Contract Manufacturing Boosts Peregrine’s Growth

Growing biomanufacturing demand prompts Peregrine to set up third facility

Source: Company's Website
Source: Company’s Website

Biopharmaceutical company Peregrine Pharmaceuticals Inc. (NASDAQ: PPHM) announced its Q4 FY16 and full year FY16 financial results on July 14th, 2016. Peregrine has an R&D pipeline of monoclonal antibodies in clinical trials for the treatment and diagnosis of cancer. The Company also delivers high quality biological products through its contract development and manufacturing organization (CDMO) services. Peregrine has two platforms and is pursuing multiple clinical programs in cancer with its lead immunotherapy candidate bavituximab, its phosphatidylserine (PS) targeting agent, PGN65, and its brain cancer therapy, Cotara. Peregrine’s in-house CDMO services, including cGMP manufacturing and development capabilities, are provided through its wholly owned subsidiary Avid Bioservices Inc., which also offers development and biomanufacturing services for both Peregrine and third-party customers. Read more about Peregrine’s financial results below.

Q4 FY16 and full year FY16 financial highlights

Total revenues for Q4 FY16 shot up 101.7% to $18,783,000 compared to $9,308,000 in the year-ago quarter. For the full year FY16, total revenues jumped to $44,686,000 compared to $26,781,000 in FY15. The jump in revenue in Q4 FY16 and full year FY16 is mainly due to higher contract manufacturing and commercial biomanufacturing revenue.

Total costs and expenses for Q4 FY16 were higher at $30,698,000, compared to $21,477,000 for the year-ago period. For full year FY16, total costs and expenses increased to $101,046,000 compared to $77,280,000 for FY15. The higher costs is mainly due to an increase in R&D costs associated with the Phase III SUNRISE trial, the clinical costs associated with two previously planned phase II trials, and higher manufacturing costs related to preparing bavituximab for commercial manufacture.

For Q4 FY16, R&D expenses were higher at $16,265,000 compared to $11,531,000 for the year-ago quarter. For full year FY16, R&D costs increased to $59,529,000 compared to $42,996,000 for FY15. In addition, cost of contract manufacturing shot up 104% to $9,721,000 in Q4 FY16 and 47% to $22,966,000 for full year FY16, primarily due to higher reported revenue as compared to the same prior year periods. However, selling, general and administrative expenses were lower in Q4 FY16 at $4,712,000 compared to $5,188,000 in the year-ago quarter. For the full year FY16, selling, general and administrative expenses were almost flat at $18,551,000 compared to $18,691,000 for FY15.

The biopharmaceutical company’s consolidated net loss contracted slightly to $13,264,000, or $0.05 per share, for Q4 FY16, compared to a net loss of $13,513,000, or $0.07 per share, for the year-ago quarter. For the full year FY16, Peregrine went deeper into the red with net losses of $60,136,000, or $0.28 per share, compared to $54,054,000, or $0.30 per share, for FY15. As of April 30th, 2016, Peregrine reported $61,412,000 in cash and cash equivalents, compared to $68,001,000 as of April 30th, 2015.

Avid Bioservices financial highlights

Avid’s contract manufacturing revenue jumped 66% to $44,357,000 for FY16 compared to $26,744,000 for FY15, mainly due to higher demand for contract manufacturing services. Avid is growing at a five-year compounded annual growth rate of 39% and Y-o-Y growth rate of 66%. This growth came entirely from Avid’s first manufacturing facility. The Company launched its second manufacturing facility that became fully operational in March 2016. With these two operational facilities, Avid is projecting manufacturing revenue of $50-$55 million for FY17.

Clinical Development Highlights

P2Under its SUNRISE Phase III Trial, Peregrine is currently analyzing the clinical data and testing numerous biomarker samples to determine if certain subgroups or patients with other characteristics benefited more from bavituximab treatment. The Company is conducting the bavituximab clinical program with the National Comprehensive Cancer Network (NCCN), AstraZeneca PLC (NYSE: AZN), and other clinical collaborators.

Peregrine is focusing on small, early stage proof of concept trials with other immune stimulating therapies, going forward. As part of this clinical strategy, Peregrine’s research collaboration with the NCCN is proceeding in the right direction. The Company expects to initiate selected trials by December 2016, or early 2017.

Other highlights

On March 7th, 2016, Peregrine commissioned its new state-of-the-art commercial biomanufacturing suite in Tustin, California. The new facility, which is being operated by Avid Bioservices, is expected to generate an additional $40 million in annual revenue. This is expected to give a fillip to Peregrine’s biomanufacturing business, which reported a 20% revenue growth to $26.7 million in FY15. The growing biomanufacturing demand has prompted Peregrine to open a third manufacturing facility, which is expected to be commissioned by mid-2017.

On July 14th, 2016, Peregrine signed an exclusive licensing agreement with the University of Texas (UT) Southwestern Medical Center for a novel exosome technology that has potential application as a simple blood test to detect or monitor cancer. This technology complements well with Peregrine’s expertise, its proprietary PS-targeting platform, and the bavituximab development program. The Company is scouting for a partner to develop the final commercial test kit, establish clinical proof-of-concept for the test, and initiate partnering discussions for the program in 2017.

Guidance for FY17

Avid’s current contract manufacturing commitments from third-party customers are approximately $68 million, covering services to be provided during FY17 and FY18. Based on this current backlog, Peregrine expects its contract manufacturing revenue to be between $50-$55 million in FY17.

Stock Performance

P3Peregrine’s stock stood at $0.40, rising 2.65%, at the close on Tuesday, July 18th, 2016, having vacillated between an intraday high of $0.40 and a low of $0.37 during the session. The stock’s trading volume was at 1,014,654 for the day. The Company’s market cap was at $104.11 million as of Tuesday’s close.

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