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Peregrine Pharmaceuticals Inc (NASDAQ:PPHM) Remains Undervalued
By Alex Carlson / in Biotech & Pharma, Momentum Stocks, Stocks / on Monday, 28 Mar 2016 03:19 AM / 1 Comment / 39 views

Many shareholders of Peregrine Pharmaceuticals Inc (NASDAQ:PPHM) are wondering what their next move is. It all started in February when the company announced “that it is discontinuing the company’s Phase III SUNRISE trial of bavituximab in patients with previously treated locally advanced or metastatic non-squamous non-small cell lung cancer (NSCLC). The decision to stop the trial was based on the recommendation of the study’s Independent Data Monitoring Committee (IDMC) following a pre-specified interim analysis performed after 33% of targeted overall events (patient deaths) in the study were reached. Results of the analysis demonstrated that the bavituximab plus docetaxel group did not show a sufficient improvement in overall survival as compared to the docetaxel group to warrant continuation of the study. The interim analysis showed that the bavituximab combination group is performing as expected according to the original trial assumptions in terms of overall survival, while the docetaxel group is dramatically outperforming overall survival expectations based on the original trial assumptions and as compared to recently published studies.” We told investors at the time to not panic and that the company will indeed recover.

We are more convinced now than ever after this month’s earnings report that PPHM will indeed recover. PPHM’s Avid Bioservices division grew 20% in fiscal year 2015 to $26.7 million in revenue, and is expected to top $40 million in revenue for the current fiscal year ending April 30, 2016. Its new state-of-the-art, 40,000 square foot commercial biomanufacturing facility, which was recently formally commissioned, is outfitted with cutting-edge, single-use equipment to accommodate a fully disposable biomanufacturing process for late Phase III clinical and commercial production of biologics.

Demand for this new production capacity is high and the company already has manufacturing commitments for products to be delivered in fiscal year 2017. With demand expected to grow, PPHM is actively considering options for potentially adding more production capacity to support additional growth of this business. As of February 1, 2016, Avid Bioservices had a revenue backlog in excess of $58 million under committed contracts from existing clients, covering services to be completed in the fourth quarter of FY 2016 and into FY 2017.

In terms of bavituximab, PPHM is regrouping and working closely with its collaborators and key opinion leaders to transition the company’s clinical program to focus on bavituximab combinations with I-O agents. Peregrine’s partners and advisors, including AstraZeneca, Memorial Sloan Kettering Cancer Center, the National Comprehensive Cancer Network and the University of Texas, Southwestern. These are leaders in the field of immuno-oncology and will help determine the best course of action for bavituximab.

Currently trading at a $95 million market cap, Peregrine reported $67,470,000 in cash and cash equivalents as of January 31, 2016 compared to $68,001,000 at fiscal year ended April 30, 2015. With Avid on track for $40 million in revenues this year, PPHM remains an undervalued biotech that has yet to fulfill the potential of bavituximab. At current levels, PPHM is being valued solely as an R&D company. Investors are not taking into account the Avid division and the company’s strong cash position.

Overall, we still see potential for shares of Peregrine. The good news is that unlike other early stage biotechs, PPHM is well-funded and generates revenue. The company just raised $20 million to fund its operations well into next year and beyond. Lastly and something we always like to look for in a stock is whether smart money is getting involved. With PPHM, we’re in luck as billionaire Kenneth Dart’s Eastern Capital owns 30 million shares, or 13.1% of the company.

Disclosure: We have no position in PPHM and have not been compensated for this article.

http://www.insiderfinancial.com/peregrine-pharmaceuticals-inc-nasdaqpphm-remains-undervalued/114937/