Peregrine Pharmaceuticals per Jan 14th, 2013
The stock
After our Peregrine Pharmaceuticals (PPHM) stock peeked to 2.78$ on Monday 7th Jan, 2013 due to the 2nd ln NSCLC announcement related to the discrepancy case the pps corrected and seems to consolidate around a price of 2.12$, or about 60% up from the 1.35$ close of the Friday before. The heavy volume on last Monday and Tuesday diluted back to 3+ milj share per day and the volatility is again in normal range. This gives us a very good performance over the past 12 months, we closed on 2.10$ or 230% up compared to our close at 0.91$ on Jan 14th 2012.
We will, without news probably start to climb little by little as we saw just before the Sept 7th 2012 announcement. At that time it was in anticipation of the 2nd ln NSCLC news and the news events listed below will have to help to adjust for the bump in the road due to our discrepancy case that pulled us down from 5.40$ on Sept 24th, 2012 to about 0.80$. So we closed about 40% of that gap by now, ALSO an increase of 260% since.
As it looks now the discrepancy case may have coasted us about 1.30$ plus some potential. In fact the Sept 7th news and the pps impact of the Aug 30th loan, both in the up direction, must be set off against the Sept 24th news and the Sept 26th news of the loan. We got rid of the loan and that is a good thing (personal opinion not shared by everyone on the board) and that’s worth some pps to me as I think that without the restricting conditions of the loan we’ll negotiate better which will in turn result in better deals and related pps increases. So in essence, we can compare our current 2.10$ close with the close of Friday Sept 14th at 3.96$ and say that we lost 1.86$. If we subtract 56 cents due the pps increase following the loan announcement on Aug 30th 2012, from 2.51$ till the close just before Sept 7th at 3.07$, then 1.30$ is what we approximately really missed out on in non-emotional pps.
The difference between 3.96$ of Sept 14th and close on the Friday before black Monday at 5.39$ is the path we still have to walk in relation to the Jan 7th review announcement, just as we walked it after Sept 7th. That is 2.40$ potential we still have to make back. We will have to keep in mind that one major announcement with extremely good terms, the FDA agreement on the PIII clinical trial design for Cotara with Orphan, Fast Track and only 300 patients with the possibility to early stop the trial if intermediate results are good, has not been impacting our pps as it should have. We must add that to the potential damage due to the discrepancy case as long as the market will not have compensated for it. For that to happen we may have to wait for a next step announcement related to the Cotara pipeline at which point a correction will very probably occur.
Besides that the 2nd ln Lung clinical trial was delayed by approx. 4-6 months due to the internal investigation and we will have to restore some lost credibility because not everybody in the market realized that the error was made by a 3rd party, a CRO called CSM that was licensed by the FDA to run such ‘Gold Standard’ trials, and that Peregrine had no means of avoiding the error other than detecting it after unblinding of the data.
It is now up to Peregrine to let the market, the investors and the institutionals know the complete story and emphasize that they did not only deserve the credit of detecting the errors out of result discrepancies but also duly reviewed it, salvaged it and now bring it to the FDA.
The Agenda
The Peregrine expected news agenda is quite filled. Here is an overview, possibly even incomplete, but certainly best attempt.
2nd ln NSCLC (Bavi - Lung Cancer)
1) The uncertainty whether Peregrine, and not the announced 3rd party, could have bared some responsibility in the error is gone. This now creates the certainty that CSM will be held responsible for damages by trial or settlement and Peregrine will be compensated. An announcement is expected or in the case of a settlement that is not PRed or listed at the SEC with disclosure of financial conditions, the obligation of booking such financial part of the settlement separately will lead to its disclosure.
2) The uncertainty of the clinical trial being salvageable, say presentable to the FDA, is gone to. We know now for sure that we are dealing with a mix-up error between control arm and 1mg Bavi arm and that the 3mg arm was not affected. As FTM demonstrated the error at the basis of the detected discrepancies in the clinical trial's result analysis after unblinding and during the preparation of the end of PII meeting with the FDA are small very few and of low impact. The low control arm MOS of 5.6 at the underside of historical control arm MOS statistics and the knowledge that Bavi 1mg and 3mg had substantial higher MOS showing that Bavi works prove that the amount of Bavi administered to control arm patients must be very low. Announcement of further details of the internal review have been promised and is expected.
3) The anticipation of survival data for this trial, and the knowledge that this data is reliable because the error could in no way have created a situation in which increased survival could have been caused by anything else then Bavi, will also support our pps because this announcement will, as we know due to time passed, be very good. Also here an announcement is expected, probably around the updated dates at the gov’s clinical trial site for the new MOS event expectations.
4) The MOS event is still to occur and we have been promised that it would be announced when available. While how longer it takes for this even to occur the better for the results; as investors we would like an update because we already know this MOS is going to be excellent. SK has stated that in Sept 2012 most patients were still alive and that the MOS event was not expected shortly.
