Avid Bioservices Inc (CDMO)

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PPHM ASM NEWS

SUNRISE BLA

We can berry the Sunrise BLA. What PPHM didn't tell us in the TWO last PRs (ESMO announcement and ESMO report) is where the data came from. Until now we had a Sunrise trial stop for futility and unblinding of the data to come to some answers and conclusion which we assume to be in the ESMO presentation.

Apparently that is NOT how it went. The results that we received in the PR are NOT a 70% cut-off of the data gathered in the blinded way.

The data is :
A) Unblinded Data part situation at trail stop (100%)
B) Unblinded Data BEHIND first look-in specified events at trial stop (100%)
C) NON-BLINDED Obtained data AFTER the trial stop until Cut-Off (more data still coming in)

If PPHM referred to 70% cut-off they INCLUDED 'C' and 'B'. With 'A' alone statistical significance improvement of OS was NOT reached yet (to small 'n' and over performing ctrl arm). The FDA CANNOT accept registrational data that was NOT obtained under the trial design BLINDING paradigm. Hence this data cannot be used for a BLA, well it cannot be used as the final registrational part (it will be and must be present in any BLA request for this study). Hence PPHM has reliable results but has no FDA grade data to file with.

BIOMARKER

The above makes that while the stat. sig. 30% of patients is a scientific valid set for all further actions of PPHM in relation to biomarkets and bavi approval, it is NOT for the FDA. The biomarker data is solid BUT the correlation reference is administratively not existing as explained above. The volatility of the biomarker that has been discussed here has also be mentioned. Apparently it is not a problem because the floating range is very small (average smaller then 6%). Bungler was correct about his BB assumptions, that is 100% sure now.

What is important apparently is that for PPHM it doesn't matter of the biomarker is approved with 5000 samples or not. It sounds like they are ALWAYS allowed to add biomarker selection to ALL upcoming clinical trials to single out those 30% patients and that will impact their results dramatically to the upside direction 100% for the singled out group.

The approval of the biomarker is important ONLY to get those Bavi results APPROVED. The FDA will apparently only approve the results of biomarker singled out patients if the sponsor can prove that in commercial application he can in a CONSISTENT WAY use the biomarker to ALWAYS select/single out the patient types on which the results have been obtained.

PPHM did indeed collect more than just data on one single biomarker but work is ongoing as the collected data set is quite impressive in size.

WHAT'S NEXT

It is not clear if PPHM will do a next registration confirmational clinical trial. Thing is if they want to file a registrational final BLA under the fast track the MUST do one. I figure they will tell us. However if they do the trial will be with a relatively small number of patients, it will NOT be a PIII grade long and expensive trial (that is EXCLUDED EXPLICITELY).

The trial would be biomarker activated which means it will at the same time:

- allow to finalize the official biomarker registration (which will allow biomarker use for SELECTION of patients for the treatment approved in the SAME trial).
- allow to use the biomarker directly in this same trial for patient selection
- allow to get Bavi approved for the full target treatment population (that 30% patients singled out).

SUNRISE CONCLUSION

For me I close the Sunrise chapter here. It yielded a tremendous amount of data, cannot be used for registration due to the result state of blinded data only, and it's data will still be processed for 6 to 10 more weeks at least.

There is no doubt with PPHM that bavituximab works, they now know more then ever on what type of patients and SUnrise delivered a short-cut by patients selection for all upcoming Bavi trials. As I understand it there will be NO trials any more (at PPHM or elsewhere, related to bavituximab, without biomarker involvement). The safety data remains valid and can be added to the database as safety is not a placebo effect sensible thing.
The BLA work that has been done, which at this point is FAR LARGER then the 500.000 pages Garnick told us about before is not lost because as said it must MENDATORY go in ANY finalization of a future BLA filing for Bavi.

OTHER CLINICAL TRIALS

Two clinical trials could be in the making for 2017 that we do not yet know about on top of the 3 NCCN trials. I CANNOT undo myself from the impression that AstraZeneca could well NOT be the party we expect to see. There names has I think been mentioned only once but in a kind of "far distend" plan depending on ... after looking into ... common this/common that ... etc. We are in the 8th month AFTER Sunrise stop, PPHM just made plenty of results public and either these results are sufficient for AZ/PPHM to tune and start (and they have this data WAY longer then ESMO because it was filed for ESMO and under embargo) or the data is useless to make the needed decisions and then I wonder of what use it is for PPHM if it cannot be used to adjust some simple trial designs of trials that should have been up and running since at least 6 months. So I think, but am not sure, that PPHM may be engineering an AZ Exit strategy trying to not infringe the collaboration contract.

