials that are not usable, in which case it may not be possible to make DCVax product for the patient
involved. The finished DCVax porducts are frozen, and must remain frozen throughout the process of distribution and delivery to
the medical center or physician’s office, until the time of administration to the patient, and cannot be handled at room
temperature until then. In addition, our DCVax product candidates are personalized and they involve ongoing treatment cycles over
several years for each patient. Each product shipment for each patient must be tracked and managed individually. For all of these
reasons, among others, we will not be able to simply use the distribution networks and processes that already exist for conventional
drugs. It may take time for shipping companies, hospitals, pharmacies and physicians to adapt to the requirements for handling,
distribution and delivery of these products, which may adversely affect our commercialization.
Our product candidates will require
different marketing and sales methods and personnel than conventional therapeutic products. Also, we lack sales and marketing
experience. These factors may result in significant difficulties in commercializing our product candidates.
The commercial success of any of our
product candidates will depend upon the strength of our sales and marketing efforts. We do not have a marketing or sales force
and have no experience in marketing or sales of products like our lead product, DCVax-L for GBM. To fully commercialize our product
candidates, we will need to recruit and train marketing staff and a sales force with technical expertise and ability to manage
the distribution of our DCVax-L for GBM. As an alternative, we could seek assistance from a corporate partner or a third party
services firm with a large distribution system and a large direct sales force. However, since our DCVax products are living cell,
immune therapy products, and these are a fundamentally new and different type of product than are on the market today, we would
still have to train such partner’s or such services firm’s personnel about our products, and would have to make changes
in their distribution processes and systems to handle our products. We may be unable to recruit and train effective sales and marketing
forces or our own, or of a partner or a services firm, and/or doing so may be more costly and difficult than anticipated. Such
factors may result in significant difficulties in commercializing our product candidates, and we may be unable to generate significant
revenues.
The availability and amount of potential reimbursement
for our product candidates by government and private payers is uncertain and may be delayed and/or inadequate.
The availability and extent of reimbursement
by governmental and/or private payers is essential for most patients to be able to afford expensive treatments, such as cancer
treatments. In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers
for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services, as CMS decides
whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payers tend to follow CMS to a
substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement for fundamentally novel products
such as ours, as there is no body of established practices and precedents for these new products. To date, we are aware of only
one active immune therapy that has reached the stage of a reimbursement decision (Provenge). Although CMS approved coverage and
reimbursement for Provenge, and private payers followed suit, there remain substantial questions and concerns about reimbursement
for Provenge, and such questions and concerns appear to be impeding sales.
Reimbursement agencies in Europe can be
even more conservative than CMS in the U.S. A number of cancer drugs which have been approved for reimbursement in the U.S. have
not been approved for reimbursement in certain European countries, and/or the level of reimbursement approved in Europe is lower
than in the U.S.
Various factors could increase the difficulties
for our DCVax products to obtain reimbursement. Costs and/or difficulties associated with the reimbursement of Provenge could create
an adverse environment for reimbursement of other immune therapies, such as our DCVax products. Approval of other competing products
(drugs and/or devices) for the same disease indications could make the need for our products and the cost-benefit balance seem
less compelling. The cost structure of our product is not a typical cost structure for medical products, as the majority of our
costs are incurred up front, when the manufacturing of the personalized product is done. Our atypical cost structure may not be
accommodated in any reimbursement for our products. If we are unable to obtain adequate levels of reimbursement, our ability to
successfully market and sell our product candidates will be adversely affected.
The manner and level at which reimbursement
is provided for services related to our product candidates (e.g., for administration of our product to patients) are also important.
If the reimbursement for such services is inadequate, that may lead to physician resistance and adversely affect our ability to
market or sell our products.
The methodology under which CMS makes
coverage and reimbursement determinations is subject to change, particularly because of budgetary pressures facing the Medicare
program. For example, the Medicare Prescription Drug, Improvement, and Modernization Act, or Medicare Modernization Act, enacted
in 2003, provided for a change in reimbursement methodology that has reduced the Medicare reimbursement rates for many drugs, including
oncology therapeutics.
In markets outside the U.S., where
we plan to operate in the future, the prices of medical products are subject to direct price controls and/or to reimbursement with
varying price control mechanisms, as part of national health systems. In general, the prices of medicines under such systems are
substantially lower than in the U.S. Some jurisdictions operate positive and/or negative list systems under which products may
only be marketed once a reimbursement price has been agreed. Other countries allow companies to fix their own prices for medicines,
but monitor and control company profits. The downward pressure on health care costs in general, particularly prescription drugs,
has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. Accordingly, in
markets outside the U.S., the reimbursement for our products may be reduced compared with the U.S. and may be insufficient to generate
commercially reasonable revenues and profits.
Competition in the biotechnology and biopharmaceutical
industry is intense and most of our competitors have substantially greater resources than we do.
The biotechnology and biopharmaceutical
industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products.
Several companies, such as Novartis, Amgen and Bluebird Bio, Dendreon, Celldex Therapeutics, Inc., Activartis, Oxford Biomedica
plc, Argos Therapeutics, Inc., Agenus, Inc., Prima Biomed, Ltd., Avax Technologies, Inc., Immunocellular Therapeutics, Ltd., Bavarian
Nordic, Bellicum Pharmaceuticals, and others are actively involved in the research and development of immune therapies or cell-based
therapies for cancer. In addition, other novel technologies for cancer are under development or commercialization, such as the
electro-therapy device of NovoCure™. Of these companies, only two have obtained approval of such therapy: Dendreon (for its
Provenge treatment of prostate cancer) and NovoCure. Additionally, several companies, such as Medarex, Inc., Amgen, Inc., Agensys,
Inc., and Genentech, Inc., are actively involved in the research and development of monoclonal antibody-based cancer therapies.
Currently, a substantial number of antibody-based products are approved for commercial sale for cancer therapy, and a large number
of additional ones are under development. Genentech is also engaged in several Phase III clinical trials for additional antibody-based
therapeutics for a variety of cancers, and several other companies are in early stage clinical trials for such products. Many other
third parties compete with us in developing alternative therapies to treat cancer, including: biopharmaceutical companies; biotechnology
companies; pharmaceutical companies; academic institutions; and other research organizations, as well as some medical device companies
(e.g., NovoCure and MagForce Nano Technologies AG).
We face extensive competition from
companies developing new treatments for brain cancer. These include a variety of immune therapies, as mentioned above, as well
as a variety of small molecule drugs and biologics drugs. There are also a number of existing drugs used for the treatment of brain
cancer that may compete with our product, including, Avastin® (Roche Holding AG), Gliadel® (Eisai Co. Ltd.), and Temodar®
(Merck& Co., Inc.), as well as NovoCure’s electrotherapy device.
Most of our competitors have significantly
greater financial resources and expertise in research and development, manufacturing, pre-clinical testing, conducting clinical
trials, obtaining regulatory approvals and marketing and sales than we do. Smaller or early-stage companies may also prove to be
significant competitors, particularly if they enter into collaborative arrangements with large and established companies.
These third parties compete with us
in recruiting and retaining qualified scientific and management personnel, as well as in acquiring technologies complementary to
our programs, and in obtaining sites for our clinical trials and enrolling patients.
Our competitors may develop more effective
or affordable products, or achieve earlier or longer patent protection or earlier product marketing and sales. Any products developed
by us may be rendered obsolete and non-competitive.
Competing generic medicinal products
may be approved.
In the E.U., there exists a process
for approval of generic biological medicinal products once patent protection and other forms of data and market exclusivity have
expired. Arrangements for approval of generic biologics products exist and are under consideration in the U.S., as well. Other
jurisdictions are considering adopting legislation that would allow the approval of generic biological medicinal products. If generic
medicinal products are approved, competition from such products may substantially reduce sales of our products.
