Analysis - PGL - Progen Pharmaceuticals

PGL - Progen Pharmaceuticals

Price($) 1.62
NTA ($) 1.57
P/NTA 1.031
Team 6.5
BurnPeriod 13.89
ProductPipe 5.5
ForeignMarket 1
Cash:Debt 455.8

PGL product score is about 5.5 - this is above average in general but there are certain reservations to consider. The main drug is PI-88 targeting multiple cancer including lung cancer, liver cancer, multiple myeloma and melanoma. There are other products which are in very early clinical stage and would not be mentioned here. PI-88 for Liver Cancer is advancing into PhIII while PI-88 for melanoma is undergoing PhII, resuls due in H2 CY2008. It is these two product that contribute to the score of 5.5.

The 3 other applications of PI-88 has mixed results and this author takes a conservative approach to write them all to zero. PI-88 for multiple myeloma results in 2003 states: "PI-88 activity has been seen in this disease and these results indicates that stabilization of multiple myeloma with PI-88 with side effects is possible". Somehow this does not seem to be a very positive result in my opinion. PI-88 for Prostate cancer concluded but further investigation needed about side effects which PGL currently claims to be associated with its combination with another drug Taxotere. PI-88 for Lung Cancer PhII did not yield positive results. It appears that the PI-88, the main development product, is not the wonder compound it was thought to be several years ago. This also impacts on the confidence of the remaining products.


Financial inconsistencies in the financial report has been observed in the Interest Bearing Liabilities. Perhaps a reader may wish to clarify this but it appears that each of the half year report claims to have an interest bearing liability but the entry disappears in the annual report. This pattern is seen over the last 3 years.

Main financial indicators for PGL at the moment is very strong. Apart from the debt inconsistencies, even the stated half year debt appeared to be very low. It has got lots of cash, over $91m and given current outflow rate, it can last over 13 half years. But note, ph III trials are usually a lot more expensive than other trials, so assume that it can last half that time - i.e. 6 half years. Due to large cash available and small share, the price/NTA is about 1.5 - a very low number for a company with a ph III product.

Management and Board are made up of an impressive list of characters with strong scientific and technical knowledge. It has a score of 6.5 which is above average in this category. Curiosly enough, this author has seen perhaps a reflection of the highly qualified board and management team in the very professional way the recent annual reports are written. The professional nature, I believe has also been instrumental in the success of PGL in obtaining funding and building confidence in the company that saw price rose to over $9 in early 2007. This comment is made to emphasize that the long term success of a biotech ultimately lies with the quality of product, without which the company cannot continue to survive.

Recent Acquisition of Cellgate gives PGL a presence in the US, potentially an established network for clinical development. In addition it also gives some additional product pipelines, hence diversifying of product risks. Financially in monetary terms (i.e. not studying the value of Cellgate itself), the acquisition is not cheap, with US$2.5 upfront and up to US$19.5 in cash or shares at a later date.

In summary, PGL shares look very cheap due to strong cash position and small number of stocks. However, the main concern by this author is the efficacy of PI-88 compound. It has been shown not to have performed well for 3 applications. Therefore PGL is considered here to be more risky that other biotechs. Recent price pattern is that of a downward trend. It may be worthwhile to wait until price has stabilised.

Recommendation: Cautious Buy at 1.50 or below and when price steadies.