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Peregrine Pharmaceuticals Inc. (NASDAQ:PPHM)

Annual Meeting of Stockholders

October 17, 2013 1:00 pm ET

Executives

Steven W. King - Chief Executive Officer, President, Director, Chief Executive Officer of Avid Bioservices Inc and President of Avid Bioservices Inc

Rolf A. Brekken - Former Member of Scientific Resource Board of Oncology

Steven W. King

So first of all, I'd like to thank all of you for being here this morning, for taking the time out of your day to get an update on the company. Let's just say that in today's meeting and hopefully throughout to shed some more insight into what we're doing as a company and where we see the upcoming milestones over the next 12 months or so.

So just a quick reminder, kind of a backdrop of the company itself, 2 Phase III ready programs. We have bavituximab plus docetaxel in second-line non-small cell lung cancer. This is our lead compound and our lead indication for that compound. And couple more about that in a few minutes.

And also a Phase III ready Cotara monotherapy for the treatment of recurrent GBM or brain cancer. This creates multiple partnership opportunities, and I know there's continual interest in our partnering discussions and those are access for bavituximab, for Cotara, as well as under our broader PS platforms. I think some of the recent data highlighting the mechanism of action has heard a lot of renewed interest in bavituximab, a lot new interest in the program, but also creates many opportunities towards collaboration. So this could be scientific collaborations with CT towards in the field of immunotherapy of cancer. This could be a new partnership, new clinical studies that we could run in conjunction with others who are active in the field as well.

So we certainly feel like this will continue to be a very active area over the coming years as we -- continuously, more data coming through, more data collaborating the combinations of bavituximab with other immunotherapies. And you'll hear more about that from myself and also, Rolf will touch on that during his presentation.

And again, we have a growing commercial manufacturing business. This year, Avid Bioservices, our CMO business, or contract manufacturing organization, generates $21 million in third-party revenue. We're projecting another good year this year with a nice backlog of future business coming up and the ability, again, to continue to stay in that business as we move the company forward.

So we do operate a hybrid business model, which is a little unusual for a biotech company. Of course, like biotech companies, we're really focused on drug developments. This includes our first-in-class monoclonal antibody, bavituximab. It has very broad potential across many different solid tumor indications, as well as infectious disease indications for bavitumixab and related compounds under the platform. And, of course, our novel radiopharmaceutical for GBM, Cotara.

And also, we are very happy that we've been able to continue to grow the other side of our business, which is our contract manufacturing business, which again, generated about $21 million in revenues the last fiscal year.

In addition to the about $10 million in services to be provided for Peregrine -- so this is really a net benefit because instead of externalizing those costs and going to third-party vendors, we've been able to utilize internal capacity and basically provide ourselves $10 million in services, thus, thereby, reducing our overall cash burn rate. And again, this is a critical resource for us as we continue to develop bavituximab, Cotara, as well as other products that are in the pipeline.

So just focus on Avid for a couple of minutes here. This has become a really nice business. We've been a commercial manufacturer since 2005 for Halozyme Therapeutics, and now they're seeing some nice extensions of their product lines through their collaboration with Roche, which they just recently launched the Herceptin subcutaneous or Herceptin SC products that now whose set of products that we've been involved in on the manufacturing side for Halozyme and Roche. And again, this is a nice core piece of the business.

If you look over the last few years, we've seen nice revenue growth, pretty consistent on the Peregrine front, but really nice third-party revenue growth over the last few years. So again, we have some new initiatives at Avid to continue to grow that business, to expand our capabilities and to see this grow into an even bigger business over the next few years.

But really our focus is on the product pipeline. Again, bavituximab, being our lead compound in multiple solid tumor indications, second-line non-small cell lung cancer leading the way, which we anticipate starting a Phase III study by year end. However, important data over the coming months can come from our liver cancer IST, from a frontline non-small cell lung cancer study, for continued follow-up in our HER2-negative breast cancer indication, which we had some very nice positive data presented at ASCO this year, as well as our first combination with radiation in rectal adenocarcinoma.

