Peregrine Pharmaceuticals, Inc. F4Q10 (Qtr End 04/30/10) Earnings Call Transcript

Peregrine Pharmaceuticals, Inc. (NASDAQ:PPHM)

F4Q10 (Qtr End 04/30/10) Earnings Call

June 14, 2010 4:30 pm ET


Amy Figueroa – IR, BioCom Partners

Steven King – President and CEO

Rob Garnick – Head of Regulatory Affairs

Joe Shan – VP, Clinical & Regulatory Affairs

Chris Eso – VP, Business Operations

Paul Lytle – CFO


Joe Pantginis – Roth Capital Partners

George Zavoico – MLV

Roger Adams [ph]

Ian Somaiya – Piper Jaffray


Good day everyone, and welcome to the Peregrine Pharmaceuticals fourth quarter and fiscal year 2010 financial results conference call. (Operator instructions) I would now like to turn the conference over to Ms. Amy Figueroa. Please go ahead.

Amy Figueroa

Thanks, Paula. Good afternoon and thank you for joining us on today's call to discuss our financial results for the fourth quarter and fiscal year ended April 30, 2010 and review our clinical development program. Participating on today’s call are Steven King, President and Chief Executive Officer; Paul Lytle, Chief Financial Officer; Joe Shan, Vice President, Clinical and Regulatory Affairs; Rob Garnick, Head of Regulatory Affairs; and Chris Eso, Vice President of Business Operations.

Before we begin, we would like to advise that this conference call includes forward-looking statements. These forward-looking statements reflect our current views about future events and financial performance that are identified by 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 our 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, 2010 filed today.

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 our expectations. And we expressly do not undertake any duty to update forward-looking statements, whether as a result of new information, future events or otherwise.

I'd now like to turn the call over to our CEO, Steven King. Steven.

Steven King

Thank you, Amy. I would like to start by thanking our investors and analysts for joining us for our earnings call this afternoon. Before we get started, I wanted to share how frustrated we all are with the current stock price performance, which is not, and I repeat not been attributed to negative events, the company, our cash position and erosion of our fundamentals, or the potential of our technology.

To the contrary, we have had significant positive news, our cash on hand has been increasing, our revenues have been solid and the clinical data and growing body of validating research around our PS Technology has never been more encouraging. All of these positive events and momentum moving forward make the company’s current stock price and valuation even more frustrating. Our clinical and operational results have never been as solid, and the outlook for the future has never been as promising as it is today. And we will continue to reach out to the institutional investment community in an effort to have this potential reflected in our stock price.

This past quarter was one of the most important quarters in the history of the company, as we achieved several critical milestones that really set the stage for advancing our clinical programs. Building on consistent and positive data seen in multiple and solid tumor indications, we have recently initiated two new randomized non-small cell lung cancer Phase IIb clinical trials. Establishing two potential regulatory paths to our product approval for bavituximab, our first in class PS-targeting monoclonal antibody. These new opportunities build on our third potential regulatory path for approval, which is for our product, Cotara, our novel approach in treating brain cancer.

Later on this conference call, Rob Garnick will review more specifics of our regulatory strategy, which is consistent with the approach he used time and time again successfully during his 24 year career at Genentech. Our data presentation this last quarter were both numerous and robust. We have a total of eight unique data presentations at AACR and at ASCO, which was well received with interest from the scientific, medical and investor communities.

At ASCO, we presented promising data in lung cancer, breast cancer as well as brain cancer, which clearly showed the broad spectrum potential of our novel monoclonal antibodies. A particular highlight was the consistent, positive results in three separate Phase II trials of bavituximab in combination with standard chemotherapy. This data clearly exceeded historical data for these chemotherapies alone in similar patient populations. This compelling data formed the basis for proceeding with our two new randomized Phase IIb clinical trials.

These trials are in refractory, as well as frontline non-small cell lung cancer, and these will be augmented by our ongoing efforts to expand the bavituximab clinical program in accordance with its broad potential in many different solid tumor types. In addition, we are anxious to complete patient enrolment in the important Phase II Cotara brain cancer trial. Looking ahead, we will have multiple opportunities to report clinical data from our ongoing company sponsored trials, as well as from our new investigator sponsored trials program, building towards unblinding top line data from our refractory non-small cell lung cancer trials by the end of 2011.

Joe Shan will provide further context on our clinical data and progress later on the call. Our regulatory and clinical plans could easily exceed our financial resources if they weren’t for the combination of strategic and careful spending and value creation in the form of outside revenues and important cost saving services provided by our wholly owned subsidiary Avid Bioservices. With Avid we are able to manufacture clinical materials for our own company sponsored trials, as well as our IST program at a much lower cost than purchasing from third-party manufacturers, literally resulting in millions of dollars of cash burn savings.

