Peregrine's bavi dream turns into a nightmare

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If something seems too good to be true then it probably is, as investors in Peregrine Pharmaceuticals found out yesterday when it emerged that the company’s antibody bavituximab was not the potential blockbuster it had seemed to be just days before.

Peregrine’s stock sank 78% after it disclosed “major discrepancies” in the running of a phase II study of bavituximab. Just two weeks earlier this trial had suggested that the anticancer agent offered a much better overall survival benefit in lung cancer even than Roche’s Avastin. Although the snafu concerns just one study its effect on sentiment has been profound, and with its stock nearing $1 Peregrine could again face the Nasdaq delisting issues that had plagued it in March.

While little has been disclosed so far about what exactly went wrong, Peregrine stresses that the stellar result should no longer be relied on. The phase II trial, in 121 second-line NSCLC patients, had suggested median overall survival of 11.1 months for bavituximab 1mg/kg and 12.1 months for the 1mg/kg and 3mg/kg groups combined, both with a high level of statistical significance over placebo at p=0.0286 and p=0.0154 respectively (Peregrine’s bavi data: too good to be true?, September 10, 2012).

Third-party contractor

The major discrepancies concerned the way test results related to group coding, suggesting for instance that data from some patients in the active group might have incorrectly been assigned to the placebo arm or vice-versa. The problems appear to stem from independent third-party contractors, implying contract research organisations.

Although it is not clear which contractor might be to blame, one of the question marks around the design of the study had been Peregrine’s use of centres in countries with a less-than-glowing record for clinical integrity, as well as some in the US. Surprisingly, in announcing the remarkable data two weeks ago Peregrine appeared to address this very issue when it said that the data were uniform across all study centres.

Still, the company might not have had all available analyses to hand at the time, or the discrepancy might be spread across several centres. Peregrine stressed that this issue did not affect any other study of bavituximab; however, its other key phase II trial of the antibody, in 86 first-line NSCLC patients, is also being conducted in the US, Russia, the former USSR and India.

Double hit

Yesterday also proved to be a bad day for Questcor Pharmaceuticals, which appeared earlier to have limited the damage caused by an important managed care player withdrawing insurance coverage for its controversial off-patent revenue driver Acthar (Questcor’s Acthar fairy tale goes sour, September 20, 2012).

But the company’s fire-fighting efforts came to nought after it announced in a brief filing with the US SEC that the US government had launched a probe of its promotional practices. Questcor’s stock, which had fallen from $50.52 to $26.35 on news of the insurance setback before recovering to over $30, lost a further 37% to close at $19.08 yesterday.

If, as seems likely, the government investigation concerns the way Questcor reps behaved in selling Acthar this might go to the heart of the product’s economic viability. It could also prompt more scrutiny into large amounts of company stock that have been offloaded by management, including the CEO, Don Bailey, over recent months.

Nevertheless, the company has bigger fish to fry, and its biggest worry right now remains the threat of other insurers following Aetna’s lead and dropping coverage of Acthar. Drug marketing practices frequently sail close to the wind, and – as in the case of Peregrine – right now management credibility is the biggest loser.

Following Peregrine’s blow-up the market values that business at $121m, and the company has around $50m in cash if a recent $30m loan is included. Management might well be ruing their inability to tap the equity markets for much-needed cash while the stock price almost tripled over the previous month.

To contact the writer of this story email Jacob Plieth in London at jacobp@epvantage.com

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