Just How Important Is Bavituximab to Peregrine Pharmaceuticals?

Only within the biotech sector can you find a waltz between hope and science.

Over the past year and change, biotech stocks have been red hot. There were were 38 biotech IPOs in 2013, and collectively that group rose by an astounding 43% for the year. Venture capital is racing into the sector quicker than you can blink, and investors are more than willing to pay hefty premiums on select biotech stocks on the hope that their revolutionary new therapy or therapies pay off in a big way.

But not everybody has been a clear winner.

Peregrine's topsy-turvy ride
Shareholders in Peregrine Pharmaceuticals (NASDAQ: PPHM  ) have witnessed their stock being whipsawed over the past two years, from a depth of $0.40 per share to as high as $5, then back below $1, and nearing $3 per share again last week.

PPHM Chart

PPHM data by YCharts.

The reason for all of this volatility is bavituximab, the company's lead experimental therapy designed to block phosphatidylserine, or PS, an immunosuppressive molecule found on the outside of cancer cells that allows them to go undetected by the body's immune system. By retraining the body's immune system to recognize these cells, it is believed that bavituximab could be a perfect therapy for non-small cell lung cancer patients who have failed or progressed on a first-line therapy.

The treatment is being tested in a number of studies, including first-line NSCLC, rectal cancer, HER2-negative breast cancer, advanced melanoma, and even liver cancer -- but these are all relatively early stage research efforts. The bread and butter of Peregrine's current market valuation is tied to the potential of bavituximab as a therapy for second-line NSCLC.

Based on the final phase 2 clinical data released last June you'd think that bavituximab's success would practically be a slam dunk. In the data from that trial, bavituximab was shown to have significantly improved median overall survival rate, in combination with docetaxel, to 11.7 months from just 7.3 months for patients in the control arm on docetaxel alone. The combination was shown to be well tolerated and had no significant differences in adverse event occurrence. 

But this wasn't just your typical cut-and-dried phase 2 study. In fact, Peregrine's share price cratered from that aforementioned $5 price back below $1 in a single session after the company disclosed that a third-party clinical contractor had made errors, and that it would need to reassess the data. What you see above is the final outcome of that reassessed data, but many on Wall Street now have a wait-and-see approach based on the company's ongoing phase 3 SUNRISE study , which is now enrolling.

The question Peregrine shareholders need to ask is, "How important is bavituximab for Peregrine's share price?" I'd contend that it's the kind of therapy that has make-or-break potential.

What might bavituximab be worth to Peregrine?
Let's look at this from a bullish perspective first.

There are very few FDA-approved second-line therapies for NSCLC. Eli Lilly's (NYSE: LLY  ) Alimta is commonly prescribed. For fiscal 2013, Alimta brought in $2.7 billion in revenue, but it also isn't solely a second-line NSCLC therapy. Alimta is also approved for malignant pleural mesothelioma and as a combination therapy with cisplatin in first-line NSCLC. 

The other primarily used therapy is docetaxel, which is marketed as Taxotere by Sanofi (NYSE: SNY  ) . Despite having its patent expire in 2010, Sanofi's Taxotere still managed to bring in $409 million in revenue in fiscal 2013.

Beyond Alimta and docetaxel, the remaining second-line therapies tend to either focus on mutations such as EGFR (Roche and Astellas Pharma's Tarceva) or ALK mutations.

Source: OpenClips, Pixabay.

What this means for the Peregrine shareholder is that, assuming strong results from the SUNRISE trial and an eventual FDA approval, bavituximab could garner a good chunk of second-line NSCLC sales. I personally estimate that this "good chunk" could generate $600 million-$800 million in annual sales for Peregrine based on existing sales of Alimta and Taxotere, and the years needed to ramp sales up to peak estimates.

"Why is this important?" you ask? Most biopharmaceutical companies with revolutionary new therapies tend to be valued much higher than their peak sales estimate. Pharmacyclics, for example, which recently had the FDA approve Imbruvica for two types of blood cancers, could have peak sales potential of $5 billion-$7 billion, yet the company is valued at close to $10 billion. Similarly, we saw InterMune shares explode higher late last month after the company delivered impressive results from its ASCEND trial involving Esbriet for idiopathic pulmonary fibrosis. Despite peak sales potential of $300 million-$500 million, according to RBC Capital analyst Michael Yee, InterMune is valued around $3 billion.

