Why Peregrine Earnings Are Stuck in the Red

Peregrine Pharmaceuticals (NASDAQ: PPHM) will release its latest quarterly report on Thursday, but investors are still cautious about the small biotech's future prospects. With the stock still hovering at low levels, it's clear that shareholders want to see Peregrine earnings turn positive a lot sooner than is likely.

Peregrine Pharmaceuticals has chosen to concentrate on cancer, as well as hepatitis C and other viral infections, with its antibody-based treatments seeking to help the body's own defenses work to rid patients of their diseases and their ill effects. Yet a setback last year hurt Peregrine's future prospects, leaving investors uncertain what the next step forward is for the company. Let's take an early look at what's been happening with Peregrine Pharmaceuticals over the past quarter and what we're likely to see in its quarterly report.

Stats on Peregrine Pharmaceuticals

Source: Yahoo! Finance.

How will Peregrine earnings do this quarter?
Analysts haven't really changed their views about Peregrine's earnings prospects in the past few months. They've held their April-quarter estimates unchanged and narrowed their fiscal 2014 estimates by a single penny per share. The stock has been in a similar holding pattern, with shares up just 3% since early April.

The big news for Peregrine came in May, when the company announced that it was starting a phase 3 trial for its bavituximab treatment for non-small-cell lung cancer. Unfortunately for shareholders, the 19% surge in the stock price that day didn't hold up, as investors realized that starting a trial is a lot different from having a successful trial. Moreover, with Peregrine's problems in analyzing the treatment's phase 2 results, investors have to be a little skeptical about bavituximab's prospects before another trial confirms the treatment's effectiveness.

Early last month, Peregrine got a little more validation when it released new data showing a survival increase of 4.4 months for non-small-cell lung cancer patients compared to the study's control. Shares again moved up temporarily, but then fell back in subsequent days as investors again realized that they'll have to wait for the new study's results to be sure of the treatment's effectiveness. Then just a couple weeks ago, Peregrine released further data that showed little advantage from the drug over using other treatments to fight lung cancer, and that sent the stock plunging about 25%.

The problem Peregrine faces is that much larger competitors are fighting to find their own successful treatments. For instance, Celgene (CELG) did a trial testing its Abraxane treatment for pancreatic cancer that had a better hazard ratio than bavituximab and also showed clearer signs of statistical significance. Yet even big companies have had trouble getting cancer treatments approved, with Sanofi (SNY -0.31%) having failed to demonstrate favorable benefits in the non-small-cell lung cancer arena and with Eli Lilly (LLY -0.14%) and its Alimta treatment not producing better results, either.

In the Peregrine earnings release, watch for the company to give updates on its long-term strategy going forward. With little revenue, cash burn is an important consideration as investors need to assess the risk of further financing needs diluting their investment in Peregrine stock.

Click here to add Peregrine Pharmaceuticals to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.