Peregrine Pharmaceuticals, Inc. F4Q09 (Qtr End 04/30/09) Earnings Call Transcript

Peregrine Pharmaceuticals Inc. (NASDAQ:PPHM)

F4Q09 Earnings Call

July 14, 2009 11:30 am ET


Steven King - President and Chief Executive Officer

Paul Lytle - Chief Financial Officer

Joseph Shan - Vice President of Clinical and Regulatory Affairs

Barbara Lindheim - Investor Relations, BioCom Partners


Stephen Dunn – Jesup & Lamont

Roger Adams - Private Investor

Unidentified Analyst

Kevin [Borjek] – Private Investor

Ken Moss – Private Investor

Jeff Gilman – Private Investor


Welcome to the Peregrine Pharmaceuticals fourth quarter and full year fiscal 2009 financial results conference call. All participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. (Operator Instructions)

I’d like to turn the conference over to Barbara Lindheim with BioCom Partners.

Barbara Lindheim

Good morning, and thank you for joining us on today’s call, with the management of Peregrine Pharmaceuticals. We are here to discuss the company’s results for fiscal year 2009 reported this morning. With me today are Steven King, President and Chief Executive Officer; Paul Lytle, Chief Financial Officer; and Joseph Shan, Vice President of Clinical and Regulatory Affairs at Peregrine.

Before I turn the call over to Steve, I would like to read the cautionary note regarding forward-looking statements. This conference call may include statements that are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect Peregrine Pharmaceuticals’ current views about future events and financial performance.

These forward-looking statements are identified by the use of terms and phrases such as “believes”, “expects”, “plans”, “anticipates”, “on target”, and similar expressions identifying forward-looking statements. These factors include but are not limited to the risk factors detailed from time to time in Peregrine Pharmaceuticals filings with the Securities and Exchange Commission, including but not limited to the Annual Report on Form 10-K for the year ended April 30, 2009.

Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from Peregrine Pharmaceuticals’ expectations, and Peregrine Pharmaceuticals expressly does not under take any duty to update forward-looking statements whether as a result of new information, future events, or otherwise.

I’d like now to turn the call over to Steven King.

Steven King

Let me start by thanking everyone who is participating in today’s fiscal year 2009 fourth quarter and year-end conference call. Joining me on today’s conference call are Paul Lytle, our CFO, who will cover financial highlights for the quarter and the year; and Joseph Shan, Vice President of Clinical and Regulatory Affairs, who will provide a detailed review of our ongoing clinical development efforts.

We believe fiscal year 2009 was an extremely positive year for Peregrine, on both the clinical development and business front, setting the stage for potentially even greater advances in fiscal year 2010. As we start, let me remind of where the company was when we began the fiscal year.

In our Bavituximab cancer program, the clinical program we have been focusing most of our effort on, we were running a phase I trial and had just completed enrolment in the initial patient cohort in our first phase II cancer study. We were still in the preparation stage for two additional phase II studies, and the company had just completed a year in which it generated just over $6 million in revenues through contract manufacturing work at Avid, representing a significant revenue growth over the previous year. In the just over a year since then, we have made significant clinical advances and important progress in raising the profile of our clinical programs, highlighted by early reports from our three phase II studies, two of which had not yet started at the beginning of the year that show that Bavituximab in combination with chemotherapy may be a valuable new option for treating cancer.

As Joe will describe, in these studies, Bavituximab has demonstrated encouraging early signs of efficacy in patients with advanced breast and lung cancers. All three phase II trials significantly surpassed the required tumor response criteria for expansion of patient enrolment, and patient enrolment is now actually complete in the entire 46 patient study testing Bavi with docetaxel in breast cancer patients. In addition, both of our trials testing Bavi plus carboplatin and paclitaxel in breast and lung cancers have now been expanded to the full trial size of 46 and 49 patients respectively, and we are well on our way to completing enrolment in these studies over the next few months. In fact, early results from the docetaxel breast and carboplatin and paclitaxel lung cancer studies have looked so promising compared to historical data for chemotherapy alone, we have already begun evaluating our options for the next set of trials testing these combinations.

In addition, we completed an ongoing phase I Bavi single agent trial, and were very pleased when data from the Bavi plus docetaxel phase II study and data from the phase I study were both selected for presentation at the prestigious cancer meeting, ASCO—a great opportunity to highlight the program in front of top clinical researchers, analysts, and the medical oncology community.

Our Bavituximab and broader anti-PS antiviral platform also received significant validation this year when we were awarded a contract with the Defense Threat Reduction Agency or DTRA that could total over $44 million over five years to evaluate Bavi and a similar human antibody as potential broad-spectrum treatments or preventatives for viral hemorrhagic fever, and through a publication in the top journal, Nature Medicine, that confirmed the antiviral potential Bavituximab. So a major accomplishment of the past year is that Bavi’s potential as a promising drug candidate in both oncology and the antiviral applications is now firmly on the map.

While our clinical focus this past year was on our Bavituximab cancer program, we also continue to make progress in our Cotara clinical program in brain cancer patients, nearing completion of patient enrolment in a dose confirmation dosimetry trial and reaching the halfway mark in our phase II trial in relapsed GBM patients. Cotara has been receiving renewed interest on a number of fronts, as a result of a well-received recent update on the program highlighting the number of long-term survivors who have received Cotara and the presentation of early positive data from the dosimetry at the Society of Nuclear Medicine annual meeting confirming that Cotara specifically localizes the brain tumors at high concentrations with minimal radiation exposure to other organs, further reinforcing its potential as a promising treatment for GBM.

Our positive momentum on the clinical front has been matched by outstanding progress this year in furthering strategy of growing our revenues, while holding down costs in order to make our clinical advances possible, a particularly important strategy during these most challenging economic times. As Paul will describe in greater detail, in fiscal year 2009, we nearly tripled our reported revenues to more than $18 million, fueled by a doubling of contrast revenues from our Avid manufacturing subsidiary and by more than $5 million in new revenues from our DTRA contract. At the same time, we continue to cut back on non-clinical R&D costs and SG&A expenses, allowing us to reduce our net loss by almost 30% compared to last year, and we accomplished this while managing a three-fold larger revenue base and treating more patients in our clinical trials than at any time in Peregrine’s history.

The fiscal year 2009 reduction in Peregrine’s net loss helps our cash position which we reinforced with a $5 million debt financing earlier in the fiscal year and by using an innovative and cost-effective method to raise $7.5 million in new equity with no discounts and no warrants. This program, known as an at-the-market or ATM offering was very successful, and Paul will go in greater detail on this during his remarks.

In summary, we believe fiscal year 2009 was a very productive year for Peregrine, laying the foundation for what we hope will be major achievements on both the clinical and business fronts throughout the remainder of this year. I will now turn the call over to Paul for a more detailed look at our recent financial highlights. Joe and I will return later to discuss our clinical and product development efforts in greater detail.

Paul Lytle

Earlier this morning, we released our financial results for the fiscal year 2009. This earnings release outlines our financial results in greater detail and includes financial tables, so I encourage everyone to read the entire release. We also plan to file our Form 10-K later today, and both of these documents will be available on our website.

During the next few minutes, I will take you through our financial results for fiscal year 2009. I’ll then briefly discuss our current financial position, and I will conclude with a discussion regarding our various sources of capital and our plans moving forward.

Now let me begin with the financial results for fiscal year 2009 starting with revenues. Total revenues for the year ended April 30, 2009, were $18.2 million, compared to $6.1 million reported in the prior year. This represents a 198% increase in total revenues. Before I go into more detail, it’s important to note that the company has two separate revenue sources—contract manufacturing revenue and government contract revenue. Let me first discuss our contract manufacturing revenue generated from Avid Bioservices, our wholly owned contract manufacturing business.

As I mentioned on the earnings call in last July, we projected Avid revenues to be in excess of $10 million for fiscal year 2009 representing a significant increase over the prior year period. I’m pleased to report that we have exceeded that goal and reported close to $13 million in contract manufacturing revenue during fiscal year 2009, representing a 120% increase over same prior year period. This is a great accomplishment for the company and a great accomplishment for Avid Bioservices.

Now addition to supporting third-party customers, Avid also provides key manufacturing services to Peregrine in supporting our three clinical programs. Now if you were to value those services provided to Peregrine in fiscal year 2009, valued at the same market rates we charge third-party customers, it would equate to almost $10 million in additional revenues to Avid, but since Avid is a wholly owned subsidiary, these intercompany revenues are eliminated in financial consolidation. These numbers re-emphasize the value that Avid provides to Peregrine.

