Peregrine Pharmaceuticals CEO Discusses F2Q2011 Results – Earnings Call Transcript

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Peregrine Pharmaceuticals, Inc. (PPHM) F2Q2011 Earnings Call Transcript December 9, 2010 4:30 PM ET


Amy Figueroa – Senior Director, IR & Corporate Communications

Steve King – President & CEO

Joe Shan – VP, Clinical & Regulatory Affairs

Chris Eso – VP, Business Operations

Paul Lytle – CFO


Joe Pantginis – Roth Capital Partners

George Zavoico – MLV

Stephen Dunn – LifeTech Capital

Roger Adams [ph]


Good day, ladies and gentlemen, and thank you for standing by. And welcome to the Peregrine Pharmaceuticals second quarter fiscal year 2011 conference call. I would like to remind you that today’s call is being recorded. (Operator Instructions)

I would now like to turn the conference over to Amy Figueroa, Peregrine Pharmaceuticals. Please go ahead.

Amy Figueroa

Thanks, Luis. Good afternoon. And thank you for joining us on today’s call to discuss our financial results for the second quarter of fiscal year 2011 ended October 31, 2010 and review our clinical development program.

Participating on today’s call are Steve King, President and Chief Executive Officer; Paul Lytle, Chief Financial Officer; Joe Shan, Vice President of Clinical and 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 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 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 ended April 30, 2010, and quarterly reports on Form 10-Q for the quarter ended October 31, 2010, 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 duty to update forward-looking statements whether as a result of new information, future events or otherwise.

I would now like to turn the call over to our CEO, Steve King. Steve?

Steve King

Thank you, Amy. I’d like to thank our investors and analysts for joining us on the conference call this afternoon. Let me start by saying that Peregrine is a unique clinical stage biopharmaceutical company.

What makes the company unique is that we are combining the development of novel therapeutic products based on exciting cutting-edge science in the oncology and infectious disease areas with several sources of revenue, including our biomanufacturing business that consistently generates revenues from third parties while simultaneously allowing us to prepare for eventual commercialization of our own products. We have made significant progress this year on both fronts and look forward to continuing success in 2011.

The focus of the company in 2010 has been to advance our greatest source of future value, our product pipeline of clinical-stage products that have demonstrated broad therapeutic potential. This year data presented for our lead PS-targeting clinical program bavituximab showed its great promise in multiple oncology indications and data from our novel brain cancer therapy Cotara showed its potential in improving survival for patients with GBM.

We are executing a comprehensive clinical, regulatory and manufacturing strategy as we advance our product pipeline. We have made significant progress since our last quarterly conference call by advancing each of our four ongoing trials, nearing completion of patient enrollment in two of these studies, initiating the first of several planned investigator sponsored trials and continuing plans for several new trials we expect to initiate shortly.

The combination of completing trials along with the ongoing and planned studies, are setting the stage for a robust flow of clinical data reports with the potential to realize significant value driving inflection points in 2011.

Looking at our later stage assets, we have two Phase II oncology programs representing multiple independent regulatory paths, including front and second-line non-small cell lung cancer, as well as recurrent glioblastoma multiforme or GBM.

We also have two Phase I studies, including our recently initiated Phase I/II trial in advanced liver cancer and our Phase I HCV trial, which again is nearing completion of enrollment. Later on our call, our VP of Clinical and Regulatory Affairs, Joe Shan, will discuss our clinical programs in further detail.

Beyond our oncology programs, we are continuing to make progress with our bavituximab antiviral program, nearing completion of a Phase I HCV clinical trial and just last month we presented preclinical viral hemorrhagic fever or VHF data for bavituximab and its potential synergistic effects with ribavirin. These data are particularly relevant as they provide further support for our next planned virus therapy clinical trial, which will evaluate bavituximab in combination with ribavirin in chronically infected HCV patients.

I would like to emphasize the importance we place on investing in our clinical programs while managing the business. Given the multiple sources of capital available to Peregrine, our goal is to maintain a balanced financial position as we push toward important clinical data reports over the coming year. We believe this data represents potential value building milestones for Peregrine and our shareholders.