We may be exposed to potential product liability claims,
and our existing insurance may not cover these claims, in whole or in part. In addition, insurance against such claims may not
be available to us on reasonable terms in the future, if at all.
Our business exposes us to potential
product liability risks that are inherent in the testing, manufacturing, marketing, sale and use of therapeutic products. We carry
insurance coverage but this insurance may not cover any claims made. In the future, insurance coverage may not be available to
us on commercially reasonable terms (including acceptable cost), if at all. Insurance that we obtain may not be adequate to cover
claims against us. Regardless of whether they have any merit or not, and regardless of their eventual outcome, product liability
claims may result in substantially decreased demand for our product candidates, injury to our reputation, withdrawal of clinical
trial participants or physicians, and/or loss of revenues. Thus, whether or not we are insured, a product liability claim or product
recall may result in losses that could be material.
We store, handle, use and dispose
of controlled hazardous, radioactive and biological materials in our business. Our current use of these materials generally is
below thresholds giving rise to burdensome regulatory requirements. Our development efforts, however, may result in our becoming
subject to additional requirements, and if we fail to comply with applicable requirements we could be subject to substantial fines
and other sanctions, delays in research and production, and increased operating costs. In addition, if regulated materials were
improperly released at our current or former facilities or at locations to which we send materials for disposal, we could be liable
for substantial damages and costs, including cleanup costs and personal injury or property damages, and we could incur delays in
research and production and increased operating costs.
Insurance covering certain types of
claims of environmental damage or injury resulting from the use of these materials is available but can be expensive and is limited
in its coverage. We have no insurance specifically covering environmental risks or personal injury from the use of these materials
and if such use results in liability, our business may be seriously harmed.
Collaborations play an important role in our business,
and could be vulnerable to competition or termination.
We work with scientists and medical
professionals at academic and other institutions, including UCLA, among others, some of whom have conducted research for us or
have assisted in developing our research and development strategy. These scientists and medical professionals are collaborators,
not our employees. They may have commitments to, or contracts with, other businesses or institutions that limit the amount of time
they have available to work with us. We have little control over these individuals. We can only expect that they devote time to
us and our programs as required by any license, consulting or sponsored research agreements we may have with them. In addition,
these individuals may have arrangements with other companies to assist in developing technologies that may compete with our products.
If these individuals do not devote sufficient time and resources to our programs, or if they provide substantial assistance to
our competitors, our business could be seriously harmed.
The success of our business strategy
may partially depend upon our ability to develop and maintain our collaborations and to manage them effectively. Due to concerns
regarding our ability to continue our operations or the commercial feasibility of our personalized DCVax product candidates, these
third parties may decide not to conduct business with us or may conduct business with us on terms that are less favorable than
those customarily extended by them. If either of these events occurs, our business could suffer significantly.
We may have disputes with our collaborators,
which could be costly and time consuming. Failure to successfully defend our rights could seriously harm our business, financial
condition and operating results. We intend to continue to enter into collaborations in the future. However, we may be unable to
successfully negotiate any additional collaboration and any of these relationships, if established, may not be scientifically or
commercially successful.
Our business could be adversely affected by new legislation
and/or product related issues.
Changes in applicable legislation and/or
regulatory policies or discovery of problems with the product, production process, site or manufacturer may result in delays in
bringing products to market, the imposition of restrictions on the product’s sale or manufacture, including the possible
withdrawal of the product from the market, or may otherwise have an adverse effect on our business.
Our business could be adversely affected by animal rights
activists.
Our business activities have involved
animal testing, as such testing is required before new medical products can be tested in clinical trials in human patients. Animal
testing has been the subject of controversy and adverse publicity. Some organizations and individuals have attempted to stop animal
testing by pressing for legislation and regulation in these areas. To the extent that the activities of such groups are successful,
our business could be adversely affected. Negative publicity about us, our pre-clinical trials and our product candidates could
also adversely affect our business.
