Steven King - President and CEO Paul Lytle - CFO Roger Lias - President of Avid Bioservices Tim Brons - IR

George Zavoico - JonesTrading

Good day, ladies and gentlemen, and welcome to the Peregrine Pharmaceuticals First Quarter Fiscal 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference may be recorded. I would now like to hand the conference over to Tim Brons of Peregrine’s Investor Relations Group. Please go ahead.

Thank you. 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; and Dr. Roger Lias, President of Avid Bioservices. Today, we will be providing an overview of the company’s operations and progress, spanning the Avid Bioservices contract manufacturing business, as well as our research and development programs and corporate activities. After our prepared remarks, we will welcome your questions. Before we begin, I’d like to caution that comments made during this conference call today, September 11, 2017, will contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, concerning the current belief of the company, which involves a number of assumptions, risks and uncertainties. Actual results could differ from these statements and the company undertakes no obligation to revise or update any statement made today. I encourage you to review all of the company’s filings with the Securities and Exchange Commission concerning these and other matters. With that, I will turn the call over to Steve King.

Thanks, Tim, and thanks to all of you who have dialed in and all of you who are participating via webcast today. I would actually like to start with a moment of silence in respect to those that died in the 9/11 terrorist attacks and for those that have been affected by the recent hurricanes. Over the past year and a half, following the negative results from our Phase III SUNRISE trial, we have seen the company change from an R&D-focused business that has been running a contract development and manufacturing organization or CDMO on the side to a CDMO business that has been running R&D on the side. I am very proud that we have been able to grow our CDMO business, Avid Bioservices, from an internal support operation to a full service CDMO that now manufactures bulk drug substance for products that are approved and marketed in over 18 countries by leading biopharma companies. The company was recently recognized as a leading CDMO by Life Science Leader and received multiple 2017 Contract Manufacturing Leadership Awards for Quality, Reliability, Capabilities, Expertise and Compatibility. Avid has an outstanding regulatory inspection history and state-of-the-art cGMP manufacturing facilities. This growth did not happen by accident. It is the result of the dedication, selflessness and intense effort by the Avid and Peregrine employees that have been involved in the business, which has always been the secret of our success and will continue to be in the future. We have two very different businesses, CDMO and R&D within Peregrine with different investment and growth strategies and the two efforts need to be separated so that each has a better opportunity for success. From a business standpoint, we want to ensure the success of Avid which represents a relatively lower risk business that can be grown over the coming years to create significant stockholder value. In the meantime, we also want to find the best strategic options for advancing the bavituximab and PS-exosome diagnostic programs which will require significant short-term investment which by the very nature of R&D is relatively high risk and capital intensive. The appointment of Dr. Roger Lias as president of Avid Bioservices and his appointment to Peregrine's Board of Directors marks an important next step in this transition. Roger is a highly experienced executive with a long track record of success in the CDMO industry, and was an ideal candidate for the position. We have a successful commercial CDMO business and we look forward to taking Avid to the next level under Roger's leadership. Naturally, job one will be a smooth transition to ensure we continue to support our existing clients while simultaneously working to attract new clients as we look to grow the business on multiple fronts. As we focus on the success of the CDMO business, we have been evaluating the best options for divesting our R&D assets. The goal being to find a partner that will make a significant short-term investment in the bavituximab program in order to validate the subset analysis from the Phase III SUNRISE trial and build on recent data from our collaborators. The subset analysis, which supports the combination of bavituximab with checkpoint inhibitors, is compelling but needs further clinical validation. This data, combined with findings from our collaborators at Memorial Sloan Kettering Cancer Center or MSKCC supporting combinations with cellular therapies including CAR-T and the ongoing trials from our partners at the National Comprehensive Cancer Network or NCCN, all as outlined in our earnings release, have bolstered our belief that our bavituximab program can be successfully advanced in the right hands. However, there is still much work to be done to realize this value. For this reason, we have concluded that in order to best position Peregrine’s R&D assets for successful development, they should be advanced by a partner with the appropriate expertise and ample resources to invest in the necessary clinical trials. To that end, we have been working diligently towards the transformation of the overall business to becoming a pure-play CDMO while assessing the best strategic options for the R&D assets that would allow stockholders to directly see the future value from their continued developments. By partnering and eliminating future R&D expenditures, we believe we are best positioning Avid for future growth. Through reinvestment and expansion we believe we will attract new customers and extend current contracts that will help position Avid as a leading U.S. CDMO. We are moving forward expeditiously with strategic discussions as we recognize the need to move quickly both from the R&D and CDMO standpoints. We hope to bring this process to completion over the coming months and will update you on our progress. Now back to Avid. We have continued to see lots of activity on the CDMO front, including first quarter revenues of 27 million. And while we are projecting a relatively flat revenue year, based on the decreased fiscal year 2018 forecast from our two largest customers, we do believe this decrease will be temporary and expect that Avid will continue to thrive despite lower revenue from these two clients in the short term. There could still be a revenue upside this year as our new customers continue to move towards GMP manufacturing and the potential to bring on even more new customers. In addition to our business development efforts, we have also continued to make critical investments in our CDMO facilities to ensure that we offer the most state-of-the-art systems. During the quarter, we installed two new 2,000 liter bioreactors in the Myford facility and we have already secured commitments for this capacity. Due to its modular design, there’s a potential to install additional bioreactors in our Myford facility which will allow us to grow the business in the future. In addition, we continue to evaluate options to expand Avid’s offerings in order to meet even more needs for our existing and prospective clients. I would now like to turn the call over to Roger for a few words on his joining the company and future directions, and we will then turn the call over to Paul Lytle for a discussion of financial highlights for the quarter and for the remainder of the fiscal year. Roger?