In other words, Peregrine's current market value, which is hovering around $425 million, could have significant upside potential given on how its peers are valued.

Source: Urbanicsgroup, Flickr.

But what if bavituximab fails?
Biotech investors must consider every angle, and failure is always a possibility. Before you go breaking out the piñata consider these major risks.

First, small-cap biotech stocks have a notoriously bad track record of approval over the past decade. The Feuerstein-Ratain Rule, developed by TheStreet.com senior columnist Adam Feuerstein and University of Chicago oncologist Dr. Mark Ratain, notes that of biotechs that have spent the majority of their time at or under a $300 million market cap have failed either in their phase 3 trial or to gain approval from the FDA in 23 of 23 cases over the past decade. That's right, a 100% failure rate, at least through last summer! Peregrine may be over that market cap now, but it has spent much of its time well below the $300 million threshold, meaning history may not be on its side.

Second, dilution is a very real possibility. Predominantly clinical-stage biotechs such as Peregrine need to fund their operations somehow; if they choose not to partner their products up with a larger company in order to receive up-front cash and/or milestone payments, then the only other recourse usually is to offer shares on the open market to raise money for research. Peregrine, for instance, does generate revenue from its biomanufacturing subsidiary, Avid Biosciences, but it's certainly nowhere near enough to cover the cash required to run its ongoing studies. This means Peregrine has had to turn to potentially dilutive share offerings to fund this research. Since 2004, Peregrine's share outstanding have soared from roughly 27 million to 176.45 million as of its most recent quarter.

Finally, it practically is a case of bavituximab or bust for Peregrine. With the exception of its PS-targeted tumor imaging agent PGN650, which is in early stage studies, and cotara which is being studied as a therapy for glioblastoma multiforme, the deadliest type of brain cancer, Peregrine's entire pipeline revolves around bavituximab. While the final phase 2 second-line NSCLC data would suggest that could be a good thing, it could just as easily become a crutch. 

If bavituximab were to fail its phase 3 trial or receive a complete response letter from the FDA, the outcome could be devastating to the hopes of investors expecting good data from its other remaining studies. In addition, a failure in second-line NSCLC would move shareholders way back on the game board since none of the company's other five studies involving bavituximab are out of phase 1 yet. The good news for biotech investors is that different types of cancers can respond very differently to the same therapy, so there would still be hope for success if bavituximab faces headwinds in its phase 3 study. Realistically, though, Peregrine would probably face a steep haircut with only $63.2 million in cash on its balance sheet as of last quarter.

One worth watching
Admittedly, we're still a ways off from finding out the results of its SUNRISE study, as Peregrine is still enrolling. However, it's pretty evident to me that this drug possesses make-or-break potential for this company. If anything, I would suggest biotech-savvy and more risk-willing investors add Peregrine Pharmaceuticals to their watchlist and keep a close eye on the progress of bavituximab and the commentary from management, because the eventual results are probably going to move its share price in a big way, one way or the other.

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  • Report this Comment On March 11, 2014, at 9:27 PM, BigCDog wrote:

    Feuerstein is a joke and all he likes to do is say bad things about biotech companies. Their revised data was quite impressive and this is the type of company to be bought out if p3 is successful.

  • Report this Comment On March 12, 2014, at 7:13 AM, ryancheski wrote:

    March 11, 2014

    Data Presentations at Keystone Symposium Support Potential of Peregrine Pharmaceuticals' PS-Targeting Antibodies to Overcome Immune Suppression and Enhance Anti-Tumor Activity of Anti-CTLA-4 and PD-1 Antibodies

    Preclinical Studies Support Potential of Combining Upstream and Downstream Immune Checkpoint Inhibitors; Combination of Phosphatidylserine (PS) and CTLA-4 or PD-1 Targeting Antibodies Demonstrate Greater Tumor Growth Suppression and Survival Than Either Antibody Alone; Consistent Data Demonstrated Across Multiple Preclinical Cancer Models

