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Peregrine Pharma: Cash Crisis and Exaggerated Survival Benefit

TUSTIN, Calif. ( TheStreet) -- Peregrine Pharmaceuticals (PPHM - Get Report) is now dealing with a financial crisis on top of a discredited lung cancer drug.

On Wednesday, Peregrine's lenders filed a notice of default that forced the company to repay immediately a $15 million loan plus interest and fees. "Major discrepancies" in the conduct of Peregrine's bavituximab lung cancer study, disclosed Monday, caused the company to violate the terms of its loan agreement, the creditors said.

Peregrine now has only enough cash on hand to fund operations until April 2013 -- the end of the company's fourth quarter of fiscal year 2013. Peregrine could try to raise more cash via an existing At-The-Market (ATM) equity facility, but such stock sales now are unlikely to due the risk of legal liabilities.

Shares of Peregrine fell 22% to $1.30 in Wednesday after-hours trading. The stock has now lost almost 80% of its value in the past three days.

I was working on the following story about the unreliability of the bavituximab survival data when the company disclosed the study errors Monday. The story is a bit less significant now, but still illustrates the weakness of the Peregrine-bavituximab bull story even if this week's troubles hadn't occured.

Peregrine Pharmaceuticals omitted half the patients from the analysis of its bavituximab lung cancer study, thereby exaggerating the drug's reported survival benefit.

The pooled bavituximab arms of the phase II study produced a median overall survival of 12.1 months compared to 5.6 months for the control arm -- a statistically significant benefit, according to Peregrine. But left unsaid by the company is how the unusually large number of patients missing or "censored" from the analysis most likely accounts for the bavituximab survival benefit.

Censoring refers to the practice of excluding patients from an analysis of a study's primary endpoint. In a survival trial, patients are typically censored for two reasons: 1) A patient is lost to follow up i.e. it's not known if he's alive or dead; or 2) A patient is still alive but hasn't been in the study long enough to analyze.

While censoring is a common practice, it does reduce the reliability of study results. Therefore, investigators running clinical trials try to keep the number of censored patients at a minimum by keeping close tabs on all patients and allowing for enough follow up so that the greatest number of patients can be analyzed with sufficient information.
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