Before turning the call over to Joe, I’d like to take a minute to quickly review milestones we expect to achieve by our next quarterly conference call. First, we expect to complete enrollment in two clinical trials shortly, one for Cotara in GBM patients and the other for bavituximab in HCV patients, setting the stage for data presentations next year.

And to explore bavituximab’s broad therapeutic potential, we are planning to initiate additional company and investigator-sponsored trials in the very near future. We are excited by the growing body of data for our clinical products, our advancing clinical programs and the regulatory and manufacturing strategies that are in play to help us reach our product development goals.

Our team is working hard to achieve our strategic objectives to successfully develop and commercialize our antibodies that continue to demonstrate such broad therapeutic potential.

With that, I’d now like to turn the phone call over to Joe. Joe?

Joe Shan

Thank you, Steve. We have multiple ongoing studies in different stages of the execution and I’ll spend the next few minutes highlighting the most important developments during the quarter. As you recall, at ASCO earlier this year, we reported very encouraging tumor response rates and median progression free survival results from three Phase II signal-seeking trials for bavituximab.

Based on these consistent promising data, we launched our most important trial to date, two randomized Phase II trials in front-line and second-line non-small cell lung cancer. Since initiating these trials mid-year, we have continued to open additional clinical sites with the goal of completing enrollment in both studies by mid next year.

The front-line trial is open-label and we look forward to sharing interim data potentially as early as the middle of next year. The second-line trial is double blinded and we expect to unblind top-line data by the end of next year. Our strategy of evaluating bavituximab concurrently in both front-line and second-line settings provides us with two potential regulatory approval pathways in lung cancer.

Beyond lung cancer, we are expanding our pipeline with additional planned company and investigator-sponsored trials or ISTs. We were excited to announce last week the first IST had been launched, a Phase I/II trial in advanced liver cancer.

As a reminder, we are supporting ISTs at a cost effective way of gaining clinical data on bavituximab’s mechanism and potential uses in additional indications and combinations as this antibody has such broad therapeutic potential.

This first IST is being led by Dr. Adam Yopp of UT Southwestern. His colleagues have conducted research demonstrating that sorafenib or Nexavar, a current standard treatment for advanced liver cancer increases the exposure of PS on tumor vasculature, which also increases the target for bavituximab.

This trial aims to determine if combining the anti-angiogenic mechanism of sorafenib with the vascular targeting and immune reactivation mechanisms of bavituximab can improve anti-tumor effects in patients with liver cancer.

Since this is an open-label study, we expect interim data will be reported as the trial progresses. As an IST though, the timelines for enrollment will be determined by the investigators. However, we will certainly provide updates as they are made available to us.

Several additional ISTs in other indications and with other therapeutic combinations are expected to begin in the near-term and we will announce these as the trials are launched by the investigators. While we continue to initiate new bavituximab cancer studies, we are close to completing enrollment in our ongoing Phase I bavituximab hepatitis C trial.

Based on the data from the current and two prior HCV monotherapy trials, together with the recent positive preclinical antiviral data combining bavituximab with the antiviral drug ribavirin, we are planning to initiate a new HCV study using this combination and will let you know as soon as this clinical trial has begun.

Now before turning the call over to Chris, I’d like to provide an update on Cotara, which represents our second Phase II oncology program. In October, Dr. Deepak Gupta, who is the lead investigator in the ongoing Phase II study, presented very positive interim data from a cohort of 14 recurrent GBM patients treated at his site.

In Dr. Gupta’s own words at meeting with our investors, the interim median survival of 86 weeks was simply amazing and we agree that this is quite remarkable given that the expected survival of only about 24 weeks for this deadly disease.

We have previously reported interim median survival of 38 to 41 weeks from Phase II studies and we look forward to completing enrollment in the current trial shortly. We then anticipate top-line data from the entire trial for the middle of next year, which could set the stage for meeting with the FDA to finalize plans for a Phase III trial to support licensor.

