Australia | Jul 17 2007
By Chris Shaw
A few months ago Progen Pharmaceuticals (PGL) was trading at more than $9.00 per share, a level Intersuisse suggests would be about fair value if the company was close to completing Phase III clinical trials for its PI-88 compound for the treatment of liver cancer.
Given the company is still some way from that point, having only recently completed Phase II trials, the broker suggests the share price correction that has occurred since April is not altogether surprising. What is a surprise though is the magnitude of the pullback as the stock has more than halved in that time, leading the broker to suggest there is some value emerging.
Its approach would be to look for some signs of share price stability, at which point it sees the stock as a Speculative Buy given its price target for one year after Phase III trials begin is $6.84. The current timetable suggests such trials should start in around six months from now.
In the broker’s view there have been a number of factors contributing to the price weakness, including some tax loss selling at the end of June, a sell-down by a previously substantial shareholder earlier this year and a shortfall on a recent entitlement issue despite the issue being pitched at a discount to the share price at the time.
The other issue the broker notes is the likely lack of significant market news over the next few years given the Phase III trials will take some time to be completed. This of course reduces the appeal of the stock to more speculative investors and possibly explains some of the recent price weakness in the broker’s view.
Intersuisse suggests these factors are taking focus away from the company’s clinical results, where positive outcomes have been achieved. Phase II trials of PI-88 showed increased survival time for liver cancer sufferers, the hope being the upcoming Phase III trials will further confirm these results.
With this in mind Intersuisse suggests any period of price stability is an opportunity, as while the next round of clinical results are not due for a few years there remains the possibility the company could announce a co-marketing agreement covering a number of potential markets.
Progen is not covered by any of the broker’s in the FNArena database, which is largely explained by the fact the company is only capitalised at around $245 million at current prices. Having traded in a range over the past 12 months of $2.47-$9.61, Progen shares today are stronger and at 3.00pm were up 12c at $4.37.