Progen skyrockets on Genentech news

Brisbane-based Progen (ASX:PGL) is riding high on the US Food and Drug Administration's approval of Genentech's anti-angiogenesis drug Avastin.

The company's share price went from $1.60 on Thursday to $1.80 on Friday, when news of the approval hit the markets, and by Monday had risen another $0.25 to $2.06 on heavy trading, an increase of nearly 30 per cent. The company was trading at $2.40 at press time on Tuesday.

Progen managing director Lewis Lee said he was happy to leverage what he could from Avastin's success. He said that the approval marked a paradigm shift in the market, with Genentech's anti-VEGF monoclonal antibody being the first of a number of drugs acting to inhibit angiogenesis to reach the market, and would raise confidence in the approach taken by Progen and other companies in targeting angiogenesis.

Lee said the success of Avastin in combination with other chemotherapeutic agents as a treatment for advanced metastatic colorectal cancer validated Progen's early results with its small molecule angiogenesis inhibitor PI-88.

PI-88, which acts more broadly on VEGF and fibroblast growth factors (FGFs) as well as heparanase to inhibit blood vessel growth, is currently being tested in a series of four Phase II clinical trials as both a single therapy and in a combination with other chemotherapeutics for cancers including melanoma, non-small cell lung cancer and multiple myeloma. A fourth trial is also due to start in Taiwan in the near future for liver cancer in patients who have had their liver removed.

Progen is hoping to partner with a pharmaceutical company this year, prior to starting Phase III clinical trials.

Mike Stanford, a dealer at investment bank EG Capital, said that the increased investment into Progen over the last few days was linked to the interest of larger brokers in the company, which is listed in the US on the Nasdaq exchange (Nasdaq:PGLAF) in addition to its ASX listing. "In the last week we've seen bigger US-based dealers come in and pick up some of the stock," he said.

Stanford said that compared to other US biotech companies pursuing anti-angiogenic drugs, which had also benefited from Genentech's announcement, Progen had a substantially lower market capitalisation.

Half-years

The company released its half-year results late last week, reporting a reduced operating loss for the first two quarters of $1.9 million compared to $4.2 million in 2002, largely due to the sale of the company's reagents and consumables distribution business to NZ company Global Science and Technology.

"The year-end results won't be as attractive as that, as we won't have that one-off sale," Lee said. But the company's other business offshoot, its contract manufacturing services arm, was doing well, with several repeat contracts, he said.

The company's cash balance was almost $15 million at the end of the second quarter. "It's comparatively healthy but we're always looking for more," Lee said. He said it was natural for companies that had progressed into clinical trials to burn cash more quickly, which could be seen as a positive sign.