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Biotech / Medical : Progenitor (PGEN) -- Ignore unavailable to you. Want to Upgrade?

To: chris dawson who wrote (25)	2/19/1998 10:34:00 PM
From: Czechsinthemail	Read Replies (1) \| Respond to of 106

chris, Here are some highlights from the 2/13 report by Lehman analyst Matthew Murray, Ph.D. on Progenitor: Murray gives the stock a V1-Venture Buy rating with a 12-month target of $9. He estimates ($0.30) for FY98 and $0.05 for FY99. Stock price was $2. With 13.4 million shares, market cap was $26.4MM. Debt/Capital was 4.3%. 1Q98 loss of $3.3 million ($0.25)/share was in line with expectations. BUSINESS DESCRIPTION: "Progenitor is a biotechnology company that specializes in the discovery of disease genes. It has unique genome technology called developmental biology." FORECAST: "We believe that the company is ontrack with meeting our revenue and expense projections for FY1998. The company is likely to recognize revenue from HH diagnostic deal with SKB Clinical Labs in 2QFY98." COLLABORATIONS: "We believe that the company is likely to announce corporate collaborations in its angiogenesis and asthma gene programs in the 1H98 and the 2H98 respectively." CASH BURN: "The company had cash burn of $4.5 million this past quarter. If the company is not able to sign additional collaborations in the coming quarters as anticipated, it could fall below one year of cash survival." INVESTMENT RATING: "We maintain our Venture-1 Buy rating on the stock with a 12-month target price of $9/share based on royalty rates from its discovery program. "We believe that in the short term key drivers for the stock are not necessarily financial but more focused on the continued developmental and partnering of the company's internal gene discovery programs. Two key areas Progenitor is actively working on include asthma and angiogenesis genomics. Announcement of further progress in these areas could move the stock. Progenitor has previously discovered genes in obesity (leptin receptor) and hereditary hemochromatosis (HH gene). We believe that the company is likely to sign corporate collaboration in these two areas. Genomics deals in the area of asthma have had a potential size averaging $68.5 million [$67 million GENE deal with Schering and $70 million AXYS deal with Boehringer]. INVESTMENT THESIS: "We believe that Progenitor represents an attractive investment opportunity due to its relatively low valuation and its ability to diversify a genomics portfolio. The company appears undervalued from both a relative and absolute perspective. The average technology value of the eight other currently traded genome companies is about $260 million, which is significantly higher than Progenitor's current technology value of only $12 million. This, despite the fact tht the company has made several significant gene and protein discoveries that compare favorably with the discoveries made by other genome companies. The company also seems attractively valued when one considers that major gene discovery announcements have added an average of $29 million in market capitalization. We believe that the company will make a good fit in a genomics portfolio due to the diversification qualities of its gene discovery technology. Among other technologies at its disposal, the company has developed a method called developmental biology, which is different from the gene discovery technologies used by other genome companies. It involves studying the time and tissue type in which genes are activated during the developmental cycle in order to determine their function. The company was able to validate this approach to genomics with the discovery of the leptin receptor gene, a gene that was later shown to be involved in obesity. This discovery was in turn validated by issued patents and a corporate partnership with Amgen. Overall, however, the company has relatively modest corporate collaborations. NEWS FLOW: Events that could move the price over next 12 months 1H98 Outlicensing small molecule rights for leptin receptor gene 1H98 Hereditary hemocromatosis test kit deal 1H98 Patent issuance of mutations in the gene for HH. 1H98 BFU-e (red blood cell growth factor) discovery milestone. 1H98 Corporate collaboration for a developmental biology/angiogenesis program 2H98 Corporate collaboration for discovery of asthma gene.