Believe Change is Desperately Needed to Peregrine’s Board Given Current Strategy, Poor Corporate Governance, Apparent Misalignment of Interests with Stockholders and Constant Dilution
Announces Nomination of Gregory P. Sargen, Brian W. Scanlan and Saiid Zarrabian for Election at Upcoming 2017 Annual Meeting
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 8.8% of the Company’s outstanding shares of common stock, today issued a letter to Peregrine’s stockholders. In the letter, Ronin announced that it has formally nominated three independent, highly-qualified candidates, Gregory P. Sargen, Brian W. Scanlan and Saiid Zarrabian, for election to the Company’s Board of Directors (the “Board”) at the Company’s upcoming 2017 annual meeting of stockholders. As explained in the letter, Ronin believes that there are opportunities to increase stockholder value; however, Ronin is concerned that stockholders will continue to suffer unless the Board is reconstituted with directors who will represent stockholders’ best interests. The full text of the letter follows:
July 13, 2017
Dear Fellow Peregrine Stockholders:
Ronin Trading, LLC and SW Investment Management LLC (together, “we”) collectively beneficially own approximately 8.8% of the outstanding shares of Peregrine Pharmaceuticals, Inc. (“Peregrine” or the “Company”), making us the Company’s second largest stockholder.1
As we have discussed on several occasions with the Company’s management, we are extremely concerned by Peregrine’s current strategy, the continuous dilution of stockholders and the Company’s exceptionally weak corporate governance. Both publicly and in our private conversations with management, we were shocked that neither Steven W. King nor Paul J. Lytle, Peregrine’s Chief Executive Officer and Chief Financial Officer, respectively, could articulate any long-term strategy for addressing the capital needs of the Company, curing the outstanding going concern notice or rectifying the Company’s corporate governance shortcomings, including the apparent interest misalignment of directors and other problems associated with Peregrine’s Board of Directors (the “Board”).
Now, well over a year after another clinical failure of bavituximab (the Company’s immunotherapy drug candidate), instead of addressing the core problems of the Company, the Board relies on tangential, counterfactual, and straw-man arguments to justify their positions, in desperate attempts to externalize the problems they have created. We believe immediate changes are necessary to stop Peregrine’s reckless spending and equity dilution in order to put the Company on the path towards creating value for stockholders and stability for employees.
It is important you understand that, unlike the current Board, our interests are aligned with yours. Like you, we will only be able to achieve a return on our investment upon the appreciation in value of Peregrine’s stock and we will lose our money if the Company continues to perform poorly. We have histories of successful investments in biotech and pharmaceutical contract development and manufacturing firms, and we believe it is obvious that the only path towards creating value for all stockholders begins with electing a new group of highly qualified independent directors and a sensible change of strategy. We would like to take this opportunity to explain the strategic changes that we believe are necessary to increase stockholder value and detail why we believe ALL stakeholders – stockholders, employees and customers – would benefit from the election of our independent, highly qualified director candidates at the upcoming 2017 Annual Meeting.
Suspend All Clinical Development Activities
All clinical development activities should be immediately halted and the Company’s cost structure must be adjusted accordingly. In the last decade, we estimate that Peregrine has spent over $300 million cumulatively in research and development on clinical development activities, which are almost entirely related to bavituximab, a drug which has been unsuccessful in numerous clinical studies, most recently failing a Phase III SUNRISE trial in February 2016 for small cell lung cancer. It has shown similarly disappointing results for breast cancer, hepatitis C, and pancreatic cancer. Given bavituximab’s poor performance in clinical trials, it is questionable whether any further spending on its development is warranted at all; however, given Peregrine’s financial condition and the emergence of its contract development and manufacturing business, Avid Bioservices (“Avid”), squandering additional capital on further studies is objectively indefensible. The profligate spending on risky clinical development has caused Peregrine to continually resort to myopic and harmful financing solutions which have caused staggering stockholder dilution amounting to an astonishing 30% annually since fiscal year (“FY”) 2010. In its most recent Form 8-K filing on July 7, 2017, the Company revealed that the number of outstanding shares had risen to 315 million (now split-adjusted to 45 million shares), bringing the total dilution in FY 2017 alone (plus the subsequent period from April 30, 2017 through July 7, 2017) to an outrageous 45.6%. That management publicly laments its stock price and claims a focus on creating value for all stockholders while simultaneously diluting stockholders at such an extraordinary (and accelerating) rate shows a profound misunderstanding of governance, management and stockholder value.