Peregrine Pharmaceuticals' (PPHM) CEO Steven King On Q4 2014 Results - Earnings Call Transcript

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Peregrine Pharmaceuticals Inc. (PPHM)

Q4 2014 Earnings Conference Call

July 14, 2014 04:30 PM ET


Steven W. King - President and CEO, Director

Paul J. Lytle - CFO

Joseph S. Shan - VP, Clinical & Regulatory Affairs

Jeff T. Hutchins - VP, Preclinical Research

Stephen T. Worsley - VP, Business Development

Christopher Keenan - Investor Relations/Corporate Communications


Charles Duncan - Piper Jaffray & Co.

George Zavoico - MLV & Co.



Good day, ladies and gentlemen, and welcome to the Peregrine Pharmaceuticals, Incorporated Fourth Quarter and Full Fiscal Year 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I’d now like to turn the call over to Christopher Keenan of Peregrine's Investor Relations group. Mr. Keenan, you may begin.

Christopher Keenan

Thank you, Eric. Good afternoon and thank you for joining us. On today’s call, we’ve Steve King, President and Chief Executive Officer; Paul Lytle, Chief Financial Officer; Joe Shan, Vice President of Clinical and Regulatory Affairs; Jeff Hutchins, Vice President of Preclinical Research; and Steve Worsley, Vice President of Business Development.

Steve King will begin by providing a brief overview of the Company's progress over the last quarter, including the progress made in our SUNRISE Phase III trial, the achievements coming from our preclinical immunotherapy development program and the Company’s strategy for the coming fiscal year.

Joe will provide an update on our SUNRISE Phase III clinical trial achievements and updates to our investigator-sponsored trials or ISTs. Jeff Hutchins will review in greater detail of recent data emerging from our immunotherapy program with Steve Worsley providing an update on the business development activities as well as the Company strategy surrounding collaboration.

Paul will then finish with a summary of our financial results for the fourth quarter and fiscal year 2014, as well as provide our full-year 2015 guidance of our wholly-owned subsidiary bio, Avid Bioservices. After our prepared remarks, we welcome your questions.

Before we begin, we’d like to remind you that during the call, we will be making forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ. These forward-looking statements reflect our current views about future events and financial performance, and are identified by the use of terms and phrases such as believe, expect, plan, anticipate, on target, and similar expressions identifying forward-looking statements. These risks 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 our fiscal year 2014 ended April 30, 2014, which was 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 duties to update forward-looking statements, whether as a result of new information, future events or otherwise.

With that, I'll turn the call over to Steve.

Steven W. King

Thanks, Chris, and thanks to all of you for participating in this afternoon’s call. This quarter capped off a busy year for Peregrine, including the many activities associated with running the bavituximab SUNRISE Phase III trial, the continued successful evolution of our bavituximab immunotherapy program that has yielded encouraging preclinical data leading to our first immunotherapy combination in clinical trial this quarter.

We also have an expanding research program, including new collaborations and another solid revenue quarter for our manufacturing subsidiary Avid Bioservices. This helped us exceed our stated revenue projections.

As you will hear from Joe Shan, our VP of Clinical and Regulatory, during the quarter we focused on the continued execution of the ongoing SUNRISE trial, which is evaluating bavituximab plus docetaxel in second-line non-small cell lung cancer. We now have over 100 global clinical sites initiated speaking to the large scale of the trial as well as the logistical challenge.

We are happy with the progress in the study and look forward to completing enrolment in the trial by the end of next year. As an aside, I’ve had a chance to meet many of the investigators and coordinators involved in the study and really enjoyed seeing their enthusiasm for being involved in the trial. There is a strong recognition of the importance of this study and general excitement in being involved in developing a new immunotherapy approach to lung cancer therapy.

We look forward to continuing to update you as the study continues to expand and as we move closer to interim data points for the trial. Joe will give an update on this in more detail during his prepared remarks.

Beside the SUNRISE trial, we’ve also been very active on the clinical and preclinical research fronts. Our goal is to attract academic, clinical, and industry led collaboration in order to explore the full potential of bavituximab as a novel immunotherapy. These efforts include our IST program which already has ongoing trials in liver, first line non-small cell lung cancer, rectal cancer and the new trials evaluating our first immunotherapy combination with Yervoy in melanoma.

