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Jan 8, 2014

Stock Watch: What’s Popping Up at Progenics

Scott Matusow explains why he thinks the Relistor developer is a company to watch.

Stock Watch: What’s Popping Up at Progenics

Progenics, a firm that engages in the R&D of biotechnology product candidates in the areas of oncology and therapeutics, has two significant catalyst events rapidly approaching. [© Lane Erickson - Fotolia.com]

  • Catalyst events for developmental pharmas usually mean the associated stock prices see good appreciation in the period leading up to these events. As we get within a few days to a catalyst event, the stock price hits a peak, and many traders take profit from their shares while others roll these into the stock's option chain. If traders and investors feel a company will see positive results from these catalysts, they normally purchase call options. Today at stockmatusow, we focus on a company that has two significant catalyst events quickly approaching.

  • Progenics Pharmaceuticals (PGNX)

    Progenics engages in the research and development of biotechnology product candidates in the areas of oncology and therapeutics worldwide. The company offers Relistor* (methylnaltrexone bromide), a subcutaneous injection for the treatment of opioid induced constipation (OIC) in patients with advanced illnesses such as cancer, as well as for the treatment of OIC in patients with noncancer pain. It also offers Relistor-Oral, which has completed Phase III testing for the treatment of OIC in patients with noncancer pain. It also provides oncology medicines including PSMA ADC that is in Phase II testing for treatment of prostate and other cancers.

    The first drug we want to talk about in more detail is Relistor, which is the only prescription medicine approved in the United States to treat this form of constipation. Relistor is now approved in the U.S. and over 50 other countries around the world. In the U.S., Relistor is marketed by its commercial partner Salix Pharma (SLXP), a leading specialty pharmaceutical company focusing on gastrointestinal diseases. It is sold outside the U.S. by sublicenses of Salix and Ono Pharmaceutical in Japan.

    The interesting thing that Progenics is doing with this drug is that it's trying to increase the patient population that the company can treat with it. Salixa and Progenics has an advisory panel meeting (ADCOM) coming up in March of this year to review the supplemental new drug application (SNDA) for Relistor expanded usage in OIC chronic pain. If approved, this additional form of Relistor would now treat patients taking opioids for noncancer pain who suffer from OIC as a result. This population includes patients taking opioids for conditions such as back pain or joint pain.

    In July of 2012, Salix and Progenics Pharmaceuticals received a Complete Response Letter (CRL) from the U.S. Food and Drug Administration (FDA) following its review of the sNDA for the Relistor injection for subcutaneous use for the treatment of opioid-induced constipation in adult patients with chronic, noncancer pain—the CRL requested additional clinical data.

    Sources tell us the reason for the CRL was because according to the FDA, Salix submitted incomplete safety data. It has been over one-and-a-half years since the CRL, and both companies, after extensive meetings with the FDA, engaged the new FDA appeals process believing they have the complete safety data to ensure the FDA approves the sNDA. As a result of the appeals process and meetings with the regulatory body, the FDA assigned the ADCOM.

    We believe come March, the ADCOM will recommend approval for the sNDA to the FDA, and the FDA will likely accept this recommendation and approve Relistor for this chronic pain indication.

    • Progenics is set to receive $50M for sNDA approval, and $200M in milestone payments from Salix.

         1. Up to $50.0 million upon U.S. marketing approval of an oral formulation of Relistor.

         2. Up to $200.0 million of commercialization milestone payments upon achievement of specified U.S. sales targets.

    • Progenics' proprietary drug candidate, if eventually approved, should warrant a market cap well north of $1B.

    Sucampo Pharma’s (SCMP) Amitiza is the top approved treatment for OIC in patients with chronic pain. In July 2013, Amitiza was launched in the U.S. for the treatment of OIC in adults with chronic, noncancer pain. As stated, we expect ADCOM to give a positive recommendation for Relistor's sNDA, which would boost sales significantly of the drug and should give Amitiza a run for its money.