We continue our development of PGN650 and looking to move Cotara again into Phase III. Because of all the activities surrounding bavituximab and basically, the startup of the Phase III study, we've determined that we will only initiate that Phase III study in conjunction with a partner, so really pushing this partnering discussion as quickly as we can to move this program into hopefully, the final phase of clinical development towards commercialization.

So a few recent highlights. As Paul alluded to earlier, we -- last fall unfortunately had a major setback through the issues that were found in our Phase II study, combining bavituximab plus docetaxel. I'm happy to say that we persevered through that. We're able to get through that investigation to understand what's happening in that study and actually, I think the program is in a really great position right now.

One thing that came through was really the validation of the immunotherapy mechanism of action, and we'll also talk again much more in detail about this during his discussion. But this is the data that has been presented at the American Association for Cancer Research earlier this year, which really helped us to delineate what the mechanism of action for bavituximab was. And they seem funny, after many years of developments, you finally figured out how your drug actually works, but this is the reason that there's continual preclinical research into compounds like bavituximab because this is really, I think, is in my mind a breakthrough information. It affects how we develop the drug, the kind of dedications we will start to focus on, the different dosing regimens and really how do we use the drug. And then I think some of those will come through in Rolf's discussions later on. So this is certainly a major breakthrough point during the last year.

Then data presented at ASCO, again, the promising bavituximab plus docetaxel data in second-line non-small cell lung cancer, thus for advancing the Phase III clinical trials. So again, as a result of our investigation into the issues that we had in the last study, we were able to clear that up. Look at the data and really, I think, it's a very, very promising data. And I'll talk a little bit more about that.

In addition, we had very promising data for bavituximab plus paclitaxel in breast cancer, which certainly seems to support advancing that combination. Again, this is a combination we've had a lot of good success with in both preclinical studies and relative clinic and that the data was an 85% tumor response rate, a really nice number of complete remissions, really, I think support advancing this from our current ongoing study.

And then, lastly, the FDA clearance to advance into the Phase III. So we had promising data. We presented to the FDA the results of our investigation our clinical plans from when we begin the Phase III. And we had really a great response from the FDA. And we reached agreement in May to -- that we could advance that into Phase III, again, that we hope to start by the end of the year.

In addition, last September, we also reached agreement with the FDA on the Phase III trial design for Cotara. That was really instrumental or is critical in being able to not only advance Phase III, but also to engage in partnering discussions and then ask for the revenues for advancing the program.

So on our lead indication with -- in second-line non-small cell lung cancer, across the board, we've always had really promising results with docetaxel in tumor models showing great reduction of tumors in those models. In the earlier Phase II clinical trials of bavituximab plus docetaxel in advanced metastatic breast cancer in which we saw an overall survival of almost double, which you would expect in that patient population, and again, the compelling data from the Phase II randomized study, which we presented at ASCO. And it turns out, I think this is very important that as we've learned more about bavituximab's mechanism of action, it actually only heightens our confidence and our excitement about this particular combination because there's many synergies with the way docetaxel works and actually, also enhancing immune responses, T-cell responses in the way bavituximab works. And really, it looks like they should go really nicely hand-in-hand across the mechanisms of action.

So the Phase III data that was presented at ASCO this year, really, I think, is summarized by the slides, which is a capital merit curve [ph] in which looks at survival of patients that were enrolled in the study. What we see here is in red the bavituximab line and in green, the line for the control arm of the study.

What you see is a bavituximab 3-milligram per kilogram arm shows a nice 11.7 months median overall survival, a very strong overall survival number in the patient population, whereas the control arm has 7.3 months median overall survival. There's about a 4-month difference from the overall survival in the 2 arms of the study.

When you think about that from a statistical standpoint, very strong hazard ratio and a very nice p-value for our Phase II study. So certainly we'll support of advancing the program into Phase III, again, as agreed with the FDA. That Phase III study, which we have named the SUNRISE trial, will be approximately 600 patients double-blinded, placebo-controlled, in which we'll have bavitumixab 3 milligram per kilogram plus docetaxel versus placebo of docetaxel. The primary endpoint, overall survival and again, looking to open up this study by the end of the year and to enroll that study in 2 years or less as we get it up and running.

