Avid Bioservices Inc (CDMO)

[Protector]

JamesGMS, I don't know if GILD will be the PPHM partner. It will not be that easy and straight forward.

I agree GILD is looking for a cornerstone molecule for its IO program and with bavituximab (and BetaBodies next generation) PPHM has for sure the goods. And as ONLY hyper Safe Molecule and ONLY Upstream (Global/Systemic) agent that also as ONLY one blocks PS immune suppression and at the same time is an immune activator by stimulating the immune system is UNIQUE.

I cannot emphasize that uniqueness better then in : Bavituximab, multiple Unique Selling Propositions in one!

But GILD is not alone. There are 3 companies of which we could say that they have comparable pocket depth and that are Pfizer, JNJ/Janssens and Gilead. Also in market capital they are good as they all have billions of outstanding shares. That is IMPORTANT!!!

 PFE   32$   6173 MIL shares 
 JNJ   105   2767 MIL shares 
 GILD 103$   1441 MIL shares

All 3 are certainly NOT among the Immuno-Oncology leaders, they all are either behind OR depend on contracts/deals with some of the leaders such as Merck. And ALL 3 must compete with the 2nd tier IO BP's that are rapidly and massively buying the small anti-body companies (AstraZeneca and Norvartis are two BPs doing that) and we are late in the game. And ALL 3 WILL of course have to compete to acquire market share from the leaders in IO such as Merck, Bristol, Roche,...).

What is true for Novartis is true for the others. I quote their CEO's statement on CNBC again because I cannot emphasise sufficiently HOW IMPORTANT it is for PPHM that the BP's want to OWN their cocktails (that is all components of a combo treatment) in order to maximize on the profit.

Well the CEO of Novartis is without any doubt correct, certainly in the era of immersing COMBO's and the consensus that IO will not be a single drug story. It will certainly NOT be a single drug story if it needs to sets its moderated SOC improvements (e.g. Docetaxel vs Opdivo in small population of responders in NSCLC) versus its large price difference AND its HUGE price difference if Docetaxel generics are brought in line (only 10-30% of the price). So selling a combo at 150K$ that gives you 5 years versus a single drug at 150K$ that gives you max 3 months over Docetaxel is indeed a strategy because the profits will stay high if you own the combo-components because the production cost of these drugs, ones started, are low.

So if that is the goal, and it surely also is for GILD, PFE and JNJ/J, then what component would you go after FIRST? Well I would go for the one of which there is only one. And that is Bavituximab. It doesn't has its comparable. If I have that one I can start buying other molecules or make deals if needed. A PD-1/PD-L1 program is not so hard to come by. AstraZeneca for instance is an AFFORDABLE target for GILD, PFE and JNJ/J.
And WHEN would I do it? Well I'd wait until my competitors and those with less pocket depth spend there money to others, bying 10 companies in the hopes one of them has the anti-body that brings something extra to the table. And HOW would I do it. I would make an offer to PPHM that is sufficiently HIGH to keep the smaller players away and only allow my direct 'pocket depth' competitors to compete BUT that is to low for PPHM to accept it. In this way I can stall them while the others spend and I can see WHO has WHAT and what combo I need to beat.

And today I would go for PPHM+AZ+TIPV+some others IOs and a generic manufacturer (or just set-up a generic facility) of chemo drugs. And that is an AFFORDABLE combination allowing me to move from Chemo+IO to Pure IO over time.

TIPV, another Dart invested company, has an interesting antibody. Maybe not absolutely needed but certainly, if it works, a great add on. And if you have such combo elements you could see if you could sell them in a relative dose: e.g. Molecule A,B,C all in one (joined) and all dosed in function of 1Kg body weight. So your competitor, to have Bavi, would have to buy your combo because you do not sell Bavituximab alone AT ALL. That is ONLY possible if, AGAIN, you OWN all combo elements.

Do you see the dramatic consequences of that for those that do not have/control bavituximab? Nobody can force PPHM to sell pure bavituximab. If it is ONE product then it is not tying/bundling sales. And without Bavituximab it will become HARD for the others to go after the SOC. You need to condition that tumour environment, allow the immune system to activate and then make sure that there are no other 'cell' specific binding mechanisms that ADDITIONALLY on a Cell-by-Cell basis say: Don't touch me as does PD-L1.

I am SURE that ALL BPs today know about anti-PS targeting and that ALL have had contact with Worsely (PPHM), not just AbbVie and AstraZeneca.

Hence:

Stephen Worsley: I think the exposure that we’re seeing with these 2 collaborations [AZN & MSKCC] have significantly increased who we're talking to, but also the ability for bavituximab to act in a variety of different indications. This is obviously leading to further discussions with some of the leading oncology players worldwide.

...AND...

Peregrine’s goal in partnering with these immuno-oncology leaders is to define the broader scope of utility for bavituximab. Through these collaborations, we are actively identifying a range of indications & treatments that will benefit from combination therapy with bavituximab. This will undoubtedly yields important findings in the near-term that will continue to build shareholder value. We continue our dialog with a number of other world leading pharmaceutical organizations and believe that bavituximab will continue to generate partnering interest.

So GILD, PFE and JNJ/J can place themselves on the MAP in one single hit and become the CENTRAL player. But, being late and buying the effort of 15 years of research now that the main risk is out comes at a price. This IS what BPs try to avoid by doing early breadcrumb deals. Better buy 20 companies at 1.000.000.000$ including ONE winner that would cost 50, 100, 200, 500 bil$ depending on what exactly they have.

Bavituximab and Betabodies will NOT be sold for 50Bil$, this pipeline is already today, and given the market evolution in immuno medicine and Bavi's uniqueness, worth MUCH MORE then whatever Genentech was when Roche bought it. The traditional sales or profit multipliers to find an acquisition price doesn't work here. Small Caps have learned to look and understand the potential of their pipelines and the profits it can generate.

And so GILD, PFE and JNJ/J will have to come with a package INCLUDING shares and cash. They all 3 have sufficient cash to pay 100$ per share , about 24Bil$ which for GILD is harder, and then do a 1 for X share exchange (which for GILD is harder then for PFE and JNJ/J).

And it is going to be something like that because the ONLY WAY to buy PPHM in full agreement with its shareholders (and today Kenneth Dart will weight on that) is to make sure they REMAIN connected to Bavituximab's potential so that you do not have to pay UPFRONT for that potential. And that is a WIN WIN because nobody would have overpaid if Bavi would not be what we know it is and on the other side current PPHM shareholders may not get the price reflecting the huge possibilities of Bavituximab immediately but will get it with the increase of their new acquires shares.

And if we then look at Cash and outstanding shares, it think JNJ/J sits in a very good position to make such deal without much dilution of THEIR shareholders because Bavi, certainly after SUNRISE approval, is a NO RISK acquisition that will bring MUCH MUCH more then the acquisition costed.