Shares of Peregrine Pharmaceuticals (NASDAQ:PPHM) didn't do much in 2015. PPHM remained range bound between $.91 and $1.66. Considering the potential of PPHM's monoclonal antibody bavituximab, I find this quite surprising when you consider how much PPHM accomplished in 2015 and how the future is setting up for the company.
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Driving shares higher in 2016 will come from several fronts. First up, PPHM announced last month that the company is nearing completion of enrollment for the Phase III SUNRISE trial with over 90% of the intended number of patients enrolled. PPHM also made substantial progress toward initiating several new trials including a Phase II/III breast cancer study and a Phase II NSCLC trial in combination with AstraZeneca’s anti-PD-L1 antibody, durvalumab. Along with the SUNRISE trial, PPHM plans new breast and lung cancer trials that will show the true potential of bavituximab.Second, the collaboration with Astra Zeneca is unique. Astra Zeneca has fallen behind Bristol-Myers, Merck, and Roche Holdings when it comes to bringing cancer treatments to market, especially in regards to lung cancer. The goal for PPHM and Astra Zeneca is for PPHM's bavituximab combined with Astra's durvalumab to become the go-to treatment for lung cancer.Considering how important the collaboration is for Astra Zeneca, would it surprise anyone for Astra to buy out PPHM? At $1.17, PPHM has a current market cap of just $268 million. With over $4 billion cash on Astra's balance sheet, a purchase of PPHM would be a drop in the bucket for Astra Zeneca even if the purchase price was $1 billion or over $4 per share.The reality is that this price might even be too low, especially if durvalumab combined with bavituximab becomes the new standard of care (SOC) in NSCLC lung cancer. If this were to happen, the value of PPHM's bavituximab would be enormous. A sale of $1 billion would be far too cheap for a drug that becomes the new standard of care in a space this large.Leading me to believe in the potential of bavituximab is PPHM's collaboration with Memorial Sloan Kettering Cancer Institute. This is perhaps the most prestigious cancer research organization in the world. MSK can pick and choose its partners. It chose PPHM. This is quite a big deal in today's cancer world. Obviously, MSK believes in bavituximab and wants to be involved from the very beginning.
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A $4 or $5 number on PPHM is not at all unrealistic when you look at its long term chart. Shares hit this level back in 2012. Since then shares have traded mostly between $1 and $2. Over the past year, PPHM has consolidated at the bottom of this range and we see in all likelihood the stock breaking out in 2016.
Unlike other early stage biotechs, PPHM is well-funded and generates revenue. The company just raised $20 million to fund its operations well into next year and beyond. Its Avid Bioservices division generated $9.5 million in the second quarter and is on track to do $35 million to $40 million for the full fiscal 2016 year. Going forward, Avid’s new manufacturing facility is now ready for the initial phase of GMP manufacturing. The facility has the capacity to potentially generate approximately $40 million in new revenue annually. Already Avid has a $49 million backlog in contract manufacturing from just existing customers.
Lastly and something we always like to look for in a stock is whether smart money is getting involved. With PPHM, we're in luck as billionaire Kenneth Dart's Eastern Capital now owns 30 million shares, or 13.1% of the company. With Memorial Sloan Kettering Cancer Institute, Astra Zeneca and now billionaire Kenneth Dart all involved with PPHM, the bears don't have much to stand on in shorting PPHM. We expect 2016 to be a great year for PPHM and its shareholders. Don't miss out on the latest with PPHM and all of our hot stock picks, sign up below!
Disclosure: We own no shares of PPHM, but may initiate a LONG position within the next 72 hours. We have not been compensated for this article.
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