Avid Bioservices Inc (CDMO)

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PPHM-BAVITUXIMAB-SUNRISE in total perspective

Introduction

On Thirsday, during after-hours, PPHM stopped the SUNRISE clinical trial based on a futility advice of the IDMC (Independent Data Monitoring Commission). There are many reasons for futility. For instance it could be that the drug under investigation doesn't work or works poorly compared to the goals set in the trial design.

In the case of SUNRISE there was no problem with the drug under investigation, Bavituximab, but an anomaly in the Control arm – the people that get SOC Docetaxel+Placebo – showing that those people lived much longer then what was expected in the SUNRISE trial design. And hence, if the IDMC sees that the control arm outperforms it will at a certain point conclude that compared with the GOALS set for the Bavi arm patients to outlive the control arm by two months (SOC+2) becomes impossible or unlikely. Hence the advice to stop the trial for futility.

So futility is a GENERAL term, which is seldom even used in the IDMC letters, to say to a sponsor (PPHM): There is little or no chance that if you run this clinical trial to the end you will reach the end-points. You should stop the trial. And that is what PPHM did.

Do in all this not confound Bavituximab and SUNRISE. There is NOTHING wrong with Bavituximab here, the drug performed as expected and that was said in so many words too. It’s scientific broad potential is exactly the same. It’s economic potential too, depending on what strategy PPHM is playing here or not. I’ll come to that. And while I have been saying that this stop is mainly a loss of time-to-market, with the not so nice side effect of temporarily low PPS, I may have to review my position on that.

SUNRISE is/was only one way to get Bavituximab approved for sale, the fastest and most advanced path, and yet maybe not (see later). As I will develop, and it is an another poster that triggered this with a certain phrase, we may be living the ‘next’ smart and unpredictable move from PPHM after salvaging the PII, the PPHMP funding, the Avid grow, the collaborations and with hindsight possibly also the Dart funding WITHOUT the traditional players being involved (reason Piper Jaffreys left).

I reiterate my Thursday idea about PPHM wanting SUNRISE data earlier in one of my theories below. But now in more detail.

PPHM PPS and Trading

Before I developed the above a little note on the PPHM trading since Thursday. I include this in this post because it is part of what strengthens my believe in the underlying two strategies/scenario’s of what this SUNRISE exit may be part of.

As PPHM shareholders we either see the PPS, we see the underlying fundamentals and we see the reactions and comments from others. When the PPS is low it doesn't take much to make us forget the fundamentals, make us panic or take hasty decisions or lead us by empathy or psychology such as fear/reward/uncertainty/time-passing and others tricks in the book. And where PPHM traders mix with PPHM investors the investors are ALWAYS the prey because traders need movement in the PPS in certain direction depending on where they stand with their own positions.

So I would advise every one here to remove the emo , look at the fundamentals and follow theories that are at least sustained in some way and explained and of which you can form a reasonable feasibility opinion rather then led you to be led by one liners, doom and, in many cases, fake statements of selling out in full or partially, worthless drug, collaborators will run away, delisting, etc, etc, etc.

You are VULNERABLE now due to the traumatic effect of a drop in the PPHM PPS on Thursday of 65+% in after hours, kind of like the same vulnerability of a widow that just lost her husband and will see many parties taking advantage of that starting with the mortician sales process.

But look…what nobody wants you to see is the PPHM trading on Friday and even less that of the Friday main session. On Thursday only 900K PPHM shares were traded in AH versus 811K during the day and BEFORE the PR. And actually the PPS was brought down in the first minutes because of how the quoting system works after a NASDAQ Halt and before Time & Sales (Trading) resumed. Someone was first in putting in a Low Ask and as a consequence all Bids, not allowed to cross the market, had to be below it. The stock HAS NOT be shorted down from 1.07$ all the way. Very few shares have been sold at prices higher then 0.50$ (which is good because that is the LOSS point for those that were short).

Only about 100K PPHM shares traded in PRE-HOURS on Friday. Believe me, there is not ONE SINGLE fund manager, II, PRO on Wall Street or for that matter probably ANY PERSON that has PPHM in his portfolio that did NOT know what happened with SUNRISE on Friday morning, probably not even one that would be climbing the Mount Everest during a holiday. So 100K shares is nothing! Furthermore there has always been a price up stress from 0.35$ towards 0.40+$ during AH and PH and that on its own is strange. So this is completely not comparable with Sept 24th 2012 and the dose switching incident.

