Avid Bioservices Inc (CDMO)

[Protector]

Court dismisses Consolidated Class Actions against PPHM

The UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA ruled in favor of Peregrine Pharmaceutical’s “Motion to dismiss Consolidated Complaint”. This puts an end to all remaining Class Actions that were filed against Peregrine Pharmaceuticals and some of its management for alleged SEC regulation infringement if no amended pleading is filed by September 16, 2013.

For the foregoing reasons, the Court DENIES Plaintiff’s motion to strike and GRANTS
Defendants’ motion to dismiss. Plaintiff may amend his Complaint in accordance with the foregoing. Should Plaintiff choose to amend, he may submit an amended pleading no later than September 16, 2013.

Failure to file an amended pleading by September 16, 2013 may result in dismissal of the action with prejudice.

IT IS SO ORDERED.

In Q3/2012 Peregrine Pharmaceuticals (NASDAQ:PPHM) was the victim of dose switching in its 2nd line Non Small Cell Lung Cancer (NCSLC) clinical trial. A 3rd party CRO, CSM from Fargo, ND, was said to be responsible for the erroneous, intentionally or not, labeling and packaging of the drugs resulting in switching the placebo and the drug under investigation Bavituximab (Bavi) for a number of patients enrolled in the clinical trial. This was a double blinded clinical trial in which PPHM could not take part, interfere or even request 3rd party monitoring as the CRO, under FDA regulation, is responsible to keep all data blinded to all parties until official unblinding of the clinical trial data.

The company announced this news on Monday September 24th, 2012 after the stock quoted 5.40$ the Friday before, September 21th, also option expiration Friday.

The Class Actions that were filed against PPHM, shortly after, claimed that four people at PPHM knew about this dose switching long before the public announcement in which the company warned not to rely on information about this clinical trial dating from before September 24th 2012 for investments. PPHM, under SEC regulation, had 4 business days to announce such material events after learning about them. Defendants were said to have the authority and position to stop a PR on September 7th in which PPHM announced extra-ordinary results for its 2nd ln NSCLC clinical trial which resulted in a steady take of the stock price.

The Class Actions all came down to about the same argumentation. They claim the defendants knew about the dose switching and used this information, by withholding it, to make personal gains on the markets, well knowing that the announcement of this dose switching news would result in the stock price collapsing. At the beginning of day on September 24th, around 7:30 AM Eastern, the stock dropped from its 5+$ price to 0.80$ to close around 1.20$.

It took PPHM till Q2/2013 to salvage the clinical trial and get the FDA’s approval to enter a Phase III clinical trial for 2nd ln NSCLC Docetaxel (Sanofi) + Bavituximab. While PPHM had another Phase III design clinical trial approved by the FDA after September 24th for its Brain Cancer treatment Cotara and has beaten analyst prediction multiple quarters in a row now, mainly due to the very good results of its fully owned in house production facility Avid Bioservices, the market has never responded to such news which otherwise has a certain effect on the stock prize. Except for a few peeks up to and over 2$ the stock currently still hangs out around 1.40$. The uncertainty of the pending Class Actions will certainly have contributed to that. PPHM entered the Russel and currently has 14% Institutional Investors or about 20% if the investments in PPHM around Kenneth Dart are included.

Today the last Class Action, which was a consolidation of the remaining ones after many others stopped the procedures themselves, has been dismissed. An amended pleading may be filed till September 16, 2013 otherwise the class actions are over. The pending Class Action, which never had real solid grounds, kept the company from communicating as freely as it would have been able otherwise but before all kept an uncertainty alive. Uncertainty is something the financial markets don’t like. Besides that many other side effects may have caused harm or potential harm to PPHM. While the company currently funds itself with the ATM program it is almost sure they would not have received a loan as long as Class Actions were pending.

After what we saw with the Ney-York lawyer of plaintiff it looks like there is a good chance no extra money is going to be put in these class actions and no amendment pleadings will show up (speculation).

The remaining lawsuit from PPHM against the CRO (CSM from Fargo, ND) is scheduled for the coming weeks and months. After a very long window of opportunity to settle both companies, almost a year after the facts, will appear in Court. There still remains a change of settlement as parties can settle at any time before a verdict. However, since the dose switching was in the disadvantage of Bavituximab it is know that the results of the trial would have to been even better than those announced on September 7th, 2012 and it will very probably be very difficult to calculate the damage done to PPHM due to lost time and having to enter a an End Of Phase II meeting with the FDA showing a 60% MOS improvement versus the 106% MOS improvement or much better if all patients had received their due dose of Bavituximab and if the control arm patients would not have received Bavituximab.

It is unclear what to expect from this trial. PPHM filed its complaints, mainly neglect, but said it would prove its case in Court. Also the defense of CSM was a text-book grade generic defense, never to the point. Practically this means this trial will either settle at some Insurance amount, come before a jury with an never predictable outcome for CSM (because there is clear evidence of dose switching and only CSM can be liable for that in a double blinded trial), or maybe there may be some bigger surprise disclosure about the circumstances of the dose switching.

Was it an error or intentional? If intentional then who did it and why? Was there another party involved in the motive? If a trial starts then other parties, harmed by what happened, may adhere and ask difficult questions to answer! A settlement would have been so much better and saver for everyone.

As soon as there is news about that trial it will be on this IHub board. Many people are doing a great job in following every detail, every move and every development around PPHM and the IHub PPHM board will have the news as hot as it can be served!

Good Luck to all with your PPHM investment!