We believe the data from the current Phase II trial together with a well-designed FDA approved Phase III trial will add significant value to this program for us or a potential partner. As our clinical programs advance reaching important milestones in the year ahead, we look forward to updating you on our progress.

I’ll now turn the call over to Chris for a review of Avid’s business.

Chris Eso

Thanks, Joe. I’d like to quickly review the objectives we have established for Avid and what this asset provides us strategically. At Avid we have two primary mandates, first, to select – to seek new third-party clients while expanding our existing relationships with our key anchor clients, both in an effort to generate contract manufacturing revenue.

Second, is to produce all of Peregrine’s required clinical material for the company-sponsored, as well as investigator-sponsored trials that are ongoing or planned for the future. Being strategically integrated with Peregrine provides us this unique opportunity, as well as the flexibility to provide third-party clients with a broad range of biomanufacturing services while producing Peregrine’s clinical material.

Let me first review Avid’s results. Our services to third-party clients resulted in contract manufacturing revenue of $3.6 million for the second quarter and $4.6 million for the first six months of the fiscal year. As you know, our revenue does fluctuate from quarter-to-quarter due to the level and timing of the services we provide to our clients.

For the full fiscal year, we continue to expect to generate third-party contract manufacturing revenue of between $8 and $12 million, in line with what we provided last quarter. The work we have scheduled for clients throughout the remainder of the fiscal year should allow us to achieve this goal.

In addition to a variety of other development and biomanufacturing services that we are working on, we currently manufacture one commercial API and have two others that are in the final submission preparation, providing what we anticipate will be a more consistent and predictable level of commercial supply revenue for our business.

Most recently, as we announced yesterday, we secured a new contract and client to provide development services to a privately held biopharmaceutical company developing biosimilars for global commercialization.

We have experience developing biosimilar products and this new project will further broaden our expertise and capabilities in this complex and exciting market segment. Also, in September we announced that we secured a new biomanufacturing contract to supply clinical material of a fully human antibody to Affitech.

So for the year, we have secured two new contracts with full spectrum projects, as well as new project from existing clients. We hope to continue this momentum well into 2011 and beyond.

While we are focused on broadening our services to existing and new clients, let me briefly review what we have been doing internally. We have produced all of the required clinical material needed for the trials that Joe described and we have been preparing our manufacturing capabilities and facility for future clinical and commercial supply.

We must manufacture all of Peregrine’s clinical supply requirements and do so at a much lower cost and with greater flexibility than could be provided by another CMO. As bavituximab and Cotara programs advance into later stage trials towards a goal of commercialization, we must and are taking the necessary steps now to be prepared when Peregrine’s clinical programs are successful and are saving the lives of patients.

With that, I will now turn the call over to Paul.

Paul Lytle

Thanks, Chris. Since our financial results for the second quarter can be found in our press release and Form 10-Q filings, I’d like to spend this time reviewing our financial goals and strategy as they support overall corporate objectives.

As Steve mentioned, we are focused on advancing both Cotara and bavituximab towards commercialization and with bavituximab broad therapeutic potential, the potential to treat many different cancers and viruses, our efforts must be closely aligned with our various sources of capital, which is exactly what we have delivered.

Over the past several quarters, we have continued to advance and expand our clinical programs towards what we believe could be major value inflection points for Peregrine and we have achieved this clinical progress while increasing our cash position to $22.6 million as of November 30th.

We are able to do this because of the number of resources available to us. Our integrated biomanufacturing asset Avid is expected to continue to generate contract manufacturing revenue while also providing many financial and strategic benefits to Peregrine.

In addition, on the last earnings call, I mentioned that we applied for grant funding under Section 48D of the Internal Revenue Code. I’m pleased to say that we received close to $1 million under that program, which represented the maximum amount allotted to each therapeutic project that we applied for and yes, these funds have been deposited into our account in November.

Also, we continued to generate revenue under our government contract to study bavituximab as a potential treatment for viral hemorrhagic fevers and this contract has been extended to March 2011 with two one-year option periods available for exercise beyond March. Beyond these two government funded sources of capital, we will continue to apply for additional grants and contract opportunities as non-dilutive capital as our preferred source of capital.

