Jay Carlson - Investor Relations Steve King - President and Chief Executive Officer Paul Lytle - Chief Financial Officer Joe Shan - VP, Clinical and Regulatory Affairs Jeff Hutchins - VP, Preclinical Research

Roy Buchanan - Piper Jaffray Thomas Yip - MLV & Company George Zavoico - JonesTrading Rahul Jasuja - Noble Life Science Partners

Good day, ladies and gentlemen and thank you for standing by. Welcome to the Peregrine Pharmaceuticals’ Fourth Quarter Fiscal Year 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to Jay Carlson of Peregrine’s Investor Relations Group. Please go ahead.

Thanks, Karen. Good afternoon and thank you for joining us. On today’s call, we have Steve King, President and Chief Executive Officer; Paul Lytle, Chief Financial Officer; Joe Shan, Vice President of Clinical and Regulatory Affairs; and Jeff Hutchins, Vice President of Preclinical Research. Steve King will begin by providing a brief overview of the company’s progress over the last quarter and will conclude the call with a more detailed review of recent achievements, upcoming milestones and the company’s strategies for the coming fiscal year. Joe Shan will provide an update on our SUNRISE Phase 3 clinical trial as well as information on new clinical trials and planning stages. Jeff Hutchins will review recent preclinical and translational data emerging from our immunotherapy program. And Paul Lytle will provide a summary of our financial results for the fourth quarter and fiscal year 2015 as well as provide our full year 2016 guidance for our wholly-owned subsidiary, Avid Bioservices. After our prepared remarks, we welcome your questions. Before we begin, we’d like to remind you that during the call, we will be making forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ. These forward-looking statements reflect our current views about future events and financial performance and are identified by the use of terms and phrases such as believe, expects, plan, anticipate, on target and similar expressions identifying forward-looking statements. These risks include, but are not limited to, the risk factors detailed from time-to-time in our filings with the Securities and Exchange Commission, including but not limited to, the Annual Report on Form 10-K for our fiscal year 2015 ended April 30, 2015, which was filed today. Investors should not rely on forward-looking statements, because they are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations. And we expressly do not undertake any duties to update forward-looking statements, whether as a result of new information, future events or otherwise. With that, I will turn the call over to Steve.

Thanks, Jay, and thanks to all of you who have dialed in or participating via webcast in this afternoon’s Peregrine update. This past year was marked by clinical progress, scientific validation and business growth for Peregrine. Clinically, our SUNRISE trial in non-small cell lung cancer remains on target to complete patient enrollment by calendar year end. While we continue to advance the SUNRISE trial toward completion, we are also taking important steps to expand the commercial potential of bavituximab in the non-small cell lung cancer and breast cancer indications by initiating new later stage clinical trials in both areas by calendar year end. These new studies are supported by compelling data from several prior clinical trials showing the potential of bavituximab in combination with chemotherapy in HER2-negative breast cancer and by exciting preclinical and translational data supporting the potential of bavituximab with anti-PD-1 targeting compounds like Opdivo. We believe supportive data from these new trials, combined with the SUNRISE trial data, will set the stage for commercial success for bavituximab into very important cancer indications. In addition to the flurry of activities on the later stage clinical development front, exciting data from the bavituximab clinical and preclinical programs was consistent and building throughout this past year. Within oncology, there is a need almost across the board for new drugs that will improve existing therapies. Whether as chemotherapy, radiation or immunooncology agents, most patients are still not getting the level of anti-tumor activity that is needed to have a significant impact. We believe bavituximab has the potential to make a difference in patient outcome when used in combination with all of these therapeutic approaches to treating patients. We have already seen across a number of clinical trials the classical immunotherapy survival tail when bavi is given in combination with chemotherapy. Recent preclinical data firmly supports the concept that targeting and blocking the PS-signaling pathway with antibodies, like bavituximab, allows more subjects to initiate a T-cell immune response, resulting in longer treatment duration in combination with PD-1 targeting antibodies that resulted in more subjects responding to therapy and as a result, statistically significant improvement in anti-tumor activity. In addition, translational clinical data supports the potential of bavituximab to have an immune stimulating impact on PDL-1 negative tumors. Data presented by number of investigators at both ASCO and AACR show convincingly that patients with PDL-1 negative tumors did not fare well when treated with either PD-1 or PDL-1 targeting antibodies. So, bavituximab has shown the potential to help stimulate a T-cell anti-tumor immune response in the tumors that absolutely need a better immune response in order to respond to PD-1 therapy. We recently entered into collaboration with investigators at Memorial Sloan Kettering Cancer Center to continue expanding on this important work as well as to explore other potential applications of bavituximab and other agents that target PS-signaling pathway. On the manufacturing front, I am very pleased to acknowledge that our wholly-owned subsidiary, Avid Bioservices, achieved record revenue this year, growing as a successful business while providing equally important infrastructure that can support commercial launch of bavituximab. I will continue my comments later, but first, the other members of our team will give a detailed overview of our clinical, preclinical and operational achievements. We will begin with Joe Shan, Vice President of Clinical and Regulatory. Joe?

