Loss Widens at Peregrine, Shares Down - Analyst Blog

Share price of Peregrine Pharmaceuticals, Inc. PPHM fell 8%, after the company announced its third quarter of fiscal 2014 (ended Jan 31, 2014) results. Although the stock has witnessed a slight volatility since then, the overall share price has fallen 8%.

Peregrine Pharma reported a net loss of 6 cents per share in the third quarter of fiscal 2014, narrower than the Zacks Consensus Estimate of a loss of 7 cents per share but wider than the year-ago loss of 4 cents.

Revenues decreased 44.8% to $3.9 million, nearly in line with the Zacks Consensus Estimate of $4 million. The decrease in revenues was due to lower contract manufacturing revenues.

Avid Bioservices, a Peregrine Pharma subsidiary, posted contract manufacturing revenues of $3.9 million during the quarter, down 44.2% year over year. For fiscal 2014, Peregrine Pharma expects contract manufacturing revenues on the higher end of the previously guided range of $18−$22 million.

Peregrine Pharma's total costs and expenses increased 11.7% during the third quarter of fiscal 2014 to $13.6 million due to higher research and development (R&D) and selling, general and administrative (SG&A) expenses. R&D expenses increased 22.3% to $6.6 million due to higher investment in pipeline and share-based compensation expense. SG&A expenses were up 46.6% to $4.6 million reflecting higher share-based compensation expense, payroll and related expenses and corporate legal fees.

Pipeline Update

Peregrine Pharma's lead pipeline candidate, bavituximab, is being developed for multiple oncology indications including the treatment of second-line non-small cell lung cancer (NSCLC). Bavituximab has received Fast Track designation from the U.S. Food and Drug Administration (FDA) for the NSCLC indication.

The company is conducting a pivotal phase III study, SUNRISE (Stimulating ImmUne RespoNse thRough BavItuximab in a PhaSE III Lung Cancer Study), on bavituximab for second-line NSCLC. The randomized, double-blind, placebo-controlled, phase III trial (n=600) will compare bavituximab in combination with Sanofi's SNY Taxotere (docetaxel) to Taxotere and placebo.  

Apart from NSCLC, bavituximab is being developed for multiple oncology indications including HER2-negative metastatic breast cancer (phase I – final data expected in 2014), advanced hepatocellular carcinoma (phase I/II), treatment naïve stage IV NSCLC (phase Ib) and stage II/III rectal adenocarcinoma (phase I).

Our Take

We are concerned about the decrease in manufacturing revenues in the reported quarter. However, we expect investor focus to remain on updates pertaining to bavituximab. The successful development and commercialization of bavituximab would be a major positive for Peregrine Pharma, which currently has no approved drug.

Peregrine Pharma carries a Zacks Rank #2 (Buy). Other well-ranked stocks in the biotech sector include Gilead Sciences Inc. GILD and Biogen Idec Inc. BIIB, each carrying a Zacks Rank #1 (Strong Buy).