So certainly, coming from where we were last year, where we had concerns about the data from the Phase II study, to understanding that, to advancing the program into Phase III, I think, is a tremendous accomplishment across the company, in which everyone really contributed to that accomplishment.

I'd like to turn the talk over to Rolf Brekken. So actually, I've known Rolf for almost 20 years, which is pretty hard for me to believe. We actually both worked in the laboratory of Dr. Philip Thorpe. As you know, in previous years, at our Investor Meeting, we've been able to have Dr. Thorpe periodically come in and give presentations to the investors. Unfortunately, very suddenly, Dr. Thorpe passed away earlier this year. This is really shocking. Personally, a number of us, I mean, obviously considers Phil a great friend, as well as a mentor. And so he'll be deeply missed.

I am very happy, having said that, to have Rolf here today. He's studied under Dr. Thorpe, made a great name for himself outside of the group there, UT Southwestern, and then kind of came home a few years back to become a full professor at the -- an associate professor at the University of Texas Southwestern Medical Center. So he is currently the group we're working with because it's all under Rolf of UT Southwestern, and it's been really a great continuing collaboration with the group there. And I think we're really excited about when we're going to be out of the lab coming over the next few years.

So with that, I'll turn it over to Rolf, and he will talk to you about the mechanisms of action and Rolf will talk to you about such an exciting time for the company.

Rolf A. Brekken

Make sure I have my directions appropriate. Good morning. I'm happy to have the opportunity to tell you a little bit about the progress that's happening with respect to the anti-PS program in the lab and bavitumixab. This is something that I've been involved with since its inception. As a graduate student, I was involved in the early stages of looking at targets that we could deliver drugs to, and PS was one of those targets.

I moved on and worked on other areas. I'd say it's really working on angiogenesis matrix that we're modeling in tumors. When I was recruited back at Southwestern, Phil was instrumental in that recruitment. And Phil and I maintained a very close connection, both as a -- he was my mentor, so I asked him for advice and interacted with him on a regular basis. But then as my lab -- as I became more independent, Phil started using me as a sounding board for these ideas that have really developed into the bavituximab program.

And so while my lab -- independent lab didn't work on bavi directly or much of the 2000, we did play with the Thorpe lab in terms of collaboration. And I wasn't cognizant and involved in from an intellectual standpoint, the project from the get-go. So it's very disappointing to have this opportunity to tell you about this because that means Phil is not here and really Phil was the creative force that built this project, but I take this as a great responsibility and I'm humbled by the opportunity to lead his group and interact at a high level of stuff there [indiscernible]. So PS is a global immune checkpoint, and that's really the message that I want to try to get across today. And this is the sort of the starting slide and what I want to do is, this is a bit of busy slide, but I want you to take -- I want you to understand that when a cell dies, that is part of the normal process of tissue homeostasis, right? You're going to have -- in every tissue, cells are going to live out their lifespan. They're going to be -- they're going to live out their functional time, and then they're going to die. And every time a cell dies, you do not want a massive inflammatory response or a strong, what we call, loud response. You want a quiet response that removes the debris in the dead cell. And so the body has evolved many mechanisms and one of the principal mechanisms for removing these cells that have died really deals with phospholipid called phosphatidylserine or PS. So when an apoptotic goes through the process of programmed cell death, it's called apoptosis. So when you hear the word apoptotic, that means a cell that is dying or died through or is dying through programmed cell death, which is a complex mechanism that, like many other cell biology events, is quite regulated. But one of the critical features of an apoptotic cell is that it expresses PS on the outer leaflet of the plasma membrane. You've heard in the past that PS is a phospholipid that exclusively expressed on the inner leaflet of the plasma membrane. So the cells are surrounded by a bilayer of phospholipids. PS is on the inner leaflet and then there are certain conditions or certain environment when it gets flipped and one of those is when a cell dies through programmed cell death process. This PS on the cell surface is recognized by cells that functions as essentially that the cells that clean up the debris. These are called macrophages and they are -- you could think of it as garbage collectors. They're the ones that come and survey the landscape and remove itself, and these garbage collectors can do their job very quietly or they can do it very noisily and they can bring in other cells of the immune system. But when a cell dies through natural causes like programmed cell death, you don't want that to happen. You don't want it to be a noisy event that brings in lots of other immune cells. So under a normal tissue, this process of recognition of PS on the cell surface by the macrophage, at least to this macrophage to not only clean up the dead cell, but it also secretes valuable mediators that tell the rest of the immune system, "Everything is okay. You don't need to be alerted." And it suppresses that immune response, and that is your body -- our bodies have evolved to do that to prevent autoimmunity, okay? And that is evolution working. We want that to happen. Okay?