Switching gears now to other potential sources of capital, it’s important to emphasize that our clinical – our latest stage clinical assets Cotara and bavituximab remain mostly unencumbered. As we get closer to randomized Phase II data for bavituximab at the end of next year and solidify a Phase III protocol with the FDA for Cotara, we believe a great amount of value will be added to these two programs.

Our ultimate goal is to monetize these assets for territories outside the U.S. and to utilize these funds to advance our development programs within the U.S., which is by far the single largest market opportunity. Other biotech companies have followed the same partnering strategies successfully as a source of funding and to extend the international sales potential of their products.

Beyond these two sources of capital, we have raised additional capital through the equity markets and it is important to note that over the past three years we have sold every share at market prices without warrants, without discounts.

We continue to be active in the investment community and we have had strong interest from institutional investors intrigued by our clinical data, by our multiple trials to evaluate bavituximab’s broad therapeutic potential and by the interim survival data we have seen from our novel brain cancer therapy Cotara.

Our goal is to maintain a balanced financial approach with multiple sources of capital and to carefully manage our cash burn as we continue to advance these programs. We expect 2011 to be an exciting year as we plan to report data from several clinical trials that should lead us to unblinding data from our randomized Phase IIb trial in second-line non-small cell lung cancer, data we expect towards the end of 2011.

Thank you for your time today and for your continued support of Peregrine. We would now like to open the call for your questions. Operator?

Question-and-Answer Session


Thank you. (Operator Instructions) Our first question are in queue is Joe Pantginis with Roth Capital Partners. Please go ahead.

Joe Pantginis – Roth Capital Partners

Hi, guys. Good afternoon and thanks for the update. Maybe more focus on Cotara for this moment here sort of a two-pronged question. Do you think you can add a little more color with regard to your regulatory plans and when you think you might sit down with the FDA and what, and I know I’m really fast forwarding here a little bit, what a potential label might look like for the drug or the design of a Phase III program?

And sort of the second part of that question, I know the first part was a little long, is some time has elapsed since you announced the data for Cotara, the new survival data. I was just wondering what kind of physician from the trenches comments you might have received on the data and the feedback that you have gotten from physicians? Thanks a lot.

Steve King

I’m sure I can answer the first part of the question. I’ll turn it over to Joe for some of the other components. I think our strategy is to obviously complete the enrollment in the Phase II study hopefully by the end of this year, that’s been the plan all along. Then to really, as we continue follow-up of patients, hopefully have final data toward the middle of next year for that trial, I think that really then opens the door for an FDA meeting toward the middle of the year, probably third quarter of the year would be sort of our goal there, it depends on how the data comes together and the analysis comes together.

But I think our strategy is to really take what we know about the drug, be able to put in front of the FDA our manufacturing plans for commercialization. In addition to the clinical data, our goal being to get the study, the pivotal study into either a single study or two studies with a total number of patients we think is easily executable and I think at that point it really gives the product a very nice clear regulatory pathway toward approval.

And with that data in hand, I think partnering is an opportunity, as well as, if we are in a position to really move it forward ourselves and I think it’s – the clinical data is very remarkable. It’s certainly invigorating to hear the physicians. We had Dr. Gupta, our lead investigator in the Phase II study, talk about his experience at our shareholders meeting, as well as at a neuro-oncology meeting.

And he is really glowing about the program and it’s exciting when you see your physicians excited about a new drug in an area where there is clearly a very high unmet medical need and basically none of the drugs on the market have done anything to help the patients.

I’ll turn it over to Joe to talk maybe a little bit more about things like the potential labeling of the drug and some additional feedback he may have had from the physicians.

Joe Shan

Yeah. I think this trial that we’re wrapping up is one of a number of trials we’ve conducted all counting towards the label. There’s a lot of components such as the radiation physics and safety profile. So we are gathering all that data in preparation for meeting with the agency.

