Biotech: Let's Make A Billion-Dollar Deal

| About: MannKind Corporation (MNKD)

Partnership, by definition, is an arrangement in which parties agree to advance their mutual interests. In the biotech realm, however, it means so much more. The small biotech company gets to advance its potentially breakthrough product, and the large pharmaceutical company gets majority rights to the next potential pharmaceutical blockbuster. To the biotech investor, this simply means validation and the coming of true valuation to the partnered biotech company. Those who invest in biotech are always searching for the next Pharmacyclics (NASDAQ:PCYC) or Genentech (Private:DNA), companies whose market valuation increased by billions shortly after announcing their partnerships with large pharmaceutical companies. To find that needle in the haystack, an investor must invest hundreds of hours researching the clinical trials and balance sheets of the sea of biotech companies. Two companies which I believe have the next billion-dollar drugs and are on the verge of partnerships with large pharmaceutical companies are Mannkind (NASDAQ:MNKD) and Peregrine Pharmaceuticals (NASDAQ:PPHM).

Mannkind has a game-changer in the diabetes market with their version of insulin called AFREZZA. For the past ninety years, patients with insulin-dependent diabetes have been forced to painfully administer their daily insulin doses through injection. Mannkind is looking to change the insulin delivery game. AFREZZA is a novel, ultra rapid-acting mealtime insulin therapy in late stage clinical investigation for the treatment of adult patients with Type 1 and Type 2 diabetes mellitus for the control of hyperglycemia. It is a drug-device combination product, consisting of AFREZZA inhalation powder, pre-metered into single-use dose cartridges, and the light, discreet, and easy-to-use AFREZZA inhaler. Because of its unique pharmacokinetic profile, AFREZZA may be a promising new therapy for patients with Type 1 and Type 2 diabetes, as it controls post mealtime glucose levels with less weight gain and lower risk of hypoglycemia. With potential approval in 2014, Mannkind could revolutionize how diabetes is treated. The question now: Will Mannkind partner prior to the FDA's decision? One thing for certain is that pharmaceutical giants Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO) are watching closely. Annual sales of AFREZZA could be upwards of $3 billion.

Peregrine Pharmaceuticals, Inc. is a biopharmaceutical company with a portfolio of innovative monoclonal antibodies in clinical trials focused on the treatment and diagnosis of cancer. Peregrine is pursuing multiple clinical programs in cancer with its lead product candidate Bavituximab and novel brain cancer agent Cotara. Peregrine also has in-house cGMP manufacturing capabilities through its wholly-owned subsidiary Avid Bioservices, which provides development and biomanufacturing services for both Peregrine and outside customers.

Peregrine's potential blockbuster drug is Bavituximab. I highlighted Bavituximab's superiority in the immunologic class of upcoming cancer therapies in my previous article. Bavituximab is a first-in-class phosphatidylserine (PS)-targeting monoclonal antibody that has demonstrated broad therapeutic potential across multiple oncology indications and represents a new approach to treating cancer. In a recent phase 2b trial, which was highlighted at this year's ASCO, Bavituximab showed a doubling survival rate over SOC therapies in second-line non-small cell lung cancer. To understand Bavituximab, one must understand PS. PS is a highly immunosuppressive molecule usually located inside the membrane of healthy cells, but it "flips" and becomes exposed on the outside of tumor cells and cells that line tumor blood vessels, causing the tumor to evade immune detection. Cancer therapies increase PS exposure on the cell surface, further increasing immune suppression in the tumor environment. Bavituximab targets PS and blocks this immunosuppressive signal. It has also been shown to reactivate the body's immune system, restoring its ability to recognize and respond to tumors. The company has recently announced FDA approval for phase III testing in second-line non-small cell lung cancer. In the oncology market, partnership deals are signed most often prior to phase III testing. The market potential for Bavituximab is virtually endless with its mechanism of binding to PS, which is also exposed on all viruses. What Peregrine possesses with Bavituximab is the perfect partner for the new class of anti-PD-1 immunologic therapies being developed by Bristol-Myers (NYSE:BMY) and Merck (NYSE:MRK) and possibly the perfect addition to antiretroviral therapies possessed by Gilead (NASDAQ:GILD) and Roche (OTCQX:RHHBY). Peregrine and potential partners know this potentially opens the door for treatment of all viruses from SARS, ebola, smallpox, hepatitis and HIV. Future sales of Bavituximab for the treatment of solid tumors and viruses could be in the tens of billions per year.

Disclosure: I am long PPHM. 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.

Additional disclosure: I have no position in MNKD but may initiate a long position in the future.

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