Let me switch gears now to discuss our second revenue source—government contract revenue. Our government contract revenue stems from our contract signed with the US Defense Threat Reduction Agency or DTRA on June 30, 2008, and the purpose of this contract is to study our product candidate Bavituximab and a fully human equivalent antibody as potential broad-spectrum treatments for viral hemorrhagic infections. The contract is potentially worth up to $44.4 million over a five-year period, with $22.3 million potentially available over the initial 24-month base period. During the current year ended April 30, 2009, we reported $5 million in revenue under this contract, and since it is all new revenue Peregrine, there is no corresponding revenue in the prior year.

Now let me turn to expenses. Total costs and expenses increased to $34.4 million for the current fiscal year. This compares to total costs and expenses of $30.2 million reported in the same prior year period. This $4.2 million increase in total costs and expenses was mostly related to an increase in the cost of contract manufacturing directly related to higher reported revenues.

Looking at R&D expenses this fiscal year, we were able to keep R&D expenses in line with the prior year slightly increasing 1% to $18.4 million compared to $18.3 million reported last fiscal year. We were able to keep R&D expenses stable this year while continuing to advance our clinical programs and also finding new research under our government contract with DTRA. This was achieved by implementing planned reductions in pre-clinical program spending as we continue to focus our resources on our later-stage clinical programs.

Now, turning to SG&A expenses, we achieved a 2% decrease in SG&A expenses for the current fiscal year compared to the prior year. It is noteworthy to mention that this decrease resulted from the company’s continued commitments to reduce discretionary expenses.

Moving down the statement of operations to other income category, we reported a decrease in interest and other income of $789,000, and this was mostly due to lower interest rates and a lower average cash balance on hand compared to the prior year. We also saw an expected increase in interest expense in fiscal year 2009 of $383,000. This is directly related to the $5 million term loan we closed last December.

Now, let me turn to the bottom line. For fiscal year 2009, we reported a decline in our net loss of 29% to $15.5 million or $0.07 per basic and diluted share. This compares to a net loss of approximately $23.2 million or $0.10 per basic and diluted share reported in the same prior year period. This decrease in our net loss is a direct result of the growing revenues we have generated combined with the reduction in discretionary costs we have successfully achieved in many areas of our business. In view of the hard time affecting the global economy especially during the past fiscal year, we are proud that we’re successfully increasing revenues and reducing direct discretionary expenses while advancing the programs that are key value drivers for Peregrine.

Now let me shift your attention to the balance sheet. We ended the fiscal year with approximately $10 million in cash and cash equivalents. This compares to $15.1 million in cash and cash equivalents we reported last fiscal year. Now if you look at liquid assets on the balance sheet, representing cash and receivables, we had $13.7 million in liquid assets at April 30, 2009, compared to $15.7 million at our fiscal year end April 30, 2008. With two important revenue sources, liquid assets will be an important measure of our capital resources, representing cash on hand, as well as those assets that can quickly be converted into cash.

Now let me conclude with a discussion regarding our financing activities, our various sources of capital, and our plans moving forward. Last July we stated that our goal was to do four things: First, we wanted to grow our revenue streams in order to reduce our overall reliance on the capital markets during these challenging times. Second, we wanted to seek a non-convertible term loan to bridge ourselves to hopefully better economic conditions. Third, we wanted to raise as little equity base capital as possible until market conditions improved, and fourth, we wanted to continue to advance our drug development efforts to enable us to reach that next major inflection point in our clinical trial programs, and we did exactly what we said last July, and we did so despite the worst economic conditions we have seen in recent times.

First, we were able to grow our revenues by almost 200% in fiscal year 2009 to $18.2 million. This revenue growth helped reduce our overall reliance on the capital markets during these challenging market conditions. Second, we were able to raise $5 million under a non-convertible term loan last December during the worst banking debacle of our times. This provided us additional funding as we faced overall negative market conditions.

Third, we entered into an at-the-market issuance in March 2009, whereby we were able to sell shares of our common stock at market prices, and this achieved selling shares at market prices and without issuing a single warrant. This is a very cost-effective financing vehicle, and we have been successful in raising $7.5 million in gross proceeds under this vehicle, of which $600,000 in gross proceeds was raised during fiscal year 2009. And fourth and most important, with the various sources of capital I have just discussed, we have been able to advance our clinical programs, and we were able to generate positive interim data from all three phase II Bavituximab programs. I will not say much more on the clinical program as Steve and Joe will discuss our progress our progress in more detail later in the call.

