PPHM Sinking Back To Levels Prior To Erroneous and Misleading Data

Peregrine Pharmaceuticals (NASDAQ:PPHM) could have big trouble after reporting erroneous clinical trial results that took the stock up 13-fold from its lows this year. Lawsuits claiming potential misconduct are likely to start rolling in, and with new doubt that lead drug candidate bavituximab has any value at all, PPHM could trade back down to the sub-$1.00 level seen just a couple of months ago. In May, the company reported top-line data from its Phase II trial for bavituximab in second line non small-cell lung cancer (2nd-line NSCLC), with results showing a 1.5 month increase in Progression-Free Survival (PFS) in patients on the drug vs. those on placebo. Despite the impressive results, no large biotech-focused funds got involved in the stock, which we thought was surprising (see PropThink’s prior story). With little interest in the stock, PPHM was facing a NASDAQ de-listing throughout the summer, when in late July, activity started heating up, fueled by management’s statements that the company was in talks with potential partners for bavituximab. Still no large healthcare-focused funds cared about the stock, with the “top-line” results previously reported lacking key statistical metrics that typically validate clinical trial results like P-values or hazard ratios.

In mid-July, the company reported its fiscal 4Q 2012 results, with PPHM’s press release highlighting the strong Phase II results, pointing to a “doubling of tumor response rates, a 50% increase in median PFS, and trends toward significant improvement in median overall survival.” Management commented in the press release: “We could not be happier with the strength of the data from this robustly designed trial which gives us a clear direction and greatly enhances the probability of success as we look to Phase III development. These data have resulted in a surge in partnering interest for the program.”

On July 30th, the company announced that it regained compliance with the NASDAQ’s Minimum Bid Price Listing Requirement. Shares of PPHM continued to rise, and on September 7 the company reported follow-up “interim data” for the Phase II 2nd-line NSCLC trial, with a statistically significant improvement in Overall Survival (OS) and a doubling of median OS in patients treated with bavituximab vs. placebo. This time, the company reported P-values and hazard ratios, and the strong results impressed even the smart biotech money.

Shares recently peaked in the mid-$5.00 range and appeared to be heading higher until today’s statement by the company that “investors should not rely on clinical data that the company disclosed on or before September 7, 2012 from its Phase II bavituximab trial in patients with second-line non-small cell lung cancer or any presentations or other documents related to this Phase II trial.” The company is now telling investors that in preparation for its end-of-Phase II meeting with the FDA, management found major discrepancies between patient sample test results and patient treatment code assignments, and that the discrepancies appear to be associated with an independent third-party contracted to code and distribute the drug in the trial. While the company is blaming its third party vendor for the error, and management is using the trial’s “double blind” design to say that it did not know of the discrepancy prior to its recent analysis, one could question the amount of time the company had to discover the erroneous coding since releasing the initial top-line results in May. Additionally, the company’s need to raise its share price and public profile to; 1) avoid the NASDAQ delisting and 2) obtain capital through a credit line, also fuel concerns over who knew what and when, as well as concerns over the company’s aggressive public disclosures. As a result of today’s news, PPHM will certainly be diverting resources to corporate challenges beyond advancing its pipeline. It is hard to imagine how investors, or the pharmaceutical industry, will ever trust this company again.