Multiple late stage clinical trials of DCVax-L for GBM,
our lead product, may be required before we can obtain regulatory approval.
Typically, companies conduct multiple
late stage clinical trials of their product candidates before seeking product approval. Our current Phase III 312-patient clinical
trial of DCVax-L for GBM is our first late stage trial. We may be required to conduct additional late stage trials with DCVax-L
for GBM before we can obtain product approval. This would substantially delay our commercialization. There is also some possibility
that changes requested by the FDA could complicate the application process for product approval. In addition, a number of products
are under development for brain cancer and at least one (NovoCure) has been approved in the U.S. It is possible that the standard
of care for brain cancer could change while our Phase III trial is still under way. This could necessitate further clinical trials
with our DCVax-L product candidate for brain cancer.
Changes in manufacturing methods for DCVax-L could require
us to conduct equivalency studies and/or additional clinical trials.
With biologics products, “the
process is the product”: i.e., the manufacturing process is considered to be as integral to the product as is the composition
of the product itself. If any changes are made in the manufacturing process, and such changes are considered material by the regulatory
authorities, the company sponsor may be required to conduct equivalency studies to show that the product is equivalent under the
changed manufacturing processes as under the original manufacturing processes, and/or the company sponsor may be required to conduct
additional clinical trials. Our manufacturing processes have undergone some changes during the early clinical trials. Accordingly,
we may be required to conduct equivalency studies, and/or additional clinical trials, before we can obtain product approval, unless
the regulatory authorities are satisfied that the changes in processes do not affect the quality, efficacy or safety of the product.
We may not receive regulatory approvals for our product
candidates or there may be a delay in obtaining such approvals.
Our products and our ongoing development
activities are subject to regulation by regulatory authorities in the countries in which we and our collaborators and distributors
wish to test, manufacture or market our products. For instance, the FDA will regulate the product in the U.S. and equivalent authorities,
such as the EMA will regulate in Europe. Regulatory approval by these authorities will be subject to the evaluation of data relating
to the quality, efficacy and safety of the product for its proposed use, and there can be no assurance that the regulatory authorities
will find our data sufficient to support product approval of DCVax-L. In addition, the endpoint against which the data is measured
must be acceptable to the regulatory authorities. The primary endpoint of our Phase III trial is progression free survival. Sometimes
regulators have accepted this endpoint, and sometimes not. There can be no assurance that the regulatory authorities will find
this to be an approvable endpoint for Glioblastoma multiforme cancer.
The time period required to obtain regulatory
approval varies between countries. In the U.S., for products without “Fast Track” status, it can take up to 18 months
after submission of an application for product approval to receive the FDA's decision. Even with Fast Track status, FDA review
and decision can take up 12 months. At present, we do not have Fast Track status for our lead product, DCVax-L for GBM. We plan
to apply for Fast Track status, but there can be no assurance that FDA will grant us such status for DCVax-L.
Different regulators may impose their
own requirements and may refuse to grant, or may require additional data before granting, an approval, notwithstanding that regulatory
approval may have been granted by other regulators. Regulatory approval may be delayed, limited or denied for a number of reasons,
including insufficient clinical data, the product not meeting safety or efficacy requirements or any relevant manufacturing processes
or facilities not meeting applicable requirements as well as case load at the regulatory agency at the time.
Risks Related to Our Intellectual Property
We may not obtain or maintain the benefits associated
with orphan drug status, including market exclusivity.