Thanks, Steve. I’d like to first provide an update on the company’s ongoing Phase 3 SUNRISE trial, which is evaluating the use of bavituximab in the treatment of non-squamous non-small cell lung cancer. SUNRISE continues to progress according to plan with more than 150 active clinical centers spanning 14 countries. We remain on track to complete enrollment by the end of this calendar year. Meanwhile, we continue to receive positive feedback from investigators who are excited by both the safety profile and immunomodulating properties of bavituximab. As a reminder, SUNRISE is designed as a Phase 3 registration trial and has two planned interim analyses. The first interim analysis, which will be conducted when 33% of the targeted overall survival events are reached, is for futility and the second interim analysis for futility or predictive success, will be conducted at 50% of events. To protect the integrity of this double-blind trial, an independent data monitoring committee has been established to evaluate safety data on an ongoing basis and make recommendations to Peregrine as to when the trial should be unblinded. As the interim analyses are triggered after pre-specified numbers of trial events are reached, in this case, deaths, we cannot, at this point, guide to when these might be reached, but we will be sure to provide updates as soon as we can. Let me now discuss the expansion of our clinical programs in non-small cell lung cancer and breast cancer. As we announced last month, while we wrap up enrollment in SUNRISE, we are planning a few new clinical trials, which we expect to initiate before year end. Peregrine’s decision to launch these new trials is driven by the considerable and growing body of data supporting bavituximab’s therapeutic potential when combined with chemotherapeutic drugs or immunotherapeutic agents such as checkpoint inhibitors. One of these trials will build on the foundation we are laying in the non-small cell lung cancer setting with the SUNRISE trial. The decision to initiate another lung cancer trial is supported by recent robust preclinical data supporting the combination of bavituximab with immune checkpoint inhibitors, which is very timely as the anti-PD-1 agent, nivolumab, has recently been approved in previously treated squamous non-small cell lung cancer. To that end, we are planning to initiate an open label multi-center randomized Phase 2 trial of nivolumab, which is marketed as Opdivo versus nivolumab plus bavituximab in patients with previously treated locally advanced or metastatic non-small cell lung cancer who have not received a prior PD-1 or a PDL-1 inhibitor. The primary endpoint of this trial is expected to be overall response rate with secondary endpoint, including duration of response, progression-free survival, overall survival and safety. Importantly, as translational studies have demonstrated that bavituximab enhances multiple markers of immune activation, even in tumors that express low levels of PDL-1. We plan to retrospectively examine patient outcomes based on pretreatment PDL-1 expression level to better understand bavituximab’s effects on this potential biomarker. With regards to our overall lung cancer and clinical development strategy, our goal is to have the opportunity for preliminary readout from this new trial prior to the un-blinding of the SUNRISE trial. In addition, based on the totality of our clinical experience in advanced breast cancer to-date, we are also compelled to advance the program by initiating a late stage trial in breast cancer. Promising data from an investigator sponsored Phase 1 trial of bavituximab plus paclitaxel to patients with metastatic HER2-negative breast cancer were published during the quarter in the peer reviewed journal, Cancer Medicine. Results demonstrated that 85% of evaluable patients achieved an objective tumor response, including a complete response rate of 15% by RECIST. Data from this IST, combined with two prior Peregrine -sponsored trials, bavituximab plus taxane-based combination treatment, which yielded between 61% to 74% overall response rate, a median overall survival of over 20 months in advanced or metastatic breast cancer patients provided strong rationale to advance this indication. Thus, we are planning a seamless Phase 2/3 trial in patients with metastatic HER2-negative breast cancer with all patients receiving physician’s choice of paclitaxel or docetaxel alone or in combination with bavituximab. The primary endpoint of overall response rate in the Phase 2 is reached, the Phase 3 part of the trial will be activated, which has a primary endpoint of progression free survival. As with our planned lung cancer trial, we expect to initiate this breast cancer trial before the end of the calendar year and the open-label nature of the trial may provide us the opportunity for data updates, prior to SUNRISE unblinding. Additionally, a randomized trial that of neoadjuvant paclitaxel with or without bavituximab is also planned to further elucidate bavituximab’s immune modulating mechanism in early stage HER2-negative breast cancer. Now beyond lung and breast cancers, bavituximab has shown promise in several additional oncology indications. Data from an investigator-sponsored trial evaluating bavituximab plus sorafenib, patients with advanced hepatocellular carcinoma has demonstrated promising signs of activity in acceptable safety profile, in multiple signs of immune activation as measured by pre and post-treatment tumor samples. Finally, two investigator-sponsored trials continued to enroll patients, evaluating bavituximab combination treatment regimen in patients with advanced melanoma or rectal adenocarcinoma. While it’s important to note that these studies are being conducted independently under investigator-held INDs and thus we do not have control over the timing of the data, with that said data from the rectal adenocarcinoma trial will be presented at the American Society for Radiation Oncology’s Annual Meeting in October. I look forward to providing you an update on our future clinical advancements. And I will now turn the call over to Jeff Hutchins to discuss our preclinical program. Jeff?