    TUSTIN, CA -- (Marketwired) -- 03/11/14 -- Peregrine Pharmaceuticals, Inc. (NASDAQ: PPHM) (NASDAQ: PPHMP) today announced that preclinical data presentations made validate the immune-stimulatory mechanism of its phosphatidylserine (PS) targeting platform while demonstrating that the combination of an anti-PS antibody and anti-CTLA-4 or anti-PD-1 antibody displayed superior tumor growth suppression than either anti-CTLA-4 or anti-PD-1 antibody alone in animal tumor models. These data were outlined in two presentations at the Keystone Immune Evolution in Cancer meeting being held March 9-13, 2014 in Whistler, British Columbia, Canada. Peregrine's lead PS-targeting antibody, bavituximab, is currently being evaluated in second-line non-small cell lung cancer (NSCLC) as part of the SUNRISE pivotal Phase III clinical trial.

    In a late breaking presentation, Xianming Huang, Ph.D. of the Simmons Comprehensive Cancer Center at the University of Texas Southwestern Medical Center in Dallas provided results from studies demonstrating that PS-targeting antibodies, such as bavituximab, block an upstream immune checkpoint and reactivate tumor immunity at multiple levels.

    In the poster titled: "Phosphatidylserine-Targeting Antibodies Induce M1 Macrophage Polarization, Promote Myeloid Derived Suppressor Cell Differentiation and Boost Tumor-Specific Immunity", Dr. Huang and colleagues demonstrate that PS-targeting antibodies significantly decreased the ratio of M2 to M1 tumor associated macrophages (TAM) and decreased the levels of myeloid derived suppressor cells (MDSC). In addition, PS-targeting antibodies were shown to promote and increase the frequency of dendritic cell (DC) maturation into cells having the phenotype of functional antigen presenting cells while also eliciting specific anti-tumor T-cell responses. In combination studies with anti-PD-1, tumor progression was slowed compared to anti-PD-1 treatment alone. As well, combination treated splenic T-cells produced increased levels of the cytokines IL-2 and interferon gamma.

    "These data provide further validation of the immune-stimulatory properties of bavituximab blocking PS, an upstream immune checkpoint, that, in turn, initiates a series of elegant downstream steps to boost tumor-specific immunity," said Jeff T. Hutchins, Ph.D., vice president of preclinical research at Peregrine. "We believe that the mechanism of action and combination data strongly support the continued investigation into the combination of bavituximab with other immune checkpoint blockades that could synergistically induce potent long-lasting antitumor immunity."

    In a poster titled: "Phosphatidylserine Targeting Antibodies Enhance the Activity of Immune Checkpoint Inhibitors in Tumors" scientists from Peregrine and the University of Texas Southwestern Medical Center demonstrate that PS-targeting antibodies enhance the anti-tumor activity of anti-CTLA-4 and anti-PD-1 antibodies through infiltration of activated immune cells in tumors and induction of adaptive immunity.

    Results from these preclinical studies found that animals administered a combination of a PS-targeting antibody and an anti-CTLA-4 or an anti-PD-1 antibody exhibited greater tumor growth suppression and longer survival than anti-CTLA-4 and anti-PD1 antibodies alone. In addition, data showed that animals that survive the initial tumor challenge develop tumor-specific protective immunity and are resistant to re-challenge of the initial tumor. Lastly, tumors from animals treated with PS-targeting in combination with anti-CTLA-4 antibodies show strong and uniform T-cell and macrophage infiltration by immunohistochemical staining.

    "These data build on the encouraging data we announced last year showing that the combination of bavituximab and an anti-CTLA-4 antibody yielded enhanced anti-tumor activity in a pre-clinical model of melanoma," said Jeff T. Hutchins, Ph.D. "While this is early data, it is compelling in that the combinations of bavituximab with an anti-CTLA-4 or an anti-PD-1 antibody clearly show both a delay in tumor growth and a decrease in the number of animals with tumor progression. In addition, the discovery of tumor-specific immunity to re-challenge support further investigation into the mechanisms involved and the potential for clinical investigation of these promising upstream and downstream immune checkpoint blockade combinations."