Now that we have accomplished the goals we set out last July, we are looking to the future. As I mentioned before, funding our drug development efforts is job number one. Now based on our current financial projections, we believe we have sufficient cash on hand to operate our business through at least fiscal 2010 based on our current planned operations and without raising additional equity capital. Although we feel confident about our financial projections, there are always potential uncertainties associated with financial projections that limit our ability and the ability of our independent registered public accounting firm to rely 100% on our anticipated cash inflows from Avid Bioservices and under our government contracts.

Due to these potential uncertainties, our independent registered public accounting firm issued an unqualified opinion with an explanatory paragraph for a going concern. Let me state clearly that this opinion has no impact on our current operations. As I have been discussing, Peregrine has a number of engines that should fuel our operations and drug development efforts. We believe Avid is well positioned based on its current backlog to have another great year. Our government contract with DTRA is also going well, and we believe these two revenue sources could generate in excess of $20 million in total revenues during fiscal year 2010.

Now in addition to these two revenue sources, we have also seen an uptick in interest in the Bavituximab program from potential partners. This appears to be the result of the promising clinical data we have generated in recent months on all three Bavituximab phase II studies. We’ll continue to pursue these opportunities and the potential sources of capital these opportunities represent.

In addition to the potential sources of near-term capital, we must also plan for the future. We must have the ability to internally support our clinical programs and the expansion of those programs based on the promising data we have already seen, and as we consider the various financing vehicles that may be available to us, it is important to understand that pre-registered common shares sold off in SEC-filed shelf registration statement generally provides for terms that are much more favorable than selling unregistered shares. Therefore, based on the promising data we have seen from our clinical programs, we are planning for the future. This plan includes filing a shelf registration statement so that we can provide the company with the best possible options as we look at supplementing our revenue streams with additional capital. As we get closer to starting later stage trials, drug development becomes more expensive, but the potential returns are also much greater.

Along with the shelf registration statement, we plan to enter into another at-the-market issuance agreement that will allow us to sell small blocks of shares of common stock at market prices as market opportunities arise. A couple of key points to remember is that this arrangement will allow us to sell shares at market prices and in addition to this without issuing a single warrant. We now have firsthand experience with this financing vehicle, and it allowed us to raise $7.5 million in gross proceeds during key market opportunities. In fact, our price per share rose 102% from the time we entered into the agreement to the time we were able to raise the $7.5 million in gross proceeds.

At a time in the company’s history when positive clinical data continues to build, we must ensure we have the necessary resources to advance these clinical products—products we believe have great clinical and commercial potential.

I would like to thank you for your time and attention. This concludes our discussion of the financial results. Steve will now update everyone on the company’s recent achievements and our major objectives for the upcoming months.

Steven King

I would like to follow up on a few key points that Paul made during his presentation. Clearly, we are in perhaps the most challenging economic time in recent history. Beginning last year, we began setting priorities to conserve cash flow by limiting resources allocated to non-essential, pre-clinical development efforts, and discretionary spending, and at the same time creating revenue and funding opportunities such as growing Avid business, entering into the contrast with DTRA, and applying for external support for research programs, while not losing focusing on the fact that we are and will continue to be a biotechnology company developing exciting targeted therapies with broad market potential, and these product development efforts do require considerable resources.

As we move forward, we intend to continue to be creative in generating and applying for non-dilutive funding resources and to leveraging our strategic assets to grow the value of the company. We expect these efforts to include first and foremost continuing to grow our contract manufacturing business, Avid Bioservices.

I want to start by congratulating the entire Avid team for the extraordinary performance they delivered in fiscal year 2009. They’ve done a tremendous job of making Avid an innovative, respected, and highly productive provider of top-quality biomanufacturing services. We operate Avid as a separate business with a dedicated management team and staff, and Avid has built a stellar reputation in the industry over the past few years. Avid’s mission is to grow its business revenues and net profits. We expect these efforts not only to firmly establish Avid as a standalone successful business, but we also believe this growth will support Peregrine in its product development efforts through generating positive cash flow as well as through the provision of our critical clinical supplies.

Secondly, we will continue to execute under our contract with the DTRA. I would again like to congratulate the entire DTRA contract team at Peregrine for not only being successful at negotiating the contract, but more importantly for establishing the infrastructure to successfully manage the program. This program is on track and is bringing significant revenues into the company for efforts that directly support our broader Bavi development goals.

