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: TSIF.

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Company Peregrine Pharmaceuticals (Nasdaq: PPHM  )
Submitted by TSIF
Member Rating 99.94
Submitted on Dec. 6, 2011
Stock Price at Underperform Recommendation $1.37

Peregrine Pharmaceuticals profile

Star Rating **
Headquarters Tustin, Calif.
Industry Biotechnology
Market Cap $96.2 million
Industry Peers

YM BioSciences (AMEX: YMI  )

Dendreon (Nasdaq: DNDN  )

OXiGENE (Nasdaq : OXGN)

Source: S&P Capital IQ, Yahoo! Finance, and Motley Fool CAPS.

This Week's Pitch:

Peregrine Pharmaceuticals has been lingering on my watch list for a few years. I had a piece of them back in 2009 before the 1:5 reverse split and the share price drops left me with little and I realized that the endgame was much further out than I had been playing it.

I only downthumb the 50% spike today that was caused by positive study results on Bavituximab, for reduction of lung cancer tumors, because it is "still early" and investors are far from patient at this stage. The drug is a combo drug used with other chemo drugs and appears to have similar results as Roche's Avastin. The market is sufficiently sized for them to be a nice play if they complete trials, prove safety, prove efficiency and get approval from the FDA but when a drug is already on the market the tendency of the FDA is to be stricter on the followers. Since it is being use with other drugs then results can be harder to measure. A 37% improvement with baxituximab vs 26% with only stand-alone drugs is significant, but will be difficult to correlate to survival benefit and against Roche's Avastin. 2012 is dedicated to longer term studies. Eventually the drug may be useable for other tumors.

In the short run we have a $30 Million per year cash burn rate and only $16 Million in cash. All funding so far has been from dilutive stock issue. Overall the company's stock can suppot more shares issued if it's successful in the end, BUT intermediate investors, those who pop in and pop out, usually with inconsistent expectations as I did two years ago, are not going to ride through the gyrations.

Short term thumb back down, will keep watching as data develops and a date with the FDA can be considered.

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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 (9) | 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 December 07, 2011, at 7:18 PM, applegate888 wrote:

    I see glodman is a major holder ive had it for years it will go to 10.00 i hope in my lifetime.

  • Report this Comment On December 08, 2011, at 8:57 AM, Caciatore wrote:

    Agreed with this article, even if this stock were ever to make it to 10 which is a far long shot, I would still have lost money on this guy. The 1:5 split, the dilution of stock, this stock is a snail. Just hanging in for a break even. Like the product, though and I do hope it is effective in the end.

  • Report this Comment On December 08, 2011, at 10:54 AM, TSIF wrote:

    applegate888, Goldman holds less than a half of a percent. They often end up with small positions of many company's from helping with stock offerings.

    I've hit a few biopharms at just the right time, but I've lost on others. Especially the ones I called right but dove on FDA approve on the "now what", "sell the news" model. SVNT for example burned me.

    I'm trying to learn the cycles and my call was not long term, but short term on the pullback. This one could be a winner someday as the market is large and valuable, but it's moving slowly and a lot can happen between now and the FDA dates. I don't mind holding a speculative biopharm in a small portion in my portfolio, but I usually mentally discount it to zero and I limit my exposure. Lately, I prefer to try the ones furhter in development even though some of the possible upside has been wrung out of them.

    Good luck!

  • Report this Comment On December 08, 2011, at 2:52 PM, BBTERPS wrote:

    I WOULD NOT NORMALLY WASTE MY TIME WHEN A STOCK I HAVE IS TRASHED WITHE FALSE STATEMENTS AND OBVIOUS STUPIDITY BUT THIS WENT OUT TO YAHOO AND THE INVESTMENT COMMUNITY LIKE IT WAS A NEWS WORTHY STATEMENT. I WANT IT CORRECTED OR PUBLICLY RETRACTED.

    First off the ORR was 39 % not 37% a 50 percent improvement over SOC.

    Secondly Avastin results were 35% (below Bavi.), however the huge difference is the side effects of Avastin which include some DEATHS do not occur with Bavituxtimab (Bavi). Avastin has already lost it's FDA approval for breast cancer where Bavi has recorded CR's (complete remissions), The FDA would love to supplant Avastin with a better safer alternative.

    As far as being years from an inflection point for improved PPS, PPHM has recorded significant improvement for GBM patients and FDA registrational pathway approval is slated for a meeting hopefully within the next few weeks. With that in hand PPHM has indicated they will be in postion to license or partner Cotara to a BP.

