June 25, 2014 - 2:32pm EST by
2014 2015
Price: 4.19 EPS -$0.35 -$0.45
Shares Out. (in M): 68 P/E NA NA
Market Cap (in $M): 285 P/FCF 0.0x 0.0x
Net Debt (in $M): -96 EBIT 0 0
TEV (in $M): 189 TEV/EBIT 0.0x 0.0x

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  • Pharmaceuticals
  • Small Cap
  • FDA


Long PGNX 
Progenics offers an asymmetric risk-reward profile with mulitple ways to win.


 -Approved injectable drug for opioid-induced constipation (OIC) marketed by SLXP to end-stage cancer patients. PGNX received $6mm in royalties (~10% rate) in 2013


 -SLXP filed sNDA to expand indication to non-cancer pain, which would result in $40mm approval milestone to PGNX and expand peak sales potential to $180-200mm


 -Market underappreciates sNDA value because it was rejected at first (received CRL in 2011 due to potential Cardiovascular risk for this class of drugs), and although an FDA AdComm voted 22:2 no risk exists, headlines from vote show mixed results

  • During AdComm, 5 doctors changed their votes because they didn’t understand the FDA question, and another 5 doctors voted to require CV trials for Entereg only, a drug that’s not being developed for OIC
  • Not only did AdComm vote 22:2 that there is no CV risk of Relistor, they also stated that they do not even require CV trials AFTER approval
  • FDA is supposed to act by July 15 on the SLXP sNDA. Approval is possible, but more likely there will be a small delay to allow for time to negotiate post-marketing requirements. As long as approval is on the table, it’s positive for PGNX


-After sNDA approval for the injectable drug, SLXP will file it’s 505b2 NDA for an oral version of Relistor. The oral version Phase3 data is positive and the safety data will reference the 12-month injectable studies.


-Upon oral Relistor approval, PGNX will receive another $40mm in milestones, likely in 2015, and the peak sales could increase to $300-400mm


  • Even though Relistor will not be the first to market, drug is differentiated by it’s PRN (as needed) dosing. Instead of taking pills daily, a patient can simply take the injection/pill in the AM, have a bowel movement in a few minutes and get on with his day


  • SLXP is known for it’s expertise to sell late-to-market products: colazal, apprise, its purgative franchise, etc.


  • Total value of Relistor Franchise: $3/shr (dcf key assumptions: sales ramping to $300mm by 2020 with oral and noncancer indications, 12% disc rate)
   -Low-risk radio-therapeutic treatment for ultra-orphan disease (pheochromocytoma -- rare tumors found primarily in the adrenal glands). 
   -Low commercial risk
  • Drug has been compounded for 20+ years, users of the drug are known centers, PGNX will simply have to switch them to the FDA-approved version upon commercialization
  • Since centers will be able to make money on the FDA-approved version, which will be higher quality, conversion should be very quick
   -Low development risk
  • FDA sent letter to PGNX in 2013 that they need to recruit an additional patients into pivotal trial to file for approval
  • PGNX has SPA with the FDA for the trial, and with the first 41 patients who completed the trial, the primary endpoint was already met
   -High economic value
  • Peak sales in current indication around $100mm and 90% GM
  • Very long product life, since drug cannot go generic because of radio-active isotope. There is no AB-rated generic pathway or drug substitution
  • Since ultra-orphan will require very few FTE’s to manage and very high price-point ~$100k+ / therapy
  • Can be used to additional tumor types
  • Total estimated value of Azedra: $3-5/share  (assuming one indication and range of probabilities for approval from 30% to 70%)
  • 1404 (trofolastat), a small molecule which binds PSMA and acts as an imaging agent to diagnose and detect prostate cancer.   PGNX completed a global multi-centered ph2 study assessing the diagnostic accuracy of 1404 imaging in men with high-risk prostate cancer scheduled for radical prostatectomy.  Interim ph2 results were positive.  Estimating a potential for 1mm tests at approx. $1000.  Discount back at 30% could add $270mm in market value, $4/share.  Would further cut that in half to be conservative given the longer runway.
  • PSMA ADC, Monoclonal antibody-drug conjugate designed to deliver a chemotherapeutic agent to cancer cells by targeting the three-dimensional structure of the PSMA protein. In a phase 2 open-label, multicenter clinical trial to assess anti-tumor activity, tolerability and safety.  PGNX completed enrollment in an original cohort of chemotherapy refractory patients with metastatic castration-resistant prostate cancer (mCRPC) and is conducting a second cohort of chemotherapy-naïve patients.  Interim ph2 results were presented at ASCO in January.
  • MIP-1095, PSMA-targeted small molecule radiopharmaceutical originally developed by PGNX's Molecular Insight subsidiary.  PGNX expects to file an Investigational New Drug (IND) application in the U.S. later this year.  Compassionate use of the drug at a German site showed reduced levels of PSA and lower bone pain in 25 evaluable patients out of 28. 
Value of the pieces
CASH                                                                                                   $2/share
Relistor                                                                                                $3/share 
Azedra                                                                                                 $3-5/share                          
1404                                                                                                    $2/share
PSMA/MIP-1095                                                                                    Free Options
Total Value                                                                                           $10-13/share 
Downside seems limited unless the FDA goes against the advice of the advisory committee and requires CVOT studies pre-marketing.  That would push timeline for approval out by perhaps two years but in the meantime the company would still have close to $2/share in cash and options on longer term pipeline opportunities.  Cash burn would be higher in front years and incremental cash flows would be more at risk.  Adjusting the DCF for these factors would knock $1-2/share off of Relistor value.
 Source: Company filings.
I do not hold a position of employment, directorship, or consultancy with the issuer.
I and/or others I advise hold a material investment in the issuer's securities.


FDA approval of SNDA for Relistor
FDA approval of oral Relistor
Phase 2 trial Azedra q1 2015
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