Thanks Joe. Our group is working to further delineate bavituximab’s unique immunostimulating mechanism of action and find the most promising immune activating treatment combination for bavituximab by a series of preclinical studies that have also recently led into translational studies, utilizing human lung tumor samples. I am pleased to say that the results of these studies have been impressive. Data from these studies presented at the ASCO Annual Meeting in June demonstrated the ability of the company’s PS-targeting antibodies to significantly increase the prevalence of tumor infiltrating CDA positive T cells and immune activating cytokines, while decreasing tumor promoting macrophages and myeloid cells, thereby enhancing the antitumor effects of chemotherapy as well as immune checkpoint inhibitors. Measurements of cellular immune activation markers and cytokine profiles in multiple tumor models consistently support the potential of our PS-targeting antibodies’ ability to work synergistically with approved and investigational immunotherapies. Our preclinical studies show that the combination treatment with an anti-PD-1 antibody yield superior growth inhibition in a large percentage of subjects, while also exhibiting multiple immunostimulatory changes associated with and anti-immunoresponse as compared to anti-PD-1 alone. Taken together, these results support the potential of bavituximab to increase the number of subjects susceptible to respond to immune checkpoint blockade treatments and provide a rationale for the clinical evaluation of bavituximab with PD-1 or PDL-1 targeting drugs in lung cancer and other indications. Data from additional studies presented at the ASCO Annual Meeting measured changes in immune parameters in human lung tumor samples treated with the combination of bavituximab and the chemotherapeutic drug, docetaxel. These clinical translational studies demonstrated that bavituximab alone and in combination with docetaxel activates tumor-infiltrating CD8 positive T cells, as demonstrated by increases in immune stimulatory cytokines and cellular activation markers. Interestingly, these positive results were correlated with low PDL-1 expression in the tumor lung tissue. A measurement common to the majority of non-small cell lung cancer patients and which is typically associated with poor response to checkpoint therapy. This further increases our enthusiasm regarding the Phase 3 SUNRISE trial, which is evaluating the same treatment combination used in these promising translational studies. We are excited to see these data and the consistency in which we see superior tumor growth inhibition with bavituximab alone and in combination with other therapies. We are not alone as Peregrine has generated and presented more data in recent months. There has been growing interest in the PS-signaling pathway in bavituximab. This interest is evidenced by the research agreement that Peregrine recently signed with Memorial Sloan Kettering Cancer Center. This research, which will be conducted in the lab of Dr. Jed Wolchok, a leader in the field of cancer immunotherapy, will examine the combination of bavituximab alongside models of Checkpoint blockade that are unresponsive to inhibition or co-stimulation. This is not only a collaboration that is validating, but it will also create a better understanding of how PS-targeting agents may enhance immune activation and antitumor responses combined with other immunotherapies. We look forward to providing an update on this collaboration as well as the translational work we continued to conduct at Peregrine. I will now turn the call over to Paul Lytle, Chief Financial Officer, who will discuss the company’s financial performance and our Avid Bioservices business. Paul?

Thanks, Jeff. Now, turning to our financials, it’s important to note that we continue to closely manage our operations in line with our cash position, while balancing our various sources of capital. And one important source of capital is derived from our contract manufacturing business, Avid Bioservices, which generated $9.3 million in revenue this quarter and $26.7 million for the full fiscal year 2015. This represents a 44% increase in quarter-over-quarter revenue and a 20% increase in year-over-year revenue. As we look to the future, I would also like to emphasize that we currently have a strong backlog for future services. Over the recent periods, our backlog has ranged from $20 million to $30 million and today this backlog has grown to approximately $40 million. As a result of this growing backlog, we expect contract manufacturing revenue for fiscal year 2016 to increase to a range of $30 million to $35 million. This projected revenue growth is primarily due to two reasons. First, we have seen an increase in demand from existing and new customers; and second, we now have new manufacturing capacity to offer our customers that is already being booked. This is an exciting time for our contract manufacturing business. So, let me take a few more moments to share with you our plans and progress in building this new facility. Last December, we laid out strategic plans to expand our manufacturing capacity to help support the revenue growth of Avid as well as creating sufficient manufacturing capacity for the potential commercial launch of bavituximab. We also mentioned that growing this revenue-generating business is very important to us as it reduces the amount of capital and funding we would need to raise by other means. This strategy is coming to fruition very quickly. I am excited to say that the new facility is close to being ready for production. The core manufacturing suite has been built. The equipment has been installed. And it is now undergoing some final testing to ensure all systems are operating effectively. We remain on track to commence production in this new facility in the very near future. Now, turning to expenses, we saw an expected increase in R&D spending this quarter and fiscal year as we continue to invest in the Phase 3 SUNRISE trial. This resulted in an increase in our reported cash burn rate representing our reported net loss minus non-cash expenses to approximately $10.5 million for the fourth quarter. This cash burn rate has been consistent over the past four quarters of fiscal year 2015 leading to a burn rate of $42.6 million for the full fiscal year. A more detailed analysis of our statement of operations is included in our Form 10-K that will be filed shortly. In conclusion, let me say that our financial goals are centered on maintaining a solid cash position and investing these proceeds into our novel immunooncology program led by bavituximab and our revenue-generating manufacturing business. We will continue to closely manage our operations in line with our cash position, while balancing our various sources of capital. Let me turn the call back over to Steve to discuss some important upcoming milestones. Steve?

