This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bull Case on Peregrine Pharma Shouldn't Be Dismissed

Look closely at Peregrine's survival data, which can be found in the pre-recorded webcast on the company's website, and you will see faint "tick marks" in the Kaplan-Meier curve. Those are censored patients. The number of patients "at risk" is also listed along the bottom of the graph. In both bavituximab arms, there are lots of patients censored after ten months, which means the data on the far right hand of the survival curve are less reliable than the results on the left.

According to the company, investigators conducted a "sweep" for deaths before preparing the study for presentation to find unreported fatalities among censored patients. I don't know if this is true, but it's standard practice for a clinical trial. Since I don't have any reason to suspect a rash of deaths among censored bavituximab patients, I'm guessing the bulls are right that these data won't change much.

3. Expectations for success in other indications remain low, which skews risk to the upside. Peregrine will report data from two Phase II studies of bavituximab in first-line non-small cell lung cancer and pancreatic cancer by year-end. Initial data in front-line non-small cell lung cancer, reported earlier this year, showed essentially identical response rates and progression free survival. Based on these results, investors appropriately concluded that this study has a very low probability of success. There are no data yet available from the pancreatic cancer trial, although consensus is that bavituximab will fail to meaningfully extend survival.

Fundamental investors can't ignore market sentiment. Although I agree that Peregrine's studies in front-line non-small cell lung cancer and pancreatic cancer will most likely fail --- even the bulls could offer me no substantive rationale for success -- investors already expect it. As such, failure will not drive Peregrine shares lower and even the slightest positive signal would send bulls rushing to buy and bears scrambling to cover.

4. Peregrine will most likely partner bavituximab within the next six months. This is a good point, and I wouldn't be surprised if the company secured impressive deal terms. Many investors view partnerships as validation of a drug's potential. Although I don't share this view -- I could easily cite more than a dozen examples of surprisingly obvious pharma and large-cap biotech business development mistakes -- Peregrine shares will still trade up if the company inks a solid deal.

Management says it hopes to secure a partnership before an end-of-phase II meeting with the FDA, which will likely be scheduled in late 2012 or early 2013. I'm not sure why the company put forth a timeline, which seems like an unnecessary detail that could complicate investor expectations. Bulls argue that the specificity of company's partnership guidance suggests a deal is imminent. I'm not so sure, but I wouldn't bet against it.

After last week, the bull case seems far more compelling to me than it did at first. I'm still a bit hesitant, but risk-tolerant investors might reasonably consider modest long exposure. However, absent new clinical data, investors should treat Peregrine as a trading position rather than a long-term investment.

Sadeghi has no position in Peregrine

Nathan Sadeghi-Nejad has 15 years experience as a professional health-care investor, most recently as a sector head for Highside Capital. He has worked on the sell side (with independent research boutiques Sturza's Medical Research and Avalon Research) and the buyside (at Kilkenny Capital prior to Highside). Sadeghi-Nejad is a graduate of Columbia University and lives in New York. You can follow him on Twitter @natesadeghi.
2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,001.22 -38.27 -0.22%
S&P 500 1,988.40 -3.97 -0.20%
NASDAQ 4,538.5510 +6.4470 0.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs