Progen offered $3.39 million AusIndustry grant

Brisbane cancer-drug developer Progen Industries (ASX:PGL, NASDAQ:PGLAF) has been offered and intends to accept a AUD$3.39 million AusIndustry "Commercial Ready" grant for further development of the company's drug discovery program over the next three years.

The grant will allow Progen to ready its lead optimisation products for the clinic, said Progen's managing director Lewis Lee.

"Getting to that phase from early discovery is certainly filling a gap we've had in the past," said Lee. "We've been very conscious of the requirement for any sophisticated company from a long term sustainability point of view to have their own internal research engine if they want to be around for a while."

Progen will match the grant, funded from its working capital which stood at approximately $24.6 million in cash in June as a result of an options exercise and underwriting which raised approximately $8 million. Progen saw a take-up rate of 65.3 per cent of its option issue that expired on May 31. The issue was underwritten by Emerging Growth Capital, with the shortfall being placed with a small number of existing institutional investors.

"You've got to look at all opportunities to raise capital in this market," said Lee.

The grant is a follow-on from the $3.1 million AusIndustry "Start" grant awarded to Progen, that concluded in June 2005. The company's drug discovery program achieved all milestones under this grant.

"If the government is serious about helping companies get up to commercialisation, the pathway to establishing a biotech industry, you don't give them one grant and then pull the plug on them halfway. If they're doing all the right things you have to keep helping them along right up as far as you can," said Lee. "I think that's much appreciated from the company's point of view."

Progen's drug discovery research focuses on the role of heparan sulfate, a complex sugar found in the extracellular matrix -- the biological 'glue' that binds cells together into tissues. For example, Progen's anti-cancer drug, PI-88, is a heparan sulfate mimic with a dual action - it inhibits tumour growth by suppressing angiogenesis, and inhibits the metastatic spread of secondary tumours.

The grant will not, however, be used to further Progen's two current product candidates, PI-88 and PI-166, which are already in clinical trials, but will be used to further the company's drug discovery pursuits.

The grant offer is subject to the standard practice of executing a formal agreement between the Commonwealth government and Progen.