Peregrine Pharmaceuticals' Q1 Loss Wider than Expected

Peregrine Pharmaceuticals, Inc. (PPHM) reported a net loss of 8 cents per share in the first quarter of fiscal 2015 (ended Jun 31, 2014), wider than the Zacks Consensus Estimate of a loss of 6 cents and the year-ago loss of 5 cents per share.

Revenues increased 17.2% to $5.5 million, above the Zacks Consensus Estimate of $5 million.

Quarter in Detail

Avid Bioservices, a Peregrine Pharma subsidiary, posted contract manufacturing revenues of $5.5 million during the quarter, up 20% year over year. For fiscal 2015, the company continues to expect contract manufacturing revenues in the $19−$23 million range.

Peregrine Pharma’s total costs and expenses shot up 51.7% during the first quarter of fiscal 2015 to $18.7 million, primarily due to higher research and development (R&D) expenses and selling, general and administrative (SG&A) expenses. R&D expenses increased 92.3% to $10.2 million due to higher investment in pipeline. SG&A expenses were up 12.7% to $4.9 million.

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 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 study will enroll approximately 600 patients by the end of 2015. The randomized, double-blind, placebo-controlled, phase III trial will compare bavituximab in combination with Sanofi’s (SNY) Taxotere (docetaxel) to Taxotere and placebo.

Apart from NSCLC, bavituximab is being developed for other oncology indications including HER2-negative metastatic breast cancer (phase I – final data expected shortly), advanced hepatocellular carcinoma (phase I/II – data from the phase II portion of the study expected to be presented at a future scientific conference), treatment naïve stage IV NSCLC (phase Ib – interim data expected in late October at 2014 Chicago Multidisciplinary Symposium in Thoracic Oncology), advanced melanoma (phase Ib – enrollment ongoing) and stage II/III rectal adenocarcinoma (phase I – enrollment ongoing).

Our Take

We are disappointed with the wider-than-expected loss in the reported quarter. 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 #4 (Sell). Some better-ranked stocks in the health care sector include Gilead Sciences Inc. (GILD) and Allergan Inc. (AGN), each carrying a Zacks Rank #1 (Strong Buy).

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