5) As Peregrine seemed to be quite advanced with its preparations for the FDA end of PII meeting, and as said the error in the data is assumed quite small, it will take them not much time to correct the preparations as well and move to the FDA. We can expect one or two announcements, be it the meeting announcement itself – but that is not within Peregrine’s habit, however given the circumstances they may PR it, and the FDA letter accepting or rejecting the PII for entrance into PIII.
6) Peregrine never said they were talking with potential partners for LUNG cancer specific. They said they had 15 partnership meetings and sometime later SK stated these partnerships talking’s took so much time that they needed to do their day jobs at night. As we also know that a partnership seemed to be eminent and two board members were about to be added to the BoD and that partners remained interested after the discrepancy case but wanted to see the review results first we may assume partnering activities have resumed. The first step of this was disclosed to us in the Jan 7th announcement saying that potential partners would be updated right away with the reviewed data, which in their case must mean the details of that data as I assume they won’t settle for anything less. So also here an announcement may be made although it could be wider than just for Bavi Lung cancer.
7) In all this we shouldn't forget the potential class action files. The announcement of participation to the Credit Swiss event on Sept 10th, a few days after the Sept 7th announcement, actually already points in the direction that the people accused in these class action didn't know on the 7th that there was a problem in the data because they later retrieved their participation in stead of not announcing Credit Swiss at all. While as such that is not prove, bad tongues will say even that could have been staged, it remains so that there is a big difference between facts and perception of the market of those facts and that no matter what the markets act on that perception until factual disclosure occurs. In mean time most of the class action filing announcement to the public have been removed from the NASDAQ News page, something I have seldom seen and there is no trace of Peregrine being served one.
1st ln NSCLC (Bavi - Lung Cancer)
1) The MOS event, possibly with some other data, is expected to be announced in this trial where the expectation date has also been moved to end Q1/Q2 of this year. Given the amount of time this trial is enrolled and closed the expectation are very good here too.
2) It can be that Peregrine decides to announce survival data together with the MOS or as a separate event. All will depend when what does occur and whether or not Peregine will allow multiple announcement to play a role in the support of the pss. Furthermore it has been speculated that this trials data may come or have to come inline to convince the FDA in the 2nd ln case to accommodate some for the re-shifting of that trials data or for the fact that the 3mg arm isn't statsig.
Pancreatic (Bavi)
1) Also for this trial results, or at least interim results, are expected. It can be assumed that after the NSCLC debacle Peregrine will make extra efforts to verify that data, because this is not a double blinded trial and they are not cut off from the trials data. Also here the MOS expectations are very high, this trial started in JAN 2011 and finished enrolling in the beginning of 2013.
Others
The 5 IST’s the Bavi Viral domain and the Digital Imaging Clinical Trials are all other sources of news that at some point may generate news. For now we will leave them out of the equation because there isn’t a good view on when such news would be available and whether the parties conducting these trials can hold the calendar of their announced expected results.
Cotara
1) Now that the FDA approved to move Cotara into a final PIII clinical trial one of the announcements, or detectable events via the concerned web-sites, is the start of the enrollment. It is however to be considered that when Peregrine is in partnering talks for Cotara they will not take that step without the partner.
2) It should be expected that a partnership announcement for Cotara will precede any other Cotara related activity. As this is a material event and will most certainly be accompanied by up-front payments this should not only move our pps accordingly but also move it sufficiently to compensate for the low reaction on the Cotara PIII announcement due to the atmosphere that was ruling at that moment due to the uncertainty about the NSCLC discrepancies.
Conclusion
A big information train is on the way and its wagons may enter the station at each moment of Q1/Q2 2013. We will be able to catch up some of the losses in pss and others will be lost forever. Never the less on this news train we should be able to see the pps go way above the 5.40$.
Personally I think partnership news or pancreatic news are the first drivers we will see. I would expect a resolution with CSM before the announcement of the details of the internal review. Both very possibly before Feb 15 because the announcement of Jan 7th proves the details are available at Peregrine’s. If we don’t see this news before Feb 15th it could be that it was technically possible to stall the serving of CSM and make a settlement depended on an FDA's verdict in 2nd line Lung. However that would mean we also will see an announcement about that soon as the 120 days period after filing the lawsuit against CSM is coming to an end soon.
I did not include evens such as PPHM being included in the Russel 3000 if that happens or surprise events such as grants or announcements of good Avid revenue on a quarterly/CC etc.
This week was a very normal trading week with pattern development as expected after a peek as that from past Monday. In case of no news or bear raids on Monday 14th I think it is going to be a boring day again with very few change. Then during at least 3 days of that week I expect a climb that should close us next Friday between 2.40$ and 2.50$, again in a non-evented market, because events can drastically alter this if, and depending on when, they occur.