So PS signaling leads to immune system signaling, which leads to immunosuppression and the downstream consequences of this macrophage-feeding [ph] PS, bonded with cell is that this macrophage suppresses the development of an immune response that we can then monitor by looking at other cells that are important in developing immune response such as dendritic cells or T-cells.

Okay, what I'm telling you is not a story that's been developed in the Thorpe lab or in the Brekken lab or at UT Southwestern. This is a biology that is appreciated and known broadly and worldwide. So apoptotic cells have been known to express PS ever since we understood that they were going through a regulated process to die, okay? It's also been known that cancer cells -- and this is something that was identified in the Thorpe lab, cancer cells and tumor blood vessels is externalize PS. That's really where we came in through the picture. It was demonstrating that, that blood vessels in tumors externalize PS and could target the antibody. This PS has been hijacked. This natural system has been hijacked by a tumor to drive immunosuppressions in the tumor. And that's why PS is a global immune checkpoint. And as a growing body of literature that supports not only PS and recognition of apoptotic cells and how it's found by these garbage collectors and has been keeping the signal and that's literally the term that's used in scientific literature is that PS is introducing signal, but there's lots of support in the literature that PS is immunosuppressive. So PS plays a key role in tumor immune evasion. As tumors develop, there are lots of hurdles that they have to overcome and one of them is that they have to figure out how to hide from the immune system, and so just to elaborate it, maybe too intensely [ph], the idea that PS is involved in immunosuppression, but this is exactly what's happening in the tumor microenvironment. The tumor is hijacking this idea or this concept, this biology, that PS is an immunosuppressive agent. So in normal tissues, normal cells express PS and as shown here [indiscernible]. And then as the tumor develops, the cells in that tumor flip PS to the outer leaflet. And this is done because of the microenvironment, we've got cells that are dying. We can externalize even more PS when we treat those with chemo and radiation. So you flip even more PS to the outer leaflet. It's even more a bit exposed for detection by bavituximab. And this is really the mechanism or the reason why one of the main reasons why bavi works so well with other therapies. it's because you're externalizing more PS. And what we'd like to do is figure out which therapy would not only externalize PS, but also harness and combine the immunostimulatory activity of PS.

Okay, this is -- okay, this is a slide that we -- I just showed you that PS is a global immune checkpoint. Again, this is mediated by cells that recognize PS and one of those critical cells are macrophage is or MDSCs. MDSCs are cells called myeloid derived suppressor cells and these are cells that you're going to be hearing much more about as you read the scientific literature or keep track of immune therapy in general. These are -- I have to describe them as the teenagers. These are cells that have not developed into their final form, into their job and to their -- they haven't differentiated into a class yet. They are unproductive in a lot of ways. So MDSCs are present in tumors and they have a phenotype that drives immunosuppression. However, because these are teenagers, and some teenagers you can educate. You can drive them towards a productive endpoint, all right? So the vast majority of MDSCs are present in a tumor microenvironment, really, try to tell the rest of the immune system to be on low alert. They secrete cytokines such as TGF beta or IL-10, and these cytokines suppress other immune effector cells. However, there are ways in which we can educate these MDSCs to differentiate into cells that are productive with respect to generating an immune response, such as those cells that are involved in antigen presentation and those cells that are directly involved in tumor cell [indiscernible] such as T-cells and what we call M1 macrophages. And I think I can show you -- in fact, we demonstrated that bavi drive the differentiation of MDSCs towards these productive effective [indiscernible].

