Fly high don't look back peregrine. Our regular readers will know that Peregrine Pharmaceuticals (NASDAQ:PPHM) is one of the companies we have long highlighted as one that we see as being undervalued, and by proxy, due a revaluation. On a number of occasions over the last few months, we’ve discussed our thoughts on the stock, and the most recent of these occasions came on February 12, as part of this piece.
We had two sides to our argument.
The first, and the longer term thesis, is rooted in the unique positioning of the company as both a development stage biotechnology entity and, concurrently, a successful contract manufacturing company. The latter arm, the CM arm, generates revenues that Peregrine is able to use as development capital, and this removes a large portion of the risk generally associated with an investment in an early stage biotechnology entity – namely, the potential for dilution driven by the need to issue equity to raise capital.
That’s the bull driver we’ve been pushing for a while, but alongside this thesis, our second argument (and the one we focused on in our recent coverage) was rooted in a near term catalyst. Specifically, the company is developing a cancer diagnostics platform, and earlier this month, reported that it had successfully completed proof of concept study for said trial. For those that missed the coverage, and by way of a brief introduction, it’s rooted in what are called exosomes. They are bits of cells that break off from primary cancer cells, and after breaking off, are free to roam about a patient’s body in the bloodstream. They express something called phosphatidylserine (PS), and Peregrine has developed a technology that is able to detect (and measure) the presence of PS in a patient’s blood.
The concept, then, is relatively straightforward. The more PS, the more advanced the cancer, and that’s what Peregrine’s tech is set up to measure.
So where does this play in to a near term bias?
We think the company, now it has proof of concept data in hand, can start pitching for a big name partnership. The data relates to ovarian cancer, which for those not familiar with the oncology space, is a global unmet need across pretty much all aspects of its treatment – diagnosis, first lie therapy, maintenance, etc.
A host of big name pharmas are pushing ovarian cancer assets through various stages of the development pathway – AstraZeneca plc (ADR)(NYSE:AZN), Clovis Oncology Inc(NASDAQ:CLVS), TESARO Inc(NASDAQ:TSRO) – as are some smaller, but equally viable, names – TapImmune Inc (NASDAQ:TPIV), Oncomed Pharmaceuticals Inc (NASDAQ:OMED). With a diagnostics platform that has proven benefit in an ovarian cancer indication, Peregrine could easily attract one or more of these names into a collaboration deal, and with any deal would likely come an upfront cash injection.
So we covered this last time, why are we highlighting the company again so soon?
Well, Peregrine just started to run, and it doesn’t look like it’s going to slow down anytime soon. The company traded for circa $0.3 a share at the beginning of the month. By the end of last week, this had risen to $0.55 – an 85% run. Most of this run came last week, subsequent to us highlighting the company and its partnership potential post-OC proof of concept.
To put it simply, we think that markets are finally latching on to this company’s longer term potential, and that it took a shorter term catalyst to get things moving – a spark, if you will. Now that the fire is lit, however, we don’t see it slowing down. Sure, we may see a correction, as traders who picked up an earlier exposure pull profits off the table. For us, however, these pullbacks are an opportunity to pick up an exposure at a discount ahead of a return to the overarching upside momentum.
AI