But beyond that, I think it’s really going to be driven by the survival data coming out of this full set of patients in the current trial. And then we will obviously be able to adequately power the next study for registration.

And to your question about what the physician and the trenches, I think most people that see the data are obviously very pleased with it, the 86 weeks is quite unheard of as the media now, granted this was a subset of patients from the trial. But even the data reported previously has been viewed as very positive and an indication where survival has not really improved in decades, yeah.

Steve King

Yeah. I think that really makes the investigators enthusiastic because certainly Dr. Gupta who we worked with for a number of years now, obviously his patients are getting out there. And just to see his enthusiasm is almost infections just because again they are used to really using drugs that don’t really do anything at all for survival even if they prolong progression or potentially even shrink tumors, really nothing has really touched the survival time.

And these are just examples. I mean some of the very first patients we ever treated with Cotara are now alive about 10 years after treatment with confirmed GBM. And again, it’s just the totality of the data I think that strikes the investigators to see this number of long-term survivors given a single drug is pretty – makes them pretty enthusiastic.

Joe Pantginis – Roth Capital Partners

Great. Thanks for the added color, guys.


Thank you, sir. Our next question on the queue is George Zavoico with MLV. Please go ahead.

George Zavoico – MLV

Hi, everyone. Congratulations on a good quarter. And the results, as you briefed everybody just now, over the last clinical meetings is really terrific. Just another, well, in terms of Cotara, could you just – I mean Dr. Gupta was the PI and he had some tremendous results. You spoke mainly – I believe spoke mainly of his experience. Could you just more broadly describe what the experience of some of the other sites may have been and whether the physicians expressed the same sort of level of enthusiasm as Dr. Gupta does?

Steve King

I mean basically the other clinical experience, so we had data from an earlier Phase II study, which we looked at the dose ranges we are looking at for moving forward into obviously the Phase II study we are completing but also as we look to the pivotal trial. You know, earlier results from that study were about a 38-week median survival time. An earlier data analysis from this study was about a 41-week median survival time. And, of course, these are all timed to events. So the data has to mature and that's really the primary driver of Dr. Gupta's experience last year versus this year.

I think overall it’s been positive. I mean I'm not sure that we expect the overall results from the Phase II study to be 86 weeks because that is – I’d say a pretty outstanding number. But I think we probably expect the numbers to be significantly in excess of the expected 24-week median survival time. I think the data are going to be positive and we fully expect them to support that FDA meeting again in the middle of next year. And I think – so there are kind of two – in my mind, two big events next year for Cotara. The first will be the final data from this study and probably toward the middle of next year. And then the follow-up to that would be the outcome of the FDA meeting, which again we – our goal going into that meeting is to set the stage for an executable Phase III study that really should be the final proof that the drug works and move it toward the market.

George Zavoico – MLV

With the work that you have done so far, it sounds like you're pretty much settled on the dose, the basic parameters for the protocol and the dosing seems to be pretty set now. I mean in the past it has sort of been somewhat variable?

Steve King

Yeah. I think that is kind of what we have gotten out of the last couple of studies. So another study that was actually running concurrently with the Phase II study was the dosimetry trial, which was to meet some regulatory requirements. So from our previous meetings with the FDA, we had a number of kind of components of the clinical program that needed to be completed. That dosimetry trial, I think, was very successful.

We really did determine that we can effectively concentrate the antibody as well as the Iodine 131 in the tumor with a very nice favorable profile of tumor's normal organ ratio. So I think that was part of the data that the agency wanted to see and I think this Phase II study really represents for us the ability now to appropriately power and plan out that pivotal trial.

So, again, I think we have kind of achieved the goals recently we had from those two studies very successfully. I think very happy with the results and excited about that meeting with the FDA next year.

George Zavoico – MLV

It appears with that long of a median survival, I mean Gupta and you, everybody seems very amazed by it and there is reason to do so. And I guess the underlying thought is, well, are these patients effectively cured or not? So the question is, in this follow-up of 86 weeks, do the patients undergo scans? Is there any evidence of any tumor left in any of these patients? How – and as you mentioned about the data actually maturing, I mean the 86 weeks might actually become a larger number later on. Is that correct?