But the most remarkable thing is the Friday main session trading. 16Milj+ shares traded and the PPS moves from 0.37$ up to 0.40+$ being kept all day in a 5 cent range. Now, that doesn't happen BY COINCIDENCE and it is even impossible UNLESS you have REAL buyers, not just fisherman on the down side because they let the PPS go down. And ClayTrader's last chart confirms that that support was there. ClayTrader's chart is what put me completely at ease on something I already suspected by giving it more substance. In his words, the bulls were in charge and to come to that conclusion on the first trading day after the Thursday AH PR, and which would have had to be a Bearish Festival with after party, holds a lot of information for those that want to see it.

If Wall Street, the funds, the Institutionals and the main hard long longs that look at the fundamentals of things would think there was a problem, we would be at 0.10$ cent because 16Mil$ shares could easily do that starting from 0.37$ down. And as said, ALL PRO's for SURE KNEW on FRIDAY! So they had NO STOPS set (or we would have been flooded with their shares) and the PPS didn't infringe and trigger there money management rules (or they would also have closed the PPHM position).

That means they protected the PPHM position to NOT SELL EVEN NOT on this 67% drop in PPS as we could all see! Now why would they do that? That is what I try to explain in the next parts in a detailed and sustained way so that you can judge for yourself. I think some party is at least aware or suspects some next move from PPHM, as do I.

PPHM's possible TWO strategies for Bavituximab SUNRISE

For starters, while I thing I have sufficient substance, everybody must read what follows with a critical mind and keep in mind that a theory is SPECULATION by nature.

I have made one reasoning mistakes in my past days post in relation to the stop of SUNRISE. I have assumed from the beginning that the Docetaxel outperforming the comparable historical Docetaxel data (such as Herbst et al, 2010) is an unlucky coincidence. While in this case I do NOT believe at all at this point (unless PPHM would communicate otherwise after looking into SUNRISE data) in any form of tempering or sabotage. Not even after CEO King used the words “dramatically outperformed”.

There are many reasons why the word dramatically could be there and one of them is that the 33% events are delivered by US and European patients that were enrolled first compared to the others and that those countries have Insurance and Social Security allowing for affordable 3rd ln NSCLC treatment keeping patients alive. Then they don’t end up in the MOS table and that is what the IDMC (Independent Data Monitoring Commission) sees.
Actually, simple out-performance would have been sufficient.

It was a phrase from another poster the past days that attracted my attention to the fact that the SUNRISE trial design with a look-in at 33% knowing one must be stat. sig. and that the difference between Control arm and Bavituximab arm must only be 2 months actually CALLED for such an IDMC advice but that PPHM could, at that moment, simply continue the trial KNOWING the 2 months would easily come out later. The IDMC advices, they do not STOP a trial for futility, that is the sponsors decision.

Theory 1 – the Bavituximab strategic surprise shortcut to marked

We all were looking at DEC 2016 for SUNRISE unblinding, therefore also all PPHM competitors that would suffer consequences from a SUNRISE new high MOS record will have been planning with that date in mind. PPHM always said: First look-in only for futility, 2nd starting H2/2016 possibly for efficacy.

But if you design a trial as such that you kind of illicit a FUTILITY advice, knowing you can at that point chose to stop or continue anyway, then by stopping you could surprise everyone and have FAST access to data of SUNRISE. Data that is clean and not tempered with and can be used for BTD. The FDA already allows BTD based on early stage trials. Here PPHM has data on 582 enrolled patients, has at least 1000 proves of safety (which with BTD weights MUCH more because if the FDA grants a short-cut they must at least make sure it is safe).

In this strategy we do not need to wait for unblinding and analysis till DEC with processing in Q1/2017 and filing to the FDA with a 6 month response window due to Fast Track. Actually the FDA probably has already acknowledged most of the SUNRISE BLA data under that Fast Track interaction of all the non-SUNRISE related data (PI/PII/etc that all need to be part of a BLA after PIII).

