Last month small-cap biopharmaceutical company Peregrine Pharmaceuticals (NASDAQ:PPHM), which is focused on developing novel cancer immunotherapy products, reported its fourth-quarter results, which handily surpassed Wall Street's expectations.
For the fourth quarter, Peregrine announced revenue of $9.3 million, a 44% increase from the year-ago period when it reported $6.5 million in revenue. Although Peregrine's pharmaceutical business is still wholly clinical, its contract manufacturing subsidiary Avid Bioservices has been driving its top-line higher.
But higher sales didn't stop Peregrine's year-over-year loss from widening to $13.5 million, or $0.07 per share, from $10.6 million, or $0.06 per share, the year-ago quarter. Nonetheless, Peregrine's revenue came in close to $3 million ahead of estimates, and its loss was $0.01 per share narrower than expected.
On the surface this all sounds great, but these headline figures really give us no idea how healthy Peregrine's pipeline is, or how prepared the company is to survive over the long-term. In order to get those answers we need to turn directly to the horse's mouth, Peregrine's management team, and highlight the five most important takeaways from the company's conference call with investors and analysts.
In no particular order, here's what you need to know (quotes courtesy of S&P Capital IQ).
SUNRISE is on track
"Clinically, our SUNRISE trial in non-small cell lung cancer remains on target to complete patient enrollment by calendar year end." -- Steven King, CEO
Arguably the most important words to come out of Peregrine's conference call came within the first few sentences from CEO Steven King. The SUNRISE trial, which is a phase 3 study examining cancer vaccine bavituximab as a second-line treatment for non-small cell lung cancer, or NSCLC, with a primary endpoint of a statistically significant improvement in overall survival relative to the placebo, remains on track to be fully enrolled by the end of this calendar year.
Aside from the fact that positive data in the SUNRISE study would validate Peregrine's drug development platform targeting phosphatidylserine receptors, remaining on track is important to help keep Peregrine's expenses under control. Despite having contract manufacturing revenue under its belt, Peregrine burned through nearly $43 million in cash in fiscal 2015. It's important its study remains on track so the company doesn't run out of cash.
NSCLC is just the beginning
"Our preclinical results study show that the combination treatment with an anti-PD-1 antibody yield superior growth inhibition in a large percentage of subjects, while also exhibiting multiple immunostimulatory changes associated with an anti-immune response as compared to anti-PD-1 alone. Taken together, these results...provide a rationale for the clinical evaluation of bavituximab with PD-1 or PDL-1 targeting drugs in lung cancer and other indications." -- Jeffrey Hutchins, VP of Preclinical Research
While bavituximab as a second-line therapy for NSCLC has the potential to validate bavituximab as a viable therapy and demonstrate the value of Peregrine's drug development platform, NSCLC isn't the end of the line for Peregrine -- it's just the beginning.
Peregrine has presented a number of preclinical studies in recent months that demonstrate bavituximab's PS-blocking activity (binding with PS receptors blocks the immunosuppressant quality of cancer cells) may actually heighten the effect of anti-PD-1 and anti-PD-L1 cancer immunotherapies, which are all the rage among oncology researchers. The PD-1 and PD-L1 drug market is being described on Wall Street as a "tens of billions of dollars" opportunity in the coming decade, and if bavituximab can latch on with these immunotherapies as a combination therapy that improves response rates and survival, it could be a big positive.
You want a catalyst timetable? You got one!
"We plan IDMC interim analysis [for SUNRISE] at 33% and 50% of targeted overall survival events as those are reached, with estimated unblinding of the trial to occur approximately near the calendar year end of 2016. Regarding our planned Phase II second-line non-small cell lung cancer, bavituximab plus nivo [Opdivo], and our planned Phase II, III HER2-negative breast cancer trial, evaluating docetaxel or paclitaxel with bavituximab, we estimate trial initiation for both of those studies during the second half of 2015. And in these open-label studies, we will have the potential for interim data from both studies as early as 2016." -- Steven King
When it comes to clinical-stage biopharmaceutical companies, nothing wets the whistle of investors more than clinical-stage data. Given the success Peregrine has witnessed with its PS-targeting vaccine in preclinical studies, it's moving into a number of midstage and late-stage trials with bavituximab as a combination therapy. These include a second-line NSCLC trial involving Bristol-Myers Squibb's checkpoint inhibitor Opdivo and a phase 2/3 breast cancer study with either docetaxel or paclitaxel.
While it's impossible to predict the timetable when data might be available, CEO Steven King did his best to offer a tentative timeline for investors during the conference call. An independent data monitoring committee interim analysis for SUNRISE will be conducted for futility at 33% of targeted events, while a second interim analysis will be conducted at 50% of events to examine predictive success or futility. These events are likely to happen before the end of calendar year 2016.
Additionally, interim data for second-line NSCLC with Opdivo and phase 2/3 in breast cancer could be out in early 2016.
And here's one more catalyst to watch for
"Data from the rectal adenocarcinoma trial will be presented at the American Society for Radiation Oncology's Annual Meeting in October." -- Joseph Shan, VP of Clinical & Regulatory Affairs
But wait, there's more!
Although investors haven't heard much about bavituximab being investigated as a treatment for rectal adenocarcinoma, in October Peregrine should have data to share with the world. In other words, the American Society for Radiation Oncology's annual meeting is most likely the next major catalyst for Peregrine.
Keep in mind that this is an investigator-sponsored trial, so Peregrine has no final say on when the data is going to be released. But for Joseph Shan to go out on a limb and suggest that the company will have data in October demonstrates that the study is likely over or very near completion and the investigator is merely compiling or analyzing the data. Ultimately, we're not talking about a huge indication marketwise, but it would represent yet another successful step forward for bavituximab if successful.
Our contract manufacturing backlog could soar
"Just a little more information on the new facility [for Avid]. It actually more than doubled what our current capacity is in terms of space and bioreactor space that we have over there. So we do have an opportunity here to really to grow the business, even much larger than what our current backlog is." -- Paul Lytle, CFO
Lastly, no discussion of Peregrine would be complete without mentioning the strength of its contract manufacturing business, which is helping to offset some of the rising costs of its late-stage SUNRISE study.
In just a single quarter's time Avid Bioservices' backlog rose form $29 million to $40 million, which in turn allowed Peregrine to suggest guidance of $30 million to $35 million in fiscal 2016. At the midpoint Peregrine is forecasting 22% year-over-year growth for Avid -- and that may be just the beginning.
Avid has a new production facility readying to come online that will support phase 3 and commercial production, and, in the words of CFO Paul Lytle, more than double capacity. Peregrine's management noted on the call that the $11 million increase in backlog had nothing to do with the new facility, implying that Peregrine could really ramp up its backlog and reduce its cash burn in the coming years.
What's an investor to do?
As you can see, there's a lot to be excited about at Peregrine. But this excitement doesn't come without risk.
The vast majority of Peregrine's pipeline revolves around bavituximab and PS-targeting. If SUNRISE misses the mark, then serious doubt will be cast on Peregrine's remaining pipeline, even with the understanding that different cancers can respond differently to the same medication. It's a major risk that investors in this stock have to accept.
Of course, if SUNRISE meets its targets in the interim analysis, it could quickly find a licensing partner at its doorstep, and any future cash concerns would disappear.
Owning Peregrine is a gamble that I believe only extremely high-risk biotech investors should be taking at the moment.