The Seeking Alpha article this morning is troublesome. I would like to take a closer look at this article and make the point that the real question for investors is "whether to invest in PPHM at this time and price"???.
Regarding the above simple question I would add that A CORRECT FACTUAL STATEMENT DOES NOT ALWAYS LEAD TO THE CORRECT ANSWER TO THE CENTRAL QUESTION.
Let's parse this article and see if I can better make the point:
1. " Peregrine holds or has an exclusive license to over 200 issued patents and published patent applications worldwide, which is important, but holds little value until the intellectual property is tested and in the clinic".
First of all, if nothing else PPHM is all over the clinic. IMO were the patents for sale they might have serious value. We have all seen recent patent sales from several companies that were in the billions.
2. " Peregrine's stock price, quoted on the NasdaqCM, has seen quite a flux in 2013, ranging from $1.21 to $2.43 in 2013".
This statement is factually true but no more so than most biotech stocks so hardly specific to PPHM. Also, this statement may be totally irrelevant to the central question.
3. "It should be noted that Peregrine was almost de-listed from the Nasdaq due to its share price being below $1.00 for a period greater than 30 days in Q4 2012".
This statement is mostly true, dated, and again irrelevant to the central question. I say mostly true because at no time did I really fear PPHM would be delisted for price since price could be adjusted by reverse split.
4. "it should be noted that with so many outstanding shares, one piece of bad news could easily sending it tumbling below $1.00."
The number of shares is not so important as the market valuation. Bad news could affect any biotech stock and this phenomenon is not specific to PPHM.
5. "Almost every analyst is bullish with their price targets on biotech stocks because they want the financing business that almost every biotech will require. An example of this is Roth's recent $7 price target, or a target that is over 420% the current price"
This statement is not necessarily true in general, certainly not true for PPHM, and Roth historically has not handled PPHM financing. MLV has handled some financing.
6. "Peregrine does still have $145.5 million worth of equity still to offer, which could potentially dilute the stock by 39%"
This statement may be accurate but again, not particularly specific to PPHM. Any biotech can issue more stock and it may be dilutive.
7. "If no additional capital is raised, Peregrine expects to be able to operate through January 31, 2014."
This statement is official. PPHM has operated as a going concern for most of a decade and has never properly addressed this question. It has funded through ATM, Govt grants and Avid revenue--not the most efficient method but nothing new in this . This may not be the most important fact going forward for a new investor that is looking for PPHM to partner.
8. "Ayer Capital Management, one of the largest institutional funds in the biotech sector recently has sold off the majority of their holdings in Peregrine."
This is factually true (and rather funny). Ayer has liquidated most if not all of their holdings in all of their stocks since the fund is going out of business. This fact is rather insidious in my opinion and not germain to PPHM.
9. "The biggest issue with success thus far is the management team at Peregrine. Inexperienced and overconfident management teams often are the difference between a successful start up and a failure. "
PPHM is not a start up. After nearly 14 years the PPHM team is neither inexperienced nor seems overconfident IMO. The original management team led by SK has been bolstered and contains a cadre of sophisticated players that came over from Genentech. These include top clinical experts, top execs at Avid, and of course Rob Garnick who is arguably the foremost authority in the world in FDA regulatory matters. If the article had said the BOD is thin I would have been more in agreement.
10. " it is clear that the company could have put itself in a better position for success in the past. This was seen in 2012 when they released misleading trial results about a second-line NSCLC bavituximab trial."
I'm not sure how PPHM could have "better positioned" this stuff. Again it is factually true in the narrowest sense that PPHM released misleading trial results. However, PPHM did not "knowingly" do so. When the error was found PPHM was quick to retract the results and to investigate. This was a gold standard double blind trial at an FDA sponsored CMO so PPHM was unable to manage the trial and "vial mis coding " may have been deliberate (to be determined legally).
What is more germain is that the FDA found PPHMs' corrective measures using the 3mg arm vs the combined placebo and 1mg arm sufficient in result to allow the phase III testing. The adjusted phase II trial appears historically to be the finest ever run vs 2nd line NSCLC in spite of the PPHM handicap of having to test against their own drug to some extent. IMO as an investor this is far more germain in trying to answer the central question of whether to invest in PPHM than trying to blame PPHM for something out of their control. This is a sophisticated argument and IMO largely lost on most investors to date.
11. "This is not the only time Peregrine has skewed results however. In March 2012, they also admitted that the unexpectedly high PFS in 1st line NSCLC patients taking bavituximab. This was attributed to "Principal Investigator" bias."
I'm not sure I even understand the grammar of the first sentence in this statement. In any case, IMO PPHM did not skew the data they just reported it and to that extent this statement is false. Again these arguments are sophisticated and largely ignored by a "shoot first ask questions later" investor culture.
12. "This clearly has had an effect around the ASCO news release to the extent that investors either see the results as nothing extraordinary, or are still skeptical about investment in PPHM."
I certainly have to agree with this statement.
13. "I believe the second line results show that bavituximab has its merits, and could be used in combination with other immunotherapies and chemotherapy drugs, but it is nowhere near as exciting as the PD-1 drugs being developed by Bristol-Myers Squibb (NYSE:BMY), Roche (PINK:RHHBY.OB), and Merck(NYSE: MRK). With a safety profile that to this point is in line with other approved products, if the phase II results are similar in Phase III, I would foresee approval in second-line NSCLC."
This is an interesting statement/speculation. IMO I disagree with the first sentence and agree with the second sentence. I believe I am better informed than the author of this article and my opinion could be substantiated with a long scientific argument. I believe that argument will be made by PPHM going forward over time and more importantly the argument will be made to potential partners. IMO the safety profile is better than other approved products and the statement quoted is false.
14. In conclusion (mercifully): "Ultimately, the question is, can Peregine get back on the track to success? I believe it is possible, but with the history of mistakes and lack of cash on hand, I am not too bullish. I do not believe that Peregrine is currently overvalued and a partnership deal could send the company easily to a $500 million market cap, but any source of bad news could send it to the OTC for good".
IMO I agree that PPHM is "not " overvalued. It is a generally true statement that bad news is bad and partnering for PPHM would be good. Who needs this author for that sort of deep thinking?
We could go on but I think the point has been made. Simple factual statements are not always germain and may not lead you to a correct answer for the central question.
Best Regards,
RRdog
AI