Along these lines, this was another productive quarter to Avid to finish a record year of manufacturing output. And Chris Eso, Avid’s vice president of business operations will provide an update later on our call. In addition to Avid, we have another source of revenue, our contract with the Transformational Medical Technologies Initiative, known as TMTI, of the US Department of Defense’s Defense Threat Reduction Agency or DTRA. We recently provided an update on this contract, which supports development and evaluation of bavituximab for the treatment and prevention of viral hemorrhagic fever or VHF.

Over the course of the two year base period, the TMTI contract has helped us not only evaluate bavi for VHF, but has also been important in advancing our bavituximab clinical development programs. Through funding that supported development efforts such as production scale up and formulation work. We recently announced a 45 day extension of the two-year base period from its original exploration at the end of June, and we will be using this time to complete our scientific review and to plan continuing preclinical evaluation in more advanced models of VHF.

As soon as we have completed the review, finalized plans for the next preclinical studies and have agreed with TMTI on the specifics, we will be able to provide an update on those plans moving forward under this multi-year contract. Our progress during the past year has been unparalleled in our history. Equally as remarkable, we have increased our cash position in each of the last four quarters. Paul Lytle, our CFO, will provide an overview of our financial position, and our strategy later on the call before we open your call to questions.

As you look back on an extremely productive quarter of clinical and operational progress, we look forward to executing our next set of clinical programs to drive our future success. Thanks to the dedication and hard work of our team, we are on track to achieve several milestones, which include executing our two randomized Phase IIb non-small cell lung cancer trials for bavituximab, with the goal of completing enrolment in both by the middle of 2011.

Secondly, initiating up to 4 additional bavituximab trials by year end, including both company sponsored and cost-effective investigator sponsored studies in order to explore the broad potential of the PS Technology platform. In addition, we are looking to complete enrolment in our Phase II Cotara trial in recurrent GBM, and complete the ongoing Phase I HCV/HIV Coinfection trial for bavituximab by the end of this year.

We should have many opportunities the share our progress over the coming months, and we look forward to updating you along the way. I will now turn the call over to Rob for a quick review of our regulatory strategy. Rob.

Rob Garnick

Thanks, Steven. Since I joined Peregrine last year, I worked closely with the team here to develop a comprehensive clinical, regulatory, and manufacturing strategy for bavituximab, similar to what I used successfully for avastin, while I was at Genentech. And as you know, avastin was the first broad-spectrum anti-cancer agent, and in my mind bavituximab could be potentially very similar to avastin because of the broad presence of bavituximab phosphatidylserine target in numerous cancers.

We designed this comprehensive regulatory strategy to take advantage of the previous signal seeking Phase II trials completed by Peregrine in order to design a regulatory strategy for bavituximab that could lead to a rapid regulatory approval. This strategy, which I again used successfully at Genentech for avastin and rituxan targets the first approval in the refractory disease setting, followed by an approval in the frontline setting, which as you all know is much more difficult.

In addition, we are initiating a number of investigator sponsored signal seeking trials or ISTs to further develop bavituximab as a broad spectrum agent similar to avastin. In order to execute this strategy, we initiated a Phase IIb refractory non-small cell lung cancer trial in June of this year, and today announced a Phase IIb trial in frontline non-small cell lung cancer. As I described previously, our first approach for approval for bavituximab is a proof of concept refractory non-small cell lung cancer trial.

We are pursuing the refractory disease setting as it is a high unmet medical need, and potentially the fastest route for FDA approval. An excellent recent example of this strategy is that last week Genentech submitted a BLA for Herceptin DM1. This application was based on a single arm Phase II trial in 110 patients with HER2+ breast cancer, which failed previous therapies. Genentech trial measured an objective response rate as the primary endpoint.

Clearly, there is a regulatory pathway for bavituximab if the data from our refractory Phase IIb trial are exceptional. In drug development, well-designed trials have the potential to generate exceptional data. And we need to be prepared to file for accelerated approval if we hit the home run scenario. I should point out that if the data from this trial aren’t a home run, but still positive, which is the more likely outcome we would plan to conduct and additional Phase III trial to pursue the refractory non-small cell lung cancer indication for bavituximab.

A third critical aspect of our clinical, regulatory and manufacturing strategy is that Peregrine has the major advantage of having its own clinical product manufacturing capability in Avid. While simultaneously developing the regulatory and clinical strategy I just outlined, we also over the last nine months have put significant effort into increasing our manufacturing capability for bavituximab. This capability is now sufficient to support an early approval if we’re lucky enough to be in that situation.

