'Confident' Progen boosted by manufacturing gains

Half-year results for drug developer Progen Industries show the company enjoyed healthy revenue gains from its contract manufacturing arm while R&D spend rose slightly.

Revenues rose 46 per cent to $2.36 million for the six months to December 31, compared with the previous period. Progen CFO Milton McColl said the company is confident of achieving its $3 million revenue target this year.

R&D expenditures rose slightly to $2.36 million as the company maintained a renewed focus on its leading anti-cancer drug candidate, PI-88, now in Phase II clinical trials.

Net loss on ordinary activities was $3.68 million, sharply up from a profit of $223,000 in the previous period. However the earlier profit was created by a one-off gain of nearly $4 million that Progen booked when it acquired 19.9 per cent of Taiwanese biotech Medigen Biotechnology.

The company believes its new revenue levels are sustainable but does not expect the same growth rate in the second half.

Progen's life sciences business contributed to the higher revenues but the lion's share of the gain came from contract manufacturing and was aided by a shortage of fermentation manufacturing capacity worldwide, said business development vice-president Dr Peter Devine.

"Something we are looking at is more investment in the fermentation area which has been winning us clients in the US," he said.

However, Progen will not be tempted into diverting significant resources into expanding its manufacturing business to the detriment of its R&D program for PI-88, officials said.

The company has about $15 million in cash, which leaves it comfortably positioned to support its R&D plans for the next period. If PI-88 successfully passes its Phase II trials, Progen expects to be ready for Phase III trials in about a year.

Progen plans to strengthen its IP position by lodging a second provisional patent related to its drug discovery platform technology, according to MD Lewis Lee.

The interim results translate into "steady as you go" for Progen, said Lisa Springer, director of the biotechnology group in PricewaterhouseCooper's corporate finance division and a former stock analyst who follows Progen.

"The good increase in their contract manufacturing business is something the market has been waiting for. But overall there are no real surprises in their results."