FDA's OK of Relistor Bodes Well for Progenics

Soon after European regulators announced the approval Thursday afternoon of Relistor, the bowel drug from ProgenicsPGNX and WyethWYE, Citibank analyst Yaron Werber pushed out to clients a reiteration of his sell rating and $4 price target on Progenics.

In his note, Werber insisted that despite European approval, regulators in the U.S. would not approve Relistor.

A few hours later, Thursday evening, the U.S. Food and Drug Administration announced the approval of Relistor.

Oops.

Werber is a good guy and a smart analyst, so I don't mean to mock him for making a bad call on Progenics and Relistor. Heck, everyone makes mistakes, and this time Werber wasn't alone. Cowen & Co. analyst Leland Gershell, for instance, did exactly the same thing Thursday afternoon, except he had a neutral rating on the stock -- not a sell.

But as I wrote at the end of March when Progenics was trading below $6 and near cash, investors were giving no value at all to Relistor (also known as methylnaltrexone). That didn't seem right. Sure, Relistor had its share of setbacks, but in this case the clinical data made a reasonable case for FDA approval. The stock was already pricing in rejection, so there didn't seem much to lose.

On Thursday, Progenics, a $5-$6 stock in March, closed at $10.64. When news of the FDA approval hit the wires after hours, the stock jumped another 20% to $12.75.

How much higher can the stock go?