    "Data such as these are extremely valuable as we begin to advance novel immunotherapy combinations into the clinic," said Joseph Shan, vice president of clinical and regulatory affairs at Peregrine. "We are already on the cusp of seeing the first clinical trial initiated to evaluate the combination of bavituximab with the approved anti-CTLA-4 targeting antibody ipilimumab and we look forward to advancing other immunotherapy combinations into the clinic as more data becomes available."

    About Bavituximab: A Targeted Immunotherapy

    Bavituximab is a first-in-class phosphatidylserine (PS)-targeting monoclonal antibody that represents a new approach to treating cancer. PS is a highly immunosuppressive molecule usually located inside the membrane of healthy cells, but "flips" and becomes exposed on the outside of cells that line tumor blood vessels, creating a specific target for anti-cancer treatments. PS-targeting antibodies target and bind to PS and block this immunosuppressive signal, thereby enabling the immune system to recognize and fight the tumor. These data detailing the immune-stimulatory mechanism of action of PS-targeting antibodies, such as the company's lead drug candidate bavituximab, are the subject of a manuscript published in the October 2013 issue of the American Association for Cancer Research (AACR) peer-reviewed journal, Cancer Immunology Research . Bavituximab is currently being evaluated in several solid tumor indications, including non-small cell lung cancer, breast cancer, liver cancer and rectal cancer with a trial in advanced melanoma anticipated to initiate in the near future.

    About Keystone Symposia

    Keystone Symposia serve as a catalyst for the advancement of biomedical and life sciences by connecting scientists within and across disciplines at conferences and workshops held at venues that create an environment conducive to information exchange, generation of new ideas and acceleration of applications that benefit society.

    Copies of these posters are located in the Upcoming Events section of the Investors tab of Peregrine's website www.peregrineinc.com.

    About Peregrine Pharmaceuticals, Inc.

    Peregrine Pharmaceuticals, Inc. is a biopharmaceutical company with a pipeline of novel drug candidates in clinical trials for the treatment and diagnosis of cancer. The company is developing multiple clinical programs in cancer with its lead immunotherapy candidate bavituximab while seeking a partner to further advance its novel brain cancer agent Cotara®. Peregrine also has in-house cGMP manufacturing capabilities through its wholly-owned subsidiary Avid Bioservices, Inc. (www.avidbio.com), which provides development and biomanufacturing services for both Peregrine and third-party customers. Additional information about Peregrine can be found at www.peregrineinc.com.

    Safe Harbor Statement: Statements in this press release which are not purely historical, including statements regarding Peregrine Pharmaceuticals' intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties including, but not limited to, the risk that the results from human clinical studies involving combinations of bavituximab with an anti-CTLA-4 or an anti-PD-1 antibody may not correlate with the data from the preclinical studies. It is important to note that the Company's actual results could differ materially from those in any such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, uncertainties associated with completing preclinical and clinical trials for our technologies; the early stage of product development; the significant costs to develop our products as all of our products are currently in development, preclinical studies or clinical trials; obtaining additional financing to support our operations and the development of our products; obtaining regulatory approval for our technologies; anticipated timing of regulatory filings and the potential success in gaining regulatory approval and complying with governmental regulations applicable to our business. Our business could be affected by a number of other factors, including the risk factors listed from time to time in our reports filed with the SEC including, but not limited to, our annual report on Form 10-K for the fiscal year ended April 30, 2013 as well as any updates to these risk factors filed from time to time in the company's other filings with the Securities and Exchange Commission. The Company cautions investors not to place undue reliance on the forward-looking statements contained in this press release. Peregrine Pharmaceuticals, Inc. disclaims any obligation, and does not undertake to update or revise any forward-looking statements in this press release.

    Contact:

    Christopher Keenan or Jay Carlson

    Peregrine Pharmaceuticals

    (800) 987-8256

    info@peregrineinc.com

    Source: Peregrine Pharmaceuticals

    News Provided by Acquire Media

  • Report this Comment On March 12, 2014, at 7:14 AM, ryancheski wrote:

    all in a name peregrine is the patron saint of cancer, do you believe....???

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