UPDATE 2-Peregrine cancer drug shows promise in mid-stage study

(Adds analyst comments, updates share movement)

By Vidya L Nathan

BANGALORE, Feb 4 (Reuters) - Peregrine Pharmaceuticals Inc (PPHM.O) said its experimental drug, bavituximab, for the treatment of lung cancer met the main goal in the first phase of a mid-stage study, sending its shares up as much as 14 percent.

However, Rodman & Renshaw analyst Reni Benjamin was concerned about the company's capital position and its ability to continue trials for the lead drug, which he believes will not be out in the market for another three years.

"We think the cash that they have on hand is probably good to get them in to mid-2010," Benjamin told Reuters.

"So they'll either have to secure a partnership (on bavituximab) before then or they will have to obtain more cash from the capital market," said the analyst, who expects a partnership to fetch the company between $20 million and $40 million in upfront payment.

As of Oct. 31, Peregrine had $8.2 million in cash and cash equivalents and a non-convertible term loan with an initial tranche of $5 million that will be funded upon closing, with an option to acquire a second $5 million tranche in the future after meeting certain conditions.

MID-STAGE TRIAL RESULTS

The primary objective of the mid-stage trial in patients with previously untreated locally advanced non-small cell lung cancer was to assess the overall tumor response rate, the biopharmaceutical company said.

The two-stage study would evaluate the safety and efficacy of the drug in combination with chemotherapy drugs carboplatin and paclitaxel, Peregrine added.

The company said preliminary results showed that six of the 17 evaluable patients showed partial tumour response, while one showed complete tumor response.

"These preliminary results exceed the pre-specified benchmark criteria established for enrolling an additional 28 patients in Stage B of this trial," the company said.

Bavituximab is also being studied in two mid-stage combination therapy trials as a treatment for advanced breast cancer and in an early-stage trial as a monotherapy for advanced solid cancer.

Shares of the company touched a high of 49 cents a share, but pared some of its gains to trade up 7 percent at 46 cents Wednesday afternoon on Nasdaq. (Editing by Himani Sarkar, Amitha Rajan)