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Portage Biotech (PTGEF) Distributed $160 Million To Shareholders, Can They Do It Again?

Summary

PTGEF gave $160 million to shareholders. Can they do it again?

Stimunity is gaining momentum.

PPL and Sentien should not be forgotten.

Those invested in the biotech sector know that there are thousands of early-stage pharmaceutical and therapeutic based companies in the developmental stage, promising a revolutionary new mechanism of action that will disrupt the often-niche-focused markets they target. However, it's no secret that the pathway to FDA approval is incredibly expensive and full of roadblocks, especially for smaller companies focused on developing a specific treatment. As such, it is not uncommon for the biotech investor interested in emerging stocks to watch their investments soar, or crash, after a new press release details the development progress.

In a playing field with high risks and high rewards, investors often feel left in the dark as to which companies possess the management expertise and likely clinical outcomes to reach the goal of FDA approval. On the other side, many startup companies with potentially life-changing therapies are unable to progress through the lengthy approval process due to incompetent management, legal, or capital issues. However, not all emerging companies get stymied by these formidable obstacles.

Portage Biotech (OTCMKTS: PTGEF), for instance, has already proven itself to be far different from ordinary micro-cap stocks, and their success at nurturing a then-emerging Biohaven (NYSE: BHVN) stock into a billion-dollar company is proof of the team's capability and strategic expertise. Moreover, not only did they build the BHVN success story that now has multiple shots for near-term FDA approvals, but they also shared the wealth with all PTGEF shareholders.

Portage Biotech is Developing Novel Opportunities

Portage Biotech (OTCMKTS: PTGEF) is a pharmaceutical company dedicated to discovering, financing, and developing early-stage treatments that have shown great potential through a valid scientific foundation. Portage aims to eliminate the issues faced by smaller companies by utilizing strengths from its experienced management team, which can bring value to an opportunity by developing and implementing a thorough proof of concept strategy for the product. Having the ability to recognize and uncover opportunity is an essential step forward in the pathway to a successful clinical outcome and is a vital element in catching the eye of Big Pharma to attract partnership and licensing opportunity.

Experience and expertise are key strengths behind Portage Biotech's success, and the company's relationship with industry professionals allows them to quickly implement efficient clinical programs and determine a straightforward development pathway, minimizing risks while maximizing potential gains. The management at Portage has over 80 combined years of biotech experience, has overseen the development of 5 separate drugs valued at more than a billion dollars each, and has executed multiple million-dollar licensing deals with pharmaceutical giants. The experience allows PTGEFto consistently discover and develop relatively inexpensive clinical trials for emerging products, a task that can prove difficult for biotech companies that lack strong leadership and are missing an industry focused skill set.

PTGEF Is A Disciplined Asset Holder

Portage operates by investing in an emerging and promising portfolio of products and works to minimize common risk factors by only injecting capital into its clinical programs if they can demonstrate clinical value in the early development stages of the study. As such, PTGEF can be quick to terminate any acquired assets that are not performing as expected and shift funding into their more successful products and new opportunities. The PTGEFteam brings value and strength to the products it invests in by serving up financial, operational, and development support through both part and full-time management professionals.

By focusing on the development of new drugs or therapies rather than marketing, Portage becomes a valuable asset for a pharmaceutical industry that is always searching for latest products and treatments. Also, because PTGEF diversifies its approach into several different areas of study, investors benefit from a diversified and expertly curated portfolio, eliminating much of the risk associated with a direct investment in an emerging company.

PTGEF Developed Biohaven – And Then Distributed $160 Million!

What investors need to focus on when considering an investment into PTGEF is the ability for management to maximize the potential from their clinical stage companies. Take Biohaven, for instance, a company that PTGEF took an initial 54% stake of ownership in January of 2014. At that time, Biohaven focused their attention toward the identification and development of clinical stage neuroscience compounds targeting the glutamatergic system. BHVN brought with them a worldwide license from Yale University to use intellectual property relating to the use of certain glutamate modulating agents in the treatment of neuropsychiatric disorders.

