Peregrine Pharmaceuticals Inc on Monday warned of discrepancies in the results of a mid-stage lung cancer trial, the second time in six months the drugmaker has got into trouble over its data, wiping off more than three-quarters of its market value.
The drug, bavituximab, is Peregrine's key product and is currently being testing it in multiple clinical trials.
Earlier this month, the company's stock climbed 50 percent after Peregrine issued results from the trial, saying the drug doubled survival time in lung cancer patients.
Analysts said the new finding came as a shock and might irreparably damage investors' confidence in the company. The question now is whether the data can be salvaged.
"If you can't trust this data, there will be doubt about any other data reported by the company. So the management will have to work hard to restore that trust," McNicoll, Lewis & Vlak analyst George Zavoico said.
The errors related to the trial were found while preparing for a review meeting of studies of the drug with regulatory authorities, the company said.
A subsequent review determined that the source of the discrepancies appeared to be an independent third party contracted to code and distribute investigational drug product.
"A coding discrepancy of this kind could mean that the company does not know which patient got placebo and which got bavituximab," McNicoll's Zavoico said.
The mid-stage trial involved 121 previously treated, or second-line, non-small cell lung cancer patients and was conducted across multiple geographies.
NOT THE FIRST SNAG
This is not the first time that Peregrine is grappling with data discrepancy issues.
On March 9, company said that an independent review showed unexpectedly high progression-free survival rates in lung cancer patients receiving standard chemotherapy.
The trial was testing bavituximab in combination with standard cancer therapy in non-small cell lung cancer patients who have received no prior treatments - also known as first-line treatment.
The company's shares lost nearly a quarter of its value that day and closed at 68 cents. Since then, the stock has risen 8-fold before today's drop.
"By discounting the results of this second-line trial, the stock valuation appears to be resetting to, or close to, where it was last spring," McNicoll's Zavoico said.
"It is almost as though the last 4 months did not happen."
Shares of the Tustin, California-based company were down 77 percent at $1.23 in late morning trade on the Nasdaq on Monday. They touched a low of 80 cents earlier in the session.
Zavoico said the company could try to figure out if the discrepancies occurred across geographies or were found in specific parts.
"That may be one way to salvage the data."
Bavituximab is a genetically engineered antibody, designed to target a lipid molecule found on tumor blood vessels, and works by suppressing the immune system.
It is being studied as a treatment for a range of cancers, including pancreatic and breast cancer, but the company said it does not expect the discrepancies to affect the other trials.
The trial for non-small cell lung cancer, testing the drug in patients who were previously treated, is the most advanced of several studies testing the drug.
Lifetech Capital analyst Stephen Dunn, who has had a 50 cents price target on the stock since April, said the trial data announced earlier this month looked "too good to be true."
"The control arm looked like it was too low and the treatment arm showed results that you don't just see in second-line lung cancer."
He said the 50-cent price target reflected only the value of the company's manufacturing business, Avid Bioservices, which makes clinical products for use in trials.
(Additional reporting by Pallavi Ail in Bangalore; Editing by Anthony Kurian and Sriraj Kalluvila)