Although our lead product, DCVax-L for GBM,
has been granted orphan drug status in both the U.S. and the E.U., we may not receive the benefits associated with orphan drug
designation (including the benefit providing for market exclusivity for a number of years). This may result from a failure to maintain
orphan drug status, or result from a competing product reaching the market that has an orphan designation for the same disease
indication. Under U.S. and E.U. rules for orphan drugs, if such a competing product reaches the market before ours does, the competing
product could potentially obtain a scope of market exclusivity that limits or precludes our product from being sold in the U.S.
for seven years or from being sold in the E.U. for ten years. Also, in the E.U., even after orphan status has been granted, that
status is re-examined shortly prior to the product receiving any regulatory approval. The EMA must be satisfied that there is evidence
that the product offers a significant benefit relative to existing therapies, in order for the therapeutic product to maintain
its orphan drug status. Accordingly, our product candidates will have to re-qualify for orphan drug status prior to any potential
product approval in the E.U.
Our intellectual property rights may be overturned, narrowed
or blocked, and may not provide sufficient commercial protection for our product candidates, or third parties may infringe upon
our intellectual property.
The patent position of biotechnology
and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years
been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent
rights are highly uncertain. Patent laws afford only limited protection and may not protect our rights to the extent necessary
to sustain any competitive advantage we may have. In addition, the laws of some foreign countries do not protect proprietary rights
to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights
in those countries. Moreover patents and patent applications relating to living cell products are relatively new, involve complex
factual and legal issues, and are largely untested in litigation — and as a result, are uncertain. Our pending
and future patent applications may not result in patents being issued which adequately protect our technology or products or which
effectively prevent others from commercializing the same or competitive technologies and products. As a result, we may not be able
to obtain meaningful patent protection for our commercial products, and our business may suffer as a result. Third parties may
challenge our existing patents, and such challenges could result in overturning or narrowing some of our patents. Even if our patents
are not challenged, third parties could assert that their patents block our use of technology covered by some or all of our patents
As of October 31, 2013, we had 68
pending patent applications and 120 issued patents worldwide relating to our product candidates and related matters such as manufacturing
processes. The issued patents expire at various dates from 2015 to 2029. Our issued patents may be challenged, and such challenges
may result in reductions in scope, cancellations or invalidations. Our pending patent applications may not result in issued patents.
Moreover, our patents and patent applications may not be sufficiently broad to prevent others from using substantially similar
technologies or from developing competing products. We also face the risk that others may independently develop similar or alternative
technologies, or design around our patented technologies. As a result, no assurance can be given that any of our pending or future
patent applications will be granted, that the scope of any patent protection currently granted or that may be granted in the future
will exclude competitors or provide us with competitive advantages, that any of the patents that have been or may be issued to
us will be held valid if subsequently challenged, or that other parties will not claim rights to or ownership of our patents or
other proprietary rights that we hold.
We have taken security measures (including
execution of confidentiality agreements) to protect our proprietary information, especially proprietary information that is not
covered by patents or patent applications. These measures, however, may not provide adequate protection for our trade secrets or
other proprietary information. In addition, others may independently develop substantially equivalent proprietary information or
techniques or otherwise gain access to our trade secrets.
We may be exposed to claims or lawsuits that our products
infringe patents or other proprietary rights of other parties.
Our commercial success depends upon
our ability and the ability of our collaborators to develop, manufacture, market and sell our product candidates and use our proprietary
technologies without infringing the proprietary rights of third parties. We have not conducted a comprehensive freedom-to-operate
review to determine whether our proposed business activities or use of certain of the technology covered by patent rights owned
by us would infringe patents issued to third parties.
There is a substantial amount of litigation
involving patent and other intellectual property rights in the biotechnology and biopharmaceutical industries generally. The patent
landscape is especially uncertain in regard to cell therapy products, as it involves complex legal and factual questions for which
important legal principles remain unresolved. We may become party to, or be threatened with, future adversarial proceedings or
litigation regarding intellectual property rights with respect to our products and technology, including interference proceedings
before the U.S. Patent and Trademark Office. Third parties may assert infringement claims against us based on existing patents
or patents that may be granted in the future. If we are found to infringe a third party’s intellectual property rights, we
could be required to obtain a license from such third party to continue developing and marketing our products and technology. However,
we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a
license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be
forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found
liable for monetary damages. If the infringement is found to be willful, we could be liable for treble damages. A finding of infringement
could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could
materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties
could have a similar negative impact on our business.
