We have previously discussed[1][2] the numerous shortcomings of the overhyped oncology developer, Peregrine Pharmaceuticals (NASDAQ: PPHM). With further details on a botched Phase II trial that still leave many questions, investors still have not woken up to the fact that Bavituximab is worthless. In 2013, we expect to see another failed trial in first-line lung cancer and more dilution for shareholders following another at-the-market offering in December.

Recent History

For a very brief period of time in 2012, Peregrine looked like the makings of a phoenix rising from the ashes. After much hype, Peregrine released overall survival(OS) data from their randomized Phase II trial in second-line non-small cell lung cancer that wowed many. They spoke of over a dozen big pharma companies looking to partner with them. Even during the Q4 2012 earnings call on July 16th, Peregrine hyped the potential for accelerated approval.

However on September 24th, Peregrine informed the world that their previous data wasn’t reliable due to “major discrepancies between some patient sample test results and patient treatment code assignments.” Peregrine’s investigation indicated that somehow discrepancies were isolated to only the placebo and 1mg/kg treatment arms of the trial, but no evidence of discrepancies in the 3mg/kg treatment arm of the trial. How does a vendor mix up labeling two of the arms, but not the third? We find their explanation insufficient and rather odd, but Peregrine has a long history of straining credulity to the limits.

We also don’t view their recent ad-hoc analysis of the data as acceptable by any standards. The following is is a great example of Peregrine’s creativity: they are analyzing the combined the placebo and Bavituximab 1mg/kg arms into one treatment arm (control arm), and comparing those results to the 3mg/kg arm. Notice the complete lack of any other details like the p-value or censoring rate. We would love to the see faces of the FDA reviewers when Peregrine has their mid-year end of Phase II meeting.

With a botched trial and multiple other failed studies, it should be unlikely they will move this into Phase III. However, management still looks willing to waste shareholder money further by initiating a pivotal trial near year-end. Based on their Phase II missteps and inconclusive data, it is not a wise investment to move Bavituximab into Phase III.

Chalk up another failure for Bavituximab

On February 13 of 2013, Peregrine announced the results of their randomized Phase II study of Bavituximab used in combination with gemcitabine in patients with previously untreated, advanced Stage IV pancreatic cancer. The trial failed on endpoints, but Peregrine can not be honest with investors and admit failure in words. Notice all data below has no mention of p-values or statistical significance anywhere in the press release.

With overall survival as the primary endpoint, those treated with bavituximab plus gemcitabine had median overall survival of 5.6 months vs 5.2 months in the gemcitabine alone arm with a hazard ratio equal to 0.75. The secondary endpoint, tumor response rate, showed 28% in the bavituximab plus gemcitabine arm versus 13% in the gemcitabine arm.

Instead, they go onto say:

“We are pleased with the results seen in this very difficult to treat patient population,” said Kerstin Menander, MD, PhD, head of medical oncology at Peregrine. “Although the median overall survival improvement is modest, further analysis of the data including subgroups shows some very interesting and potentially promising trends. We look forward to presenting the full data set from this trial later this year at an upcoming scientific meeting.”

We believe investors should assign zero potential revenue to Bavituximab. Clinical data presented to date has demonstrated that it is NOT effective for the treatment of any disease or cancer. Future overall survival data from their randomized Phase II trials in patients with front-line Stage IIIb and Stage IV non-small cell lung cancer (NSCLC) will likely be further evidence of any efficacy. In fact, their first cut of the data revealed that Bavituximab failed to significantly increase progression-free survival or overall response rates.

Still burning cash, while endlessly diluting investors

Following the debacle in late September, Peregrine defaulted on their $30 million loan they had just taken out weeks prior. It was definitive proof their Phase II results were worthless. In addition to returning all the money, Peregrine was forced to pay roughly $1.8 million in fees and interest on this loan, something they only had for under 30 days.

Peregrine reported cash and cash equivalents of $24.4 million at the end of October 31, 2012. In December 2012, Peregrine filed another at-the-market offering through MLV in the amount of $75 million. As of October 31, 2012, Peregrine has an accumulated deficit of $354 million dollars since inception. That’s a pretty amazing accomplishment.

From July 2011 until now, investors in Peregrine have seen the outstanding share count more than double from around 70 million to over 133 million. This number also excludes the over 24 million shares they have set aside for issuance to employees as options grants or their stock incentive plan. We look forward to Peregrine’s updated financials, which will likely reveal further dilution.

Conclusion

Peregrine’s lack of credibility and continual data flubs should not be taken lightly by investors. They have wasted over $350 million since inception and there is no end in sight. Bavituximab has failed to meet any of the key criteria of being considered a promising developmental drug, yet Peregrine continues to push it forward. With a market capitalization well over $200 million and enterprise value over $170 million, Peregrine is grossly overvalued in comparison to competitors and based on Bavituximab’s bleak future. At some point, the market will wake up to this fact.