If this was a strategy (I mean if this stop has been part of PPHM chosen path to approval by interrupting and requesting BTD) then it is BRILLIANT. Unfortunately some temporary side effects on the PPS that we will have to endure comes with it but PPHM is known for doing what it has to do without any consideration of the effect on the stock price and CEO King has said that with so many words years ago in an interview. I some up what is in my mind:

- Garnick explicitly saying he doesn't like the BTD path (on annual meeting) – putting competition on the wrong foot? He will have said that elsewhere too!

- Garnick explaining us the complete PRO-grade approval procedure of SUNRISE (annual) preparing us all, an steering competition, towards 2017.

- Trial design which with hindsight does indeed solicit Futility (and Garnick will have known that while still keeping the continue option open)

- CEO King: Ah, a BTD wouldn't we all want that? (Quarterly/CC) – no Steve, Garnick said so!

- PPHM's surprises strategy record (salvage, PPHMP, Collaborations AS/MSK/NCCN, Dart Financing,…) each time bypassing the problem of the moment (low pps, no partners, etc) as if they anticipated it.

I think PPHM is aware that it will be fought and countered by several parties that see Bavituximab as a disruptive drug/molecule. I posted specifically about it here.. Hence they anticipate that the PPS will be under lid and that there will be not much goodwill for any partnering/collaboration in type of deals that would provide cash to PPHM unless a firm grip on Bavituximab is given back. The 2012 banker reaction must have opened their eyes! No time to prove something just immediate and sudden retraction of the loan that could have killed PPHM if we would not have had the ATM.

So now they anticipate. No one saw PPHMP coming and at that time it provided the needed funding. No one saw Dart coming (and it couldn't leak because PPHM dealt directly with Easter Capital), nobody probably expected that PPHM could salvage the PII (because they should have been without the financial means to do it). And now, nobody could see coming the BTD torpedo that would hack all planning of BP’s expecting Bavi on the marked with improved SOC in Mid 2017 in two.

But one thing is for sure: If PPHM doesn't want out of CHEMO+Bavi as is my 2nd theory explained below, then they will not just throw all the Docetaxel+Bavituximab data from PI till SUNRISE away and will use the other paths. The BTD is then the candidate by excellence. With a FAILED SUNRISE, normal Controal arm and Bavi arm only a few weeks better, BTD would not be any option any more because you cannot file for one AFTER a PIII. Stepping out now is the surprise move because now the PIII data is sufficiently available.

Theory 2 – Clear the Path for I-O collaborators/partners, no more chemo.

All BP’s involved in I-O spend not millions but billions in their pipelines. That will have an effect on the pricing of their solutions and for Opdivo, Keytruda and Yervoy alone we know we are talking about 120-150K per full treatment cycle. While Hillary plans to put that under pressure, the last thing BP want is that there are seamless solutions, possibly even with less side effects, that are much cheaper and force their prices, and hence their return on investment and profit perspectives, down. Hillary they can handle, the patients budget not.

Chemo+Bavituximab is such a solution. For starters most chemo’s have generics at 30% to even 10% of the price of the original. We are talking about Docetaxel, Sorafenib and alikes. Secondly these drugs combined with Bavituximab can set new MOS records and become the SOC (as our Breast and NSCLC PII’s have shown to be possible) and then be even better then Opdivo alone and would be hard to beat even with I-O+Bavituximab combo’s.

It still is my believe that in the current stage of I-O combo’s a PD-1/PD-L1 plus Bavituximab will not outperform Doce+Bavituximab by two months. Hence SUNRISE is a serious threat. It can not only set a hard to beat MOS, but with its time table it would have the costly risk of changing the MOS in the mids of a ton of clinical trials of BP’s that all were designed based on current MOS and control arms. And this time we are not talking about an individual trial by one BP that is in dangered, we would be talking about all 2nd ln NSCLC trials for all BP’s and multi-billions of invested dollars in those clinical trials. And after SUNRISE Bavituximab would have many quick ways to go after other SOC's in much shorter time frames.

Apart from the GENERAL threat SUNRISE forms/formed it also has a specific effect on PPHM’s partners/collaborators. When AstraZeneca runs Durvalumab+Bavituximab, ending end 2017/begin 2018 and under way SUNRISE increases the MOS then for PPHM that is certainly not a big deal, they are SUNRISE, but for AstraZeneca it is a problem.