AVID

While all positive I want to add a negative note here. We must be VERY VERY VERY careful with PPHMs usage of language and words. Looking at the complete process starting with acquiring a location up to the first commercial batch that can be sold, there are a lot of steps and terms used. One and the other has to do with cGMP approval and other FDA requirements for the production of biologics. So we will have to see Q/CC NUMBER on a facility (Avid II and later Avid III) to conclude that it is up-and running and producing production grade substances. There have, apparently, been some problems leading PPHM to a vocabulary that did not allow us to in a conclusive way know that commercial production is running. I understood, with all the commissioning stuff etc, that Avid II was producing commercially after April. Apparently that is NOT THE CASE. So we must look for a CLEAR STATEMENT of PPHM saying that Avid II generates INCOME otherwise all forecasts, while correct in numbers, are not in time-expectations. So test runs, tuning the process, commissioned, FDA approved, etc is all well but we can NEVER assume that this equals commercial production until we see the income from a factory or have an explicit statement on it.

They are ready for Avid III but they have a problem with the landlord. Not exactly sure what it is. I just hope there is nothing that keeps them from building Avid III regulation wise at the location they have. No information as to "where" is available it seems.

REVERSE SPLIT

Vote YES, so no OTC listing. However, those that expect the RS to happen tomorrow, or even in the coming week or this calendar year, think again. PPHM doesn't want the RS and for the FIRST TIME EVER I think there has been a spark related to the stock! Until now PPHM, IMO, was always uninterested in the PPS while claiming shareholders value etc more for the show and because that is what is expected then to really mean it.

Attention, I am NOT saying here they do not/did not want to create value, actually they are doing great in that area IMO. Only, the translation of that potential value into PPS while the journey is still busy seemed to be the least of their deep down concerns. But this RS clearly does NOT sit good with them and although not said with so many words there seems to be some detectable 'awareness'/'concern' now about what is happening with the PPS. I am going to disclose something here.

Until now I at least had the option open that PPHM might have an interest in the RS and that their passiveness and CONSISTENTLY poor PR work (no matter whether using internals as CK or external offices) might have been a strategy that fits such bigger picture. I am no 100% convinced that if there was a button that the BoD members or PL could press to bring us above 1$ for 10 business days they would press it on the spot.

Authorised shares. As I expected PPHM has NO INTEND to parachute us with AS because they can and they amply have after any RS. First they want to avoid RS and next, at that time, PPHM's revenue will already be boosted and operational cost even lower then today that they will have highly reduced the ATM usage. Avid play in that scenario BUT also exosomes (see below). In the case of an RS they seem to have a new news train coming on (either way).

EXOSOMES

Surprising, but given the Sunrise wind-down and need for some confirmation trial, certainly the right strategy is that PPHM seems to have ZERO-NULL-NIHIL-NONE go-it-alone plans with EXOSOMES. There complete strategy is partner based and they are finishing a prototype/proof-of-concept test. They want to partner based on that and then allow the partner to co-decide how a final commercial version would look.

Now we can only SPECULATE on what kind of terms. Pre-payments, mile-stones, licensing? But one thing is for sure PPHM has high expectations of this and I am now more convinced then ever that their 21 (now 20) months to profitability is EXOSOMES based and not Avid. The reason is that a fast calculation/estimate (and here RRDog would have been on tremendous value) shows us that even with Avid III operational PPHM would probably still be 20% away of profitability given that sales revenue is not the same as profit. PPHM runs around 50% gross margin with Avid and apparently will expect that to become better when Avid II and III provide the bulk of the production.

FAITS DIVERS

Good-luck trying. You will never single me out :) You know who you are, you just don't know who I am :) You don't even know if I was there in person :)

CONCLUSION

While PPHM didn't say explicitly that they will not file a BLA the new information about the constitution of the used data in the ESMO presentation for me makes me think it is impossible to file, including a registration clause, at this point with an extra small and quick trial. What troubles me is that we cannot extract a clear statement as to if such trial is coming or not. It always comes back to a same phrase: further define our...bla bla.

However SUNRISE was certainly an investment that yielded the data set for PPHM to hit the full target if they take the next shot. In that it is kind of like artillery gun zeroing, one left of the Churchtower one Right and the 3rd one strait on. With biomarkers and exosomes added to the Bavituximab and BetaBodies pipelines and an oild and fast growing Avid were are good. I believe the 'profitable in 21/20 months' statement and am actually most pleased about the 'non-go-it-alone' in exosomes. There are LOTs of big national and multi-national players that will be interested in such exosome based cancer test and it is a HUGE market. Think Baxter-grade distribution.

So, I will take a short break now for a couple of days because there is need for more new information in order to be able to D&D new things. The Sunrise chapter is at an end and the next step isn't clear yet.