We have already been exposed to one
patent lawsuit by a large company, which we vigorously defended. Our defense resulted in the plaintiff withdrawing nearly all of
the claims it filed, and in settlement of the last claims without our paying the plaintiff anything. However, the litigation was
expensive and time consuming. We have recently also been exposed to claims (without a lawsuit) by a competitor asserting or implying
(and commentaries by third parties based on the claims by our competitor) that a patent issued to our competitor covers our products.
We believe these claims to be without merit. However, if a lawsuit for infringement were brought against us, there can be no assurance
that a judge or jury would agree with our position, and in any event such litigation would be expensive and time consuming. In
the future, we may again be exposed to claims by third parties — with or without merit — that our products infringe
their intellectual property rights.
Even if resolved in our favor, litigation
or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract
our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of
the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive
these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings
could substantially increase our operating losses and reduce the resources available for development activities or any future sales,
marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation
or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than
we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation
or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
DCVax is our only technology in clinical
development.
Unlike many pharmaceutical companies
that have a number of products in development and which utilize many different technologies, we are dependent on the success of
our DCVax platform technology. While the DCVax technology has a wide scope of potential use, and is embodied in several different
product lines for different clinical situations, if the core DCVax technology is not effective or is toxic or is not commercially
viable, our business could fail. We do not currently have other technologies that could provide alternative support for us.
Risks Related to our Common Stock
The market price of our common stock may be volatile and
adversely affected by several factors.
The share prices of publicly traded
biotechnology and emerging pharmaceutical companies, particularly companies without consistent product revenues and earnings, can
be highly volatile and are likely to remain highly volatile in the future. The price which investors may realize in sales of their
shares of our common stock may be materially different than the price at which our common stock is quoted, and will be influenced
by a large number of factors, some specific to us and our operations, and some unrelated to our operations. Such factors may cause
the price of our stock to fluctuate frequently and substantially. Such factors may include large purchases or sales of our common
stock, positive or negative events relating to other companies developing immune therapies for cancer, positive or negative events
relating to healthcare and the overall pharmaceutical and biotech sector, currency fluctuations, legislative or regulatory changes,
and/or general economic conditions. In the past, shareholder class action litigation has been brought against other companies that
experienced volatility in the market price of their shares and/or unexpected or adverse developments in their business. Whether
or not meritorious, litigation brought against a company following such developments can result in substantial costs, divert management’s
attention and resources, and harm the company’s financial condition and results of operations.
The market for our common stock may be limited, because
our common stock is subject to “penny stock” rules.
Our common stock is subject to the
SEC’s “penny stock” rules. As a result, broker-dealers may experience difficulty in completing customer transactions,
and trading activity in our securities may be adversely affected. Under the “penny stock” rules promulgated under the
Securities Exchange Act of 1934, as amended, or the Exchange Act, broker-dealers who recommend such securities to persons other
than institutional accredited investors must:
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make a special written suitability determination for the purchaser;
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receive the purchaser’s written agreement to a transaction prior to sale;
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provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks” and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies; and
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obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a “penny stock” can be completed.
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As a result of these rules, broker-dealers
may find it difficult to effectuate customer transactions, and trading activity in our common stock may be adversely affected.
As a result, the market price of our common stock may be depressed, and stockholders may find it more difficult to sell our common
stock.
Toucan Capital and its affiliates are the principal holders
of our shares of common stock, and this concentration of ownership may have a negative effect on the market price of our common
stock.