I’m very excited about the opportunity to execute this comprehensive strategy and feel fortunate to have the opportunity to work on a second broad-spectrum agent such as bavituximab. At this point, I would like to just turn your attention for a moment to our second anti-cancer drug, Cotara. As you know, we’re currently completing the Phase II trial of this product in recurrent glioblastoma multiforme, and expect to have an end of Phase II meeting with the FDA early next year as soon as these data are available, and then be able to effectively plan our Phase III approval strategy.

I like to end by again saying how optimistic I am about bavituximab’s potential. The growing body of research points to bavituximab potentially providing a unique and valuable new approach for the treatment of cancer. The clinical results we have to date, support moving forward with our regulatory strategy to advance this novel antibody.

I will now turn the call over to Joe Shan for an update on our clinical programs designed to support the comprehensive strategy I have just outlined.

Joe Shan

Thanks, Rob. Over the past three months, we had four presentations at the ACR and four at ASCO, leading to the launch of the two randomized Phase IIb trials. Before I describe these new trials, it is probably helpful to take a step back and talk about the rationale leading up to these filings.

First we began bavituximab’s clinical development with Phase I studies designed to assess safety and pharmacokinetics of various dose levels in a limited number of doses in advanced cancer or HCV patients. This then led to a pilot study combining bavituximab with one of several standard chemotherapy regimens, again with very limited and dosing and safety as the primary end point. At this point, we did not know whether bavituximab would increase anti-tumor activity in patients and if so to what extent or which tumor types should be further explored.

With this in mind, we designed three non-randomized Phase II signal seeking trials to evaluate the effect of bavituximab combined with standard chemotherapy in lung and breast cancers, which would lead to randomized trials if we saw positive results. You may recall that these trials use an adaptive two-stage adaptive design, which allowed us to stop these trials early if prespecified end points were not achieved during interim analysis.

These signal seeking Phase II trials were designed to match as closely as possible the patient populations that dose regimens, and end points from three published studies that included chemotherapy regimens of interest that we could use as historical benchmarks. These benchmark studies continue to be relevant as the review of recently published larger trails continue to report very consistent results. It is important to emphasize that our signal seeking trials are not meant to replace randomized trials, but rather to estimate sizes [ph] so that we could properly design and power randomized trials for increased probability of success.

From an operations perspective, we decided to conduct these trials outside of the US, where patient populations were larger, recruitment rate is often several times faster, and procedural fees can be a fraction of the cost in the US. All patients consenting to participate in these trials received a standard type of care chemotherapy in addition to bavituximab. Under rigorous ICH GCP guidelines the procedures were well documented, strictly followed and regularly audited that the data could support further clinical development under IND [ph].

Our international approach for these signal seeking studies was recently validated by the Department of Health and Human Services statistic that 80% of drugs approved in 2008 had trials conducted in foreign countries, and 78% of all subjects had come from outside the US. With these signal seeking trials near completion, we have met our original goals for these trials, which include providing additional safety data on bavituximab’s use in combination with chemotherapy, estimating antitumor activity and supporting the design and initiation of randomized trial.

We are very encouraged by the data from all three signal seeking Phase II trials, showing consistent, positive results compare to published historical data. Our frontline non-small cell lung cancer trial showed a 43% overall response rate or ORR in 6.1 month median progression free survival or PFS for patients treated with bavituximab in combination with carboplatin and paclitaxel. These exceed the 15% ORR and 4.5 month median PFS with carboplatin and paclitaxel alone in a separate trial.

Our advanced breast cancer trials one in front-line and one in refractory patients also showed promising ORR and PFS for patients treated with bavituximab and chemotherapy, again exceeding results from historical trials that they were based on. Taken together the data from these trials form the basis of our two recently initiated randomized Phase IIb trials in refractory and frontline non-small cell lung cancer being conducted again under US IND.

The first trial, our refractory lung cancer trial is enrolling up to 120 patients, and has a rigorous randomized placebo-controlled double-blinded features typical of pivotal Phase III trial. We’re measuring response rate as a primary endpoint and PFS, survival and duration of response, and safety as secondary endpoint. This trial is being conducted in up to 30 sites in the US and internationally with top line data expected by the end of 2011. As Rob mentioned earlier, refractory non-small cell lung cancer is one of our potential regulatory paths for bavituximab. And currently approved drugs unfortunately yield very low response rates in these patients.

Taking a look at the package insert information from the top three selling drugs for refractory patients which accounts for most of the market response rates are between 5% and 9% only. For our Phase IIb trial we are combining bavituximab with docetaxel, which is supported by the positive data using the same combination in our signal seeking refractory breast cancer trial. Our second randomized trial that we just announced this morning is a front-line lung cancer trial enrolling up to 86 patients. This trial is being conducted in up to 20 sites in the US and internationally, and we expect to have this trial fully enrolled by midyear 2011.

