Avoid This Biotech Stock

Editor's note: This article is a stock pitch made by a member on CAPS, The Motley Fool's free investing community. The pitch is published UNEDITED and is the opinion of the CAPS member whose pitch it is, in this case: zzlangerhans.

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Company Peregrine Pharmaceuticals (Nasdaq: PPHM  )
Submitted By: zzlangerhans
Member Rating: 99.58
Submitted On: 8/10/2012
Stock Price At Underperform Recommendation: $2.24

Peregrine Pharmaceuticals Profile

Star Rating *
Headquarters Tustin, California
Industry Biotechnology
Market Cap $250 million
Sources: S&P Capital IQ, Yahoo! Finance, and Motley Fool CAPS

This Week's Pitch:

Peregrine has gotten a lot of mileage from their phase IIb trial of bavituxumab in second-line advanced NSCLC showing a doubling of ORR from 8% in control to 15% and 18%. They're now a four-bagger and counting from the June low of 0.43, and predictably I bailed out of my green thumb with plenty of points left on the table. Now, of course, the upward momentum is pure speculation in the usual game of baby biotech chicken. Ultimately, we know that ends up with someone splattered on the pavement.

Red flag one is that bavituxumab has been around for like, forever. Longer than I've been following biotech. That's a long time for a miracle drug to reveal its miraculous nature.

Red flag two is that PFS was only 4.5 months vs 3 months for standard of care. Better than nothing, but not necessarily predictive of prolonged survival. Ultimately a drug has to treat patients, not CT scans.

Red flag three is that the company released very little of the data from the trial. Statistical significance?

Red flag four is that the share price didn't start taking off until a month after the data release in May. Trial data doesn't get around by Pony Express and smoke signals. The delayed reaction reeks of manipulation and speculation.

Red flag five is courtesy of Adam Feuerstein, who points out that Peregrine has made a business model out of selling stock through unannounced ATM financings for years. If they've got something so great, why are they selling stock and diluting shareholders as hard as they can all the way up?

If you don't want to miss that kind of dilution and you can't bring yourself to pore through the quarterly SEC filings, just remember to click that cash flow link under Financials on Yahoo Finance. They can dilute without telling you in PR, but they can't hide their Sale Purchase of Stock.

Foolish Bottom Line

While this CAPS All-Star thinks you should avoid Peregrine Pharmaceuticals, for a stock you don't have to avoid, check out our brand new free report "The Only Stock You Need to Profit From the NEW Technology Revolution."

The Motley Fool is investors writing for investors. Dan Dzombak did not have a position in any of the companies mentioned in this article. Pitches must be compelling, made in the past 30 days, and be at least 400 words. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (10) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 24, 2012, at 12:08 AM, tjeo wrote:

    Same recycled short garbage.

  • Report this Comment On August 24, 2012, at 7:28 AM, tutone71 wrote:

    As I stated in a comment to a recent article published at Seeking Alpha on 8/22/12, I am open minded investor and I find it amazing articles are published to have some presence as credible without the identification of the author behind it. Again, this article is not new information that hasn't already been presented prior. It's very obivious, this is just another attempt to drive the price of this stock for the writer's own interest. The article is very vague lacking details to its arguement against Peregrine. As an outsider looking in, the multiple attempts to publish the same misleading information over and over again in a short timeframe shows there is some serious desperation at this point with investors, like this anonymous writer again, to try attempt and drive this stock down to protect his/her own interest. I am amazed this is credible information for Motley Fool to publish as newsworthy. Sad. With this type of fear, it tells me this company must have some serious goods around the corner.

  • Report this Comment On August 24, 2012, at 10:16 AM, cjgaddy wrote:

    To the actual author of this bashing article: Brian D. Pacampara

    (this article is a re-post of 8-14-12 Daily-Finance, “1-Star Stocks Poised to Plunge: Peregrine Pharm?”, by Brian D. Pacampara - http://www.dailyfinance.com/2012/08/14/1-star-stocks-poised-... )...

    Peregrine’s ATM fundraising program (3/2009-6/2012), required to get Bavituximab to the present data/partnering inflection point, has served its purpose – per mgt’s public statements 7-16-12/CC & 8-15-12/Wedbush, it’s NO MORE as of 7-13-2012…

    Shares O/S as of 7-13-12: 104,174,056 (10-K 4-30-12 iss. 7-16-12 http://tinyurl.com/79o57b2 )

    7-16-12 CFO Paul Lytle (ConfCall): http://tinyurl.com/cs7spbz

    “In addition to our focus on growing Avid revenues, our next immediate focus is to secure a less-dilutive debt-financing vehicle, similar to a term loan. Recognizing the growing value in the Avid asset, and the strong clinical data in 2nd-Line NSCLC, we are pursuing a non-convertible-type loan in the range of $20-30mm. We will keep you updated as we get closer to a possible transaction.”