We have already seen important data coming out of these studies with more expected in the future. Joe again will update us on these ongoing clinical studies shortly. It is important to note that each of these clinical studies was supported by robust preclinical data and as Jeff will cover during his remarks we’re expanding our collaborations to explore even more immunotherapy combination that can result in future clinical avenues for development. We expect these efforts to be fruitful from the standpoint of expanding the potential indications for bavituximab and as a great source of news flow over the coming year.

Steve Worsley, our Vice President of Business Development will update you on his efforts to help drive these important collaborations with potential partners as well as the current progress in seeking development partnerships. Partnering remains a priority with the goal being to use partnerships to continue expanding the bavituximab program, while we continue to execute the SUNRISE Phase III trial.

Turning to financials, while we utilized cost effective strategies such as employing the IST model as part of our clinical development strategy, there are initiatives such as the SUNRISE Phase III trial that we’re advancing on our own terms and timeline. This approach allows us to continue adding value to the program on our timeline and as new data supporting expanded combination comes to light and new uses of bavituximab are realized, we feel this value will only be amplified.

We continue to maintain a balanced financial approach to operating the business and as Paul Lytle, our CFO will explain, our contract manufacturing business Avid Bioservices had another strong year, one on which we can continue to build upon.

I’m pleased with the progress made throughout the pipeline including the successful rollout to date of our immunotherapy development program. With recent reports forecasting that the global market for cancer immunotherapies will reach almost 9 billion in 2022 compared with just 1.1 billion two years ago, we believe the potential of bavituximab to play a key role in this therapeutic area is greater than ever.

I’ll now turn the call over to Joe, to discuss clinical progress. Joe?

Joseph S. Shan

Thanks Steve. Let me first say how pleased I’m with the progress of start up activities for the SUNRISE trial over the past few months, which is a complex and lengthy process, especially in the European and Asia Pacific regions. Our internal team and vendor partners have been working tirelessly to coordinate all the various submissions and timely responses, in order to obtain approvals necessary to conduct this global clinical trial.

These approvals range from the national government level to ethics committee and institutional approval, to shipment import permissions, and as a result we’ve now activated over 100 clinical sites worldwide in SUNRISE trial, but more planned to come online over the next few months.

We remain on track to complete enrollment of approximately 600 patients by the end of 2015, with two planned event-driven interim data analyses. As part of these initiation activities, we’re implementing an extensive education initiative for investigators and thought leaders in conjunction with scientific and medical conferences such as the ASCO Annual Meeting and at Peregrine hosted events.

We conducted several meetings, where investigators and key opinion leaders reviewed details on the SUNRISE file as well as our overall bavituximab development pipeline. The attendance and active participation at these meetings especially in cases such as ASCO where many companies are vying for people’s time, is a strong indicator, not only of the level of enthusiasm for the SUNRISE trial, but also for the bavituximab program overall.

We plan to continue expanding these initiatives and increase bavituximab awareness at key conferences throughout the year. While we continue to execute our plans with SUNRISE trial, we’re also advancing bavituximab development as a novel immunotherapy in other solid tumor indications.

Starting with breast cancer, we’ve now generated data from three separate clinical trials combining bavituximab with taxane chemotherapy. The most recent is from an investigator sponsored trial or IST by Dr. Alison Stopeck of the University of Arizona Cancer Center, in Tucson in which she previously reported an 85% response rate including a 15% complete response rate in patients with HER2-negative metastatic breast cancer.

Given these results in which approximately half of the patients were triple negative and extremely difficult to treat disease and the immune-stimulatory synergies that exist between bavituximab and taxane, breast cancer is high on our list of next indications. We look forward to the publication of final data in a manuscript form from this trial from Doctor Stopeck in the near future.

Now we’re also encouraged by what we’re hearing from the liver IST led by Dr. Adam Yopp of the University of Texas Southwestern Medical Center, in Dallas and look forward to his presentation of the clinical results upon maturity. As patient enrolment and treatment continues, clinical samples are being collected and analyzed, examine changes in patient’s immune response to treatment.