This randomized trial is open labeled, which allows us to report interim data as the trial progresses. This trial is intended to confirm in a randomized setting the results from our signal seeking lung cancer trial, which again showed 43% overall response rate, which is more than double the generally accepted chemotherapy response rate of under 20% in numerous publications. The favorable results from this trial could then lead to an end of Phase II meeting with the FDA, with possibly a pivotal Phase III trial for front-line lung cancer, our second potential regulatory pathway for bavituximab.

In preclinical and clinical studies, bavituximab has shown broad-spectrum potential, which we are planning to further study with additional company sponsored trials and several investigator sponsored trials, which we expect to be initiated between now and the end of this year. We’re very excited about our IST program, as we believe these trials would generate valuable data to guide us on bavituximab’s potential use and additional indication, as well as different therapeutic [ph].

We have already received numerous proposals from interested investigators for liver, pancreatic, breast, brain and prostate cancer studies just to name a few. And we look forward to sharing additional details about these open label studies once initiated under the investigators own IND.

Turning to Cotara, we have enrolled over 75% of the planned recurrent GBM patients in our Phase II trial. And interim analysis showed positive survival trends, and we look forward to completing enrolment by the end of this year. If the data continued to trend favorably for the entire study population, we plan to meet with regulators to reach an agreement on a pivotal file design, paving a third potential regulatory path for one of our product candidates.

Our ability to conduct these trials is directly supported by Avid’s manufacturing capability. So I will now turn the call over to Chris to discuss Avid operation.

Chris Eso

Thank you, Joe, and thank you everyone for joining us today and providing me the opportunity to update you on some of Avid’s achievements. Avid continues its solid performance and continues to play a critical supporting role for Peregrine, as well as our third party clients. During the year, we supported a multiple company sponsored and investigator sponsored trials that Joe described, and ramped up production of bavituximab, while maintaining our solid performance for third-party clients.

Not many biotech companies our size are able to offer IST programs, but because of the infrastructure at Avid we make it possible for Peregrine to further explore the broad therapeutic potential of bavituximab, and do it in a cost effective manner. Avid’s total output for the year, which includes services to Peregrine, third-party clients and services under the government contract achieved a record level of $30 million for the fiscal year 2010 compared to $23 million for last year.

As you can see, the activity level at Avid remains high and continues to increase. While Avid is strategically integrated into Peregrine, our goal has been to continue to strengthen and expand our existing relationships with our key third-party clients. Because of the integration with Peregrine, we are able to offer our clients a broad range of service, beyond the typical services provided by CMOs, and our clients have benefited from the breadth of our services and experience.

During the fourth quarter, we successfully extended our existing commercial supply agreement and entered into a second commercial supply agreement with one of our important client, Halozyme. Additionally, we entered into a long-term strategic relationship, as Halozyme designed Avid their preferred supplier for future products requiring our capabilities.

Going forward, we will continue to strengthen our relationship, while augmenting those with new clients that we can service and grow our business strategically over time to support the future needs of not only our third party clients, but also Peregrine. At the same time, we will be working diligently to implement efficiencies throughout the organization in preparation for our potential commercialization of bavituximab.

Whether we are adding to Peregrine top line with our services to third-party clients, or reducing the overall burn rate by manufacturing Peregrine’s clinical products at a much lower cost, our contribution to the company’s overall strategy and success are critical and continued to expand.

With that, I will now turn the call over to Paul, where he will provide more insight into the company’s financials. Paul.

Paul Lytle

Thanks, Chris. During the next few minutes, I will review a couple of our key financial highlights for the fiscal year, I will then discuss our financial position as of April 30, 2010, and I will conclude with a discussion covering our various sources of capital and our strategy to fund our investments in research and development.

Starting with the financial highlights, total revenue for fiscal year 2010 hit a record $27.9 million. This compares to total revenue of $18.2 million reported in fiscal year 2009. Year-over-year this represents a 54% increase in revenue, mostly driven by our revenue reported under our government contract. Looking to the future, our goal is to continue to generate revenue from two sources as a way of reducing our overall burn rate and stretching our investments in research and development.

Regarding revenue generated under our first government contract, we plan to continue to advance the preclinical research under our TMTI contract based on the terms of that agreement. In addition, we are actively applying for additional government contracts and grants such as IRS Section 48(d), which further validate and support the development of our technologies. For contract manufacturing revenue, as Chris mentioned earlier, the value of Avid’s total services or output is a key measurement of our subsidiary’s value creation.

When Avid provides manufacturing services to third-party customers, we recognize the revenue and we see a reduction in our net loss. Likewise, if Avid is providing manufacturing services to Peregrine, we see a reduction in our R&D cost, and Avid is manufacturing those products at a much lower cost compared to the price we would pay to an external manufacturer. In either situation, we see a lower net loss for Peregrine that allows us to stretch our investments in research and development.

