Why Peregrine Pharmaceuticals (NASDAQ:PPHM) Can Be A Buyout Candidate?

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Peregrine Pharmaceuticals

Peregrine Pharmaceuticals (NASDAQ:PPHM) posted robust 2Q2017 fiscal report surpassing analysts’ projections of net income and revenues by a wide margin. The company guided for continued robust growth for its Avid Bioservices segment predicting break-even in next 18 months. It continues to make remarkable progress in its initiatives to better understand the functionality of cancer drug bavituximab by recognizing key biomarkers.

This could make Peregrine stock a buyout candidate. The existing share price does not reflect a proper market valuation for the firm’s Avid segment. Adding Avid, drug bavituximab prospect, and no debt and $49 million cash yields $1 per share valuation.

The buzz

Peregrine Pharmaceuticals functions through two divisions: the first one Peregrine, which is involved in the R&D of monoclonal antibodies for the cancer treatment, and Avid Bioservices, which provides contract manufacturing services to third-party clients on a fee-for-service basis and also boosting its internal drug advancement measures.

Peregrine posted strong fiscal 2Q2017 financial report on December 12, 2016 surpassing revenue and net income projections by a wide margin. Even guidance came promising and developments in the clinical side were encouraging.

However, instead of the stock price going up it has declined nearly 30% market capitalization since the earnings release. Fiscal 2Q2017 revenues came at $23.4 million reported December 12 surpassed analyst’s mean revenue estimate of $17.98 million by $5.42 million. However, the upper projection was $20 million. Net loss in 2Q2017 amounted to 2c/share that surpassed analyst’s consensus projection of a 3c/share loss. The decline was noted sequentially and also in 1H2017 period compared to the 1H2016.

Peregrine expects turning profitable in 18 months. After a considerable decline in cash from $72 million at the close of 2Q2016 to $44.2 million at the close of 1Q2017, cash actually surged sequentially by nearly $5 million from the first quarter to second quarter fiscal 2017 to $49.1 million. It is noteworthy because it represents stabilization and financial discipline resulting from closing down R&D expenses to the new reality.

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