This translational work is designed to recapitulate the immuno stimulating mechanism of about PS targeted antibodies observed in preclinical models and we plan to present data at a future conference. Furthermore, we announced this quarter the initiation of the first immunotherapy only clinical trial combining bavituximab with an approved check point inhibitor.

The Phase I IST sponsored by Dr. Art Frankel, Professor of Internal Medicine at UT Southwestern Medical Center, in Dallas will test bavituximab in combination with Yervoy an approved anti-CTLA-4 checkpoint inhibitor and up to 24 patients with advanced melanoma.

As you will hear from Jeff in a moment, this clinical trial represents the next stage in development of bavituximab with other immunotherapeutic strategies and is directly supported by preclinical models for this novel combination. As this is an open-label two arm randomized, single-center trial with numerous immune end points, we hope to provide interim data updates throughout the trial.

And with that, I’ll turn the call over to Jeff to review our preclinical initiatives as well as our collaboration goals.

Jeff T. Hutchins

Thanks, Joe. In addition, we’re very pleased with the data emerging from the bavituximab immunotherapy development program. And as such, continue to be aggressive in ensuring that we’re presenting this to the most appropriate scientific and medical audiences. This quarter we had the opportunity to present at two keystone symposia and the AACR Annual Meeting further validating the immune-stimulatory mechanism of action of bavituximab and its potential in both oncology and anti-viral therapeutic areas.

At the keystone symposia and the AACR Meeting, data was presented showing that a combination of a PS targeting antibody equivalent to bavituximab and an anti-CTLA-4 or an anti-PD-1 antibody exhibited greater tumor growth suppression and longer survival than an anti-CTLA-4 or an anti-PD-1 antibody alone. As well, these animals that survive the initial tumor challenge developed tumor specific protective immunity that were resistant to re-challenge of the initial tumor.

In a separate study, also presented at the AACR Conference, an equivalent antibody to bavituximab administered with stereotactic body radiation therapy showed a 100% improvement in survival and favorable tumor eradication in a model of non-small cell lung cancer compared to radiation therapy alone.

As part of a broader strategy in the anti-viral area, researchers presented data showing that a PS-binding antibody inhibited HIV infection of cells by indirectly blocking viral receptors used by HIV to facilitate infection.

As you can see these are very encouraging data that we have been able to share with the scientific community over the past few months and served as a very important step in validating our programs. As well, we continue to pursue new internal and collaborative efforts to further evaluate and expand bavituximab combination opportunity.

These data along with the translational work that our teams have done, have allowed us to execute the next step in our development program. The movement from the laboratory setting into the clinic just as we did with the melanoma IST that Joe just discussed.

With that, I’ll turn it over to Steve Worsley for a review of the business development and collaboration goals. Steve?

Stephen T. Worsley

Thanks, Jeff. Today I will speak to our strategy as it pertains partnering as it has greatly evolved over the last two years partly due to two events. The first of those being the Phase II experience in September 2012 and the second the subsequent data from Phil Thorpe’s lab validating the immune-stimulatory mechanism of bavituximab. When taken together partnering should be thought of in a very different light than in early 2012.

Essentially there are two partnering buckets that we’d like to fill. As it is clear that we were able to efficiently execute the SUNRISE Phase III trial, our goal is to seek a partner to assist us in advancing bavituximab into indications into the mid stage clinical trials that have shown early clinical promise that Jeff and Joe alluded to.

We believe that data to date supports several indications which we’re including in our discussion. We are also seeking collaborators that build on what we’ve just heard from Joe and Jeff regarding other checkpoints of pathways such as PD-1, IDO, immune-stimulatory drugs and even vaccines. These will be very early stage collaborations, aimed at enhancing the data to emerge from the ongoing Phase Ib IST in advanced melanoma.

We continue to have discussions with numerous potential partners and updating them with new data as it emerges from the program. If they’re in an immune-oncology space or have a drug candidate that can be leveraged by the immune-stimulatory mechanism of bavituximab, they’re certainly on our radar. This past quarter with data from keystone at AACR in hand, we were able to engage several prominent companies. This is a process that takes time and should not be rushed.