Now, turning to the bottom line, during fiscal year 2010, our net loss declined 12% to $14.5 million or $0.30 per share. This compares to a net loss of $15.5 million or $0.37 per share reported last fiscal year. This decrease in our net loss is a direct result of the revenue growth we achieved this past fiscal year.

Now, let me shift your attention to the balance sheet. As of April 30, 2010, we reported $19.7 million in cash, and this is our fourth consecutive quarter we have achieved an increase in our cash position. Looking forward, our strategy to fund our investments in research and development is based on several potential sources of capital. First, our preferred source of capital has always been nondilutive capital. And unlike most biotech companies we are fortunate to have two key sources of non-dilutive capital, which has helped us reduce our overall reliance on the capital markets.

In fiscal year 2010, we generated close to $28 million in total revenue, which reduced our burn rate and the amount of additional funding we raised from the capital market. We are also experiencing continued interest in our clinical programs from potential partners. Our goal is to keep potential partners informed of our progress, while the advance the pipeline closer to randomized Phase II data, which we believe with positive results could add significant value to these partnering discussions.

In the meantime, we will continue to pursue partnering opportunities and potential sources of capital they represent. Along with these sources of capital, our goal is to use a combination of our revenues from third parties and financing strategies to support our future operations. Over the past four fiscal quarters, we have successfully increased our cash position by closely matching our capital needs with our capital resources. We have raised additional capital when market opportunities arise through a financing vehicle called an aftermarket or ATM issuance program. Under this vehicle, we are able to sell shares without a discount to market and without issuing a single warrant.

During fiscal year 2010, we were able to raise over $26 million in gross proceeds using this vehicle and the shares were sold at an average price per share of $3.51. In addition to the financing tool, we are looking to gain a greater institutional ownership position in Peregrine through an active investor outreach program. We are highly focused on building the awareness of Peregrine within both the medical and investment communities and our progress towards this goal can be measured.

Since January, we went from no analyst coverage to four new analysts covering our stock. We presented at six investor conferences, spanning from the East Coast to the West Coast, as well as into Europe. We conducted multiple non-deal road shows and held close to 50 meetings with targeted institutional investors so far this year. But this is not the end of our investor outreach campaign, but merely the beginning. We have a fresh and powerful story to share with the investment community, and it gets more and more exciting as progress continues.

As of today, we have three ongoing later stage Phase II programs in oncology, and this is an exciting position to be in late stage trials using novel targeted therapies with broad therapeutic potential. We all believe in Peregrine, the novel technologies we are developing, and our fight against cancer.

Thank you for your time today and for your continued support of Peregrine. This concludes our prepared remarks. We will open the call to questions. Operator?

Question-and-Answer Session


(Operator instructions) We will take our first question from Joe Pantginis with Roth Capital Partners.

Joe Pantginis – Roth Capital Partners

Hi, guys. Good afternoon and congratulations on the progress. A couple of quick questions if you don’t mind, one for the team and maybe one for Rob, you did mention a few indications with regard to the IST study that you have received interest for such as liver, breast, brain et cetera. You also will look to be starting your own internal study as well by the end of the year. What kind of thought processes are you going through to decide which indication to actually go after with regard to IST versus your internal programs?

Steven King

So, I think – First of all, thanks Joe for the good question. I think the overall strategy is really to look at which programs are best supported by the prior preclinical and clinical data, and then to really see which ones have the clearest pathway towards a product registration type movement. So I think each one of these diseases has many different indications obviously within that overall cancer type. So really what we are doing, and a lot of this is based on just really the very broad nature of the technology platform, and clearly you now as far as we now virtually every solid tumor type will have – (inaudible) in our target for bavituximab exposed on the surface of the tumor vessels must be a good target for therapy.

So our goal is to really you know, if you will paint an entire picture through the IST, the company sponsored programs, looking at the indications with the clearest pathway towards registration and really pursuing those as aggressively as we can through the company sponsored studies, and utilizing the ISTs to really do additional sort of studies, verifying the mechanisms of action, showing which tumor types may be more responsive to the therapy, also exploring different combinations. We really have an interest in things such as radiation in combination with bavituximab and there are different treatment modalities.

So, really just trying to pick the ones that we think have the best most direct pathway towards registration for our company sponsored studies, utilizing ISTs to really expand beyond that into what we really think is a broad potential technology.

Joe Pantginis – Roth Capital Partners

Got you. And if I could just follow up quickly with a question for Rob, Rob obviously you have had a lot of experience in dealing with the FDA in the past, based on your historical experience can you sort of characterize how your interactions have been since you have joined Peregrine with regard to the FDA feedback, and potential enthusiasm by the agency regarding bavituximab?

