Biotech: Let's Make A Billion-Dollar Deal, Part 2

| About: MannKind Corporation (MNKD)

In the biotechnology world time and money is well spent as long as the end game becomes closer at hand. It's been a very productive few months for both Mannkind (NASDAQ:MNKD) and Peregrine Pharmaceuticals (NASDAQ:PPHM), the two companies I focused on in my previous article. With great progress made in each respective company and more milestones achieved, the end game moves near for both. For Mannkind investors the goal now is FDA approval of AFREZZA, and for Peregrine Pharmaceuticals investors the goal line is partnership and/or buyout.

Value in a biotechnology company's pipeline is not seen in current price per share but rather in projected value of the biotechnology company's intellectual property. What is most intriguing to investors of Peregrine Pharmaceuticals besides holding what may be the greatest discovery ever in oncology with its immunotherapy bavituximab, is the fact that Peregrine Pharmaceuticals owns one hundred percent of its intellectual property, and is not in debt to any banking institution. Although what Peregrine Pharmaceuticals has done over the past year is dilute its current shareholders through use of its ATM "at market offering" vehicle. This funding option gives Peregrine Pharmaceuticals the option of selling shares on the open market at prevailing market price. In my opinion ATM financing should not be viewed as a negative as it allows Peregrine Pharmaceuticals complete flexibility during partnership negotiations. Mannkind, on the other hand, has involved itself in numerous finance vehicles which Mannkind believes is best fit to advance its pipeline's most valuable asset, AFREZZA, which in and of itself will transform how diabetes is treated if approved by the FDA in 2014. With current debt in excess of three hundred million dollars Mannkind does not have the same flexibility Peregrine Pharmaceuticals does in partnership negotiations.

Let's take a look at how close the end game is progressing for these two companies on the forefront of their respective fields. Peregrine Pharmaceuticals noted in June, that their recent agreement with the FDA on the Phase III trial design, along with the successful fundraising efforts have positioned Peregrine Pharmaceuticals for advancing the bavituximab program into Phase III development, and have strengthened their position to develop bavituximab including ongoing partnering discussions. Peregrine Pharmaceuticals expects these developments will lead to important milestones during the second-half of the year as they advance the bavituximab program and gain further insight into its potential. Then in August, Peregrine Pharmaceuticals presented ground breaking data at the "Immunomodulatory Therapeutics Antibodies for Cancer Conference". Lastly in September, Peregrine Pharmaceuticals updated investors with news of their planned Phase III trial design entitled "SUNRISE", and noted they will continue to steadily progress the bavituximab clinical programs as they prepare to initiate this global trial by year-end in second-line non-small cell lung cancer.

In addition to Phase III preparations, Peregrine Pharmaceuticals researchers and external collaborators have undertaken a flurry of preclinical experimentation that will help guide exciting new combinations and therapeutic areas for bavituximab. This activity was spurred on by recent data showing that bavituximab works by harnessing the body's natural immune system to fight cancer. Peregrine Pharmaceuticals' preclinical development plan is designed to simultaneously look at new indications and therapeutic regimens including new combinations with other immunotherapy agents. Because bavituximab acts on a primary immune system checkpoint, there are an abundance of possible immunotherapy combinations with agents working on further downstream targets. In summary, calling bavituximab's market potential a multi-billion dollar asset is an understatement, and in my opinion Peregrine Pharmaceuticals and potential partners know this. As I have mentioned in my previous article bavituximab could potentially be used as a treatment for all solid tumors and viruses, making the market potential endless. Recently, over the past weeks, rumors have surfaced that Peregrine Pharmaceuticals was in deep negotiations summer 2012 with Abbvie Pharmaceuticals (NYSE:ABBV), a division of Abbott (NYSE:ABT). Abbvie Pharmaceuticals is a global biopharmaceutical company that has the ability to discover and advance innovative therapies and meet the health needs of people and societies around the globe. Over the past year Peregrine Pharmaceuticals has advanced its pipeline dramatically, now having two FDA Phase III approved pharmaceuticals and one Phase III trial set to begin in the coming months.

Currently investors in Peregrine Pharmaceuticals are told partnership negotiations are continuing, and clearly so is the progress of bavituximab. Today it's not a question of if Peregrine Pharmaceuticals will partner, the question today is when and for how much? In my opinion the answer will come soon, and for a king's ransom at that, a fitting price for the Golden Goose of immunotherapy.

In closing, let's take a final look at Mannkind and the clinical progress of AFREZZA. Mannkind is clearly ready to submit their NDA for AFREZZA. Both Phase III studies met their primary efficacy endpoints and Study 171 also achieved its other main objective of demonstrating comparability between the Gen2 and MedTone inhalers. Alfred Mann, Chairman and Chief Executive Officer of MannKind Corporation, and also the largest shareholder of Mannkind stock is more confident then ever today on the success of Mannkind and AFREZZA. Alfred Mann recently noted to investors, "The positive results of Study 171 and Study 175 will form the basis of an amendment to our new drug application for AFREZZA, which we expect to submit to the Food and Drug Administration early in the fourth quarter of this year." Once this milestone comes and passes the FDA will make their long awaited decision, and in my opinion the answer will be marketing approval for AFREZZA in early 2014.

Disclosure: I am long PPHM, MNKD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.