Thanks, Paul. I will start today’s call by stating that we have continued to make progress across our entire business. As Joe, Jeff and Paul have details, these achievements are significant. We are more confident than ever in the potential of bavituximab to help other cancer treatments work better and we are expanding our clinical programs to capture the value that we believe exist in new therapeutic combinations and indications. Specifically, as Joe detailed, we will be initiating a Phase 2 study in non-small cell lung cancer, combining bavituximab with Opdivo, an FDA-approved PD-1 inhibitor, while also initiating a Phase 2/3 preclinical trial in breast cancer, combining bavituximab with chemotherapy. The intent of these trials and all future trials of bavituximab is to expand the utility to ultimately address multiple cancers and to improve the lives of cancer patients worldwide by improving upon current and evolving standard of care. As discussed by Jeff, the compelling preclinical data we have been presenting as well as a growing body of nonaffiliated research into the PS signaling pathway and how it is exploited by tumors for survival and growth has greatly heightened interest in bavituximab from the scientific community. As a result, we recently entered into collaboration with established immunooncology experts at Memorial Sloan Kettering Cancer Center to continue expanding the potential of the PS targeting platform. Beyond our therapeutic platforms, the Avid Bioservices business has been growing steadily, achieving record revenue of over $26 million this year. And with the $40 million backlog, we anticipate our revenue next year to grow to between $30 million and $35 million. This business is strong and gaining momentum and the revenue generated by Avid provides a firm foundation for its continued success. With that, I will outline a number of upcoming milestones. Regarding our SUNRISE Phase 3 second line non-small cell lung cancer study, on track, we are on track for completing patient enrollment by year end 2015. We have planned IDMC interim analysis at 33% and 50% of targeted overall survival events as those are reached, with estimated unblinding of the trials to occur approximately near the calendar year end of 2016. Regarding our planned Phase 2 second-line non-small cell lung cancer, bavituximab plus nivo and our planned Phase 2/3 HER2-negative breast cancer trial evaluating docetaxel or paclitaxel with bavituximab, we estimate trial initiation from both of those studies during the second half of 2015. And in these open label studies, we will have the potential for interim data from both studies as early as 2016. For the ongoing Phase 1 rectal adenocarcinoma IST evaluating bavituximab in combination with capecitabine and radiation, the investigator is continuing to enroll and treat patients and we do expect interim data to be presented at the ASTRO Meeting coming up in October. And with Avid, we expect launch of production in our new facility to happen in the immediate future and this launch will be a pivotal event as we continue to grow the Avid business and to prepare for bavituximab commercialization. This concludes our prepared remarks and we would now like to open the line for questions.

Thank you. [Operator Instructions] Our first question comes from the line of Charles Duncan from Piper Jaffray.

Hey, guys. It’s Roy in for Charles. Thanks for taking the question. Nice top line results by the way. So, on this Phase 2 with nivolumab, do you guys plan to screen for PDL-1 expression on enrollment and intend to balance between the arms for that expression?

At this point, we are not planning to select patients based on that status, but we will be collecting that information for retrospective.

Okay. And then just a quick one, have you guys applied for breakthrough and do you intend to, for SUNRISE?

So, SUNRISE, as you know, we have a fast track designation. And so that’s I think the current strategy, don’t afford us the regulatory benefits of a priority review, so…

Yes. And then I think to expand on that, I think as we learn more about bavituximab, particularly through these upcoming studies, that’s certainly a possibility for the future. I think it will depend really on the particular targeted indication or set of patients. And that’s going to be very interesting as you mentioned earlier to take a look at the PDL-1 negative patients or low patients and see how the outcome of those patients is as compared to the PDL-1 higher positive patients. So, certainly, there appears to be a developing need for better treatments for better combinations in those PDL-1 negative patients. And so that’s an example of a potential indication that could trigger some additional regulatory strategy beyond the fast track.