Rob Garnick

Yes, good question. I think our interactions have really been exceptional, frankly. We have had two – we really had two meetings with the FDA , type C meetings so far in moving into our randomized controlled Phase II trial, and both on the CMC side and on the clinical side, and I would characterize the interactions as the agency has been extremely encouraging. Frankly, more so than I have seen in many other experiences that I have had with them. I was frankly pleased and surprised. But I think our goal, one of the goals we have is to really have a very collegial respect for and close relationship with the agency so that our drug development programs go as smoothly as possible. And that has always been my goal in working with the agency and it has been very successful so far.

Joe Pantginis – Roth Capital Partners

Great. Thanks so much, guys.

Steven King

Thanks, Joe.


And moving on, we will go to George Zavoico with MLV.

George Zavoico – MLV

Hi, good afternoon everyone, and congratulations on the progress you have shown in the last fiscal year and the last quarter. I have a question regarding Avid Bioservices and the growth of the contract manufacturing revenue. In the last two years, you have shown on a percentage basis greater growth than you did in the last fiscal year, and I’m wondering whether that is because number one, it is the overall economic situation, and number two, that you have shifted perhaps some of the resources over to production of bavi in support of the ongoing trials. And to speculate perhaps or project forward with regard to as you mentioned getting new customers and clients for that business.

Steven King

Yes, I will take a first stab at that George, first of all thanks for the question. Yes, we view Avid has the total value asset. So basically the value we get from this is the outside clients, but clearly a third-party revenue source and really what we get out of that is covering cost as well as hopefully making a profit on those activities. But probably as important, maybe more important is the role that Avid plays in moving Peregrine’s technologies forward.

I think Rob mentioned earlier that we had a big FDA meeting, and really on the CMC [ph] side to really set the stage for moving the programs into later stage clinical studies, and even eventually looking forward to commercial production. Clearly that requires a lot of effort and a lot of manufacturing runs to prepare for those meetings, to generate the data which the FDA expects to see, that supports you know, again process changes, and really again as we move into later stage clinical studies, looking at process validation. You know, these activities just get more and more expensive and require more and more activities.

So I think our goal at Avid has been to really continually increase the production output from the facility. I think as mentioned very nicely, we certainly saw a big jump this year over previous years, and if you look at the growth of the overall output of Avid, I think that that has been really tracking nicely year-over-year. We’re getting more and more out of the facility.

So I think that we do view the outside revenues as one part of the puzzle. But again for every dollar that in services we provide for Peregrine, those are dollars that are saved in outside CRO type activities we otherwise would have to undertake to support our overall development program. So we want to keep the right mix. We don’t want – our goal is not to grow the Avid contract manufacturing business at the expense of our product development efforts or vice versa. So it is really balancing those two, keeping them in the right proportion and then again, continuing to see the increase in output, and that will be I think the best judge of how the business is doing and how we are utilizing that asset.

George Zavoico – MLV

Okay, thank you for that, and one other question, you have clearly announced non-small cell lung cancer as the key next registrational indication, you have some trials obviously in breast cancer as well, and with the IST studies you are considering other targets to pursue. In that regard, is the best cancer program on hold for now, as you focus delivering on non-small cell lung cancer?

Steven King

Yes, I wouldn’t characterize it as being on hold so much as the fact that we really got the most compelling data was in non-small cell lung cancer and in fact, it was the breast cancer Phase II data, with provided some of the background information on the combination with docetaxel, and again that did look promising. Just reiterating what I said to an earlier question is basically we are looking at the company sponsored trials, focusing on those indications in which there is the clearest pathway towards product registration.

Non-small cell lung cancer and the combination of the data and the combination with docetaxel, we felt was very compelling. Breast cancer we still have a high level of interest in. I think we will be pursuing that in the future. Right now, it is really just a matter of what is the particular indication there; and clearly, there is a lot of additional clinical programs from other companies in the breast cancer area and that is when we have to figure out how to navigate.

So I would say breast cancer is certainly in the mix, along with the others mentioned, we have seen pancreatic cancer, which we have got great support of data, liver cancer, which is a great (inaudible) program. Again with a broad natured technology like this there is so many opportunities, you really have to just picks the ones you think have the best opportunity for yielding us a nice return.

George Zavoico – MLV

Yes, I agree with that, and then I agree with the non-small cell lung cancer results being the most compelling at least in this stage of bavituximab development. I look forward to the result flow for the remainder of the year and into next year. Thank you very much. I will get back in the queue.

Steven King

Okay. Thanks again, George. We look forward to updating you.


(Operator instructions) And moving on we will go to Roger Adams [ph], a private investor.