Thanks, Steve, and good afternoon, everyone. I’d first like to say that I’m absolutely delighted to be able to join the Avid Bioservices team at what is a very exciting time for the company. It’s clear that the broad biologics market remains robust and there is undoubtedly very strong demand for high-quality contract development and manufacturing services to support the development and launch of a wide range of important therapeutic biological products. Based on my personal long experience in this field stretching way back to the formative perhaps market-making years at Celltech Biologics which is now Lonza and at companies such as Diosynth, KBI BioPharma, Cytovance Biologics and Eden Biodesign, I very strongly believe that the building blocks are mostly in place here at Avid to support growth and transition to a world-leading CDMO. I’ve had the opportunity to look at Avid recently both as a competitor over the years and even more recently as a consultant supporting a very well funded company on the East Coast that has selected, I’m pleased to say, Avid as its preferred manufacturer for a very interesting and potentially lifesaving product that should move rapidly to commercialization. The decision-making process for this company was multifaceted. The quality and capabilities go without saying and ultimately the decision to come to Avid came down to the employees, the people, the flexible and creative approach and the ability to meet timelines. And it’s interesting that Avid beat out most major contract manufacturers to win this project, and I was certainly duly impressed. In many ways, Avid is in a very unusual position relative to its peer contract manufacturers based on the somewhat unorthodox way in which the company has evolved. An exemplary 12-year track record in releasing commercial batches is very unusual and coupled with almost 25 years of overall experience in biologics, process development and manufacture, this represents a truly tremendous platform from which to grow the company. There’s clearly work to be done, however. Over the shorter term I believe we clearly need to diversify the client base and to continue to grow the order book and revenue backlog. I believe that as part of this effort, Avid’s market visibility and reach needs to be dramatically increased. The new Myford manufacturing facility represents a tremendous opportunity and obviously needs to be filled as a priority, and I’m pleased to see progress in that direction already. I believe that Avid’s earlier stage process development and process sciences capabilities need to be strengthened both in support of manufacturing operations and to create a stronger pipeline of future manufacturing projects and additional revenue stream. Stepping back and taking the longer view, there’s clearly exciting opportunities for considerable growth both organically and potentially via mergers and acquisitions. Clearly I believe the available Myford II expansion space provides opportunity to add additional commercial drug substance manufacturing to the type already installed, but we should also examine opportunities to potentially add earlier discovery services to feed the process development and subsequent manufacturing pipeline and potentially latest stage drug product manufacturing services that will fill and finish a product. I believe strongly that we also need to be ready to look beyond antibodies and recombinant proteins and to take advantage of growing market demand for newer classes of products such as viral vectors and vaccines. These support exciting new therapeutic advantages in gene, cellular and immunotherapies, antibody-drug conjugates and bio multi-specific antibody products. Each of these has specific technical and operational challenges that will need to be carefully addressed, but the opportunities are significant and I believe the timing is very good. So in closing, I’m very much looking forward to getting started and I believe that the future looks very bright for the broad biologics market and for Avid Bioservices in particular. I’m very much looking forward to taking Avid to the next level and to reporting on progress during future calls. And with that, I’d hand over to Paul who will cover the quarterly results in more detail.