Okay, very good. Thank you.

Thanks, Ray.

Thank you. And our next question comes from the line of Thomas Yip from MLV & Company.

Hey, everybody. Thank you so much for taking my questions and congratulations on the very nice quarter for Avid. My first question pertains to your preclinical collaboration with Memorial Sloan Kettering regarding the development of checkpoint inhibitor combinations. It may be a little bit early, but just wondering whether you guys have explored any specific oncology indications that you are going after while you are screening perhaps indications such as melanoma?

Certainly, this is Jeff. Melanoma is their specialty and they are heavily invested in that, so that certainly will be our first look and then expanding that based on the results. But clearly, what we are really looking for is what are the contributions of each of the combination partners and that sort of thing and the Wolchok Lab has become just world-renowned in understanding those dynamics. And so that’s what we are really anticipating to benefit from.

Yes. And I think in addition to that, obviously, there is lot of interest now in a number of indications outside of just simply non-small cell lung cancer as well as melanoma. So, there – the collaboration at Memorial Sloan Kettering is definitely broader than just melanoma, but really we want to look at other potential indications, a lot of interest is kind of coming to the top when ovarian cancer, bladder cancer is another prime target. So we will be looking at a number of different indications and some of those may end up being things we do on the preclinical front to set stage for clinical studies and some maybe more even potentially moving forward with collaborators right into clinical trials. So all that kind of thinking is currently being discussed with the people from Memorial Sloan Kettering and so I do think we will have collaborations at different levels which will include preclinical as well eventually clinical studies.

Sure, that sounds good. Switch gears, you were talking about Avid a little bit, so as you mentioned, the new facility is very close to being completed. What does the additional capacity or what does that mean to the backlog, it’s very nice that you guys have grown the backlog from just a couple of months ago, $29 million, now it’s $40 million and you guys upped the revenue target, everything sounds very good, but what is the extra capacity, will that kind of bite into the backlog or will you guys – do you expect more new customers and more orders from existing customers as well?

Yes. So I think that almost all the backlog is really related to the current facility because as the new facility comes online, obviously we have a lot of additional activities for bavituximab planed for there in the early parts of the opening of the facility. But we do have a lot of expressed interest from clients in moving into the space and actually being able to utilize that and that’s particularly for later stage in commercial products. And so right now it’s a nice mix. I mean, again a lot of backlog is just related to the existing facility, but some of that backlog is now starting to be associated with the new facility that’s coming online. We do expect that to grow as time goes by and again as we really reach full capacity over in that facility.

And Tom just a little more information on the new facility, it actually more than doubles what our current capacity is in terms of space and bioreactor space that we have over there. So we do have an opportunity to really to grow the business, even much larger than what our current backlog is. So we are excited about the new facility.

Okay, it sounds wonderful. Thank you for clarifying and thank you once again for taking my question.

Thanks Thomas.

Thank you.

Thank you. Our next question comes from the line of George Zavoico from JonesTrading.

Hi everyone and congratulations on a good quarter, I guess if you build it, they will come. The number of antibodies and other biologics that are being developed now by multiple potential customers is – I think it’s growing quite rapidly. You are there to – it seems like you are there to capitalize on it, that’s great. So we expect to see that backlog increase but also the revenue increase as you fill the orders. My first question is for Joe. Joe, you mentioned in your prepared remarks that some of the physicians that you are talking to that were involved in SUNRISE, or participating in SUNRISE have been impressed by the immuno-modulary properties that you have – that they have seen. Could you expand on that a little bit? What exactly are they measuring, what are they seeing that you might be able to talk about that they are relating to or you can’t disclose that?

I think it’s more of a general impression. I think they have been briefed on the data that was presented at ASCO and the consistency across the systems, the species that we looked as all pointing to the same immune-stimulating properties. I think that’s what I was referring to in terms of being impressed with the potential.

So you weren’t speaking specifically to the patients…?

Not SUNRISE, yes. I mean it’s still…

That’s why I thought it was a little confusing when you mentioned that. But I am sorry about that, I misunderstood.

George, actually if I can maybe expand on that. I have had a chance to meet with a number of the physicians. And I think in general, a lot of the enthusiasm is obviously it’s a blinded study, so they can’t relate to their direct experience in the SUNRISE trial other than how the trial is going overall. But I do think there is a lot of enthusiasm because of bavituximab’s mechanism of action and safety profile and the potential for combinability even outside of the docetaxel combination. I think that’s also driving a lot of interest because you have had a lot of great data over the last six months, including the translational data, which is really important because it ties together what we have seen in the preclinical models with what we expect to see in the clinic. It’s really matching up very nicely and that consistency I think is very exciting to them. But also, I think as physicians want to treat their patients and wanted to see their patients treated better there, a lot of the enthusiasm is fueled by the fact that bavituximab really has potential in chemotherapy, which is going to continue to be an important part of how patients are treated in lung cancer, in breast cancer. But also that as new and emerging treatments such as obviously Opdivo and Keytruda, coming to the marketplace that bavituximab has a place there as well. And so I think they like the fact that they are working on a drug that really does have a potential to be used throughout the continuum when they think about how their patients might get treated in the future.

