Peregrine Pharma: The Partner Guessing Game

TUSTIN, Calif. ( TheStreet) --Further thoughts on Peregrine Pharmaceuticals ( PPHM) following its conference call Monday discussing the bavituximab lung cancer data:

Peregrine says the bavituximab survival benefit observed in the phase II study is "similar" in patients across geographies. No details were offered, however, nor did the company say when we might see those data.

"We couldn't have conducted a more well-balanced clinical trial," company executives said.

Fine, but let's see the data. Real data, please! Let's see how lung cancer patients enrolled in India and Eastern Europe fared against those coming from the U.S.

It may have been my bavituximab skepticism shining through, but it certainly sounded to me as if Peregrine executives were lowering expectations for the survival results from the other phase II study in first-line lung cancer. We're supposed to see those survival data before the end of the year, which could go a long way to supporting or debunking Friday's bavituximab data in the second line.

Partnering discussions for bavituximab are moving forward at a "very active pace," said Peregrine. The company wants a deal in place before it meets with FDA later this year to clear the phase III study design. At the very least, Peregrine says to expect a partnership before the phase III study begins in the middle of next year.

Let's play a parlor game: Guess the bavituximab partner. AstraZeneca ( AZN) is perhaps the most likely suitor out of Europe given its desperation for new pipeline drugs.

Novartis ( NVS) is a maybe, except for the bad taste left in its mouth from the Antisoma partnership that ended in failure in 2010. Antisoma's lung cancer drug was similar to Peregrine's in that they both target lung cancer blood vessels. Does Novartis want to go down this route again?

Hard to see GlaxoSmithKline ( GSK) or Roche ( RHHBY) interested in bavituximab given their focus on anti-PD-1 antibodies . PD-1 is a hot cancer immunotherapy target, especially after promising data were presented at this year's ASCO conference in June.

Merck KGaA loves lung cancer immunotherapy but is already engaged to Oncothyreon ( ONTY).

Closer to home, Bristol-Myers Squibb ( BMY) and Merck ( MRK) are also working on anti-PD1 antibodies. Bristol, in fact, is moving a PD-1 drug into phase III studies, including in lung cancer. Again, why pay money to license bavituximab if you're already working on a competing cancer immunotherapy technology -- and one that has a lot more buzz.

Pfizer ( PFE)? Maybe, except Pfizer bought Coley Pharmaceuticals seeking to develop an immune-boosting therapy against lung cancer. That drug failed in phase III studies, despite posting very strong results in phase II. Will Peregrine prove to be too much deja vu for Pfizer?

Eli Lilly's ( LLY) drug research efforts are an embarrassment so Peregrine could find a receptive audience in Indianapolis. Then again, a partnership with the drug development clowns at Lilly might be the kiss of death for bavituximab.

The bavituximab phase III study in second-line lung cancer sounds like it will be designed to mimic the results from the phase II study presented Friday. The only major difference will be size and geography. Peregrine expects to enroll 300-500 patients from the U.S. and Western Europe.

My colleague Nate Sadeghi had a smart take on Peregrine this morning. He's a bavituximab skeptic, like me, but feels shorting the stock now is too risky.

"Overall, I'm very skeptical of the results," Sadeghi writes. "Unfortunately, the data don't contain a definitive smoking gun. That could be bad news for the bears, especially given Peregrine's modest market capitalization and the absence of any clear near-term negative catalyst. The company will almost surely initiate Phase III trials, which will take years to produce any data, and I'm not convinced failure in front-line NSCLC will be enough to convince the bulls to sell. The most bullish investors may even start to believe in the potential for accelerated FDA approval of the drug in the second-line setting, although I think that would be extremely unlikely. Nonetheless, my experience suggests that even wildly misplaced hope can drive a $470 million market capitalization towards $1 billion or more over time."

He concludes on owning or shorting Peregrine: "Sometimes it pays to not play."


--Written by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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