27th Annual Piper Jaffray Healthcare Conference Dec 1-2,2015
Conference was held at the Palace Hotel (3p.m.) on Madison Ave., NYC
There were a total of approx 350 presenting companies (the universe of companies Piper Jaffray is interested in is expanding annually.)
The "forum" that PPHM presented in was hosted by Charles Duncan and titled "Undiscovered OncoInnovators" (sic)
The "screen" for this forum was companies in PH III and valued under 300mm market cap. Moderated by Charles Duncan. (I liked this "screen" because it was so extreme in highlighting the value disconnect)
FYI the 5 companies represented under this screening process were:
Argos Therapeutics, inc. (ARGS) Ceo Jeff Abbey
Nanobiotix SA (NANO) Ceo Lauren Levy
Oncanova Therapeutics Inc., (ONTX) Ceo Ramesh Kumar
Threshold Pharmaceuticals, Inc. (THLD) Ceo Barry Zelnick
and of course-----
Peregrine Pharmaceuticals Inc. (PPHM) Ceo Steve King
Under this format all five companies gave an overview of what they do. IMO all five companies are interesting but most of what they said was lost on the room which accomodated 100 - 200 people.
Charles Duncan (god bless him) asked exactly the question I was thinking about as I watched these five Ceo discuss their companies.
"WHAT DON'T INVESTORS GET"???????
Lauren Levy at Nano suggested these companies suffered from new approaches for which there was no comparitor data and that therefore more data was necessary in this type of company including PH III data.
In the same vein, Barry Zelnick at THLD talked about fear of PH III results (in Thld case 2 PH III). He tried to make the case that in THLD case he would be shocked by poor data because of all the previous clinical work leading to PH III. (Reminded me of PPHM in this respect.) He also talked about lack of comparitor data and therefore lots of skepticism.
Several examples were given of similar undervalued situations that became big winners over time as data proved out and other validations both scientific and corporate (partners) panned out.
Steve King at PPHM introduced a new phrase by suggesting that they all suffered from "Novel Therapeutic Syndrome". Steve felt that data overcomes this syndrome though obviously later stage data. Steve talked a bit more about PS as a novel "key regulator". Steve felt it was difficult enough to explain to investors one action of a mab which might be blocking the immuno suppressive effect of PS but it was even more difficult to explain to skeptical investors a mab that had a double action i.e. not only a blocking effect but also an immune stimulating effect through the Fc arm of the antibody.
Steve also agreed with some of the other speakers that more validation was required from outside sources and said that PPHM had begun moving down that path with their collaborations at AZN, MSK, and UTSW.
Now these answers were okay to a point but IMO the answers were thin, left many areas unaddressed and to a certain degree illogical.
Charles Duncan then asked the audience if they had any questions and (in that first quiet moment) I was the only one with my hand up and he recognized me. I had the advantage of being able to ask my question of the panel as a whole and of Charles Duncan (so PPHM was camouflaged and not singled out.)
I asked it this way---"Essentially what you are saying is that the undervaluation is caused by the novelty of your approach. Are you suggesting that many companies in only PH I or PH II (such as the CarT companies and other examples) that are trading for multiple billions of dollars of market value are not doing anything novel???"
IMO there was considerable "fumfering" around after this question. Charles Duncan said he felt this group of companies on the panel presented much better value than those overvalued companies whose drugs had a greater chance of failure since they were earlier stage. (IMO this was true but it sidestepped the question as to how the higher valued companies had achieved their valuation and the advantage it gave them in less dilutive financing---not to mention the liquidity advantage it provided their shareholders.)
I said, "I agree with you. I think this group of companies is better "current" value but,-- I don't think it's because they are doing something novel and other companies are not." Charles of course got the point and tacitly agreed when he further answered "Well I have been doing this for a long time and sometimes the market is irrational and can be irrational for a long time."
IMO there is some truth to "Novel Therapeutic Syndrome" and "irrational markets" and more "data" and more "validation". I'd say this makes up about 20-30-40% at most. The other 60-70% has to do with financing and financial "structure", top venture investors, top management that investors trust to deploy capital wisely within their own shop or to acquire additional assets wisely, top banking, top corporate and scientific connections---in short how well connected and put together within the system is a corporation and "whose back is being scratched". If mgmt and shareholders aren't part of "the club" and can't bring in top institutional buy side talent, they tend to stay undervalued.
In addition, undervaluation tends to feed on itself. As a real time example, prior to the meeting I sat with a major institutional investor and we had some coffee and doughnuts. We got to talking and it turned out he really liked the risk / reward values in PPHM, felt very comfortable with the manufacturing protecting the downside, but, couldn't buy the company until it is over 500mm market cap.
The good news in all this is that in spite of PPHM mgmt short comings, IMO ultimately the science is strong enough that it will lead to more outside validation and market value.
Hope that gives some flavor re the conference and is helpful.
RRdog