We have a clear idea of how we want to advance bavituximab and a key will be to find a partner aligned with that vision. We are working as efficiently as possible, we appreciate your patience and we look forward to updating you as to the progress in this area.

With that, I’ll turn it over to Paul for a review of the financials for the quarter.

Paul J. Lytle

Thanks, Steve. Let me shift gears now and spend the next few moments covering key financial highlights and our related financial goals. Starting with our revenue generating business Avid Bioservices, a year-ago, we guided that our fiscal year 2014 contract manufacturing revenue was expected to be between $18 million and $22 million, and I am pleased to say that we beat those expectations with $22.3 million in contract manufacturing revenue for the full fiscal year 2014. This was partly driven by a strong fourth quarter where Avid generated over $6 million in revenue.

We expect fiscal year 2015 to be another good year and project that contract manufacturing revenue will be between $19 million and $23 million based on our current commitment. Now in addition to providing clinical and commercial manufacturing to our clients, Avid is strategically aligned to support the commercial supply of bavituximab, and we are evaluating options that would support the potential commercial launch of bavituximab in addition to supporting the continued growth of Avid’s business.

Now let me turn to our net loss and our operating cash burn which is calculated by taking our net loss and deducting non-cash expenses. As expected our net loss increased to $35.4 million in fiscal year 2014 as we supported the Phase III SUNRISE Trial and other corporate matters. But it's important to note that when you deduct non-cash expenses from this figure such as depreciation and share based compensation our operating cash burn for fiscal year 2014 was significantly reduced to $28.2 million. This compares to an operating cash burn of $24.8 million in fiscal year 2013.

Now funding our operating cash burn leads me to our financial goals. As we advance our Phase III SUNRISE Trial and prepare for potential commercialization of bavituximab, we are closely managing our operations, our cash positions and our various sources of capital. Over the past fiscal year, we have continued to strengthen our cash position to support these development goals and reported over $77 million in cash and cash equivalents as of April 30th, 2014. And last month we raised an additional $9.5 million in net proceeds from the sale of Series E preferred stock at $25 per share representing less-dilutive capital with a conversion price of $3 per share. Based on our current cash position we have the needed capital to fund our operations for at least the next 12 months based on our current financial projections.

Looking ahead we will continue to closely manage our operations in line with our cash position while maintaining and balancing our various sources of capital. We have invested in these programs using a balanced financial approach by closely matching our capital needs with our various sources of capital. We look forward to keeping you updated on our progress and we will now open the call up for your questions. Operator?

Question-and-Answer Session


(Operator Instructions) And our first question comes from Charles Duncan from Piper Jaffray. Please go ahead.

Charles Duncan - Piper Jaffray & Co.

Thanks for taking my question and congratulations on a good quarter of progress. So my first question is regarding SUNRISE, I appreciate all the color on that Joe and what you’ve been doing to make that happen. 100 sites started up, can you tell us what defines a site startup. Is it actual patient’s dosing or is it just drug onboard and they’re ready to go, and if it's not patient dosing, can you give us a sense as to what percentage of those sites have enrolled patients?

Joseph S. Shan

Hi, Charles. I think the short answer to that is a standard definition, I mean the site is activated, I mean they’re able to enroll, it doesn’t mean they actually are enrolled. As you can imagine this is a fluid process that, but sites don’t immediately necessarily have eligible patients the second they’re open. So, our definition of site activation is that they have all the approvals and drug on board ready to go. As far as I think, we’re not going to comment on enrollment patterns or any specifics on that, I think if there’s something material that necessitates that kind of information. In the mean time I think, I can say that enrollment is going well in all the regions. It's not limited to any particular location.

Charles Duncan - Piper Jaffray & Co.

Good. And then, let's see -- just a clarification regarding enrollment. I think you said this during your prepared comments. But to complete enrollment by the end of next year, does that mean the end of fiscal year end or calendar year end, which year you’re talking about, ’16 or ’15?

Joseph S. Shan

Yes, that’s the end of calendar year 2015.

Charles Duncan - Piper Jaffray & Co.

Okay, good. And then you’re including Asian sites as well, that’s intriguing to me because obviously this is a big challenge worldwide, but particularly in Asia. Can you tell us whether or not any of those sites have been Asian?