As of February 28, 2014, Toucan Capital
and its affiliates (including Cognate BioServices, Toucan Partners and Linda Powers, who also serves as our Chief Executive Officer
and Chairperson of the Board of Directors), collectively, owned an aggregate of 20,489,355 shares of our outstanding common stock,
representing approximately 39% of our issued and outstanding common stock on that date. This concentration of ownership may adversely
affect the trading price of our common stock because investors may perceive disadvantages in owning stock of companies with controlling
stockholders. Toucan Capital and its affiliates have the ability to exert substantial influence over all matters requiring approval
by our stockholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially
all of our assets. This influence could have the effect of delaying, deferring or preventing a change in control, or impeding a
merger or consolidation, takeover or other business combination that could be favorable to investors.
The requirements of the Sarbanes-Oxley
Act of 2002 and other U.S. securities laws impose substantial costs, and may drain our resources and distract our management.
We are subject to certain of the requirements
of the Sarbanes-Oxley Act of 2002 in the U.S., as well as the reporting requirements under the Exchange Act. The Exchange Act requires,
among other things, filing of annual reports on Form 10-K, quarterly reports on Form 10-Q and periodic reports on Form 8-K following
the happening of certain material events, with respect to our business and financial condition. The Sarbanes-Oxley Act requires,
among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting.
Our existing controls have some weaknesses, as described below. Meeting the requirements of the Exchange Act and the Sarbanes-Oxley
Act may strain our resources and may divert management's attention from other business concerns, both of which may have a material
adverse effect on our business.
We do not intend to pay any cash dividends in the foreseeable
future and, therefore, any return on your investment in our common stock must come from increases in the market price of our common
stock.
We have not paid any cash dividends
on our common stock to date in our history, and we do not intend to pay cash dividends on our common stock in the foreseeable future.
We intend to retain future earnings, if any, for reinvestment in the development and expansion of our business. Also, any credit
agreements which we may enter into with institutional lenders may restrict our ability to pay dividends. Therefore, any return
on your investment in our capital stock must come from increases in the fair market value and trading price of our common stock.
Such increases in the trading price of our stock may not occur.
Our certificate of incorporation and bylaws and Delaware
law, and the shareholders rights plan we intend to adopt, have anti-takeover provisions that could discourage, delay or prevent
a change in control, which may cause our stock price to decline.
Our certificate of incorporation and
bylaws and Delaware law contain provisions which could make it more difficult for a third party to acquire us, even if closing
such a transaction would be beneficial to our stockholders. We are authorized to issue up to 40,000,000 shares of preferred stock.
This preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our Board
of Directors without further action by stockholders. The terms of any series of preferred stock may include voting rights (including
the right to vote as a series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights
and sinking fund provisions. No preferred stock is currently outstanding. The issuance of any preferred stock could materially
adversely affect the rights of the holders of our common stock, and therefore, reduce the value of our common stock. In particular,
specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell our assets
to, a third party and thereby preserve control by the present management.
Provisions of our certificate of incorporation
and bylaws and Delaware law also could have the effect of discouraging potential acquisition proposals or tender offers or delaying
or preventing a change in control, including changes a stockholder might consider favorable. Such provisions may also prevent or
frustrate attempts by our stockholders to replace or remove our management. In particular, the certificate of incorporation and
bylaws and Delaware law, as applicable, among other things:
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provide the Board of Directors with the ability to alter the bylaws without stockholder approval;
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establish staggered terms for board members;
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place limitations on the removal of directors; and
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provide that vacancies on the Board of Directors may be filled by a majority of directors in office, although less than a quorum.
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We expect to adopt a shareholder rights
plan and declare a dividend distribution of one right for each outstanding share of common stock as fixed by our Board of Directors.
Each right, when exercisable, will entitle the registered holder to purchase from us shares of a new series of preferred stock
on the terms stated in the rights plan. The rights will generally be separate from the common stock and become exercisable if any
person or group acquires or announces a tender offer to acquire 15% or more of our outstanding common stock without the consent
of our Board of Directors. Because the rights may substantially dilute the stock ownership of a person or group attempting to take
us over without the approval of our Board of Directors, our stockholder rights plan could make it more difficult for a third party
to acquire us (or a significant percentage of our outstanding capital stock) without first negotiating with our Board of Directors.
