Stock Preacher

Peregrine Pharmaceuticals (NASDAQ: PPHM) (D)*

Peregrine Pharmaceuticals (PPHMD), a clinical-stage biopharmaceutical company, engages in the manufacture and development of monoclonal antibodies for the treatment of cancer and viral infections. Its drug development pipeline consists of novel compounds bavituximab and Cotara, with which the Company pursues in three separate clinical programs in cancerand hepatitis C virus (HCV) infection. On October 21, the Company reported that bavituximab, in combination with Sanofi-Aventis’ (NYSE: SNY) chemotherapy drug Taxotere, prompted an improvement in response rates in advanced breast cancer patients during a midstage clinical trial. The Company, through its wholly owned subsidiary Avid Bioservices Inc., also provides contract manufacturing services for biotechnology and biopharmaceutical companies, from pre-clinical drug supplies up through commercial-scale drug manufacture. This subsidiary also manufactures research and clinical products for the Company, including manufacture and scale-up of pre-clinical and clinical drug supplies, and for external customers.

The Company was founded in 1981 and is based in Tustin, California.

Source: Reuters.com, SEC Filings, FY ending April

*Shares will trade under the symbol “PPHM,” with the letter “D” added to the end of the trading symbol for 20 days to indicate a reverse stock split that took place on October 19; the symbol will change back to its original symbol on Nov. 16, 2009.

Financial Summary

For the first quarter of fiscal year 2010, the Company reported total revenues of $6.8 million, up 345% from the prior year quarter’s $1.5 million. The Company cited increased government contract revenue and increased sales by Avid Bioservices, its wholly owned contract manufacturing subsidiary, as primary drivers of increased revenue for the first quarter.

For the first quarter, PPHMD posted costs and expenses at $8.9 million, a 34% increase from the prior year quarter’s $6.7 million. Costs of contract manufacturing increased to $1.07 million from $903,000 in the prior year quarter, directly driven by the increase in Avid revenue.

Research and development (R&D) expenses for the first quarter of fiscal year 2010 rose to $6,074,000, up 49% from the prior year quarter’s $4.06 million, primarily attributable to increased R&D costs incurred under the government contract combined with increased costs associated with the advancement of the Company’s clinical programs. Selling, general, and administrative (SG&A) expenses increased to $1,793,000, a slight increase from the year-ago quarter’s $1.7 million.

Consolidated net loss for the first quarter of 2010 came in at $2.4 million, or $0.01 per basic and diluted share, representing a 52% decrease from the prior year quarter’s consolidated net loss of $5.08 million, or $0.02 per basic and diluted share. At July 31, 2009, the Company’s cash and cash equivalents totaled $12.8 million.

Financial Strength

Source: http://www.reuters.com/finance/stocks/ratios?symbol=PPHMD.MW

Analyst Consensus

No consensus analysis data available.

Investment Highlights

PPHMD is a clinical stage biopharmaceutical company developing monoclonal antibodies for the treatment of cancer and serious viral infections. The Company is advancing three separate clinical programs with its compounds bavituximab and Cotara that are clinical candidates under its anti-phosphatidylserine (Anti-PS) therapeutics and tumor necrosis therapy (TNT) platforms. Its R&D efforts are supported by a Scientific Resource Board that includes leading experts in cancer and infectious disease.

The Company’s wholly owned subsidiary, Avid Bioservices Inc., provides contract manufacturing services for biotechnology and biopharmaceutical companies, from pre-clinical drug supplies up through commercial-scale drug manufacture. Further, it provides services in support of the Company’s product pipeline, including manufacture and scale-up of pre-clinical and clinical drug supplies.

Avid continued to show for the first quarter of fiscal year 2010, generating a 74% increase in manufacturing revenues. The increase reportedly reflects increased manufacturing services provided to third-party customers during the quarter. The Company also generated revenues from services provided under its contract with the U.S. Defense Threat Reduction Agency for the Transformational Medical Technologies Initiative (TMTI) to evaluate bavituximab as a potential broad-spectrum treatment for viral hemorrhagic fever infections.

On October 21, the Company announced positive results from its phase II trial evaluating bavituximab in combination with Taxotere, also known as docetaxel, in patients with advanced breast cancer. According to the Company, preliminary data at the end of the six planned treatment cycles in the phase II study showed that 28 of 46, or 61%, of all patients enrolled in the trial achieved an objective tumor response according to Response Evaluation Criteria In Solid Tumors (RECIST) criteria. “We believe this data in aggregate shows the broad potential of this novel therapeutic compound for the treatment of solid tumors. We look forward to reporting further results from our ongoing bavituximab studies and to providing more details on future clinical development plans as they are finalized over the coming months,” PPHMD CEO Steven King said in a statement.

A previously announced 1-for-5 reverse stock split of the Company’s common stock recently took place on October 19, reducing the Company’s number of shares outstanding while increasing each share’s price proportionally. According to PPHMD CFO Paul Lytle, the board-approved 1:5 exchange ratio is the result of both the Company’s extensive evaluations of the capital structure of peer companies in phase II and phase III clinical trials and the expert advice of a number of highly experienced financial advisors.

PPHMD is focused on developing target therapies for cancer, which is considered to be the fastest growing therapy segment in the pharmaceutical market. According to a research report from RNCOS, the number of newly diagnosed global cancer cases is expected to reach over 17 million by 2020. The global market for cancer drugs is reportedly growing at a CAGR of 12.3% between 2007 and 2012, and is expected to cross $ 78 billion by 2012, as stated by the report. PPHMD is also pursuing a clinical program in hepatitis C virus (HCV) infection, which global therapeutics market is forecast to reach $9.1 billion by 2015, according to report by Global Industry Analysts Inc.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui

Moving Average

PPHMD is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

MACD

The MACD for PPHMD currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

Bollinger Bands

PPHMD’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, PPHMD is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

Source: http://www.scottrade.com

Comparative Analysis

PPHMD’s advancements in its bavituximab and cotara cancer clinical trials, which are considered to be key value drivers for the Company, have continued into fiscal year 2010. Lead drug bavituximab is stepping towards clearance in phase III trials, which should give the Company a significant boost. While the Company continues to move its drug prospects forward, it expects its new capital structure to attract a broader range of investors to the Company.

PPHMD has a negative Return on Assets of -56.57%, compared with an industry average of 1.41%; Return on Investment of -146.60%, compared with an industry average of 1.52%; and a Return on Equity of -173.27%, compared with an industry average of 3.10%.

Source: Yahoo! Finance, Analyst Estimates.

*PPS as of Oct. 22

Insider Trading Activity

NET SHARE PURCHASE ACTIVITY

Data provided by Thomson Financial

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