Joseph S. Shan

I’m sorry. What was the last part of your question?

Charles Duncan - Piper Jaffray & Co.

Any of those sites have been Asian in Asian countries?

Joseph S. Shan

Yes, that’s still available on So yes, there’s few countries that we are activating in Asia. So yes, Taiwan, Korea and Australia.

Charles Duncan - Piper Jaffray & Co.

Okay, good deal. And then one question on ISTs and then just one on business development. Regarding the ISTs, can you go back and kind of review just briefly the evidence that there might be some synergies with taxane for utility in breast cancer?

Joseph S. Shan

Sure. I think even before the ISTs you recall, we actually conducted two studies, company sponsored studies with taxane combinations, and those were signal seeking. And we saw I think very consistent results across not only those two, but there was a lung cancer trial that was a similar design as well also with had taxane combination with high response rates prolonged PFS and then even very early on prolonged survival which at that time we did not quite understand the immune mechanism behind that, that might explain that. So, I think taken together those and that first there was a clinical observation. Now also we’ve, now understand that taxane’s themselves have some immune-stimulatory mechanisms. Primarily, they do have effects on suppressing or inhibiting the suppressor cells that bavituximab also works with. So, I think there’s mechanistic support for that synergy as well.

Charles Duncan - Piper Jaffray & Co.

Okay. And then my one question regarding business development for Steve is, the way that you describe your efforts and appreciate the need for patients, not that I detect any lack of patients, but it seems like the partnering efforts are more along the lines of strategic rather than big source of cash or a validation, it seems like you’re more focused on partnering bavi with mechanistic rationale, is that true?

Steven Worsely

Yes, that’s fair. I think strategically we’re looking to add to the mix a company that’s reflective of where we want to take the program in multiple indications. Obviously there’s a strong bend towards looking at regional plays outside the U.S. those companies tend to be a little bit more aggressive in what they take on. So those are sort of the two main thrusts.

Steven W. King

Yes, just to expand on that Charles. So, I think the other aspect of course is that there are lots of studies that we could be running. And I think one of the other things we really want to look at in a partner is someone who can come in and really help us to expand the indications. As Joe mentioned earlier, we’ve got some nice data already generated in breast cancer, we particularly like the paclitaxel combination. We have another IST ongoing in liver cancer, and obviously if you’re talking about Asia Pacific again that’s a huge indication throughout that region. So, we’re also looking at and not just from a pipeline standpoint which is very important, but also from the standpoint of companies that want to really help us to push the program forward in some of these new indications giving us more shots for success and in increasing the value of the program at the same time.

Charles Duncan - Piper Jaffray & Co.

That’s helpful. Thanks for the added color guys.

Steven W. King

Thanks, Charles.


(Operator Instructions) And our next question comes from George Zavoico from MLV & Co. Please go ahead.

George Zavoico - MLV & Co.

Hi, and good afternoon. Good quarter. Congratulations. Well Paul, I have a question for you because you said that you have capital -- enough capital for 12 months based on current finances. And then you mentioned you had an operating cash burn of about $28.2 million, and you also said you have a strong cash position of $77 million. So ,it seems based on current burn you actually have more than two years of cash, so that implies that in effect you’re guiding to greatly increasing your R&D and your SG&A revenue. Can you speak to that discrepancy a little bit perhaps it has to do with starting the breast cancer trial?

Paul J. Lytle

Sure. In terms of my prepared remarks George, I was saying that we had cash for at least the next 12 months, so we don’t actually guide towards an operating cash burn. But we basically always want to tell share holders that we have enough money to run our business for at least the next year. Obviously if you look at the cash burn rate for the past year and it's obviously going to be more than that, but we don’t really guide towards the actual cash burn in our financials or our press releases.

George Zavoico - MLV & Co.

And in your -- you said based on your current finances, the 12 months and what your expenses are expecting to be and maybe to …

Paul J. Lytle

And then one other thing George is that, our burn rate for the past 12 months, we initiated the bavituximab SUNRISE Trial in December of this last fiscal year.

George Zavoico - MLV & Co.

Right. Half way through a little and more than half way through, yes.