Third, we will continue to seek ourselves and to support our collaborators in seeking non-dilutive funding opportunities such as government contracts or grants. A prime example of this is the recently announced ASCO grant to support a Bavi lung cancer clinical study.

Fourth, we will continue our partnering efforts. We’ve had a significant uptick in interest in our Bavi oncology program and are continuing those discussions. In addition, we have a number of pre-clinical programs which are available for licensing and which have begun generating potential partner interest. Since our efforts and resources are currently focused on our clinical programs, it make strategic sense to put our promising pre-clinical programs into the hands of companies with the interest and resources to aggressive develop them—a strategy with the potential to create short-term cash flow for the company and to build the long-term value of the programs.

Lastly, we will continue to obtain the capital that is the lifeblood of our clinical programs through equity raises as market conditions allow. These additional resources will be used to expand and support our exciting clinical programs. We have tremendous momentum in the Bavi oncology program, with very positive data already generated from the ongoing phase II clinical studies. This data has both us and our clinical investigators excited about the anti-cancer potential of Bavi, and building on this growing momentum is critical as we move toward later stage studies.

I will now the floor over to Joseph Shan, Peregrine’s Vice President of Clinical and Regulatory Affairs, for an overview of our promising clinical programs.

Joseph Shan

I will begin with an update of the Bavituximab cancer program. Bavi is a monoclonal antibody with a unique mechanism that helps the body’s own immune system to recognize and act on the tumor and its supporting blood vessels resulting in anti-cancer effects. Our current clinical program comprises several phase I and phase II studies for assessing the potential utility of Bavi. This program is focused on generating the safety and efficacy data necessary to support the more complex and costly later stage trials needed for regulatory approval.

In fiscal year 2009, we made tremendous progress in the Bavi cancer program which I will now discuss in more detail. I’m happy to report that we recently completed the planned patient enrolment in our phase I Bavituximab monotherapy cancer trial. We presented preliminary data from this trial at the 2009 ASCO annual meeting last month. Researchers reported that Bavi had demonstrated acceptable safety and that the maximum tolerated dose was not reached, even at the highest planned dose level. Also, Bavi had a predictable pharmacokinetic profile. This could be important in selecting dose levels and schedules going forward. Successful completion of this phase I study is significant because it will help support future Bavi cancer trials in the US and globally.

At the same time, Bavi is being tested in combination with chemotherapy in several phase II trials in lung and breast cancer. The main purpose of these multi-center open label studies is to assess the overall response rate—that is the ability of the combination regimen to shrink tumors in a few initial cancer indications. This measurement of objective tumor response is considered a sign of anti-tumor activity. These trials also look at other important end points such as time to tumor progression, duration of response, overall survival, and safety. As a reminder, these phase II trials use a two-stage protocol design, where a small group of patients is treated and evaluated, and then the study is expanded to a larger group of patients if pre-specified criteria are met. One of the highlights of fiscal year 2009 for Peregrine was that we surpassed these pre-specified criteria in all three of the Bavituximab phase II trials.

I’ll now briefly review highlights from each of these three studies. The phase II trial of Bavi plus Docetaxel in advanced breast cancer patients completed enrolment at the planned 46 patients on schedule during the first half of this year. We reported preliminary data in an oral presentation at ASCO last month, showing that 10 out of 14 or 71% of evaluable patients in the initial 15-patient cohort demonstrated an objective tumor response. More recent analysis estimates that the median progression-free survival of the patients enrolled in the first part of the study was 7.4 months, an additional promising early result. These are encouraging data that not only exceeded the pre-specified endpoint needed to expand the trial, but also compared favorably with published data with the same chemotherapy regimen when given alone. Patient dosing and followup in the trial are continuing, and we expect to be able to report again on this trial later this year.

The phase II trial of Bavi plus Carboplatin and Paclitaxel in patients with locally advanced or metastatic non-small cell lung cancer reported 11 of 17 or 65% of the evaluable patients in the initial cohort of 21 patients achieved an objective tumor response. This early result exceeded the pre-specified endpoint needed to expand the trial and compares very favorably with historical published data with current standard of care therapy, and is especially encouraging in this hard to treat cancer where response rates with chemotherapy are typically less than 20%. Enrollment of an additional 28 patients was recently initiated, and we look forward to providing an update as this trial is fully enrolled to the planned total of 49 patients.

