Skip Peregrine Pharmaceuticals For 2015
Mar. 25, 2015 2:55 PM ET | About: Peregrine Pharmaceuticals Inc. (PPHM)
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Summary
Peregrine is funded for the year; unfortunately, not much is expected to happen on the clinical front.
Surprise collaborations may be the only major price movers.
Tune back in next year, when interim data for the main trials are expected.
Peregrine Pharmaceuticals (NASDAQ:PPHM) is a small biopharmaceutical company focused on a new class of antibodies that bind to phosphatidylserine (PS). PS is externalized on the outer membrane of tumor cells and vasculature, but is normally localized inside healthy blood vessel cells, making PS a specific target for anticancer therapies. Peregrine's lead PS-targeting candidate has been advanced to Phase III development. Peregrine has a market cap of $278.73 million, and on March 12, announced financial results for the third fiscal quarter (FQ3) of fiscal year (FY) 2015 that ended January 31, 2015. They have money to last the year, but few catalysts.
Lead candidate:
Bavituximab is the lead antibody being evaluated as immunotherapy (helping the body's immune system to fight infections) for several oncology indications. SUNRISE is a pivotal Phase III, multinational, double-blind, randomized, controlled trial (RCT) of bavituximab plus docetaxel versus docetaxel alone in patients with previously treated Stage IIIb/IV non-squamous non-small cell lung cancer (NSCLC). SUNRISE has two planned interim analyses. The first is a safety assessment triggered after 33% of a pre-specified number of patient deaths and the second will assess both safety and efficacy after 50% of pre-specified deaths. There is no timeline as to when these might occur.
In January, Peregrine presented updated data from a single-arm Phase II investigator sponsored trial (IST) using bavituximab and NexAVAR. NexAVAR from Bayer (OTCPK:BAYRY) is the only oral therapy FDA-approved specifically for unresectable hepatocellular carcinoma (HCC). The combination was associated with a 4-month progression-free survival (PFS) in 62% of 38 patients with advanced HCC. Two patients (5%) achieved a partial response and the median overall survival (OS) was 6.2 months. The trial is being conducted by the University of Texas Southwestern Medical Center (UTSW) and may have more analyses revealed at a later time.
The company is currently evaluating its options on how to advance bavituximab in breast cancer. Two other ISTs are ongoing in rectal adenocarcinoma and advanced melanoma. The availability of funds is the major limiting factor.
Financial position:
At January 31, 2015, Peregrine had $55.2 million in cash and equivalents. Management believes they have sufficient cash resources to fund operations through at least December 2015.
Cash flows/expenses:
Peregrine's contract manufacturing business, Avid Bioservices, produced $5.7 million in revenue in FQ3 and $17.4 million for the current nine-month period. This represents a 10% increase over the same nine-month period. The revenue guidance is $5.6-$7.6 million for FQ4, while consensus revenue is $6.42 million. These targets are very likely to be reached.
Research and development spending saw an expected increase in FQ3 to $11.3 million as SUNRISE progresses. The RCT started in 2013 and the past 3 FQ R&D costs totaled $10.0 million in FQ2, $10.2 million in FQ1, and $8.8 million in FQ4 2014. R&D expenses in future quarters are likely to be in the $11-12 million range. Selling, general and administrative spending has been consistently between $4 and $5 million for the past year and is likely to remain there.
Forward look:
There is only one scheduled catalyst for 2015. A Phase I IST by UTSW incorporates bavituximab into the standard of care treatment with capecitabine and radiation therapy of patients with rectal adenocarcinoma. UTSW is trying to identify the bavituximab's maximum tolerated dose in the combination; the trial has a primary completion date of August 2015. Another Phase I IST evaluating bavituximab in advanced melanoma is still enrolling and won't be done until 2016. UTSW may report more results/analyses for the HCC trial, but if there are no additional complete or partial responses, the data won't move the stock price. Avid Bioservices does generate income. However, analysts have this pegged down, and estimates have been spot on the past 2 quarters. FQ4 is bound to be in line once again.
In conclusion, there isn't much happening with this stock this year. 2016 will be more exciting; however, to get there, Peregrine may have to dilute again. The only probable surprises during the year are additional agreements for ISTs. It does take time for investigators to write grant requests, and more time for the government (the most frequent source of past grants) to review and approve them. Longs holding out for SUNRISE have a good chance of success, based on the botched Phase II NSCLC trial results in 2013, which still delivered significant dose-dependent survival benefits. For prospective investors, other biotech stocks may be more attractive.
Source: Skip Peregrine Pharmaceuticals For 2015