Paul J. Lytle

So you would expect the cash burn rate to go up just because we’ll be enrolling a lot more patients this fiscal year then we did last.

George Zavoico - MLV & Co.

Okay. And then again you’ve held out the prospect of potentially a breast cancer trial as well, so that’s very interesting as well of course to expand on your -- on the number of trials that you do -- the company sponsored trials that you do. There was also an interesting comment in the press release about Avid that I wanted to follow-up on. You mentioned that you wanted to provide Avid with available capacity for continued growth. Now the area of antibody production is now evolving more than just having antibodies. Now there’s antibody drug congregates, there’s engineered antibodies, that sort of thing. Is Avid intending to move into that area where you might be able to do some post antibody production, modifications as it were to provide your customers with added services in that regard and I imagine that would also increase your burn as well as you expand into your capability there?

Steven W. King

Yes, I mean I think as you know we’ve grown Avid over the years and sort of, I mean, I guess in a very targeted way, and it’s really built around whatever our customer needs, whatever we see the market place going, so antibody-drug conjugates are a hot new area. It does require some specialized equipment and we’ve looked into that and it's actually, it's very doable within our business model. So, I think we’ll leave those options open. I think again as we strategically want to continue to grow the business obviously keeping in mind bavituximab also will have its own production needs down the road. We’re really looking into the future as where we have our current facility which has gotten busier and busier over the years. We recognize the opportunity for expansion and looking at ways to accomplish that and still maintain this balanced financial approach we have. And so, yes, so I mean, I think strategically we want to grow the business, we want Avid to be bigger and even more successful than it already is. We do view it as being a value driver and of course the biggest value driver would be at some point making lots and lots of bavituximab for the market place, and so we want to be ready for that opportunity as well. But yes, antibody-drug conjugates that’s a hot area. There’s opportunities in fill-finish, I mean, there’s a lot of things we can do with the business and continue to grow it and we think even really enhance its a set of offerings to match what the market is asking for.

George Zavoico - MLV & Co.

Do you have room for expansion at the current site?

Steven W. King

We’re looking at what the various options are for that. We have filled up a lot of our existing warehouse space and with current operations now reaching over $20 million plus in annual revenue. So we want to make sure again that we make the right decision when it comes to expansion. We don’t want to try to do something in too small of a space and then have issues with not being successful.

George Zavoico - MLV & Co.

And final question regarding Avid since it's obviously a very important part of your revenue stream. Is any single customer greater than say 10%, 20%, 30% or 40% of the business that you’re depending on?

Paul J. Lytle

Yes, currently George we have one customer that’s disclosed in our segment reporting section of our 10K that makes up, I believe it's over probably near 80% of our contract manufacturing revenue.

George Zavoico - MLV & Co.


Steven W. King

And I think that’s part of the nature of, because that customer has moved into commercial production, so naturally that becomes a much more consistent part. And one of the reasons our revenues are much more consistent now than they were say three or four years ago. So I think it's just the very nature of that type of customer, and clearly we want to bring in more of those types of customers and really what it comes down to is, our success is built on our customers success and biologics production is a very valuable asset, and one of those things that once you start production at facility, it’s very advantageous to be producing there.

George Zavoico - MLV & Co.


Steven W. King

So clearly we want to have more opportunities like that.

George Zavoico - MLV & Co.

Great. Okay, that sounds really good. Good luck with that, and I look forward to more progress announcements this coming quarter -- the coming quarters. Thank you very much.

Paul J. Lytle

Yes. Thanks again, George.

Joseph S. Shan

Thanks, George.


And I see no further questions at this time. I would like to turn it back to Steve King, CEO for closing remarks.

Steven W. King

I’d like to thank you all again for participating in today’s call. From our discussion it is clear that we have had a very productive quarter and an eventful year. The strides we’ve made in our clinical pipeline as well as advancing early stage work coming from our immunotherapy development program position us for a strong 2015. Over the next several months we look to share with you additional strategic decisions aimed at bringing increased value to our pipeline, patients and to our shareholders. So again, thank you very much and we look forward to updating you with this progress on the next call.


Ladies and gentlemen, this concludes today's conference. Thank you for your attendance. You may now disconnect. Everyone have a great day.

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