Dundee reportSPECULATIVE
> 12-month target price: N/A
>
> 1402 Efficacy Comparison Issue
>
> Highlights
> * ProMetic compared elevation of reticulocyte count with PBI-1402 to
> a 1990 published study of erythropoietin.
> * Management stated the response with 1402 was similar to epo, although
> the company did not report actual data for 1402.
> * We have reviewed the paper cited, and have found that the response
> to epo occurred after single injections of the drug.
> * In the case of 1402, the company treated patients 3x per day for 28
> days.
> * This suggests the potency of 1402 is substantially less than epo.
> * Although the company is testing higher doses and may derive value
> from 1402 over the long-run, we view this as an unexpected hurdle.
> * The Tunisia deal was finalized Thursday. The license fee of $2.5 million
> payable immediately and $2.5 million over the next 24 months falls short
> of our expectation of $30 million in milestone payments over the next two
> years. We have adjusted our model for this shortfall and our 2005 EPS
> decreases to ($0.10) from $0.01.
> Rating
> We rate PLI stock a SPECULATIVE. PLI stock had doubled in anticipation of
> 1402 results, and we now expect the stock to give back part or all of
> these gains. We believe our finding introduces risk to the development of
> the compound. We estimate ProMetic has about one year of cash including
> expected payments from Tunisia and Hemosol.
> The risks to shorting the stock are: PLI could announce further
> fractionation deals, and may launch a prion filter in Europe next year.
> However, we believe the 1402 challenges reflect an overvaluation of that
> program.