Progenics Pharmaceutics Upcoming Catalyst And Big Increase In Institutional Ownership Make It A Buy Now For 2014

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 |  About: Progenics Pharmaceuticals Inc. (PGNX), Includes: SLXP
by: Bob's Stocks

As a retail investor, it can be difficult to find a suitable biotechnology stock with upside potential. If you are seeking an investment in the developmental space, it can be even more difficult, although the potential upside makes it enticing. Not only do you have to sort through data, but you also have to sort through the varied opinions and inherent volatility that comes with the investment. Gathering all the usual information such as catalysts, revenue potential, and cash on hand should be the norm when researching a biotech company. However, if you're looking to add a tool to your assessment analysis, then you might want to start gauging the ownership of institutions, as these might very well be the best measure of risk and development success. I will break down the following company, which I feel will be successful. But the deciding factor in my mind is the big increase of institutional ownership quarter over quarter.

Progenics Pharmaceuticals (NASDAQ:PGNX)

Progenics is a preeminent oncology company focused on developing innovative drugs to improve the lives of prostate cancer patients and their families. Their pipeline includes therapeutic and diagnostic candidates in pre-clinical through late-stage development.

Relistor

In July of last year, the company and its partner, Salix Pharmaceuticals (NASDAQ:SLXP), announced receipt of a complete response letter (CRL) from the FDA for its attempted regulatory approval for RELISTOR® (methylnaltrexone bromide) injection for subcutaneous use for the treatment of opioid-induced constipation (OIC) in adult patients with chronic, non-cancer pain. The drug had been FDA approved since 2008 to treat constipation in patients with advanced illness and receiving palliative care, when response to existing laxative therapy had not been effective. It is also approved for use in 58 countries worldwide, including the European Union, Canada, and Australia. The company had filed an sNDA (supplemental new drug application) attempting to expand the product's labeling, but was unsuccessful and received the CRL.

At an October 5th End-of-Review meeting with the FDA, Salix discussed the CRL with the regulatory entity who advised them that it was concerned that there may be a "risk associated with the chronic use of mu-opioid antagonists in patients who are taking opioids for chronic pain. In order to understand this potential risk, the FDA's Division has communicated that a very large, well-controlled, chronic administration trial will have to be conducted to assess the safety of any mu-opioid antagonist prior to market approval for the treatment of patients with OIC who are taking opioids for chronic, non-cancer pain." However, Salix expressed the opinion that post-marketing data combined with clinical and preclinical data for RELISTOR® "adequately demonstrate an appropriate and expected safety profile sufficient to permit the approval of the current Relistor sNDA." Progenics and Salix plan to work with the FDA on a more acceptable regulatory path for the labeling expansion rather than another large trial.

Catalyst (Adcom March 10-11)

On October 1st of this year, Salix Pharmaceuticals, Ltd. and Progenics Pharmaceuticals announced that the FDA will convene an Advisory Committee on March 10-11, 2014 at which time Salix's Supplemental New Drug Application (sNDA) for RELISTOR will be discussed.

Also, the FDA has stated that it will take action under the appeal within 30 days after receiving input from the Advisory Committee.(April 10-11th decision).

Institutional Holdings

As you can see in the graphs below, the institutional ownership is extremely high at 82.93%. This has increased close to 10% from the last reported date on March 31st.

Company Details
Institutional Ownership Type Value
Total Shares Out Standing (millions): 61
Market Capitalization ($ millions): $186
Institutional Ownership: 82.93%
Price (as of 09/30/2013) 3.68
Click to enlarge
 

 

Owner Name Date Shared Held Change (Shares) Change(%) Value(in 1,000s)
BAKER BROS. ADVISORS LP 06/30/2013 4,200,000 3,300,000 366.67 15,456
FMR LLC 06/30/2013 8,503,246 2,844,306 50.26 31,292
BROADFIN CAPITAL, LLC 06/30/2013 3,500,615 698,949 24.95 12,882
KINGDON CAPITAL MANAGEMENT, L.L.C. 06/30/2013 580,000 580,000 New 2,134
BLACKROCK FUND ADVISORS 06/30/2013 1,729,000 573,656 49.65 6,363
UBS OCONNOR LLC 06/30/2013 318,191 318,191 New 1,171
PERCEPTIVE ADVISORS LLC 06/30/2013 306,650 306,650 New 1,128
AQR CAPITAL MANAGEMENT LLC 06/30/2013 250,000 250,000 New 920
D. E. SHAW & CO., INC. 06/30/2013 504,093 168,102 50.03 1,855
CITADEL ADVISORS LLC 06/30/2013 397,254 161,746 68.68 1,462
NORTHERN TRUST CORP 06/30/2013 683,353 157,380 29.92 2,515
OXFORD ASSET MANAGEMENT 09/30/2013 127,856 127,856 New 471
RENAISSANCE TECHNOLOGIES LLC 06/30/2013 103,089 103,089 New 379
BARCLAYS GLOBAL INVESTORS UK HOLDINGS LTD 06/30/2013 1,493,011 98,993 7.10 5,494
MORGAN STANLEY 06/30/2013 1,030,576 91,846 9.78 3,793
Click to enlarge

Conclusion

At a price per share of $3.95, the current valuation of Progenics Pharmaceuticals is mind boggling. The current market capitalization of around $240 million is extremely cheap, taking into consideration the potential upcoming catalyst, pipeline of potential blockbuster drugs and diagnostic agents (see graph below). I feel a fair price per share would be $8.00 to $9.00 per share (which would be a 100% return from the current pps) and with approval of Relistor a $11 to $12 would be appropriate.

Sometimes the large institutions are going to be wrong. However, for clinical stage biotechnology companies, ownership can be an indication of how institutions assess a product's chance for success. These institutions have more resources than you, and can see things that you might miss. Astute investors are urged to do further due diligence on Progenix Pharmaceuticals, as it will likely reward investors with substantial gains in the near future.

Disclosure: I am long PGNX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.