Progenics Pharmaceuticals Is A Value Play
- Progenics operates in the oncology segment. Its current major product is Relistor which is marketed and commercialized through Valeant Pharmaceuticals.
- Progenics major drug in pipeline is Azedra which treats malignant pheochromocytoma/paraganglioma. It has been granted Brekthrough therapy and Orphan drug designations and is on the Fast Track Status.
- Other four drugs in pipeline are in the PSMA targeted oncology segment.
- Progenics is a medium risk – high reward stock. There is limited downside due to current revenue from Relistor and high reward from future FDA approvals.
Current Revenue Stream
The main source of revenue for Progenics (PGNX) currently is the Relistor drug. Relistor is used to treat opioid-induced constipation in chronic non-cancer pain. The global opioid-induced constipation market is estimated to be worth $2779.24 Mn in 2022 with a CAGR of 4.6% during 2016-2022.
Relistor is marketed and commercialized by Valeant Pharmaceuticals. Progenics earns royalty income from Valeant for Relistor. The drug has worldwide sales of $70.6 million last year and this earned Progenics a royalty income of $10.3 million. Other than this, Progenics earns revenue on the drug reaching certain milestones. It has earned $40 million for US marketing approval of subcutaneous Relistor and $50 million for oral formulation of Relistor. The future revenues are contingent on the following milestones –
Progenics also receives royalty income of 15 % for the first $100 million in worldwide sales, 17% for the next $400 million and 19% on sales over $500 million. Assuming an average estimate of $300 million in peak sales for Relistor, Progenics should earn $200 million in revenue in the next 4 years. The company also earns some revenue in the single-digit millions from its license agreements with companies such as Bayer and Fuji.
According to the quarterly report, Progenics has currently $114 million in cash and cash equivalents which would be sufficient to fund their operations for 1 year. The revenue from Relistor should be enough to fund their operations for 3 more years after that. The downside risk is that the royalty revenue from Relistor is not enough to fund their operations. The New Drug Application (NDA) for Azedra also has been postponed for a few months as the manufacturing site is not inspection ready. Progenics might need to raise additional capital through debt or equity at that point.
Future Growth Drivers
The main growth driver for Progenics are the FDA approvals for Azedra and the other four drugs in the pipeline. On obtaining FDA approval, Azedra’s peak sales estimate is between $150 million to $250 million. As Azedra is developed in-house, all the revenues would be realised by Progenics. The Phase 2b trial for Azedra has been recently concluded and the primary endpoint of the study was met. The data was favorable for the secondary endpoint as well. There is a good chance of Azedra being approved by the FDA.
After FDA approval, the Azedra value alone is worth the current market cap of the company. The market has not yet priced this in the stock price of the company.
Other than Azedra, Progenics also has 4 drugs in the pipeline for development. These drugs are used in the treatment of prostate cancer. They are in different stages of development from Phase 1 to Phase 3 and provide significant upside for the stock. The 1404 and PyL drugs are imaging agents used in identifying prostate cancer. The 1095 is a new investigational drug used in the treatment of metastatic prostate cancer.
Progenics is a stock with limited downside as it has revenues from Relistor for the next 4 years. It has a huge upside potential based on the FDA approvals for its drugs in development. Due to the doubts over funding operations from the revenues of Relistor and over FDA approvals, the stock is trading at a discount. But considering that the Azedra phase 2b trials have been positive and that the stock is trading mid-range between the 52 week highs and lows, it is a good opportunity for investment.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.