In the phase II trial of Bavi plus Carboplatin and Paclitaxel in advanced breast cancer patients, 9 of 14 or 64% of the evaluable patients in the initial 15 enrolled patients achieved an objective tumor response. This data also exceeded the pre-specified criteria needed to expand the trial. Patient enrollment and dosing are now underway in the expansion stage of the trial, which will enroll an additional 31 patients for a total of 46 advanced breast cancer patients overall.

Not only are we excited about these promising early data, but the physicians running these trials and other cancer experts we’ve talked to at medical meetings are also enthusiastic about the anti-cancer potential of Bavituximab and are looking forward to seeing more clinical data. Meanwhile, we have begun planning new trials to further advance the clinical development of Bavi. These may include but are not limited to larger randomized studies and additional studies to explore the potential uses for Bavi in other cancer types or with different combinations with other treatments.

While we are focusing our clinical development resources on the Bavi oncology program, we are continuing our pilot Bavi trial in patients with HCV/HIV co-infection, which we believe has substantial promise. This study remains open for enrolment, and we intend to wrap up this program as resources allow.

Now switching to Cotara, we are nearing completion of patient enrolment in the dose confirmation and dosimetry trial in patients with recurrent glioblastoma, the deadliest form of brain cancer. We recently presented data from this trial at the Society of Nuclear Medicine annual meeting confirming that after administration Cotara remains highly concentrated in the patient’s brain tumor and is largely absent from healthy brain and other organs—an important safety consideration for a radiolabelled drug. We’re also continuing to make progress in the ongoing phase II Cotara GBM study. As noted in our last call, we have taken measures to maximize trial efficiency while reducing overall program spending by focusing on the top-performing centers. Although enrolment remains slower than we’d like, we’ve now successfully passes the halfway mark in patient enrolment while significantly cutting costs. This strategy allows us to keep these studies active in order to continue generating valuable clinical data for the Cotara program, and as additional resources become available or with the help of a development partner, the phase II study can be quickly expanded towards completion. Based on the data generated to date, both we and our clinical investigators continue to believe in Cotara’s tremendous potential for the treatment of this deadly brain caner.

So as you can see this has been an exciting year for our clinical programs, especially for Bavi oncology. We’ve worked hard to set up a number of important studies and now the data is starting to come in support the next stage of development. We’ll continue to build upon this foundation and increase value during this upcoming fiscal year as we work towards realizing the potential of our innovative drug candidates for life-threatening diseases, and with that, I’d like to turn it back to you, Steve.

Steven King

Before opening the floor to questions, I want to reiterate our optimism regarding Peregrine’s future prospects. We believe our company’s future has never looked brighter. With our Bavituximab cancer program on track to generate additional value-driving clinical data over the coming months, our Cotara clinical program continuing to progress, our revenues increasing while our outlays remain under control, and with potential partnering activities well underway, fiscal year 2010 could be a very good year for Peregrine. We very much appreciate your continuing support in helping to make our progress possible.

Operator, we are now ready to open the floor to questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Stephen Dunn – Jesup & Lamont.

Stephen Dunn – Jesup & Lamont

Can you give us a little color or guidance of when we would expect to see data from the multitude of phase II trials?

Steven King

As we allow the data to mature from the Docetaxel study, which we completed earlier this year, we do anticipate over the next few months to be able to give an update as those patients complete their full course of therapy, so I think with the patient enrolment in that study being completed, it’s a little easier to guess when we’ll have an update on the program. For the Carboplatin and Paclitaxel studies, clearly the next milestone will be completing patient enrolment in those two studies. Enrolment in the expanded cohort is now well underway so we should be completing that, I think, over the next few months time period, and hopefully later this year we’ll be able to give a meaningful update on how those patient followups are going and then what our tumor response rates look like. What I can say is that so far we think all three trials of have proceeded nicely, very happy with overseeing from the trails as a total, and again I think based on that data we have already really starting looking to the next set of studies because we certainly expect they are going to support further evaluations of these combinations.

Stephen Dunn – Jesup & Lamont

On DTRA program, they are doing viral hemorrhagic fevers and that’s kind of a pleural. I assume lots of fever is there because that’s what we saw in the Nature Medicine article. Are there any hemorrhagic fevers that go in? Is this like a broad program or is it really specifically lots of fever?

