Peregrine Pharmaceuticals (NASDAQ:PPHM): What's Next?

Our regular readers will be more than aware by now that Peregrine Pharmaceuticals (NASDAQ:PPHM) is a company we keep on coming back to. The reason we keep on coming back to it is that we are trying to get the point across that – at its current price – the company is dramatically undervalued, and we want our readers to know why we held this view.In our most recent piece, which we put out at the beginning of last week, we noted that the company was set to put out its latest earnings near term, and that these numbers (alongside the conference call that came with them) would only serve to draw attention to the company and its long standing undervaluation. In turn, we noted that this increased attention would likely bring with it a wave of speculative capital, and that this would boost price near term.Well, we were right.Peregrine gained close to 20% on the numbers, and is up close to 27% this month alone. Year to date, it's up just shy of 150%.There are a couple of things we learned during the conference call that we might class as new information, and while these things don't alter our longer term bias, they do serve to reinforce its validity.Here's what we learned, and why its important.For those new to the stock, it's a development stage biotechnology company at core, but it's got a secondary operational arm that it calls Avid, which serves as a sort of contract manufacturing operation. Avid is what really sets this stock apart from its peers, and it’s the root of our undervaluation thesis. The thing is, markets are currently valuing Peregrine without taking Avid into consideration. It's priced like a young biotech with some promising, but risky, assets, and nothing more. Even with the latest run taken into account, it goes for just $0.7 a share.As we learned on the latest call, however, Avid is likely to bring in multiples of the company's market cap over the next few years. Before the recent update, management had full financial year 2017 revenue guidance at between $50-55 million. As per yesterday's call, this is now revised to the upside to $60-65 million.There's more than $70 million in backlog contracts, all of which is expected to mature throughout the remainder of 2017 and into 2018.Additionally, management is focusing on increasing manufacturing capacity. The company just leased an extra 42,000 square feet in the same building as one of its two current operating locations, and is on track to install two 2,000-liter bioreactors in the facility within the next month or so. A book of business for this capacity is already in place.According to revised estimates, total operating capacity of the facility can exceed more than $75 million annually, equating to more than $100 million in total potential revenue between the company's two manufacturing facilities.For perspective, this is a company that holds a market capitalization right now of a little over $200 million – just a two times multiple of its likely 2018 revenues. And we'll say it again, this is just one arm of its operations. It's also a strong development pipeline, and this pipeline promises to introduce some catalysts to the market over the coming couple of quarters. Management and the company's collaborators will be presenting a number of studies at AACR, and these studies should support an efficacy thesis for the company's lead program – bavituximab.Two trials should kick off mid year – one a phase I/II brain cancer study and one a phase II head and neck cancer study – both of which are in collaboration with NCCN (allowing for a dramatically reduced R&D burden) and these should bring some speculative volume with them as and when they roll in.Bottom line here is that there's still plenty of upside on offer, even with the recent run taken into account. With profitability targeted for between now and the end of next year, dilution risk is minimal (especially when considered in conjunction with the above mentioned collaborative development strategy) and that just adds to the company's attraction long term.We will be updating our subscribers as soon as we know more. For the latest updates on PPHM, sign up below!Disclosure: We have no position in PPHM and have not been compensated for this article.