AstraZeneca has made TWO public declarations. One is that they stop all effort in Durvalumab alone in 2nd ln NSCLC and the other that they as of then play the card of COMBO’s. AstraZeneca, said #4 in the I-O downstream space, has no other choice. BMY and Merck have beaten Roche and AstraZeneca in round 1 of the boxing much the ‘alone’ round. Round two is called 'combo' and is the way back it to score points for AZ.

So SUNRISE if successful is a nightmare because AstraZeneca would then depend on Chemo+Durvalumab+Bavituximab (the other trial planned with PPHM-AstraZeneca) and that includes the so much unwanted chemo!
So with SUNRISE in the mix PPHM almost always wins and no BP will ever make a deal with them giving them a chance (cash wise for instance) to develop a chemo based program in a too near future until I-O combo's are found.

From PPHM’s perspective the strategy may have been great (if that was the strategy) but with the I-O surfacing since ASCO 2013 (shortly after our 2012 incident) and the fact that it was not a passing hype with a 10 year future promise but that BMY, Merck and the others came through, SUNRISE, in that theory, is a weakness for PPHM. When they started SUNRISE in DEC 2013 they may not have anticipated, neither did we, the speed with which I-O would put itself on the map.

I, together with several other posters, noticed how easy PPHM followed the advice to STOP SUNRISE their main clinical trial with a 60Mil$ cost (well it will be some less now because all weekly maintenance treatments stop at end of trial, incl. placebo, which is about 10 mounts saved) but still.

So the point of this theory is that PPHM grabs an opportunity, elicited by design or not, to get out of SUNRISE and open the path to a possible next step of partnerships/collaborations coming shortly. I sum up what is in my mind:

- AstraZeneca partnership, PPHM correction, no, no NON EXCLUSIVE COLLABORATION !

- Worsley on MSK, AZ, NCCN etc,…this may open other talks with global players

- The pure strategic evaluation of AZ’s Durva+Bavi with SUNRISE around as a thread. Did AZ only come to this conclusion after they signed the deal?

- The fast and easy acceptance by PPHM of IDBC advice to STOP SUNRISE

- The nothing is wrong with the trial comment, I-O combo also not at risk (why would those be at risk at all due to a control arm abnormally with Docetaxel, a chemo in another trial?)

- The general sentiment in the industry: No more chemo if possible, to cheap generics are competition for expensive I-O.

- Opening the door to BP in general by removing the SUNRISE disruption (give & take)

While I personally believe more in the first theory because it would be planned from begin to end, while in this theory we don’t know if the STOPS advice was elicited or just be coincidence and an opportunity has been grab to get out, this theory is certainly a candidate. Furthermore if this was by coincidence and PPHM didn't AT ALL plan to get out of SUNRISE but was really forced by the events then this evolution, while not fully their will, will at least allow the above scenario’s of collaboration/partnering and in that case FORCE them into some more flexible.

Personally I find focus on I-O not a bad thing, certainly not because these trials are MUCH cheaper given someone sponsors the SOC or control drug such as Durvalumab which in the I-O space is MUCH more expensive the chemo.

If this was not intentional then the only difference is that PPHM will not have an up-front 'give & take' deal somewhere (such as if you kill SUNRISE we are willing to …) but then at least now they have an open path to play Bavituximab in its SECOND disruptive quality: Who will have the first Bavi combo!

Conclusion

I have provided facts, reasoning mix with speculation on some possible paths PPHM could go with Bavituximab, since the Bavi pipeline and IP are in no way damaged and nothing changed, only the path to approval changed due to another bump, or possibly intentional bump, in the road.

No one liners, no cheap or misleading conclusions brought as fact such as SUNRISE failed therefore Bavituximab doesn't work. No conspiracy theories, no emotion, no BoD/Management or PPHM bashing, but pure reasoning for everybody to follow and make up their own opinion.

I will not lead by saying that I bought some extra yesterday. "Peregrine Pharmaceuticals the Microsoft of Biotechnology" has not diminished in my mind because I can make the difference between a failed path to approval, the reason why and on the other hand the fact that the fundamentals did not change. What others do, or say they do or did, first need to be true and secondly should make sense for you personally, but YESTERDAYS trading demonstration clearly shows that your PPHM shares are wanted, the cheaper the better. Draw your own conclusions with a CLEAR mind and open eyes!