Fund manager Neil Woodford’s worst biotech investment, Northwest Biotherapeutics (NWBO.O), is to delist from Nasdaq, the American technology stock exchange.
In a move that raises questions about its future the Maryland-based cancer specialist has given Nasdaq 10 days’ notice which means its shares will be suspended around 19 December.
It has applied to move its listing to the OTCQB Venture Market designed for early stage companies instead.
Northwest has clashed with Nasdaq this year over the amount of new shares it has issued to finance its research and for its battered share price, which after an 83% plunge, has traded consistently below $1, an infringement of Nasdaq rules.
In a stock exchange filing, the company said delisting from Nasdaq avoided the expense and uncertainty of a hearing with the tech exchange to discuss the issues. It said the move to the junior stock exchange would make it easier to raise funds for ongoing phase two and three trials of its cancer treatments, which use the body’s immune system to fight the disease.
However, it warned that leaving Nasdaq would trigger a ‘fundamental change’ clause in the loan agreements with its convertible bond holders, which means it has 20 business days in which to repay their remaining $11 million debt.
‘The company believes that it has several options for addressing this obligation, and will be evaluating those options over the coming weeks, although there can be no assurance that such options will be available or will be on acceptable terms. If the company fails to satisfy its obligation, that would result in an event of default under the notes,’ it said.
The past year has been a challenging period for Northwest and its chief executive Linda Powers. Having previously proclaimed Woodford’s backing as a sign of its potential to be the next Amgen, or biotech giant, things turned sour when allegations of financial irregularities prompted the UK’s star fund manager to demand an inquiry. The company set up an independent committee to investigate the issues, although its findings have not yet been published.
Northwest was never a big holding in either of Woodford’s funds. At the end of last year it was the 24th biggest stock in Woodford Patient Capital Trust (WPCT), accounting for 1.63% of its assets. Today it has tumbled to 61st place in the 71-stock portfolio with a weighting of just 0.29% in the £774 million fund. Meanwhile it represents just 0.07% of Woodford’s flagship £9.4 billion Equity Income fund.
According to a filing to the US Securities Exchange Commission, Woodford Investment Management held a $14 million stake of 25.9 million shares in Northwest at the end of September.
Although small, Northwest’s travails sum up the need for shareholders in Patient Capital to take heed of the message in its name. In December, after his engagement with company’s corporate governance failings first emerged, Woodford reminded investors that not all of its early-stage investments would do well. ‘There will be bumps in the road and some won’t make it to a successful destination,’ he said.
At yesterday’s close of 91.3p Patient Capital shares remain some way below the 100p at which they listed on the London Stock Exchange in April 2015. In the past month, however, the post-US election rally in drugs stocks has boosted the portfolio by over 3% and helped reduce the discount - or gap between the share price and its net asset value - to 2%.