Progenics: Investors Are Right To Be Wary

by: EP Vantage

The termination of a licensing agreement between a big pharma company and small partner is often spun as an opportunity for the latter party, whilst a plummeting share price tells a completely different story.

This could well have been the situation for Progenics (NASDAQ:PGNX) Wednesday, which announced that it had “regained the rights” to opioid-induced constipation drug Relistor from Wyeth (WYE), spelling the end to a four-year relationship.

However, Progenics’ share price is already at rock bottom, and this appears to have saved the company from a painful mauling on the stock market today. Investors have been deserting the company in droves for the last few years, largely because Relistor has been a big disappointment. The product and, by implication, Progenics, has certainly suffered as Wyeth’s attention has been elsewhere in the last year. The company believes bringing it all back in-house will prompt a change in fortunes. This is not outside the realm of possibility, but there is still a lot of work to be done and investors are unlikely to believe the spin until sure signs of progress emerge.

Taking their toll

Shares in Progenics slipped a few cents in early trading Wednesday to $4.76, close to the all-time low of $4.53 touched in June of this year. With a market cap of $146 million and cash of $117 million, investors are clearly ascribing little value to the company beyond what it has in the bank.

A number of factors have taken their toll in the last few years, including disappointing take up following the launch of Relistor in mid-2008, slow approval progress for broader indications and little news on the development of a more convenient and potentially higher value oral formulation of the drug. It is currently only available as a subcutaneous injection.

Progenics believes that regaining control will solve all of these problems. Certainly, Relistor will be the company’s number one priority, while at Wyeth it would have been way down the list.

Second-quarter sales totaled $3.2 million, up from the $1.9 million recorded for the previous quarter but hardly representing a bolt from the blocks. Currently, analysts are forecasting sales of $236 million by 2014, although this will reflect an assumption of broader approvals.

Strategic plans

Currently, the drug is only approved to treat opioid-induced constipation (OIC) in patients with advanced illness receiving palliative care. The company plans to file for approval to treat OIC in patients with chronic pain, a much larger market, in early 2011. Wyeth has agreed to complete, and fund, an ongoing phase III trial that will support that filing. In the meantime, approval could come next year for a more convenient pre-filled syringe, which could well help spur demand.

Wyeth will continue to market Relistor for the next 12 months in the US, and 15 months elsewhere, before handing it over completely to Progenics. By that time, the company will have decided whether to seek a new partner or go it alone. The outcome of the phase III pain study could well have a big impact on this decision, as if the product is looking good, a partner would help help to break into this much larger market.

However, the oral Relistor project will transfer over to Progenics immediately. Delays in choosing a candidate to take into pivotal trials has caused a lot of frustration, but the company’s management said today on a conference call that this should commence early next year, pending the completion of some remaining pre-clinical work.

A full timetable for the oral project will emerge in the next few months, Progenics said; swift progress here will be hugely important in restoring faith in the product.

Tough road ahead

As the only FDA approved treatment for OIC, Relistor certainly has the potential to be a valuable product. Past forecasts for the drug illustrate how excited analysts were about the company before the tortuous developmental journey punctured optimism. In September 2007, consensus for sales in 2012 was $883 million; currently that figure sits at $136 million.

Broader approval and progress with the oral tablet could well restore confidence, but this will take several more years and probably more cash than Progenics has in the bank. A new partner, if one can be found, must surely be pursued or another source of funds found.

Competition is also on the horizon, in the shape of a Amitiza from Takeda (OTCPK:TKPHF) and Sucampo (NASDAQ:SCMP), with phase III data in OIC due by the end of this year. A promising product from Nektar (NASDAQ:NKTR), NKTR-118, is due to enter phase III and was just cornered by AstraZeneca (NYSE:AZN) in a huge deal last month.

Progenics has a long and tough road to travel with Relistor, and investors are right to remain sceptical for now.