Okay, thanks. That’s helpful. With regard to breast cancer, since you brought it up, you are combining chemotherapy now with immune-checkpoint I mean breast cancer has been noticeably absent for most immune-checkpoint studies, can you comment on that or is – are there emerging immunotherapies in breast cancer?

Yes. I mean I think that obviously the focus from an immunotherapy standpoint has been on the – obviously melanoma, more recently lung cancer, bladder cancer. So I think there is a number of indications, which have historically been kind of hot spots for immunotherapies. I think breast cancer is relatively unexplored. It’s one of those tumor types that tends to have less of mutations that would generate some robust immune responses. But I think again, what’s needed is like changing that tumor microenvironment and getting those immune responses started and that’s where we see a role for bavituximab. So I think as we continue to move forward, while our initial focus because of our great clinical data today, the chemotherapy combination is going to the chemotherapy, we are evaluating immunotherapy combinations in breast cancer and you will just have to stay tuned to see how that evolves.

I think George also – George what we saw at ASCO was that the T-cell CD8 positive immune cell infiltrate is becoming a key marker in breast cancer for a positive prognosis. So certainly, the underlying value clinically for bavituximab or immune stimulation in breast cancer is certainly there.

And in that regard are you reconsidering pancreatic cancer, I mean you had good results in that before.

That’s interesting. We have had a lot of interest in – from collaborators in pancreatic cancer because when you just go back and look at our data, we had nice tumor responses but we did see the survival tail in the overall survival curve. And I think that, that is really something that drives interest because if we can combine that with downstream checkpoint inhibitor like PD-1, PDL-1 inhibitor, we think that, that’s absolutely an indication, where we potentially could have some impact. So it’s one, it’s just on the list along with, as you mentioned breast and a few others. But there is definitely a lot of interest in pancreatic cancer, not just from Peregrine but from others in the immuno-oncology space.

Okay. And then finally a couple of quick questions perhaps about costs the MSKCC collaboration, any terms that you can disclose or how that might increase your R&D spending?

George, this is Paul, good question. We haven’t really disclosed kind of the details of all of our collaborations. But it’s a typical sponsored research agreement where we provide drug and funding and they perform research for us. So that’s about all I can say about that because we don’t detail it out specifically within our filings.

I think in the scheme of things with all the clinical trials going on or what have you it’s not...

Insignificant portion of our R&D spend.

Well, which brings me to my final question, the significant spend of your upcoming Phase 2 and Phase 2/3 and continuing SUNRISE trial. Part of it seems to be offset by the Avid revenue. But how – and Paul you mentioned how you are managing the capital resource – various sources of capital, how – do you want to talk about the burn rate, expected burn rate, do you want to talk a little bit about how you might consider partnering any of these programs in the near future to help offset some of those costs?

I mean, we are very common with other biotech companies and that we operate in a fairly capital-intensive industry. That being said, we are actually a very unique company in that we actually generate revenues. And as I mentioned earlier, we are increasing our revenue guidance this year to $30 million to $35 million with the $40 million backlog. We have our bavituximab program, which is a I/O compound in Phase 3 development that we own the 100% of the rights to. That brings tremendous partnering opportunities to the table. And that’s one of our goals here internally is to partner ex-U.S. and to drive the value here in the U.S. for ourselves. So, I think we are going to be looking at lot of those things to kind of balance our financial resources and these are just a couple of sources that we have available to us that not all companies have.

Yes, I think George in addition to that, I mean, I think if you look at it from a timing standpoint, as we are kind of completing enrollment in the SUNRISE trial and so that kind of moves more and more towards completion of that study will actually be ramping up these other studies and that’s important for a couple of reasons, but also from an expenditure standpoint that as we expect to see the cost associated with SUNRISE go down, we will see the cost of these other trials go up sort of replace it, but to add that potential value as a go forward.

And that’s a good point, Steve, that we actually strategically aligned kind of the completion of enrollment with the current SUNRISE trial with the initiation of these other Phase 2 trials, so...

And then I suppose the additional trials also act as leverage in any partnering discussions you might be engaged in right now?

Absolutely.

Is that so?

Yes.

Okay, thank you very much, everyone. Thank you.

Thank you.

Thanks, George.

Thank you. [Operator Instructions] Our next question comes from the line of Rahul Jasuja from Noble Life Science Partners.

