bell potter research

Industry news implies changes to commercialisation strategies highly relevant to
PGL
We attended the annual BIO conference held in Boston MA USA last week. More than
20,000 industry professionals attended this year’s international convention with
presentations by a panel of experts from the industry including some of the finest thoughtleaders,
CEOs and other top executives. Three of the numerous presentations we attended
were highly relevant to PGL and we remain confident the company is on the right track to
commercialising its lead drug, PI-88.
Global biotech partnering trends indicate PGL retaining maximum possible value of
PI-88
The forecast for 2007-08 for international biotech deals points towards either very earlystage
deals or co-development at the later stage of development. This trend has largely
occurred because smaller biotechs are retaining significant control over the development of
their drug as well as much of the value. PGL is a clear case in point here and it seems that
its international peers are following the same path. Consequently, pharma companies have
been forced to become more flexible in their negotiations.
Adopting new and innovative clinical trial designs to speed up development
There is a trend towards creating new trial designs and clinical development programs that
will accelerate clinical trials, improve the probability of a drug’s success, reduce costs and
increase safety for patients. We believe PGL may consider adopting a new approach
involving the drug:placebo ration which would further accelerate the development of PI-88.
Buy 2 rating maintained based on $14.64 probability-weighted valuation
Whilst we remain disappointed with the heavy discount placed on the issue price in the
recent $74m capital raising, we maintain our Buy 2 rating. The various presentations we
attended at the recent BIO conference all point to PGL behaving like a successful global
biotech company. Our DCF probability-weighted valuation remains unchanged at $14.64.
We remain confident that this valuation gap will narrow over the next 6-12 months as PGL
embarks on the final stage of its commercialisation of PI-88.
INVESTMENT DATA
Share Price $5.86
Issued Capital
Ordinary Shares 59.3m
Options 0.6m
Fully Diluted 59.9m
Market Capitalisation $351.0m
52 Week Low/High $2.52 / $9.49
Valuation $14.64
Top 20 shareholders as at 30 June 2006 own
63% of total shares on issue
Year end Jun 06a 07f 08f 09f
Revenue $m 1.7 0.9 0.0 0.0
EBITDA $m -8.7 -16.9 -43.9 -38.2
NPAT $m -7.6 -16.8 -39.5 -35.8
EPS (adj) ¢ -18.8 -38.4 -90.7 -82.0
EPS growth % na na na na
PER x na na na na
Data is normalised and fully diluted.
Progen Pharmaceuticals (PGL) Buy 2