  • PSMA ADC

    Progenics lead developmental drug candidate named PSMA ADC is about to get a lot of exposure. PSMA ADC is a fully human monoclonal antibody-drug conjugate (ADC) directed against prostate specific membrane antigen (PSMA), a protein found at high levels on the surface of prostate cancer cells and also on the new blood vessels of a number of other types of solid tumors.

    Topline data release on the chemotherapy experienced cohort of the Phase II PSMA ADC trial will be presented at the American Society of Clinical Oncology's (ASCO) 2014 Genitourinary Cancers Symposium Meeting in San Francisco on January 30 to February 1, 2014.

    In a December 6 press release, Robert J. Israel, M.D., executive vice president, medical affairs at Progenics, stated:

    “PSMA ADC is the most advanced antibody-drug conjugate in clinical development to treat prostate cancer. Based on the data seen with PSMA ADC in chemotherapy-experienced patients, we have decided to explore whether this compound can also benefit men in the less clinically advanced chemotherapy-naïve setting.”

    Basically, the above states the company sees the potential for the drug to be used in greater measure without as much chemotherapy dependence. Essentially, the company is seeking the eventual expanded use of the drug.

    Prostate cancer is the most common cancer in men in northern European countries and the USA, and the second leading cause of cancer-related death in men in most western countries. Needless to say, the top-line data here, if positive, should be a very big price driver for the company.

    PSMA ADC could end up being in direct competition to Dendreon's (DNDN) Provenge. Dendreon has fallen on hard times recently, mainly because of poor management. It's hard to see Provenge competing with much of anything while the asset is still in the hands of current management. Therefore, we feel Dendreon is likely to be acquired this year by a mega pharma, which we believe will be Johnson & Johnson (JNJ).

    PSMA ADC could also end up being a competitor to Sanofi's (SNY) Zaltrap—Zaltrap received FDA approval in August of 2012. Zaltrap was developed in a partnership deal by Regeneron Pharma (REGN). Under the terms of its partnership with Regeneron, Sanofi gets half of the drug's profits and Regeneron has to repay half of Sanofi's development costs. Many analysts believe Zaltrap will see peak annual sales of $300M to $400M.

  • Conclusion

    With two important near-term catalysts quickly approaching, we believe Progenics should attract many biotech catalyst traders. The first catalyst is the release of top-line data from PSMA ADC at the end of this month at the ASCO conference. The second will be the FDA ADCOM meeting, which is tentatively scheduled for March of this year. Both catalysts are important for the company moving forward. PSMA ADC is the company's proprietary drug, currently without a partner. If Phase II data here is good, and we believe it will be, Progenics should be able to attract a mutually beneficial partnership with a large pharma as Regeneron has done with Sanofi with its drug Zaltrap.

    It's also worth noting that Progenics did a clean and strong financing deal in June of 2013, raising nearly $35M in a warrant-free deal. Because of this, the company can choose to "go-it-alone" with PSMA ADC if it chooses to. Either way, we expect these catalyst and their potential positive effects to drive the company's stock price significantly higher in the short term, perhaps even touching the $7 level. Progenics has a current market cap around $340M, which we feel is extremely low at this time in lieu of the catalysts coming up.

    Time will tell the long term story with Progenics moving forward in the next two to three years. If Relistor receives approval for both the recent sNDA filing and for its PSMA ADC, a stock price north of $30/share, or around a $2B market cap, is in line if management executes correctly.

    It's also worth noting that the Bakers own a little over 4M shares of Progenics. We believe their position in this one will eventually pay off very well, as most of their positions of the last two years or so have.

    Our short-term price target opinion on Progenics is around $6.50, with a one year target opinion of $11–$12 a share, or roughly $700M, based on positive Phase II PSMA ADC top-line data and Relistor sNDA approval.

    *Relistor is a trademarked name owned by Salix Pharmaceuticals.



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