    8-15-12 CEO Steve King (Wedbush/NYC): http://tinyurl.com/8mhrtld

    "We've laid out our strategy for financing the company; we've not been raising money thru the capital markets in any way. We're not currently planning on going out for, nor have we been actively involved in any other fund-raising activities. Right now, our stated goal is to pursue a debt-arrangement - with an asset like Avid Bioservices, we can get very preferential rates on raising debt-type funding right now, which we feel is the least-dilutive for the company. In fact, our stated goal is to raise $20-30mm thru a debt facility between now and out next earnings call on Sept. 10, 2012. With that capital in the bank, we’ll then will have a 1yr+ runway. We believe that will get us thru the partnering discussions, and then with a partner on board, then certainly we expect that’ll bring in the capital needed to move the company forward for what should hopefully be several years time period. So, that’s our goal – we have a nice, clean cap structure, minimal # of warrants, stock options – there’s no convertible debt on the books, so we think we’re in good shape as we continue to move the company forward into those successful partnering discussions.”

    Shares O/S as of 8-16-12-12: 104,191,176 (prelim. proxy 14A http://tinyurl.com/c48bvo )

    = > That’s +17,120 in the July13 – Aug16 timeframe .

    = = = = = = = = = = = =

    Shares O/S as of 8-16-12: 104,191,176 - history since 4-2006: http://tinyurl.com/942cx77

    …8-15-12/SKing/JMP: no more raising $$$ via capmkts/ATM; goal to raise $20-30mm via debt-facility by 9-10-12 - see http://tinyurl.com/8mhrtld

    ...A/O 4-30-12: 219,967 warrants o/s with wgt.avg. exercise price of $1.48 (exp. 12-19-2013) - none iss. in FY10-11-12.

    ...A/O 4-30-12: 7,402,248 stock options exercisable & expected to vest; wgt.avg. exercise price of $2.93. (pg.F28 10K)

    A-T-M (At-The-Market) Sales 3-2009 - 6-30-12 ($89,674,000gr./51,785,558sh=$1.73/sh): http://tinyurl.com/bnd6o7d

  • Report this Comment On August 24, 2012, at 1:51 PM, TSIF wrote:

    Shame on you guys, tanking this stock again!

  • Report this Comment On August 24, 2012, at 2:54 PM, TruffelPig wrote:

    This article originally appeared under "1-* stocks poised to plunge". Now it comes back under a different title. Same WEAK content based on the opinion of one person!

    I am a subscriber to 2 MF services but I will not renew those services because this is a clear sign of manipulation. Nothing - absolutely nothing - except for the initial paragraph in italics added seems to have been added to the original bad post but ALL those comments criticizing this article are gone. No one at Motley fool has the capability, so it seems, to actually judge the science behind the company. The PPHM scientists publish in high quality high impact factor journals. The concept and targeting method is unique and puts this company in an excellent position even should BAVI not work!

    Just to give an example, one could couple BAVI to conventional drugs and target cancer tissue with it. BAVI would have the advantage of being relatively universally applicable in contrast to other FABs.

    Shame on you Motley fool for recycling garbage. I am utterly disappointed. I do not do you the honour any more to capitalize the f in fool.

  • Report this Comment On August 24, 2012, at 2:58 PM, TruffelPig wrote:

    Ah, did ZZ put real money on the line? I did.

    LONG PPHM

  • Report this Comment On August 24, 2012, at 11:07 PM, ststephensreveng wrote:

    Help your followers understand how in the heck would someone with the stature of Robert Garnick make such a ridiculous quote as this “I've seen a lot of Phase II & Phase III data, and this is as compelling Phase II data as I've ever seen.”

    The argument that “he works for Peregrine” just doesn’t pass the sniff test. Nobody in their right mind would compromise their good name making such an outlandish statement without having gained access to data that would give him a basis for stating this. The salary he makes consulting to Peregrine is chump change for him.

    You may just be staring at Avastin’s replacement and are simply clueless at connecting the apparent dots.

    I’ll be looking forward to your strong buy announcement at the $6 – 10$ SP range after the partnership announcement later this year. The company will have their pick of the litter and the bidding process is ongoing as the data for lung and the pancreatic trials matures.

    The question shouldn’t be focused on the % recent share price rise…..but rather, how the heck the share price / market cap got so ridiculously low.

    Arguing against the “gold standard mini phase III” trial layout preliminary results as they stand today appears extremely shortsighted by the various naysayers.

    If the MOS trucks past Sept 7th, your analysis will instantly serve as comedy club material.

    The MOS don’t lie……

  • Report this Comment On August 28, 2012, at 3:11 PM, TruffelPig wrote:

    I used the short attack to buy more yesterday at $1.8. Very nice, thank you. One can protect this stock well with options btw. - even the $5 ones pay pretty well.

  • Report this Comment On August 30, 2012, at 8:07 PM, TruffelPig wrote:

    Ok, 30 million loan facility established. One year operations without ATM. New loan on no news?

    Stock price: $2.5; on a red day now up 6% including AH

    News: Sept. 7 MOS upcoming; investor conference Sept. 6

    If you follow my last post I made already 70 cents / share or about 25% since this beautiful thing came out. Haven't sold any though; accumulating.

  • Report this Comment On September 07, 2012, at 3:43 PM, TruffelPig wrote:

    Oh - eat your own words now please dear author. Since you wrote this the stock DOUBLED. Please refrain from giving financial advice in the future. Please.

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