PPHM data by YCharts

What: Peregrine Pharmaceuticals (NASDAQ:PPHM), a clinical-stage biopharma specializing in the development of monoclonal antibodies to treat cancer, saw its shares slip by almost 18% in September based on data from S&P Capital IQ. The good news is that this sell-off wasn't triggered by a specific negative regulatory or clinical catalyst.

Instead, I think this double-digit drop is best explained by the widespread drop across the healthcare sector that stung small-cap companies particularly hard. According to finviz.com, for instance, 74.6% of all small-cap healthcare stocks declined in September. 

So what: My hunch is that the market soured on small-cap healthcare companies in general last month because they tend to be cash flow-negative and heavily dependent on stock sales to fund their ongoing operations. And Peregrine is no exception in this regard.

After all, Peregrine lost $15.1 million, or $0.08 per share, in the first quarter of its fiscal year 2016, which it reported last month. Complicating matters, the company ended the quarter with less than $60 million in cash and cash equivalents -- strongly hinting that another capital raise is coming down the pike. 

Now what: While Peregrine's contract manufacturing subsidiary Avid Bioservices reportedly has a $42 million backlog in existing customers, Wall Street thinks the company's ongoing late-stage study for bavituximab, as a second-line non-small cell lung cancer treatment, will widen the company's net loss per share by another 23% next year.

As this event-driven pivotal trial may not produce top-line results until the end of 2016 or early 2017, Peregrine clearly has a long road ahead of it before reaching the promised land of an approved market. As such, investors may want to hold off on buying this small-cap drugmaker's shares for the time being. 

George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.