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.
Each week, Motley Fool editors cull a top stock idea from the pitches made on CAPS, the Motley Fool's 180,000-member free investing community. Want your idea considered for this series? Make a compelling pitch on CAPS with a minimum length of 400 words. Want to follow our weekly picks? Subscribe to our RSS feed or follow us on Twitter.
|Stock Price At Underperform Recommendation:||$2.24|
Peregrine Pharmaceuticals Profile
|Market Cap||$250 million|
Sources: S&P Capital IQ, Yahoo! Finance, and Motley Fool CAPS
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.