Thanks, Roger, and welcome to the team.

Thank you.

I’ll now discuss our financial results for the first quarter of fiscal year 2018 starting with revenue. As a backdrop, our revenue guidance for the full fiscal year is expected to be between 50 million and 55 million of which we recognized 27 million during the first quarter of fiscal year 2018. This included 10 million in revenue that shifted from Q4 of last fiscal year to the first quarter due to a customer requested shipping delay. This represents an increase in revenue of 383% versus 5.6 million that we reported during the same prior year period. While we had an excellent quarter, we have also seen decreases in manufacturing demand from our two largest customers. As a result, we saw revenue backlog decline to approximately 33 million at the end of the current quarter. As we look ahead, adding new customers and diversifying our customer base will be extremely important to growing revenue. This is the key reason we have hired a President of Avid solely focused on our CDMO business and someone who is highly connected to the bio-manufacturing industry. Let me shift gears now to discuss our gross margins on contract manufacturing. During the current quarter, our gross margins declined to 24% mostly due to a higher percentage of revenue related to pass through charges, such as raw materials, that are recorded to revenue at cost plus a nominal mark-up. This is relatively standard for our industry. During the current quarter, 38% of our revenue was related to pass through charges versus 20% in the same prior year quarter, thereby lowering the overall gross margin. In addition, we saw lower capacity utilization during the current quarter in addition to unavailable capacity while we installed and validated two 2,000 liter bioreactors which are now operational. This also impacted our gross margins for the current quarter versus the same prior year period. Now turning to R&D, we are continuing our commitment to reduce R&D spending. In fiscal year 2017, we reported a 52% decline in R&D expenses and we have continued this trend into the first quarter of fiscal year '18 achieving a 57% reduction in R&D expenses. Based on our plan to pursue strategic alternatives for our R&D assets, we expect R&D expenses to decline at least 50% overall this year and it could be a greater percentage decline depending on the timing of any potential transaction around the R&D assets. In summary, the increase in manufacturing revenue combined with a decrease in R&D spending has translated into a reduction in our net loss by 89% to 1.2 million for the current quarter versus a net loss of 11 million for the same prior year period. This concludes my financial overview. I will now open the call up for questions. Operator?

Thank you. [Operator Instructions]. We have a question from the line of George Zavoico from FBR [sic] (JonesTrading). Your line is open.

Thank you. At this time, I will like to hand the call back over to Mr. Steve King for any closing remarks.

Okay. I’d like to thank you all again for participating in today’s phone call. As always, I want to thank our stockholders for their continued support. And I would like to especially thank our patients, their families and the investigators that are participating in our bavituximab clinical trials. With that, we will conclude the call.

Thank you, ladies and gentlemen, for connecting to our conference today. This concludes the program and you may all disconnect. Have a great day.