Elaborate on Strategic Vision and Intentions with Respect to Peregrine
Ronin Trading, LLC and SW Investment Management LLC (together with the other participants in their solicitation, “Ronin”), collectively the second largest stockholder of Peregrine Pharmaceuticals, Inc. (“Peregrine” or the “Company”) (PPHM), with aggregate beneficial ownership of approximately 8.7% of the Company’s outstanding shares of common stock, today issued a letter to Peregrine’s employees. In the letter, Ronin elaborated on its intentions with respect to the Company following the announcement of its nomination of Gregory P. Sargen, Brian W. Scanlan and Saiid Zarrabian for election to the Company’s Board of Directors at the Company’s upcoming 2017 annual meeting of stockholders. The full text of the letter follows:
July 20, 2017
Dear Peregrine Employees:
Ronin Trading, LLC and SW Investment Management LLC (together, “we”) believe it is important that you understand a little more about us and what we are attempting to accomplish with our nominations of Gregory P. Sargen, Brian W. Scanlan and Saiid Zarrabian for election to the Board of Directors (the “Board”) of Peregrine Pharmaceuticals, Inc. (“Peregrine” or the “Company”) at the Company’s upcoming 2017 annual meeting of stockholders. As detailed in our public letter to stockholders dated July 13, 2017, we believe that the Company is suffering from mismanagement under the leadership of the incumbent Board that is comprised of egregiously compensated directors who lack relevant experience, possess an immaterial financial interest in the Company and have histories of losses and questionable dealings outside of Peregrine.
Rather than capitalize on the emergence of Peregrine’s contract development and manufacturing business, Avid Bioservices, Inc. (“Avid”), the incumbents have elected to use Avid to support the unsuccessful development of bavituximab. We believe this is a mistake and that the Company and all of its stakeholders – stockholders, employees and customers – would benefit from a focus on Avid.
We want to invest more capital in Avid. We believe Peregrine should invest significantly more into Avid’s people, capacity and technology – the only investments to date that have created value for Peregrine. Because of Avid’s high return on capital, excellent competitive position and great regulatory track record, we believe that additional investment will create even more value. Meanwhile, public and private market valuations for contract development and manufacturing organizations (“CDMOs”) remain very high, indicating the future return potential for businesses such as Avid. Avid should not be competing for capital with an unsuccessful drug development program; instead, it desperately needs a structure where it can invest for growth, free from the handicap of a management team that forces it to prop up a failed clinical development business.
Increased investment into Avid would also bring much-needed comfort to Avid’s customers and the Company’s other stakeholders. We appreciate how unsettling it is to see Peregrine’s auditor raise substantial doubt as to the Company’s ability to continue as a going concern. We are confident that these doubts would be alleviated by focusing on profitably growing Avid and not diverting resources to unrelated clinical development activities.
We want to attract and retain the best employees for Avid. We genuinely appreciate that the value in CDMOs is as much (if not more) about the people as it is about the physical assets. We want Avid to attract and retain the best talent available, but that will only be possible with the following changes. First, Peregrine needs a vastly improved culture, which begins with directors and management who possess relevant experience, successful track records and a true appreciation for Avid’s business. Avid can no longer be treated as little more than a means to support extraneous pursuits. Employees deserve strong commitments from a knowledgeable, ethical management team that is focused on growing Avid over the long-run. Second, incentive alignment is a critically important element to the success of any organization. As such, employees should be rewarded with better equity incentive compensation, and this compensation should reflect the work they do. This will only be possible if Peregrine immediately halts all clinical development work and reorganizes so that the price of Peregrine’s stock is determined by the success of Avid rather than the struggles of clinical development.