Okay, this is a busy slide and this is essentially summarizing what I've just told you and by putting bavi in the mix. And so we have a tumor cell or a tumor blood vessel that is PS-positive. When bavi is on board, what happens it binds to PS on the cell surface. This PS -- combining the PS does 2 things, one is to block PS from interacting with receptors on those macrophages before the garbage collectors. And so you've locked that signal that, that receptor was initiating in those cells. And the other thing that's very important is it provides an activation signal for those same immune cells, but instead of it being a PS receptor, here what you have is the antibody is interacting with a receptor on those cells called the [indiscernible] receptor. And this leads to the change in phenotype of these MDSCs and M2 macrophages, which are angry and unproductive with respect to tumor therapy into they get educated and they differentiate into cells that can drive a productive immune response, including these M1 macrophages [indiscernible] cells, and then eventually get an antigen-specific tumor cell. So you get immune activation, kind of overflowing into your -- but this is essentially the same slide. And what I -- what we've done here is just demonstrate to you that this is not just stylized slides that we've generated for presentation to folks like you. These stylized diagrams are based on hard data that's been developed in not only at UT Southwestern, but in collaboration with other folks, and this data has been embedded in the scientific peer review profit, all right. So as a scientist, I'm used to getting criticized. I'm used to being told to we have to do this better, the other is better. And that part of the nature of the scientific process is that we submit our work to our peers and they review it. And now this work has been published. And this is way too small for you to read, but these are just examples of the hard data that we actually have to back up these statements that I've made. Okay, [indiscernible].

So one of the exciting avenues that we're moving forward with is, I told you that bavi drives a productive immune response, which includes the production of mature dendritic cells and M1 macrophages and cytotoxic T-cells, but there are other therapies that are either approved or in clinical trials that are also in this vein as immune checkpoints. Things like blocking CTLA-4 or blocking another protein called PD1. These have had shown promising clinical results from patients with standalone therapy doing combination with chemotherapy. We think that it's quite reasonable to envision a combination of bavituximab with these other immune checkpoint inhibitors such as anti-CTLA-4 or anti-PD1 to be quite powerful. And the rationale is this: blocking CTLA-4 with ipilimumab or other agents like it or blocking PD1 is effective in a small percentage of patients. And the reason it's effective only in small percentage of patients is because those drugs really are downstream immune checkpoints. You have to have a productive immune response getting ready to go or present for those drugs to really be effective. One of the major breaks of developing, a major break on the development of a productive immune response with PS. So we can block PS-mediated immune suppression early. Upstream is the word that a lot of people like to use, or globally. We're now like -- I think that adding in an anti-PD1 or anti-CTLA-4 could be incredibly powerful. But instead of having response rates from patients that are 10% to 15% to 20%, you might double or triple those response rates and it would be immune therapy, productive immune therapy. So that's essentially what's going on in the lab right now, but we are looking at combining bavituximab with agents, such as the anti-PD1 or anti-CTLA-4, to see if we can model this in relevant preclinical models. And then work with clinicians to drive forward into clinical trial, okay?

This is a sort of slide I'd like to leave you with. This is current immune checkpoint inhibitors that are in clinical studies with other groups, including CTLA-4 and PD1, and these are excellent drugs, but they hit one point in the immune activation cascade. The CTLA is very important for T-cell binding and activation. PD1 is an important break on T-cell receptor function. So when you inhibit these, you're inhibiting one spot and one checkpoint. PS, on the other hand, influences many different steps in the regulatory response data driving an immune response. So we think that combining an anti-PS program like bavituximab with another entity -- another immune checkpoint inhibitor would be quite powerful.

[indiscernible] Yes, okay. I'll leave you with that. I'll be around if there's questions or if I need to explain or provide more details or less detail as you know. Thank you.

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