Zacks_Analysts' Blog : Loss at PPHM Wider than Expected - Analyst Blog

Peregrine Pharmaceuticals Inc.'s (PPHM) second quarter fiscal 2011 loss of 13 cents per share was wider than the loss of 12 cents indicated by the Zacks Consensus Estimate. The biopharmaceutical company reported a loss of 6 cents per share in the year-ago quarter. The wider loss was primarily attributable to lower revenues and higher expenses in the reported quarter.

Total revenue in the second quarter of fiscal 2011 declined 32% to $4.67 million. Revenues fell short of the Zacks Consensus Estimate of $6 million.

The decline was attributable to a reduction in contract manufacturing revenues from Peregrine's subsidiary Avid Bioservices because of the level and timing of services delivered to its third-party clients coupled with a fall in government contract revenues.

Contract manufacturing revenues slipped 31.7% to $3.63 million and government contract revenues fell 36% to $0.96 million. License revenues accounted for the balance.

Total costs and expenses for the reported quarter climbed 38.3% to $13.05 million . The rise was attributable to higher research and development (up 77%) and selling, general administrative expenses (up 53.4%). Expenses incurred for the two mid-stage trials for Peregrine’s cancer candidate bavituximab contributed to the increase.

We note that bavituximab is being evaluated in various indications such as non-small cell lung cancer, liver cancer, breast cancer, hepatitis C virus and HIV. The other leading pipeline candidate at Peregrine, cotara, is being developed to treat patients suffering from brain cancer.

Our Recommendation

Peregrine currently has a Zacks #3 Rank, which translates into a short-term Hold rating. We are also Neutral on the stock in the long term. The stance indicates that the stock is expected to perform in line with the US equity market over the next 6+ months. We advise investors to retain the stock over the time period.