As a development stage company, BHVN's first drug candidate was a glutamate-modulating agent developed for treatment-resistant mood and anxiety disorders. However, management quickly leveraged the science and technology that BHVN had to offer, and in turn transformed BHVN into a company that holds a market cap of over one billion dollars today. To put that in perspective, in less than five years since PTGEF took its 54% stake, BHVN has grown from a company that began through a relatively small private placement of $3.5 million to an NYSE listed company with a market cap more than $1.6 billion.

The best part of the story for those that invested in PTGEF is that when BHVN was strong enough to stand on its own, management spun out the company and rewarded shareholders with a tremendous dividend of one Biohaven share distributed for every 46 Portage shares held on the Record Date. At the time, PTGEF was trading for approximately $0.14 per share which made the dividend almost 4X higher than the value of the 46 PTGEF shares. The IPO for BHVN shares ultimately priced at $17, but shares traded north of $20 on opening day. For PTGEF's part, the company owned 6,341,500 common shares which at the time of distribution held a value of roughly $168 million.

The good news for PTGEF shareholders was that they received a substantial portion of the final dividend with PTGEF keeping only what they deemed a necessary amount of cash to fund the next stage of growth.

Pay Attention To The Value Proposition

Moreover, that's the point investors need to understand. The same team that built BHVN is still intact at PTGEF, and the growing portfolio of emerging companies at Portage may provide similarly impressive returns in the next few years. After all, it only took PTGEF a little over four years to return shareholders a substantial dividend from the growth of BHVN, and with what PTGEF is developing now it may soon happen again.

Incidentally, on Monday of this week, BHVN shares closed at $41.64, and after hours BHVN announced a deal with Royalty Pharma for royalty funding and stock purchase agreements totaling $150 million with a share purchase price fixed at $45.00. Royalty Pharma further agreed to by $50 million worth of stock. On Tuesday the stock jumped 1.4% to close at $42.25, decoupling from a Dow average that shed more than 287 points on the day. Thus, investors should not be fooled by the $0.14 share price because in many ways it ignores the underlying fundamentals getting built at the company. Moreover, a lot is going on within the company portfolio.

An Asset In Portage Pharmaceuticals, LTD

Portage Pharmaceuticals Limited (NYSE:PPL) is a wholly owned subsidiary of Portage Biotech concentrated on developing new and advanced cell-permeable peptide (NYSE:CPP) therapies. Treatments involving cell-permeable peptides have demonstrated significant potential for improving treatment efficacy by revitalizing protein function and normalizing gene expression. The technology works by delivering a biologically active mechanism of action into intracellular and intranuclear targets, which has been shown to improve the immunogenicity of vaccines and more effectively treat intracellular pathogens.

Through their research, Portage discovered that cell-permeable peptides developed from human genes performed significantly higher than those currently tested and licensed by Trojantec and London-based Imperial College. To further research and promote this potentially disruptive therapy, the company selected their human-based cell-permeable peptide to be the foundation of their flagship CellPorter platform.

Protected by international patent filings until 2034, CellPorter is a proprietary CPP technology based on human proteins. This new technology can successfully and efficiently deliver an active pharmacological cargo into cells without causing unwanted effects on the cell membrane. Early trials have shown promise – in collaboration with Pirbright Institute, the company's CellPorter technology was shown to provoke a specific immune response in mice, demonstrating a viable potential in human vaccine applications. PPL has also worked with additional development professionals to evaluate the efficacy and potential applications of their work further.

For example, the company collaborated with top Yale scientists in examining CellPorter's cell-penetrating ability, as well as the National Eye Institute in developing a possible application of the treatment through eye drops. These collaborations only confirmed the initial research completed by PPL – CellPorter can penetrate eye tissues, penetrate the blood-brain barrier, and in effect improve the efficacy of vaccinations.

In addition to CellPorter, PPL has been researching and developing PPL-003 over the past two years, a topical eye drop that aims to treat inflammatory eye diseases such as uveitis and dry eye disease. After assembling a clear non-clinical and clinical development plan for the product, PPL held a highly successful meeting with the FDA on September 15, 2017, granting the company a clear path to Phase 1 and II clinical studies and increasing the company's revenue-generating potential.

