Biotech Notebook: Progenics, Wyeth

Projecting potential market share for newly approved Relistor; monitoring exec moves at Introgen; and more.
By Adam Feuerstein ,

Doing some math on Progenics (PGNX) - Get Report and its newly approved bowel (constipation) drug Relistor: I think this can be a bigger-selling drug -- and more valuable to Progenics -- than many people expect it to be.

For starters, there's going to be a real demand for Relistor from nurses and other attendants of acutely ill patients. This may sound somewhat indelicate, but Relistor allows nurses to better plan their day because they can schedule when a hospice patient will have a bowel movement. There will be fewer bathroom "surprises," which means beds can be changed, patients bathed and changed, all on a more dependable schedule.

A hedge fund analyst source who's long Progenics ran some of his numbers by me and they make a lot of sense. There are about 890,000 hospice patients in the U.S., with an average stay of around 60 days, according to the Hospice Association of America. That works out to 53.4 million patient days per year.

Assuming half of these patients are eligible for Relistor (a guess), that leaves the addressable market for the drug of just under 27 million patient days per year.

Pricing is a bit of guess, but assume Relistor is sold for $45 a dose. (There's some logic behind that guess, but I won't go into it here.) Relistor can be given every other day, or about 3.5 times per week, which works out to $157.50 per week. Divide that by seven days and you get a per-day price for Relistor of $22.50.

More multiplication: 27 million patient days per year times $22.50 a day comes to a potential peak Relistor sales of about $600 million in the U.S.

Of course, Relistor won't be used in all these patient cases, but what about half? A half market share might be a tad aggressive, but let's go with it. That pegs Relistor peak U.S. sales at $300 million in 2011, about three years from now. Assuming Europe will be half as big (another guess), total peak sales for the drug could reach $450 million.

Wyeth

( WYE) is in charge of selling Relistor worldwide and paying a mid-teen royalty to Progenics. Assuming the average royalty is 15% with a sales multiple of 8 gets you a net present value of $356 million, or about $13 per share for Relistor.

When you add in Progenics' current cash and a conservative estimate of future cash milestone payments from Wyeth, you can get a fair value for Progenics in the neighborhood of $20 a share.

Progenics closed Tuesday at $13.41.

Granted, there is a lot of guessing in this model, but then, there always is when you're trying to predict the future value of a newly marketed drug. But what I like about my source's arithmetic is that he's only assuming Relistor use in hospice patients, which is conservative since there are plenty of other critically ill patients.

In this calculation, there is no value at all given to Relistor being approved in other indications, nor is Progenics getting credit for a pipeline that includes an interesting, albeit early, HIV drug. All that would be upside.

Wyeth is getting ready to start one of two phase III clinical trials of the Alzheimer's drug bapineuzumab it is responsible for under its partnership with Irish drugmaker

Elan

(ELN)

. (Elan already announced the start of its two phase III studies of bapineuzumb.)

You can find a

listing of the Wyeth study

, posted April 29, on the

ClinicalTrials.gov

Web site.

What I find interesting is that Wyeth disclosed the primary and secondary endpoints of the bapineuzumab study, and lo and behold, the primary cognitive endpoint is a change in the ADAS-cog scale.

But what happened to the highly praised and supposedly more sensitive

Neuropsychological Test Battery

, or NTB, that's supposed to be

all the rage

in Alzheimer's research circles? According to this posting, it's listed as a lowly secondary efficacy endpoint.

Wyeth is responsible for the European clinical trials of bapineuzumab, while Elan is conducting its work in the U.S. Could it be that European regulators aren't as sanguine with the never-before-used and not-so-independently-validated NTB measurement tool?

A top manufacturing executive left

Introgen Therapeutics

(INGN) - Get Report

late last year, but the company never disclosed his departure to investors.

Peter Clarke, Introgen's vice president of production and technical processes, was missing from the company's "Significant Employees" list contained in its annual proxy statement filed with the

Securities and Exchange Commission

on April 29.

Clarke was listed as a significant employee in last year's proxy statement. When asked why he wasn't mentioned in this year's filing, Introgen spokeswoman Channing Burke said, in an email, that Clarke left the company around October or November 2007. The reason for his departure wasn't disclosed.

Now, Clarke isn't an executive officer at Introgen, but still, he's important enough to warrant a mention in the company's annual proxy statement, which means his departure is probably a material event and therefore worthy of disclosure to investors.

That's something Introgen failed to do in a timely basis, so just add this red flag to the

forest of red flags

already sprouting from the company's Austin, Texas-based headquarters.

(

Cell Therapeutics

(CTIC) - Get Report

pulled this kind of

stunt

back in 2003, as I reported at the time.)

More fun stuff from Introgen's proxy statement: Chairman and CEO David Nance was awarded a $100,000 bonus in 2007. For what, I'm not sure, since once again Introgen failed to meet its biggest corporate goal -- filing an approval application with the FDA for its head and neck cancer drug Advexin.

Nance's total compensation for 2007: $1.84 million. Not bad, even though his total pay package fell from the $2.71 million he earned in 2006. I guess this was the way his oh-so-independent board of directors punished him for poor performance.

Speaking of (non) disclosure and board members, here's how Nance described the recent addition of director Robert "Bob" Pearson to the company's board of directors.

"The addition of Bob Pearson to Introgen's Board of Directors ensures the company will continue to benefit from a diversity of knowledge and opinions," Nance said in a statement. "With strong leadership skills, extensive management experience, and proven track record moving investigational compounds to successful pharmaceutical products -- Bob is a perfect addition to our Board."

Did Pearson really have an active role in "moving investigational compounds to successful pharmaceutical products?"

If you read his biographical sketch provided by Introgen, what you see is that Pearson is a public relations guy, or what we in the media call a PR flack. His current PR gig is with the computer maker

Dell

(DELL) - Get Report

, but prior to that, he worked various media relations and PR jobs with

Novartis

(NVS) - Get Report

and Rhone-Poulenc Rorer, now known as

Sanofi-Aventis

(SNY) - Get Report

.

I wanted to ask Pearson about his hands-on experience in getting new drugs approved, but he declined to take my phone call.

The other thing not widely disclosed by Introgen (unless you read the SEC filing detailing his appointment to the board) is that Pearson is on the company's payroll. He's not an independent director. Pearson is being paid as a consultant to provide "certain business development services" for a fee that could reach $3 million.

I guess I should say something about the study (a retrospective meta-analysis, actually) published this week in the

Journal of the American Medical Association (JAMA)

that links human blood substitutes like

Northfield Labs'

( NFLD) Polyheme and

Biopure's

( BPUR) Hemopure to an increased risk of heart attack and death.

I told you so

.

Seriously, what heartens me about this latest knock on blood substitutes is that the market was efficient. The beaten-down share prices of Northfield and Biopure tell you that investors knew these blood subs were dangerous and ineffective a long time ago.

Northfield Labs is still insisting that it will seek FDA approval for Polyheme later this year. With this latest negative publicity, Northfield's chances are nil. In fact, I wouldn't be surprised to see the FDA send the Polyheme application back with a refuse-to-file letter.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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