Joe Shan

George, this is Joe. That is certainly possible as we continue to follow up. I think there's a couple of moving pieces here. We are still adding patients and there are some recently treated patients. So we do need some more follow-up to arrive at a more conclusive median survival for this study. But the patients that are alive, yes, they do still continue to get follow-up and I think it is difficult from imaging to really show clearance of evidence of tumor.

But obviously this is why survival is the key end point in this disease and that you really have a black and white endpoint. And obviously, if they are alive and there is no evidence of an increasing mass in the brain, then I think that is all turning the right way.

George Zavoico – MLV

All right. And with regard to bavituximab and the non-small cell lung cancer trial, I mean you have got two trials going, one is open label and one is blinded. And you just started and you are going to have some data coming out sometime middle of next year or is it the middle of 2011 or 2012, just to be sure?

Steve King

I think the goal for those two studies is to complete patient enrollment by the middle of next year, which given the cycles of treatment puts us in a position at the end of the year for the sort of top-line data from the studies. And that top-line data would be with regard to tumor response rate. The data point coming out next year we expect to be out of the open-label study, so the front-line, non-small cell lung cancer study.

So we anticipate toward the middle of 2011, we will be in a position to have a data point there we can talk about from an interim analysis. Obviously, the drivers there are patient enrollment and getting the patients out through their cycles of therapy. But yeah, so we certainly look at that, and that is kind of part of the strategy all along because really that front-line study represents really pretty much the same study we presented data for at ASCO this year, which is front-line in combination with carboplatin and paclitaxel.

So in this study, it is obviously a randomized study and will really give us another sort of proof of principle or validation point for the technology base. Also, to allow us to find out what could really further development in the frontline setting. Obviously, the blinded study, it is pretty much all going to be unblinded at the same time. Again, just completing enrollment of that into middle of next year puts us at the end of next year for all the data from that study.

George Zavoico – MLV

Well, that is fairly interesting. You have a number of sites and you are anticipating a rather rapid enrollment to have data that quick, that is great. And finally, one last question regarding the government contract revenue with the VHF. Could you – I mean there was a little bit of pause here as they review the data. Could you guide a little bit as to how that is going to ramp up and what the next objectives are in that program with the VHF?

Steve King

Yeah, I think the – kind of the next set of studies is really getting to that – to validating the approach in hemorrhagic fever. So those are going to be a number of studies, including potentially non-human primate studies between now and March of next year, which was what the extension was through. So pretty much the experimental plans are all set. We are starting to run some of those studies again and I was extremely encouraged by the combination therapy data with ribavirin we presented last month.

The reason being that we really believe this drug represents a good immunotherapy. It is not a direct antiviral but really we believe it will be used to direct antivirals in a clinical setting over the long run. So I think what we can expect is more of those sorts of studies really again in more advanced and more aggressive forms of hemorrhagic fever to fully evaluate this as a potential treatment.

But I think the data last month was a good indicator, not just for the hemorrhagic fever but also for the HCV program. And again, this is how we view this drug being used in HCV is really as an immunotherapy potentially as a down the road as a possible replacement for interferon. We need to prove that out clinically but certainly it is an immunotherapy and really fits on that side of the therapy equation.

George Zavoico – MLV

Okay. Terrific. That's great. Good luck. I look forward to further progress. Thank you, everyone.

Steve King

Okay. Great. Thanks, George.


Thank you, sir. Our next question on the queue is Stephen Dunn with LifeTech Capital. Please go ahead.

Stephen Dunn – LifeTech Capital

Hi guys. Congratulations on progress on several fronts. I have four quick questions. The first one is on your recent Avid biosimilar win. You are doing the biosimilar development. You are looking for the cell line. I was curious if you could give me some color on, does this contract also include you doing the manufacturing in your facilities or is this more trying to find the cell line for them to manufacture? Could you give me a little color on the potential long-term implications of this?