    At that point PPS for PPHM will move substantially.

    TSIF you were wrong with PPHM when you invested and now. I hope you lost a bundle.

    I hope the moderators will step in and retract you poorly research and and less then intelligent remarks.

  • Report this Comment On December 08, 2011, at 4:38 PM, TSIF wrote:

    Hi BBTerps. Welcome aboard!!

    This forum is to "call" an equity up or down in relationship to the S&P over a given period of time. I make many pitches and sometimes do make mistakes. On my orignal pitch the 39% vs 37% was corrected by someone who used dialogue rather than shouting.

    Now as far as the title, I didn't pick it. I VERY OFTEN disagree with the titles used for articles that skim comments from forum members. There is no need to be so harsh in the title, but I guess the article compilers like to get attention as they did with you.

    Per my pitch it was a short term call based on my experience with biopharms. So far the stock has retraced 25% in three days.

    What I lost on PPHM was very minor, certainly worth the lesson I gained. You see, I use this forum to make my calls, get input from other investors on the fourm, see how I did and learn how to do better. I learned on this one that investors in biopharms are generally NOT loyal and the stocks "sometimes", not always, reacts to catalysts in a short sighted way. I learned I was too early on this one. With DNDN and JAZZ I was just about right. Not as much upside as being an early buyer, but not as much downside either. I sold both too early. SVNT I held too long.

    As far as your timeline for FDA approval, I stand by my comment. The study you cite was Phase 2. It took approximiately 16 months. The cycle/administration of this type of drug takes time, then the benefit needs measured over time. Concern for effectivity and safety need determined. Meeting with the FDA to determine the pathway is NOT an approval date.

    Lots can happen inbetween.

    It's apparent you have conviction bias, so buy away on the dips. I was positive about the long term outlook, but you didn't get past the title and the 39%. I was also making a short term call. I hope PPHM is successful here and with other drugs in their pipeline. My call was short term. Short term we have a 25% retrace.

    Good luck!

    TSIF

  • Report this Comment On December 08, 2011, at 9:33 PM, lanceim59 wrote:

    Only idiots posts messages on Yahoo. 90% of which are false information.

  • Report this Comment On December 09, 2011, at 2:20 PM, rwgoed wrote:

    I agree with the Fool's take on short-term aversion based on the volatility of this stock, but if you are going to discuss bavi results then the long position should have been the focus. If bavi continues to churn out results like this in late-stage trials, then it absolutely has a chance to compete with Avastin in various tumor types. Obviously there is still a low chance of approval at this stage (<50% approval rate for oncology products for even the top pharma companies), but with a market cap of <$100MM, potential upside greatly outweighs investment risk. I will be shocked if bavi isn't licensed by end of 2012.

  • Report this Comment On December 09, 2011, at 2:30 PM, advantedges wrote:

    TSIF

    You are to commended for your controlled and professional response to BBterps - we must assume that his "handle" suggests an aggressive Basketball fan who needs to get some much needed relief! We might suggest heavy exercise and/or a girlfriend for this person. IF BBTerps is a female, watch out! She will track you down and eat you up! lol

    We certainly hope that the speculators who get involved in Biotechs understand a basic principle in investing - that is why they created ETF's - so you can spread your risk with stocks that go Boom and Bust. For Every Gennetech (DNA) there is a DNDN or ?

    BBTerp - go plan some BB and buy IBB for your risky bets. Otherwise, take a chill pill and go to Vegas for some fun!

  • Report this Comment On December 09, 2011, at 3:39 PM, TSIF wrote:

    Hi rwgoed, the CAPS forum is mostly an investment board. When the feature writers skim from a "pitch" that was meant for discussion on the boards it's not an analyst writing the pitch. The pitch describes the CAPS "play" and is not meant to be an exhaustive review of the equity. I think it's clear even though a pitch was made into a feature article that there may be some long term potential here, but you still have to determine your entry. Good luck with your play.

    Advantedges, thanks for the comments. I fully understand BBterps frustration when these "pitches" end up in feature articles and end up syndicated on the Yahoo boards. IN particular the titles are generally not flattering. Those of us playing the game don't get "paid" to write articles, they are thoughts for discussion and in support of the upthumb or downthumb....against the S&P.

    Great point on the BIO's and the ETF model of getting a piece of many. I do like to have one in play directly to learn about them, the drug pipleline potential, and as a "gamble" as a small piece of my portfolio to spice it up a little bit. Too much gambling however can leave you broke very FAST.

    Best wishes.

    TSIF

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