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Peregrine shares plunge on loan woes

Peregrine Pharmaceuticals Inc.'s shares plunged Thursday after the drugmaker disclosed that it has defaulted on a $30 million loan agreement.

THE SPARK: Peregrine defaulted on the loan agreement, which it entered into on Aug. 30, due to a recent problem with a study on an experimental drug.

The company announced Monday that recently disclosed data about its lead product, the potential lung cancer treatment bavituximab, is not reliable. The company said that it discovered "major discrepancies" between some patient sample test results and treatment code assignments when it reviewed midstage trial data as it prepared to meet with regulators

Peregrine said the problem appears to be tied to an independent, third party, which it did not name, that was contracted to code and distribute the product.

Under the terms of the loan, this is considered a material adverse change that leads to default.

Peregrine said in a Securities and Exchange Commission filing Thursday that it was notified of the default on Monday. It has repaid the $15 million it had drawn on the loan, along with interest and a final payment fee.

The loan was underwritten by a consortium of lenders, including Oxford Finance LLC, Silicon Valley Bank and MidCap Financial SBIC. The loan agreement is now terminated.

THE BIG PICTURE: Peregrine's shares soared earlier this month after the company said patients who were treated with bavituximab in a midstage clinical trial lived twice as long as patients who were treated with only a chemotherapy drug.

Its stock reached a three-year high on Friday but plunged Monday after it revealed the data discrepancy.

Peregrine says it has enough cash to operate through the end of the fourth quarter of its fiscal year, which ends in April. And it says the recent data issue won't have an impact on other bavituximab studies under way. The company is also studying bavituximab for other uses but the recent news has spooked investors.

SHARE ACTION: Peregrine shares hit a three-year high of $5.39 on Friday but plunged 78 percent to close at $1.16 Monday. While its stock gained modestly in the following days, Thursday's default news was a sharp blow, and its shares plunged nearly 38 percent to $1.03 by early afternoon Thursday.

Steve Ballmer, Power Forward
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