Steve King

Sure. I mean, I think for us this is a great opportunity to start to look at the biosimilar area for this particular client. They have developed a cell line that they would like for us to now evaluate to really, if you will, validate the fact that cell line makes a product that is very similar to the originator product. I think the – so the initial contract is really focused around that validation work.

Of course, down the road, it does open a door for a potential manufacturing relationship as well. And, again, I think, as Chris mentioned, really growing the commercial manufacturing at Avid is one of our primary goals and really we have been fortunate to have a number of our clients now really in very late stage clinical development or actually have their products on the market.

So this just represents another great opportunity for the company. And I think as you know, we have stated on previous calls, we do have an interest in biosimilars ourselves. We have been evaluating the marketplace, the potential fit for different products within our systems and we are continuing to do that. So this is really a great way for us to really get into the – into the systems and really understand the complexities of this exciting new area, which is obviously coming, legislation is now in place and that is a matter of technically getting the job done.

Stephen Dunn – LifeTech Capital

I don't know if you can answer this one or not. Is this because of the biosimilar regulation with the 12-year exclusivity, is this mostly for the China piece of your client or you can’t comment on that?

Steve King

We can’t comment on it.

Stephen Dunn – LifeTech Capital

Okay. But I had to ask. On the – a housekeeping question on your defense contract, again, congratulations, extended to March 2011. I guess this might be one for Paul. Can you tell us exactly how much money is left on that contract? There have been a lot of moving parts over the years. So I just want to make sure we know how much is unspent, if you will?

Paul Lytle

Sure. To date through 10/31/2010, we have reported about $22.6 million in revenue under that contract and that is like to date under the contract. Total amount allowed under the contract through March 2011 is about $24.7 million. So we've got about $2 million left on the existing extension. And then the contract actually has two additional one-year option periods that could take us up to $36 million under the contract. And then…

Stephen Dunn – LifeTech Capital

Is it conceivable – is it conceivable at the end of the primate studies that just a whole new longer-term contract and so just doing annual renewals? Would that be a possibility?

Steve King

Yeah, I mean I think there is certainly the possibility of future contracts around this area both for bavituximab as well as some other agents under our PS-targeting platform. And really depending on the stage of development as you move into clinical development toward an IND filing, then additional sources of funding become available. So this is really all geared around the proof of principle and moving us toward clinical studies. And then from there, the potential pockets open up and there are other sources of funding for moving it into clinical studies.

Stephen Dunn – LifeTech Capital

Okay. Just some housekeeping on your HCV. You're currently doing bavituximab in HCV and HIV and we should be getting some Phase I data shortly. But you have mentioned now that you're going into just primary HCV, it sounded like in combination with ribavirin? Is that correct?

Steve King

That is correct and it is really based on the mechanism of action and preclinical data. As we mentioned last month, we had some good preclinical data coming out, which really is a follow-on to earlier combination therapy data we had generated. Again, really we positioned this as a immunotherapy that should be used in combination with direct antivirals whether it be ribavirin in this case, which is currently approved or certainly in the future as drugs like telaprevir come on the market as they are expected.

You know, a good combination with those drugs. Because you still need the immunotherapy piece of the combination therapy to really achieve those long-term cures of patients at least up to this point. So that is how we are positioning it and I think that study will be exciting for a couple of reasons. Number one, we certainly expect it will enroll pretty nicely once it is up and running.

Secondarily, you have a very clear endpoint. So you have a clear biomarker in this indication, viral load, expectations are out there. So we will get a real clear result, we think, even though the study will not be huge, but you still have the opportunity with small numbers of patients to get some really nice readouts.

Stephen Dunn – LifeTech Capital

Great. And my last question, if you can give me some color. Ken Dart took a 4 million share position in Peregrine recently. Could you give us some color, you know, on his investment and some feedback on what he was – what he liked? He typically does glioblastoma drugs but I don't know if you could give me some color on what his decision-making process was to take a 7% stake?