Steven King

Yes, the goal of the program is actually to look at Bavituximab as a broad-spectrum treatment for preventive for viral hemorrhagic fever, so definitely we will be looking at multiple different viral types, and I think it is one of the things that attracted the DTRA to the program was that the fact number one we were already in clinical studies with the drug so we had a little more proven technology and as you said really supported the facts that we had this broad spectrum potential because what they are really looking for is something to really potentially not just treat the known emerging viruses but new emerging virus that may come up.

Stephen Dunn – Jesup & Lamont

That’s great. I’m going to squeeze one more in. On the Avid Biosciences division, what percentage utilization rates are you running at right now? In other words, I’m looking for what’s the upside in the business. You added two bioreactors last year. I’m wondering where that business can top out.

Steven King

If you look at last fiscal year, we did about $13 million in outside business and about another $10 million in equivalent services for Peregrine, so that puts us in about the $23 million range. We think that we can push that certainly further within the existing facility, and in fact one of the things we’ve started looking at is the possibility of actually expanding the business into adjacent space that we have available, so I think in the existing facility we have always viewed this as potentially a $30 million revenue number just from manufacturing services in addition to other services provided for our clients. I think our goal next is to see can we grow up to $50 million range, and that would require some expansion beyond our existing facility, but certainly the way the business has been growing, we’re excited about really trying to be responsive to our client needs and as their clinical and commercial demand increases to be able to respond to that and capture that business.


Again as a reminder, participants would be afforded time for one question. Additional questions or followups will be accommodated as time permits. Our next question comes from Roger Adams.

Roger Adams – Private Investor

My question concerns long-term survival data in the phase II breast and lung trials. How many months of survival data will you need to collect in order to make a meaningful comparison of that Bavituximab with Avastin in both the breast and lung trials, and at which upcoming scientific conferences can you anticipate that you might be able to release survival data?

Steven King

Clearly the way the clinical trials were set up, we had the initial look at tumor response rates which is an early kind of efficacy. Once you get beyond that, you start to look at progression-free survival, and again we have seen some of those numbers start to come from particularly the Docetaxel study because it was completed a little bit earlier. These are primarily median time two events. We haven’t reached those events yet, so until you actually reach a median, you have to keep following the data on out. I think it’s also important to note that while we treated the initial cohort of patients, we’re still in the process of actually treating and following up with the patients from the expansion cohorts, so certainly survival data is going to take some time to resolve itself and hopefully it’s longer rather than shorter because that means that the patients are surviving much longer obviously, so those things will be report on probably, our dataflow will have a lot of information on overall survival this year. Those are probably things that will take longer to mature, but certainly as we get these other meaningful endpoints, like progression-free survival, we’ll try to continue to report on those and again our goal will be to report on for instance for the Docetaxel study, the entire 46-patient trial, not to so much focus on the initial cohort of patients. We’re happy to overseeing in the second part. We think that the data will all be supportive, but it is one cohesive trial at the end of the day that we’re excited to report on.


The next question comes from Kevin [Borjek].

Kevin Borjek

Gentlemen, can you give us an update on what is happening on the Duke’s front? When can we expect something out of that? Are they still continuing to use the Peregrine maps?

Steven King

Sure. We have been working with them for quite some time. The initial publication has been submitted and is in the process of being reviewed. You may have comments and what have you, but so that’s in the progress of being published. Our focus has really moved beyond that research obviously because that’s already been done, and we are still very active with the group at Duke. In fact, we’re expanding our collaboration with them, looking at many different areas, a number of different antibodies, so the collaboration is alive and well, and still very active with them, so this first publication is only the beginning of what we expect to be a really fruitful long-term relationship.


The next question comes from [inaudible]

Unidentified Analyst

I was just wondering if you could give us a little of a more detailed picture of where we stand with regard to partnership discussions and licensing discussions because we’ve been hearing about this each year and each conference call. What is it that is going to trigger a deal? What level of development do we have to accomplish in order for an appropriate deal to be triggered?

