What would you do? If you were PPHM, or a potential partner.
I know what I'd do, but before we get to that, let's review. Prior to the coding issue, PPHM's status as I understand it was this:
1. The company had just announced stellar 2nd line NSCLC data and was waiting on front line NSCLC MOS as well as results in other trials. Of course as a disclaimer, what were "stellar" results to me were being attacked by some since there were no side effects, hr and p factors weren't up to par, etc. etc. But, I disregarded this "noise".
2. The company had obtained a loan to tie over the financial aspects of the company while a partnership/licensing venture could be closed. This way, dilution from the ATM would be minimized.
3. The company was close to a deal for a partnership that would have resulted in money and additional board members prior to the company's end of phase II meeting with the FDA.
4. Cotara was still on deck, but I'll just skip that for now as the big elephant in the room is bavi, at least for me.
So, coding errors are discovered. The company announces the potential problem. The stock price tanks. Due to the busting of loan covenants, the loan is called and repaid by PPHM. PPHM is immediately sued by a host of class action lawyers hoping that where there is smoke, a pay check can be found - or manufactured. The company also immediately files a lawsuit against it's trial contractor alleging damages from the coding errors. But, the lawsuit isn't served. Free of the loan covenants, PPHM exercises the ATM to fill the coffers to allow operation until the problem can be investigated and/or a partner can be closed. That's the nickel tour in my feeble mind anyway.
So, before proceeding, let's examine some of the options for clearing up the data errors, making an announcement and proceeding down the road. Again, my understanding, but the company was limited to fairly strict protocol on how they announced initial "interim" results from the phase II trial. In essence, once the information is available to the company, it must be promptly reported. Not much leeway in this regards, or companies that have multiple or large amounts of trials might be able to delay trial data announcements to their benefit - finding cover for bad data or positive moments for good. Because of this, companies must report when data becomes available or mature.
But, what do you have to do once you have "coding errors" that throw the data into question? Well, you have to have a review. But, when is the review completed and when must the results be announced? It's not so cut and dry anymore. Do you check samples once, twice or more? Do you need to meet with the FDA to get their take on the validity or the re-worked data before it's released? Or do you not need/want this input? Lots of this has been discussed here. Of course, what you do is clouded or at least colored by what you are trying to accomplish in your lawsuit againt the trial contractor and it's colored by your need to protect yourself in the class action lawsuits. So, what do you do? And in what sequence?
Well, here's what I'd do. Of course, I'd immediately launch a review as the company did. I'd circle the lawyers to cover my butt against the class action lawsuits. For those of you that weren't at the ASM, I'm pretty sure we can put a check mark by this one too. Then, I'd do exactly as the company did and send a shot across the bow of the offending contractor. And, to speed negotiations, I'd also do as the company did and not serve the lawsuit. But, I'd enlist the help of the contractor in the review and I'd immediately start negotiations towards a settlement. I'd start identifying the hard and soft numbers regarding my losses. Getting the loan called and having to pay a fee is concrete. The fee is a penalty PPHM had to pay as a result of the coding issue. This is pretty concrete. So is the cost of the trial. Resultant dilution due to the loan being called, damages from any delays caused by the problem, settlement charges and legal fees associated with the class action suits are all potential losses to be itemized and calculated. But, these are "softer" losses requiring calculation or in the case of the class action losses, possibly not known until the cases settle.
So anyway, I believe it's safe to assume that PPHM has taken the path laid out above. And I agree with the approach. But, what's next? Again, what would you do? Well, if it was me, I'd concentrate on getting that deal with a partner done.
As postured above, PPHM probably has some leeway and corresponding concerns about how/when they announce the results of their investigation. How and when they do it could impact the outcomes of their lawsuit with the contractor and also their class action lawsuit results. And, not knowing what the FDA's take is on the validity of the corrected data would leave many questions unanswered.
But, I've got to believe that if a partner was close, as many people have told me they were, I think the best route forward is to conclude the partnership deal first. After that, everything else could fall into place.
Now sure, there are unknowns for both partners trying to make a deal. But, the unknowns could be handled with contingency options. For instance, if the partner has been involved with PPHM during the data reconstitution, it knows where things stand - in it's opinion. It'll have a view on the probability that the phase II must be repeated and/or a phase III is in the cards. It'll also have an opinion on PPHM's ability to recover damages from the contractor and it will probably understand the odds that the class actions will invoke some damage.
Now, I've got to believe that the partner that was at the door knocking to get in was just as disappointed by the "coding" issue and resulting delay as anyone. They still have lots to lose if bavi is the real deal and this faux paux let's others keep their toes in the game. And, if they are excited about the initial data, they are probably chomping at the bit to get started. They don't want to wait for PPHM to ferret out their contractor and class action suits. And, they don't want to wait while PPHM schedules a meeting with the FDA to get their initial take. They want to get going.
So, how do you do that with all of the uncertainties. Well, if PPHM has shared the data with me, I have a pretty good idea whether or not the FDA is going to allow us to proceed immediately to phase III. And, I know the case is strengthened if PPHM walks into the FDA with me as a partner. But, I still don't want to take all the risk. So, I negotiate with PPHM a deal whereby, I'll pay upfront money and buy into PPHM in a substantial way. We'll negotiate who pays what in the phase III trial. But, if we have to repeat a phase II trial (whatever size it may be), I'll want a contingency clause whereby PPHM pays their share of this trial. Or, I'll figure out a way to recoup some of the costs by sharing the proceeds from PPHM's lawsuit against it's contractor. Of course, if I buy into PPHM, I'll want the potential class action liability to remain firmly with PPHM. So, I'd want an adjustment pending the outcome of these cases too.
I know that this all sounds complicated and confusing. But, settling with the contractor in an expeditious manner would be good for both as it would provide PPHM with needed money and would let the contractor move forward. However, to get to a settlement, damages will need to be determined/colleted and without the outcomes of the class action suits, how/when will this occur. So, a contingency clause will need to accompany this type of settlement before a deal can be completed. And this will take time. Time that PPHM can't afford to waste at this juncture.
If you have to wait for the class action uncertainty to settle, get FDA guideance on the data, settle the contractor suit, etc. before the company moves forward, it could be years. My sincere hope is that the lawyers are all lawyering away on the various suits and that PPHM management is concentrating on the data revision and the "deal". Get the real data (they should have that by now - my guess), complete the partnership talks and announce a deal. Announce results of the data review whenever. Doesn't really matter the timing. Just that PPHM and it's partner are going to be walking into the FDA seeking a phase III study. And of course, the partner is hoping to leverage their partnership into other cancer indications.
This is what I'd do. Might this be why the review is taking so long????????
Regards,
WH
AI