Steve King

What we can say, Stephen, on Ken Dart, we are very pleased that we saw him come into the story and get close to 4 million shares and report his 13G just recently. But our goal all along is really to use our shelf registration statement to build this institutional ownership. If you go back to January where J.P. Morgan started this year, we have had 80 plus institutional investor meetings. We have new analysts on board like yourself and others who are helping us tell the story at the same time.

So we think all of these positive things with the company is encouraging. These institutions are really getting involved in the story and we are excited to have them on board.

Joe Shan

I think just as a follow-on to that, I think it is primarily the interest is driven through the – what is viewed as really, number one, the exciting technologies we are developing, both Cotara and bavituximab have a lot of potential and I think that that tweaks a lot of people's interest. It is not just one drug and one opportunity at success, but really multiple opportunities whether it be in bavi-oncology, bavi-antiviral or HCV or in the Cotara/GBM market. So I think that is what has really driven the interest and, you know, hopefully, as we get out there and continue to make progress, we will just build more and more of that interest and see more people want to get involved.

Stephen Dunn – LifeTech Capital

Well, it certainly was a strong vote of confidence, so congratulations on that. All right, guys. Thanks and I look forward to your next quarter.

Joe Shan

Thanks, Stephen.

Steve King

Thanks, Stephen.


Thank you, sir. (Operator Instructions) Our next question on the queue is Roger Adams [ph], who is a private investor. Please go ahead.

Roger Adams

Thanks, guys, for taking my call and for a great quarter. First, could you – I have been amazed at the speed with which you brought on centers for the two current lung trials. Could you comment on whether that reflects excitement in the medical community or just your efficiency in pushing these trials forward in a very competitive clinical trial market?

And second, regarding the median overall survival time from the completed Phase II trials in India, of course, you don't have a crystal ball, but if past trends from those trials were to continue, is there still a ways to go before reaching a median survival point in those studies?

Joe Shan

Hi, Roger, this is Joe. I think I will try to address those. Yes, we have brought on a lot of sites online pretty quickly. I would like to think it may be a combination of both efficiency as well as enthusiasm. But we are in this day and age having to use a mix of different sites, both community-based that can come up a little bit quicker as well as academic sites that take a bit longer to come online.

So we do have – we have more sites planned, and they will be coming online shortly. To your second question, I'm sorry – the median overall survival (multiple speakers) you're the crystal ball. Even if we are one patient shy, we don't know when that patient will expire. So we just have to kind of keep clocking the data until that time is hit and obviously the longer it goes, the better the results should be but survival is a binary readout but at the same time, patients do become more difficult to follow-up once they are off study. So we continue to keep tracking this data and as soon as we have something to report, we will.

Steve King

If I can just expand on this real quick, Roger, before you follow-up, I think there are two things to keep in mind here. One is that these were three different or two different indications, breast cancer and lung cancer and obviously, the outcomes in those indications are quite different. So it is highly unlikely they are all going to come to the same point at the same time.

So it becomes obviously, as Joe said, you have to have a crystal ball and read the future to know when that date is going to be here or even which quarter it is going to be in. I think secondarily and I want to make this point for those earlier studies is that really the data that has us excited has already been generated. I mean, I think it is the tumor response rates, the progression free survival, those are very meaningful endpoints and so really that is the driver for us and for our investigators and certainly for the entire group here of really driving the program forward.

So it will be nice when we can report on some of those other endpoints but really the key is we have gotten these new studies up and started and we are driving toward getting that data out there, and again, that is our current driver. But yes, obviously we look forward to putting as many clinical data points out there in shareholders' hands and physicians' hands as we can generate.

Roger Adams

Thank you.


Thank you. And it looks like this concludes our time for questions and answers. I would like to turn the program back over to Steve King for closing remarks.

Steve King

Okay. I would like to thank you all again for your interest in following our clinical progress. We will continue to work hard to accomplish our planned milestones and we will keep you updated on our advancing programs in the coming months and as the fiscal year 2011 progresses. With that, again, thank you very much.


Thank you, sir. Ladies and gentlemen, this does conclude today's program. Thank you for your participation and have a wonderful day. Attendees, you may now disconnect.

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