The patent cliff has positively impacted the valuations of small biopharmaceutical companies due to their acquisition potential. Peregrine Pharmaceuticals (NASDAQ:PPHM) is currently trading at a 50% discount to my estimated target price of $4. I believe the stock will bounce back as the market has still not adjusted for the recent positive news in company disclosures. It is also a major acquisition candidate and I believe it will be a nice fit for Pfizer Inc. (NYSE:PFE) and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA).
Pipeline
The company has an interesting pipeline with 3 primary candidates under various phases of clinical trials.
Bavituximab
This candidate is currently in Phase II clinical trials. The drug is being tested in 3 different randomized Phase II clinical trials for the treatment of NSCLC (Non-small Lung Cancer) and pancreatic cancer. Bavituximab is a monoclonal antibody that targets phosphatidylserine and has demonstrated the ability to treat various oncology indications.
Cotara
It is the lead candidate of Peregrine for their Tumor Necrosis Therapy (TNT) and is in Phase II clinical trials. The interim results have been good as the percentage of patients alive at 6 months, 12 months and 24 months were 73%, 38% and 19%, respectively. Moreover, two patients under treatment with Cotara were still alive after 3 years.
PNG650
The company is also in preclinical trial stage for its tumor imaging candidate PNG650. According to company disclosures it has initiated an open label, single center trial at Washington University. The trials will involve 12 healthy subjects which will be given a single dose of the imaging agent.
Valuations
The stock is currently trading at a 55% discount to its mean sell side target price of $4.50 and at a 30% discount to its lowest sell side target price. The stock has traded as high as $5.50 in the last 52 weeks, a 65% upside to current levels. Peregrine lost almost 50% of its value when the company announced in September that there were major discrepancies in the study for its star drug Bavituximab. I have a $4 target price on the stock based on the sell side estimates and past valuations.
Since then the stock has gained some of its value due to the positive announcement by the company that most of the problems indicated with Phase II trial have been resolved, and the drug is all set to enter phase III. According to the company’s announcement the review has found discrepancies with the 1 mg/kg trial and no problems with the 3mg/kg trial. I believe it is only a matter of time before the stock will move back to its value before the negative announcement on Bavituximab ruined its valuations.
