http://www.thestreet.com/print/story/11720253.html

Peregrine Pharma: Cash Crisis and Exaggerated Survival Benefit

Adam Feuerstein

TUSTIN, Calif. (TheStreet) --Peregrine Pharmaceuticals (PPHM ) is now dealing with a financial crisis on top of a discredited lung cancer drug.

On Wednesday, Peregrine's lenders filed a notice of default that forced the company to repay immediately a $15 million loan plus interest and fees. "Major discrepancies" in the conduct of Peregrine's bavituximab lung cancer study, disclosed Monday, caused the company to violate the terms of its loan agreement, the creditors said.

Peregrine now has only enough cash on hand to fund operations until April 2013 -- the end of the company's fourth quarter of fiscal year 2013. Peregrine could try to raise more cash via an existing At-The-Market (ATM) equity facility, but such stock sales now are unlikely to due the risk of legal liabilities.

Shares of Peregrine fell 22% to $1.30 in Wednesday after-hours trading. The stock has now lost almost 80% of its value in the past three days.

I was working on the following story about the unreliability of the bavituximab survival data when the company disclosed the study errors Monday. The story is a bit less significant now, but still illustrates the weakness of the Peregrine-bavituximab bull story even if this week's troubles hadn't occured.

Peregrine Pharmaceuticals omitted half the patients from the analysis of its bavituximab lung cancer study, thereby exaggerating the drug's reported survival benefit.

The pooled bavituximab arms of the phase II study produced a median overall survival of 12.1 months compared to 5.6 months for the control arm -- a statistically significant benefit, according to Peregrine. But left unsaid by the company is how the unusually large number of patients missing or "censored" from the analysis most likely accounts for the bavituximab survival benefit.

Censoring refers to the practice of excluding patients from an analysis of a study's primary endpoint. In a survival trial, patients are typically censored for two reasons: 1) A patient is lost to follow up i.e. it's not known if he's alive or dead; or 2) A patient is still alive but hasn't been in the study long enough to analyze.

While censoring is a common practice, it does reduce the reliability of study results. Therefore, investigators running clinical trials try to keep the number of censored patients at a minimum by keeping close tabs on all patients and allowing for enough follow up so that the greatest number of patients can be analyzed with sufficient information.

Peregrine took none of these precautions. Seventy-nine patients were enrolled in the two bavituximab arms but only 40 patients were accounted for in the survival analysis. That means 39 bavituximab patients, or 49%, were censored and excluded from the analysis.

[Censored patients show up as "tick marks" on the bavituximab Kaplan-Meier survival curves seen in the slide below.]

To put Peregrine's 49% patient censoring rate in perspective, six phase III lung cancer studies published recently in the medical literature had an average censoring rate of 19%. On average, each of these studies enrolled 710 patients.

Peregrine's bavituximab study enrolled just 117 patients (including the 38 patients in the control arm) but had more than double the rate of censoring. That speaks to very poor trial conduct.

The amount of patient censoring is important but so is the time at which censoring occurs. In well-conducted clinical trials, more censoring occurs after median overall survival is reached. This typically reflects patients who remain alive in the study when the analysis was conducted. If or when these late-censored patients die, the median overall survival estimate of the trial will not change appreciably. Remember, median is the value in the middle, not the average.

In the Peregrine study, however, much more patient censoring occurred before median overall survival was reached. [You can count the tick marks on the survival curves.] As a result, the median overall survival estimate is skewed higher artificially. If any of these early-censored patients are found to have died, the median overall survival of pooled bavituximab will not be 12 months but could be significantly lower.

The problem with early censoring can be seen most clearly in the study's 3 mg bavituximab arm, where the median overall survival was reported to be 13 months. However, this analysis was based on 15 deaths, while 18 patients were censored before the median survival was reached. When more patients are missing than confirmed dead in a survival analysis, the estimate is entirely unreliable.

Early censoring can be justified if a trial is relatively immature, meaning patients haven't been followed long enough to analyze.

That's not the case with the Peregrine trial. The bavituximab study was unblinded in December 2011. When the survival data were presented on Sept. 7, the company had 9 months of follow up at a minimum (and this assumes that all patients enrolled on the last day of the trial, which obviously didn't happen.)

Peregrine hasn't disclosed the reasons why patients were censored and the company did not return a phone call seeking comment. But based on previous statements, the bavituximab study was mature enough to avoid early censoring of patients for too-short follow up.

That leaves just one possibility: All the patients censored early in the study before nine months -- and there are lots of them -- were lost to follow up.

--Written by Adam Feuerstein in Boston.