Peregrine Pharmaceuticals (NASDAQ:PPHM) did a 7 to 1 reverse split recently and some analysts have expected the stock to walk the plank, but the price has stayed strong. PPHM is a biotech that is mainly focused on R&D. The company’s subsidiary keeps the money coming in to advance products down the testing pipeline. The company lifted 20% in trading yesterday, so let’s take a closer look.
PPHM released a shareholder update yesterday and addressed the addition of activist investors Ronin Trading LLC and SW Investment Management LLC putting members for election to the board. The two collectively own more than 8% of PPHM, which make them the second largest shareholder. Ronin and SW issued its own stockholder letter, which I will detail below, but they were very concerned about the trajectory of the stock, to say the least.
Peregrine Pharmaceuticals (NASDAQ:PPHM) bills itself as a biopharmaceutical company committed to improving the lives of patients by delivering high quality pharmaceutical products through its contract development and manufacturing organization (CDMO) services and through advancing and licensing its investigational immunotherapy and related products.
Peregrine’s in-house CDMO services, including cGMP manufacturing and development capabilities, are provided through its wholly-owned subsidiary Avid Bioservices, Inc., which provides development and biomanufacturing services for both Peregrine and third-party customers. The company is also working to evaluate its lead immunotherapy candidate, bavituximab, in combination with immune stimulating therapies for the treatment of various cancers, and developing its proprietary exosome technology for the detection and monitoring of cancer.
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Here is the statement issues after the dilution by Ronin and SW Investments:
“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.
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.”
Peregrine countered by releasing this statement:
“Peregrine welcomes the input of our stockholders and is committed to maintaining a highly qualified Board to lead the company forward. We respect the right of stockholders to nominate directors and our Board follows a defined process to evaluate any potential nominees. Our Nominating Committee will carefully evaluate Ronin/SWIM’s nominees consistent with that process. Following the Committee’s review, it will make a recommendation to the Board that is in the best interests of Peregrine and all of our stockholders. Stockholders need take no action at this time.
“We are actively engaged in an ongoing dialogue with our stockholders and welcome their constructive input on how we can further strengthen the company. We have engaged in various discussions with representatives of Ronin Trading and SW Investment Management and welcome a constructive dialogue toward enhancing value.
“Peregrine’s Board, which has a deep understanding of the Company’s R&D and CDMO business lines, has been actively involved in setting and overseeing a strategy that has delivered meaningful growth over the past five years in our CDMO business and promising progress in our R&D efforts while substantially reducing R&D spend.
Peregrine Pharmaceuticals (NASDAQ:PPHM) and the possibility of board shakeup are teasing investors right now. Trading today will be very important to watch as investors figure out what Ronin’s chances are of grabbing seats and changing the direction of this ship. The company has a 259.87M market cap with 42.53 million shares outstanding. PPHM has not been making money recently, but will not go bankrupt with Avid in the mix. So, this is a company to watch in the short-term. For continuing coverage on shares of $PPHM stock, as well as our other breakout stock picks, sign up for our free newsletter today and get our next hot stock pick!
Disclosure: we hold no position in $PPHM, either long or short, and we have not been compensated for this article.