Steven King

Partnering is an ongoing process, so we have many different programs which are available for licensing. That includes what we consider the big program, our Bavituximab cancer program, obviously Cotara, and then there are all of our preclinical development programs as well as our antiviral programs. So we take each one of these independently and each one is in active discussions currently with potential partners. That process is that they have to obviously have an interest, generally provides them with nonconfidential information, then confidential information under an appropriate agreement between the companies, and then they continue their due diligence process. We currently have everyone from major pharmaceutical companies to smaller companies interested in different technologies. On the Bavituximab cancer front, that’s everything from nonconfidential packages to full due diligence that’s ongoing, so for us it’s a matter of finding the right partner. We obviously just don’t want any partner. We need to get value for the program that we feel like we’ve built into it and also value that we believe matches the potential of the program, and so that program we have some pretty high expectations. For preclinical programs, we have much more flexibility, and I think as we go forward, we should e able to bring some of these various programs partnering efforts to fruition. Since our current R&D efforts are really focused on the clinical development, we’re actually in discussions with some of our preclinical programs. I think all of these go together to support what we’re trying to do as a company and to really realize some of the value that we’ve built into these different programs.


The next question comes from Ken Moss.

Ken Moss

I realize that you’re focused on let’s say the preclinical of the trials that are going. My interest is really in how aggressively are you growing Avid and have you considered either a spin off or part of it or say all of it with Avid still providing what is that you need. I mean this is a real gem that you’re dealing with here and secondly are you doing anything that will conflict with the raising of capital by your ATM and the $1 target that the NASDAQ is looking at.

Steven King

Avid is clearly a key strategic asset for the company. As we have been talking about, outside revenues are fantastic, especially as the company has grown and actually is starting to be a cash flow positive part of our overall structure. The other key aspect of course is the supply of all our critical clinical supplies that we use for not just the Cotara program and the Bavi program but also to support additional preclinical development to support our DTRA contract, so it’s really intimately involved in many different areas of our business. We have had a number of discussions internally about what are the best options for Avid. Currently our viewpoint is that this is such a great strategic asset, completely divesting it really doesn’t make any sense. We do have people interested and potentially partnering with us as we expand the business. We also have ourselves been looking if we want to expand the business ourselves to really move it to the next level of revenue generation where potentially it could even cover the majority of our overall expenses, if not all of our expenses in the future. Then those are very attractive because it is a nice growing business, and it’s a nice mix of expansion of work for our existing clients, which is very nice, as well as new clients coming in, so we definitely view that as a very valuable asset that we want to take full advantage of, and again as I said earlier during the prepared remarks, the group at Avid, their goal is grow the business, and they are looking at what are the different options for growing the business, not just to have some small incremental growths in revenue but to take it a whole new level, and they’re pretty excited about that, and I think it builds a lot of enthusiasm from the group there in looking at their future and what they can be as they move forward.

On the point of fundraising, I think the question was really around the fact that if we are trying to take advantage of our ATM program, is it someway going to impact our efforts to also regain compliance with the NASDAQ’s $1 minimum bid rule. Clearly we view the ATM program as something that opportunistically you can use. We do view it being a really good conduit for raising capital when the market conditions are right, and we’re certainly not going to try to go out and force any issues whether it’s fundraising through the ATM program or other fundraising efforts that would put downward pressure and force our stock price lower, so really we view that as something that’s available. It’s not something we have to use. It is something that’s under our control, and so we’ll use it in a way that will allow our stock price to hopefully regain compliance. We believe we are adding significant value and have some good milestones coming up, but it’s just something nice when the market is moving in the right direction that we can take advantage of.


The next question comes from Jeff Gilman.

Jeff Gilman

With your pipeline as strong as it is, is there any possibility in the future of one of these bigger pharmaceutical companies wanting to purchase the company or is that out of the question completely?

Steven King

No. I think that’s always a possibility clearly within the pharmaceutical industry. There have been many acquisitions recently where companies will pick up, where larger players will pick up smaller companies to fill in pipeline gaps. I think again as interest in the overall company grows, as the value of the Avid oncology programs and antiviral program continues to show its promise, then clearly at some point it might make more sense for potential big player to acquire the whole company versus taking on just one of the programs. Our focus is really not to worry too much about those aspects. Clearly we are entertaining discussions with pharmaceutical companies with an interest in our technologies, and we’ll just have to see where those take us, but our focus is on moving our clinical programs forward to able to build values such that if someone does want to acquire the whole company, it’s for a significant premium.


We’ve come to the end of the allotted time for this conference call, so at this time we would like to turn the floor over to Mr. Steve King for closing remarks.

Steven King

I would like to thank you all for again participating in today’s conference call and for your ongoing support of Peregrine. We continue to be excited about the potential of our technologies, our strategies for moving forward, and the growing revenue potential of the company. I look forward to reporting on our continued progress at the next quarterly conference call. Thank you again.

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