Peregrine Pharmaceuticals (NASDAQ:PPHM) announced more bad news Thursday, after receiving a default notice from lender, Oxford Finance, on Monday. The default on the loan was triggered by the company’s announcement last week that its Phase II 2nd line non small-cell lung cancer (NSCLC) trial, which previously reported highly favorable results, did not actually achieve the results stated, due to errors made when the trial was conducted. (See PropThink’s story on this event here) PPHM had been making positive statements about the data, lifting its share price, and raising capital through a credit line with Oxford Finance instead of raising capital through an equity offering. Oxford deemed the erroneous Phase II results as a “material adverse change under the loan agreement”, and in fact, exercised its right to sweep the cash back from PPHM, with interest. Oxford has its money back and now PPHM is back to where it was financially before the loan, and of course, possesses an asset that has questionable value.
PPHM shares were fighting to get above the $1.00 mark in the summer to avoid a de-listing from the NASDAQ, and the hype on the Phase II 2nd-line NSCLC “top-line” data that took it above $1.00 and beyond is expected to be questioned as the shareholder lawsuits pour in. In addition to disclosures around the trial results, investors are fuming about the additional lack of disclosure regarding the Oxford loan and the risk of having to pay it back on an accelerated basis. Management notes that it has cash to last through the fourth quarter of fiscal 2013, but investors beware that the company’s fiscal year ends in April. With cash running out, much distrust around the company, and lawsuits that will accelerate the cash burn and distract management from running the business, PPHM could revisit its lows for the year. Ironically, this means that a NASDAQ de-listing may come after all. Expect pressure to remain on PPHM.
On a side note, sparks are likely to fly at the company’s stockholder meeting, which, PPHM announced Thursday morning, has changed locations.