We are also subject to Section 203
of the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between
a publicly-held Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who
becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock for a three-year period following the
date that such stockholder became an interested stockholder.
These provisions are expected to discourage
certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of
our company to first negotiate with our Board. These provisions may delay or prevent someone from acquiring or merging with us,
which may cause the market price of our common stock to decline.
We might not be able to maintain the listing of our common
stock on The NASDAQ Capital Market.
Our common stock became listed on
The NASDAQ Capital Market on December 12, 2012, under the symbol “NWBO.” We might not be able to maintain the listing
standards of that exchange. If we fail to maintain the listing requirements, our common stock might move to the Over the Counter
Bulletin Board or in the “pink sheets” maintained by Pink OTC Markets, Inc. The OTC Bulletin Board and the “pink
sheets” are generally considered to be markets that are less efficient and less broad than The NASDAQ Capital Market. Our
common stock was previously quoted on the OTC Bulletin Board from December 23, 2002 to July 23, 2012. From July 23, 2012 to December
12, 2012, our stock was quoted on the OTCQB.
A substantial number of shares of common stock may be
sold in the market, which may depress the market price for our common stock.
Sales of a substantial number of shares
of our common stock in the public market could cause the market price of our common stock to decline. A substantial majority of
the outstanding shares of our common stock are, and the shares of common stock sold in this offering upon issuance and the shares
of common stock underlying the warrants will be, freely tradable without restriction or further registration under the Securities
Act. In addition, as of December 31, 2013, 20,116,000 shares of our common stock are issuable upon exercise of outstanding warrants
and 1,551,000 shares of our common stock are issuable upon exercise of outstanding options.
Risks Related to This Offering
Our management will have broad discretion over the use
of the net proceeds from this offering and we may use the net proceeds in ways with which you disagree or which do not produce
beneficial results.
We currently intend to use the net proceeds
from this offering to expand our manufacturing programs in Europe, to fund our research and development activities and for working
capital and general corporate purposes. We have not allocated specific amounts of the net proceeds from this offering for any of
the foregoing purposes. Accordingly, our management will have significant discretion and flexibility in applying the net proceeds
of this offering. You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will
not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It
is possible that the net proceeds will be invested in a way that does not yield a favorable, or any, return for us or our stockholders.
The failure of our management to use such funds effectively could have a material adverse effect on our business, prospects, financial
condition, and results of operations.
You will experience immediate dilution in the book value
per share of the securities you purchase in this offering.
Because the price per share of our common
stock being offered is substantially higher than the net tangible book value per share of our common stock, you will suffer substantial
dilution in the net tangible book value of the common stock you purchase in this offering. Based on a purchase price of $6.60 per
share, and a net tangible book value per share of our common stock of $0.10 as of December 31, 2013, if you purchase shares of
common stock in this offering, you will suffer immediate and substantial dilution of $6.70 per share in the net tangible book value
of the common stock you purchase, without giving effect to any exercise of the overallotment right. See “Dilution”
for a more detailed discussion of the dilution you will incur if you purchase our securities in this offering.
If you purchase the securities sold in this offering,
you may experience dilution if we issue additional equity securities in future fundraising transactions.
If we issue additional common stock, or
securities convertible into or exchangeable or exercisable for common stock, whether in public offerings or private placements,
our stockholders, including investors who purchase shares in this offering, will experience dilution, and any such issuances may
result in downward pressure on the price of our common stock.
There is no public market for the placement agent warrants
to purchase common stock being sold in this offering.
The warrants to be issued to the placement
agent in this offering will not be listed for trading on any stock exchange. There is no established public trading market for
the warrants being offered in this offering and we do not expect a market to develop. Without an active market, the liquidity of
the warrants will be limited. Further, the existence of the warrants may act to reduce both the trading volume and the trading
price of our common stock.