Roger Adams

Thank you, gentlemen, for a great quarter. I was hoping to get an update on two areas, perhaps, Rob could update us on the biosimilars program, and when we might hear more about the launch of that. And secondly in the area of survival data for the Phase II trials, will it be possible before the end of 2010 to let us know that the – it looks like the median survival will be at least a certain number of months. I note that you finish enrolment back in October of 2009, and it would seem compared to the other data that is out there for just paclitaxel by itself that once you get past 12, 14 months, you have market sensitive piece of information. I mean, we have to wait until half the patients have died before we can hear anything about survival data.

Steven King

I think I will take the first stab at it and let Joe and Rob augment the discussion, but since (inaudible) with the survival data it is a time two event. So you need a certain number of events to take place before you can really report that. So at this point, the fact that we haven’t reported some of that is probably not a bad thing. I mean, we’re obviously continually following up, and making sure that we are following the opportunities to update on the survival data. That is something we do anticipate putting out as we get into the latter point to those studies, and that data becomes available. Joe, I don’t know if you have anything to add to that.

Joe Shan

Thank you. That is all I had.

Steven King

Okay. On the biosimilars program, I think we do have a high level of interest in that. Again, I think just as a follow-up to the question that George had on Avid and its potential growth in the future, having your own GMP manufacturing facility in the US that has been through at this point many different FDA and European inspections has a lot of potential utility. The biosimilars is certainly an area we have a high level of interest in because again it fits the nature of our business, and our infrastructure. And it is something we could tackle without really having a significant impact on our burn rate whatsoever.

So we have been very actively reviewing the opportunities in the biosimilars space, which ones best fit with our core capabilities, as well as our capacity. And I think we are quite excited at the appropriate time here be able to roll out our plans in that area, and so you can see the progress that we are planning on making there. And Rob, I don’t know if you want to expand on that at all.

Rob Garnick

No, I think you covered it quite well Steven. Just that, I think in parallel with the bavituximab development program that we discussed earlier, we have been working equally hard I think on the biosimilars program and really have made an astonishing amount of progress in an area which as you can imagine is quite convoluted and difficult. But I think we’re nearing our final decisions as to which candidate to bring forward, and really probably our next step will be to solidify our final decision, and then begin discussions with the FDA about how to proceed forward with this program because you know, the FDA now has under the Patient Protection Health Care Act that was signed into law in March that was a pathway for biosimilars in the United States and we plan to take full advantage of that pathway as soon as possible. So very exciting project actually.

Steven King

And I think just to finish off here, I think one of the things that fits very nicely with our overall operations is due to the nature of the early work on biosimilars being in the early upstream development, cell line development, assay development and what have you, it fits in very nicely with our infrastructure, our ability to take on those sorts of projects with really a minimal impact on any burn rate or any significant expenses, it really makes it very appealing to us and just fits in perfectly with kind of our overall business model for both Avid, and as well as Peregrine. So, thanks again for the question.

Roger Adams

Thank you.


And next, we will go to Ian Somaiya with Piper Jaffray.

Ian Somaiya – Piper Jaffray

Thanks for taking my question. Just was hoping to get a little bit more color on the Phase IIb trial design. I don't know if you have spoken to the statistical powering of the study and what if any feedback you had received from the FDA, given the sort of the use of historical controls in the initial Phase II studies?

Chris Eso

Yes, when we – in our discussion with the agency, the powering was discussed early on and we’ve certainly not submitted the protocol and they fully accepted the Herceptin [ph]. The trial, actually if you look – it is a double blind fashion, and looking at bavituximab at a couple of different doses or a placebo along with chemotherapy. So it is actually a power to – tech differences between those as well. But certainly all of these features were certainly discussed with the FDA and agreed upon.

Ian Somaiya – Piper Jaffray

And what kind of differences are you looking for in the Phase IIb trials?

Chris Eso

Yes, I don’t think we’re giving guidance on that right now.

Ian Somaiya – Piper Jaffray

Just maybe a follow-up to one of the earlier questions. Just regarding overall conversations or dialogue with the FDA, you mentioned obviously there have been improvements and for good reason. I was hoping to maybe get a little bit more in quality of feedback on what some of the – sort of the nature of the improvement has been? Has there been greater access to more senior individuals within the FDA? Has the FDA been more willing to maybe let you explore Phase IIb trials on your own or additional indications on your own? Just any insights, any color that you can provide.

Rob Garnick

I think the approach we have taken with the FDA has been basically I think a very standard one. We’ve provided very detailed data packages, we have provided well structured questions, and we have actually gotten I would say a lot of reaction from very senior people within the agency, certainly in the oncology area, both on the clinical side and on the CMC side. They really – I think they really appreciated the types and depth of the data that we provided them, and the fact that frankly you know the company has in the signal seeking Phase II trial that Peregrine conducted, there is a substantial amount of safety data which we provided from all those trials to the agency, which really answered a lot of their questions having to do with the type of phosphatidylserine target.

