Progen explains share price dip

Brisbane cancer-drug developer Progen (ASX:PGL) has responded to an ASX 'please explain' in response to its flagging share price, citing the expiry of listed options on May 31 and speculation of a larger than expected shortfall as possible.

The company's shares have dropped in value from AUD$2.59 on May 31, to $1.90 on June 2, puzzling analysts - the company recently revealed good results from a Phase IIa pilot trial of its promising PI-88 angiogenesis inhibitor in patients with advanced melanoma.

Progen announced that it would move its lead compound into a Phase II trial.

In its letter to the ASX, the company said that in relation to the May 31 options, "Preliminary indications are that the uptake from option-holders was strong. Final numbers will be released early next week in accordance with market practice."

The shareholder listed options were fully underwritten by Sydney merchant bank eG Capital, with an expected $8.9 million raising with any shortfall being allocated by 15 June 2005. At the completion of the exercise of the directors' and listed options, Progen should have $24.6 million in cash and will direct this to progressing its PI-88 clinical program and scale-up manufacture, licensing activities and advancing drug discovery efforts, the company said.

On May 25, Progen announced that all directors had exercised all of their 31 May options amounting to 864,000 options, providing Progen with $2.2 million in equity funding.

Progen also told the ASX that its anticipated operating loss for the year ended June 30 would be in line with the previous year, when the results of the life sciences division for the previous year was excluded. The life sciences division was divested in November 2003 and made a net profit of $916,000 in the previous year.

Progen shares were trading at $2.04 at time of writing.