Avid Bioservices Inc (CDMO)

[skweze]

The lawsuit against CSM also provides another interesting wrinkle in this drama. In CSM's Motion For Summary Judgement, the court found that regardless of any Limitation of Damages Clauses in the CSM Master Services Agreement, CSM is still open to unlimited liability for active negligence, negligent misrepresentation, and constructive fraud. In the supporting court filings, Peregrine detailed some costs surrounding this debacle including a botched phase II study ($12MM +), additional patient enrollment in phase III ($20MM+), and at least six months loss of time to market. Further, had the original phase II results been confirmed it "likely would have shaved at least 3 to 4 years from the program and resulted in early commercial sales."

A potential damage award would appear to be in the tens of millions. And based upon the nature of the claims against CSM, one ventures that they would want to settle rather than be subject to discovery and examination of the offending actors under oath. Just a thought, but a sudden influx of tens of millions in cash on top of PPHMs existing cash position vs. the current SP/Market Cap would seem to invite a takeover attempt.

All imo.

From declaration of Joseph Shan:

17. As explained below, the ensuing damage to Peregrine is many times the amount paid to CSM for its services, and CSM's errors could not have been more inopportune. With the anticipated success of this trial, Peregrine expected to promptly partner with or be acquired by a global pharmaceutical company and move into a Phase III trial for NSCLC patients and commence other trials. Bavituximab could be potentially developed for or as a cancer vaccine. Bavituximab also has indications of benefit for other diseases such as Hepatitis C and HTV.
18. The Phase II study at issue cost in excess of $12,000,000 in direct third party costs alone, not to mention the significant internal man-hours and associated costs. The results of the 3 mg/kg arm of the study have value in that Peregrine was able to combine the "A" and "B" arm results and compare them to the "C" arm results. (The "A" and "B" groups collectively can be assumed to have received
some bavituximab at the 1 mg/kg level, and Peregrine can compare their survival data to that of the 3 mg/kg patients.)
19. Had the study, which was initially reported as demonstrating statistically meaningful overall survival benefits, been confirmed, Peregrine could potentially have sought early approval and sales of the product. This likely would have shaved at least 3 to 4 years from the program and resulted in early commercial sales. While a confirmatory Phase III trial would still need to be done, the FDA's practices and guidances indicate that it would have required only 300-400 patients in our ensuing Phase HI study based on the hazard ratio determined in the Phase II study.
20. However, once the regulatory violations were confirmed (as discussed in the Masten Declaration), the value of the Phase II study as a registration study was so severely compromised that any option for an early FDA approval was eliminated. Thus, Peregrine was forced to conduct a larger than anticipated Phase III trial of approximately 600 patients based on an increased hazard ratio estimate.
21. Stated differently, the Hazard Ratio ("HR") is used to determine the overall reduction in risk (1 minus the HR = % reduction) in a time-to-event endpoint such as overall survival. The Phase II results prior to the discovery of the CSM labeling issue was estimated to be ~0.5 which means those receiving bavituximab and chemotherapy had almost a 50% reduction in risk of death. This result was statistically significant (p < 0.05) and based on those results, Peregrine was planning to conduct a Phase m trial to target a 0.6 HR which would have required only approximately 300-400 patients in the ensuing Phase III study. Due to the errors by CSM, the data had to be reanalyzed by pooling the two study arms that CSM swapped and the HR increased to 0.662. Thus, Peregrine had to re-power the present Phase III study for a higher HR, requiring that the present Phase III study enroll -600 patients instead of 300-400 patients,
22. The estimated clinical trial external cost for our present Phase III trial per patient is $100,000, which is consistent with the per patient cost of the damaged Phase II trial. Due to CSM's errors described in the accompanying Masten Declaration, requiring an additional 200 patients or more in the present trial as explained above, the extra costs of the current trial will total approximately $20 million.
23. Additionally, Peregrine will suffer at least a six month loss in time to market. These events will also hamper bavituximab's procession into the broader cancer indications and new trials related to viral infections discussed above.