Hey, guys. Thanks for taking my question. Just a few relating questions for me and some clarifications. So, looking at PS blockade as a checkpoint – as immune checkpoint – or the PS’s immune checkpoint and comparing that to the other checkpoint – immune checkpoints, PD-1 and CTLA-4 and so on, could you comment on the fact that you are getting such a broad repertoire of an immune response versus blocking just PD-1 or CTLA-4? So, you are probably connecting an innate adaptive immunity, so one comment on that sort of differential? And two, how does that affect your opportunity for clinical development?

Yes, I think I will start off and turn over to Jeff, but I can’t – I really view sort of the immune system as it’s a balance, right? So, what is happening is that patients whose balance has tipped toward immuno-activation, particularly T-cell activation, are the patients who are now responding well to PD-1, PDL-1 therapy, it’s because those agents now have an immune system, an immune active component to work with, namely the T-cell. And I think what bavituximab does is it helps create that same balance in patients that otherwise might not have it by changing the tumor microenvironment, activating T-cells and now of course, you have got a perfect environment for these downstream checkpoint inhibitors to work. So, I mean we really view it as a nice synergistic relationship with these downstream checkpoint inhibitors, because they are helping keep going what bavituximab can get started. So, it can really get that immune system kicked off and now we can keep that going with PD-1, PDL-1 therapy. So, I think effectively, anywhere, PD-1, PDL-1 are, I think there is still going to be a need for converting more patients over to responders and so we see that as very broadly in the I/O combinations really where the potential is from a development standpoint in the clinic. And the same can be said for chemotherapy. Chemotherapy effectively by killing cells and causing more PS exposure inhibits the immune system from being able to respond to those tumors adequately. So again, anywhere where chemotherapy is effective, we think we have a great potential to combine with that and sort of drive the immune component to go along with the direct tumor killing of the chemotherapy and particularly like the Taxanes of course and we have seen great clinical data and so we are following that lead. And I think that’s what we have learned from our own clinical experience. So, I will turn over to Joe maybe or Joe or Jeff to expand on that?

Sure. Thanks, Steve. I would like to think of PS targeting kind of as a catalyst or an enzyme catalyst. So, it’s not necessarily the enzyme itself, but it lowers the barrier to activation. And you can kind of think of that in the tumor microenvironment terms is that there is such a high barrier to activation in this local microenvironment. And by coming in and blocking the PS signaling, sending activation signals to FcR gamma now you are turning the tables and as Steve said kind of reestablishing that balance to an immunoactivation balance and now you have an environment that’s capable of recognizing tumor cells and killing it.

I will just add from the clinic, yes, this phenomenon really seems to be again localized to tumor microenvironment. So, we see really a great safety profile and the combinability of bavituximab with virtually any kind of class of antineoplastic treatment, including immunotherapies is certainly an advantage and that’s how we hope to be able to really capitalize on.

And so I mean is it – it’s tempting to say that, that maybe comparing the PD-1 CTLA-4, where it seems like you only need to have tumors that have TILS [tumor infiltrating lymphocytes] out there, you probably are getting de novo allergen presentation and really sort of getting more axial [ph] spreading and so on because of the way your antibody looks. Is that okay to say?

Yes.

Okay alright good. Let me move on to my next question. So, we talked about obviously combination with checkpoint inhibitors if you got our MedImmune’s OX40 to the co-stimulator in the pipeline, 4-1BB is getting a lot of traction. What about in combination with co-simulators? Is that on the cards with the Wolchok Lab or is that not on the cards?

Absolutely. That’s some of our main intent. We have looked at the checkpoint inhibitors quite extensively internally. And that’s the kind of data that attracted this kind of collaboration and the logical follow-on now is to look at the agonist through the immune stimulator, co-stimulators in that realm.

Okay, that makes sense. And then a question on kinase inhibitors, I mean, there is tons of tumors and cancer subtypes and many of them are genetically defined that are based on kinase inhibitors. You have talked about sorafenib and I know that I think for sorafenib treatment also flips PS. So, is that another area of – or subset of tumors that you could look at combination approaches with kinase inhibitors?

Absolutely. And again, anything that stresses the tumor microenvironment out I think will work nicely with PS blockade and we are not excluding patients who have known, for example, EGFR mutations or ALK gene rearrangements in the SUNRISE trial, for example. So, we will have an opportunity at the end of the study to kind of look at and see patients who have those genetic mutations, driving mutations if they fare better on the bavi containing arm.

Okay, good. And then one clarification that I have discussed that a bit. So, you are using PDL-1 as a biomarker, now as I understand it, you are going to look at PDL-1 prior to therapy and I think you talked about that in the breast cancer. Is it breast cancer, I think it’s breast cancer or is it non-small cell lung cancer? You are going to look at PD-1, PDL-1 and then post-treatment, you are going to look for increasing the PDL-1 that would then indicate a positive anti-PS therapy, is that right?