Sentien Biotechnologies Is A Potential Windfall

Another potentially lucrative asset in Portage's portfolio is Sentien Biotechnologies, a Boston based company working to develop a novel treatment for acute kidney injury. The company's platform is based on an innovative extracorporeal bioreactor, which can aid the dialysis process by delivering the secretions of mesenchymal stem cells (NYSE:MSC) into a patient's bloodstream.

These MSC secretions contain a potent variety of anti-inflammatory compounds and trophic molecules, which can compensate for the immune dysfunction associated with acute kidney injuries while simultaneously working to repair damaged tissue. When compared to traditional methods of treatment involving injection or intravenous infusion, this approach allows for a substantially increased duration of therapeutic activity. Secondly, Sentien's platform is not restricted by the dosage limitations associated with current treatments, allowing physicians a more significant amount of control in treating a patient. Notably, not only has the company's technology shown promise in increasing the efficacy of acute kidney injury treatments, but it is also designed to integrate with existing treatment infrastructure seamlessly.

The benefits will likely reduce the cost of purchasing new equipment and would likely increase the treatment's ease and rate of adoption following a successful release. The device has already demonstrated exciting results in preclinical models of acute kidney and liver injury, as well as acute myocardial infarction. Now operating within the Portage Biotech portfolio, the company aims to complete outstanding IND enabling studies and begin its Phase I trial in patients, in which a successful result would undoubtedly bring increased valuation and industry attention to the company.

Stimunity Is Gaining Momentum

Another company operating within the Portage Biotech portfolio is Stimunity, a preclinical-stage startup focused on developing novel drugs that can stimulate a patient's innate immune system. The company's tech is based on an immune-modulator platform which utilizes Virus-Like Particles to effectively activate the STING pathway, which causes the body to initiate an immune response against the treatment's specifically targeted pathogen or tumor.

The STING pathway plays a vital role in inducing the body's reaction against infectious pathogens and cancer, but current methods of stimulating this pathway are limited as small molecules are unable to penetrate through the cell membrane. Early data has shown that the Virus-Like Particles utilized by Stimunity have the potential to overcome the obstacles faced by the current standard of care, demonstrating a more efficient and effective method of stimulating the innate immune system and T-cell response to tumor cells.

The company's flagship product is based on peer-reviewed scientific research from distinguished institutions, including Institut Curie, the University of Oxford, and the French National Institute of Health and Medical Research. Early presentations of preclinical research generated much interest within the local biotech sector, and Stimunity has recently raised a 2M€ seed investment from Portage Biotech to continue the development process and progress through clinical trials.

Developing a Future Of Value - Another BHVN?

Portage Biotech's unique business model has the potential to substantially benefit emerging biotech and pharmaceutical developers, distributors, and investors. Certainly, one of the most significant challenges faced by startup companies is the massive amount of capital and fees required to develop cutting-edge technology within a niche sector. And, for PTGEF, who is well-funded at the moment, others need may become PTGEF's opportunity.

The company's experienced management is well versed in identifying a current opportunity that may hold lucrative future potential. And, because of the management teams industry expertise, Portage can quickly eliminate non-performing resources to maximize future gains. The PTGEF portfolio, therefore, reduces the risk associated with an investment in a single emerging biotech company by providing investors with a diversified asset base with separate strategic focus.

Moreover, while PTGEF is currently housing three emerging companies, PTGEF is expected to acquire or invest in an additional five to seven companies during the next few years, and in a non-cyclical, high alpha sector, a strong portfolio of multiple revolutionary products could undoubtedly result in sizable financial gains for all involved. To investors that spend much of their time scouring the headlines for the best in emerging companies and treatments, perhaps the most plausible option is to consider PTGEF as a long-term investment. After all, history is said to repeat itself, and if PTGEF gave more than $160 million to shareholders in 2018, they can probably do it again.

Disclosure: I am/we are long PTGEF, BHVN.