And once they became very comfortable that we had that information, and it was on a reasonably large patient population, I think their really interactions with us have really been consistent with that. I mean generally with the FDA, the more open and sharing you are with information, the more open and willing they are to entertain different options and thought processes about the company, and I personally found the interactions to be extremely positive and productive. And out of those conversations came the trial design for the randomized controlled Phase II that Joe described, and other interactions we have had on bavituximab [ph], for example, show the agency is working with us in a very productive, professional and collegial manner. This is what I would expect and what I like to see in interactions with the company. So, you know, I would say our interactions are A plus.

Ian Somaiya – Piper Jaffray

All right. Thank you very much.


And next, we will do a follow-up from Joe with Roth Capital Markets. Joe.

Joe Pantginis – Roth Capital Markets

Hi, guys. Thanks for the follow-up. Just quick question, on the study you initiated today in front-line patients. As you said, it's open label and you would be looking at interim along the way. What are the decision points you would be making about what level of events you would need to see before you release data to the street?

Steven King

Well, I think it is obviously data driven and the number of patients that basically we are able to get into the study at any given point. Clearly, these are all time two events, whether it will be tumor response on which we need to do the follow-up and give the tumors an opportunity to respond to the therapy.

In a case of progression free survival, and then getting into overall survival, those are obviously much longer time points. So, I think what we’re going to do is evaluate. In the past, we have actually had investigators who would give updates just on their particular patient population, their experience with the drug. So if we have highly enrolling sites that is a possibly. From a company standpoint, obviously we have the ability to pull together data from multiple sites and to be able to put that information out there in an orderly fashion in some of the oncology conferences either in late fall of this year, or early spring of next year.

So I think our goal is to get out there the early indications of the tumor response data where possible, but also again could be even opened up as much as individual investigators in their experience, and there is lots and lots of ways in which we can get this data out there.

Joe Pantginis – Roth Capital Markets

Thanks, Steven.


And our next question will be a follow-up George Zavoico with MLV.

George Zavoico – MLV

Hi, again. Thanks for the follow up. A lot of attention, clearly on the oncology indications, but the infectious disease indication for bavi and progress with Cotara I think are perhaps as compelling as well. We previously guided that you would announce interim or final results, fixed to be in bavi with patients coinfected with HCV and HIV. I was wondering number one if that is on track?

Steven King

Yes, I think our goal for that program is still to complete the study later this year, then we will be able to probably roll-out the data from the entire study in 2011. I think again this is and open label steady, obviously, so as we get more and more of the patient data and follow up from the study, we will also be able to evaluate are there some other opportunities for pursuing the data even before the final data will be available again sometime next year.

So I think we are on track to get that study completed. You know, again we haven’t lost any of our enthusiasm for the HCV program. We still think that that is a very valuable program and that in fact we have actually started internal discussions about what are the next steps for that program, how do we want to move it forward, and what is the right combination that we want to test the drug with, because you know, again just like in the cancer setting, we really believe that it is combination therapy in an HCV setting that will work best with this technology platform.

And again, this has also opened up even to being potentially IST type trials, as well as company sponsored trials. So, yes, we look forward to getting the rest of the data from the HCV/HIV Coinfection trial out there. But most importantly how do we move the program forward and where do we take it from here.

George Zavoico – MLV

And could you comment similarly on the Cotara program? That's clearly a very different kind of therapy.

Steven King

Yes, the Cotara is obviously – we view that as a brain cancer drug at this point. Our current goal is to complete enrolment in the Phase II trial this year. Then basically be able to pull together the data from that trial, and hopefully have some meaningful interactions with the agency and internal discussions about what is the right registration pathway for that program, what is the size of the trial that will be necessary and what is the patient population. I think that is our goal to really finish the trial this year, have those discussions come to a final decision point by the middle of next year on how to move the program forward from a registration standpoint.

And I think importantly that opens up a couple of possibilities in my mind. One is, if the company is in a good position we potentially could move into those studies ourselves. But also at that point I believe if we are in a reasonably sized trial and have a pretty clear pathway towards registration, then again it is a highly partnerable program at that point as well. So let's play that by year, but I think first things first. Let's finish enrollment in the ongoing study and then make those other decision points happen next year.

George Zavoico – MLV

Okay, thank you. Good luck with that.


And with that, there are no further questions. I would like to turn the conference back over to the CEO, Mr. Steven King.

Steven King

Okay. I would like to say again thanking all of you for participating in today’s conference call. Thank you for your continued interest in support of the company. As we look ahead, we have an active schedule of planned milestones we are working to achieve. We look forward to updating you on our progress and achieving those milestones over the coming months and in the new fiscal year ahead. Thank you again.


And that does conclude today’s conference. We would like to thank you all for your participation.

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