Yes, I mean effectively and we have retrospectively, you have to look at this and see if we see the same results, CD8 activation and therefore PD-1 increase along with the PDL-1 increase that we have seen in our liver cancer translational data as well as their ex vivo, microsphere project, and of course, preclinical.

Yes, and that’s actually a component we have been building into a lot of these studies, so it’s also built into the melanoma IST as well as a rectal adenocarcinoma IST and it’s going to be built into all these studies going forward, because we recognize that’s an important validation point for each of these studies. It’s one of the data points that can come from these studies, which is nice because they are open-label studies. We will have surrogate and we will have the regular endpoints but also we will have these translational data points so it will be coming from those trials as well. So we think each of these studies we start can be rich with sort of data points that’s all basically validating for this mechanism of action and for these particular combinations. And it’s not just PDL-1 that we are looking at, we are really just building an immune profile in this pre and post-tissues in these patients to look at the condition of the lymphocytes, the myeloid cells and the dendritic cells, so...

Okay. So and then for the non-small cell lung cancer, the second line, the SUNRISE trial, obviously these metrics prospectively were not studied on medically for each patient or is there anyway you can look at retrospectively these metrics?

Yes. We are collecting, as available archival issues of pretreatment. So at least we should have some kind of hint of prognostic, if you will. These are terms that we value.

Okay.

Yes. I think that while we may get some data from the SUNRISE trial, we also recognized early on that, that’s Phase 3, and the goal there is to get us through and execute and hopefully gets an approval endpoint at the end of the study. The more complicated you make it, it’s more difficult it is to enroll a study like that. So it’s one of reasons it’s nice about these upcoming studies, which are a little more amenable to the sort of analysis and planned data analysis right upfront.

Okay. And then one last question and this is probably for – well I guess for everybody, but maybe more for Joe – sorry for Jeff or maybe Joe. So you talked about not having any autoimmunity with PS blockade versus the fact that there is the risk of autoimmunity with PD-1 and probably more with CTLA-4, now just sort of trying to understand the mechanism is it because maybe the bigger effect of blocking PS really comes from not just preventing the immuno – or worsen the immunosuppression, but actually because of the FcR gamma-mediated effect and so on that instead of revitalizing the immune systems and not what only affects immunosuppressive pathway, that is the case in PD-1 and CTLA-4?

Yes. Rahul, this is Jeff. That’s certainly our view. And we are engaging in preclinical and ex-vivo experiments to look at that closer. But certainly, the dogma is in around FcR gamma activation, is that it’s a very cross-linked dependent – concentration dependent event. And so if there are enough cells there, apoptotic cells that are expressed in PS, then that activation won’t take place and you will also need a lot of myeloid cells there at the same time. So we believe that it is very cell and receptor concentration dependent. And that’s why we are not seeing the autoimmunity in a systemic type way in our animal models. And we haven’t seen it, as Joe mentioned, clinically manifest itself on the safety profile.

Yes. I think another point there is that with blocking PS, we are simply I think restoring what should be the normal immune response to the tumor. So we are actually pushing the tumor beyond what is normally supposed to do or pushing the immune system beyond what it’s normally supposed to do. We are actually just recreating that balance that allows the immune system to activate. And I think if you look at other checkpoints, you are basically pushing the immune system beyond what it’s actually supposed to be doing, you are supposed to have those checks in place to protect the body. And when you take them all off, then of course, you are going to have these complications. And I think it’s one of the very promising things about bavituximab combination therapy is we are simply restoring the right balance of immune response to the tumor that allows that immune response to take place. We are not pushing it beyond its limits. But if we can then take these downstream checkpoints and push that immune response as far as their safety will allow, then we shouldn’t be adding to the toxicity because it’s already there in those patient that are probably responding the best. So I think that’s one of the things. Again, when we talk to physicians, they really like the concept, hey we have got basically a pretty safe drug. We can start monitoring these other things versus just adding two toxic things together and what happens, well we have seen some of the clinical data that you just get double the toxicity and that’s getting to the edge of I think what patients want to see at the end of the day.

Sure, that makes sense. Well, thank you guys and congratulations on the Avid revenue, a pleasant surprise.

Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back over to Steve King for any closing comments.

I would like to start by thanking all of you for participating in today’s phone call. In closing, I would like to say that Peregrine’s preclinical, translational, and clinical programs are contributing significantly to the promise of immunooncology and the impact it will have on millions battling cancer. More than ever, we believe bavituximab can help standard and emerging cancer treatments to overcome the immune suppression so commonly found in the tumor environment. In closing, as always I want to thank our stockholders for their continued support and I would like to especially thank the patients and their families that are participating in our bavituximab clinical trials. With that, we will conclude the call.

Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program and you may now disconnect. Everyone, have a good day.