Peregrine Pharma Stock Craters on Lung Cancer Drug Blowup

TUSTIN, Calif. ( TheStreet) -- Peregrine Pharmaceuticals ( PPHM) threw out previously reported results -- including the survival benefit -- from a mid-stage study of its lung cancer drug bavituximab because of "major discrepancies" in the study's conduct, the company said Monday.

Shares of Peregrine plunged $3.89 , or 72%, to $1.48 in early trading. The stock has now given back nearly all its gains of the summer, driven by speculation and hype around the bavituximab lung cancer data.

During the course of preparing for a meeting with the U.S. Food and Drug Administration, Peregrine says it discovered differences between the results reported for some patients and their "treatment code assignments" -- whether or not patients were being treated with bavituximab or a placebo.

Peregrine blamed the problem on an undisclosed, independent contractor hired to help run the clinical study. As a result, "investors should not rely on clinical data that the company disclosed on or before Sept. 7, 2012 from its phase II bavituximab trial in patients with second-line non-small cell lung cancer or any presentations or other documents related to this phase II trial," Peregrine said.

The bavituximab lung cancer data were already controversial even before Monday's disclosure of study misconduct.

The combination of bavituximab and docetaxel purported to yield a median overall survival of 12.1 months compared to 5.6 months for patients treated with docetaxel and a placebo. But Peregrine conducted half the study in India and Eastern Europe -- geographies with bad reputations for producing overly positive results that cannot be reproduced in larger, confirmatory clinical trials.

The median overall survival of 5.6 months in the study's docetaxel control arm also raised eyebrows for being unusually low, thereby making the observed bavituximab clinical benefit appear stronger than it might actually be.

Peregrine was hoping to sign a partner to help develop bavituximab and begin a phase III study in lung cancer by the middle of next year. Monday's setback changes all that. Now, the future of bavituximab and Peregrine are both in jeopardy.

If the bavituximab data are found to be fraudulent, Peregrine's lenders may find the company in default and seek immediate repayment of the $15 million granted in late August.

--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.