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PropThink: Peregrine Shares Continue to Bleed, Sticking Around Could Hurt Worse

October 1, 2012 -

By David Moskowitz
Peregrine Pharmaceuticals (NASDAQ:PPHM) opened down in early trading, as investors are still getting over the shock of the favorable clinical trial results for bavituximab reported last month being erroneous. (see our prior story here). As we wrote last week, the stock is likely to visit its lows for the years given that the trial data that rocketed the stock to new heights this year was unreal. And by that we mean it was actually Not Real. As the shares sink back under $1.00, investors will have to contend with the possibility of a NASDAQ delisting, which was threatening PPHM throughout the summer. A NASDAQ delisting would be a negative event for PPHM, given the general lack of trading and interest typically seen in stocks that move to the OTC bulletin board.
Additionally, the lawsuits coming out against the company will not only take time away from management running the business, but also will cost the company money, and PPHM's cash position is only sufficient to fund operations through April, according to PPHM's latest 8k filing. And that guidance was given prior to the lawsuits.  Given the hype around the Phase II results, which lasted for months, and the surprise that the data were ultimately deemed unreliable by the company, it is hard to imagine that PPHM can say anything that investors will believe at this point.
An article on today offers investors an idea on how to trade PPHM using an interesting options strategy, but our view is that investors should simply just sell the stock and re-deploy capital into ideas that have credible stories. Names we continue to like (in order of preference) include: Pain Therapeutics (NASDAQ:PTIE), Merge Healthcare (NASDAQ:MRGE), Halozyme Therapeutics (NASDAQ:HALO), Amarin Corp. (NASDAQ:AMRN), and Navidea Biopharmaceuticals (NYSEAMEX:NAVB).

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