Protalex, Inc. (OTCQB:PRTX) is focused on the development of PRTX-100, a proprietary, highly purified form of the bacterial protein staphylococcal protein A, for the treatment of inflammatory and autoimmune disorders, with rheumatoid arthritis (RA) as the lead indication. In addition to RA, for which preliminary evidence of efficacy has been demonstrated in a Phase 1b trial (Study-103), PRTX-100 has potential in several orphan disease indications, including lupus, idiopathic thrombocytopenic purpura (ITP), chronic inflammatory demyelinating polyneuropathy, thrombotic thrombocytopenic purpura (TTP), hemolytic uremic syndrome, hemolytic anemia, and solid organ transplant rejection.
The key advantage that Protalex has with PRTX-100, and what separates the molecule from other biologics currently used for the treatment of autoimmune disorders, is that PRTX-100 can be produced in bacterial cell culture, providing a considerable cost-of-goods advantage in a market that is expected to become increasingly price-competitive.
A Little Background Info On PRTX-100
SpA is a bacterial protein produced by Staphylococcus aureus (SA), a common causative pathogen in human infections including pneumonia, skin infections, and septicemia. Compared to infections caused by other bacterial pathogens, those caused by SA are unique for their high rate of recurrence, which can be as high as 30%. Recurrent infections by other bacterial pathogens are normally prevented by the development of a protective immune response during the original infection. Research performed in the 1970s traced SA's ability to cause recurrent infections to its production of proteins that interfere with the protective immune response. One of the most important of these is SpA, the active ingredient in PRTX-100.
SpA is a 42 KDalton bacterial membrane protein composed of 5 nearly identical domains. Each of these domains has the ability to interfere with the activity of antibodies and B-cell receptors (BCRs). B-cell receptors are antibody-like proteins displayed on the surface of B-cells. The B-cell receptors found on the surface of each B-cell have the same antigen specificity as the antibodies it produces. SpA interferes with the protective immune response by binding to sites on the antibody or BCR other than the antigen binding sites antibodies normally use to bind pathogens. It binds to the BCR and affects only B-cells which utilize the VH3 antibody heavy chain, but this represents most if not all of B-cells producing auto-antibodies.
A variety of cells (neutrophils, monocytes, macrophages, B-lymphocytes, NK cells) can bind antibodies via their Fc region, by a class of receptors called Fc receptors. This binding can activate or inhibit these cells depending on the nature of the complex of antibody and bound antigen binding to Fc receptors. Due to its binding of antibodies via the VH3 region, small immune complexes of SpA and antibody mimic the naturally occurring immune complexes, which inhibit activation of cells, which contribute to inflammation in rheumatoid arthritis.
An example of the ability of PRTX-100 to modulate immune responses by modulating the activity of immune cells with Fcγ receptors is provided by the dose-dependent inhibition of human monocyte phagocytosis of antibody-coated platelets shown in Figure 2 below, in idiopathic thrombocytopenic purpura, monocytes phagocytize platelets using autoantibodies as adaptor molecules. The antibody binds to the platelet via its antigen-binding site and the monocyte recognizes the platelet-antibody complex via its Fcγ receptor (FcγR). Interference with the Fcγ- FcγR interaction suppresses phagocytosis. Upregulation of Fcγ on monocytes has been associated with excessive TNFα production and resistance to methotrexate therapy in RA.
The other key binding site for PRTX-100, VH3, is found on the BCRs of about 30% of all B-cells, including B-1 cells, a subtype that has been implicated in autoimmunity. Binding to VH3 on BCRs causes the B-cells to undergo proliferation followed by apoptosis. This causes a long-lasting depletion of B-cells that produce antibodies with certain antigen specificities. The ability of SpA to interfere with the function of Fcγ combined with its ability to induce depletion of VH3 clade antibodies serves as the basis for its applications in the treatment of autoimmune disease.
Study-104: A Confirmatory Phase 1b
In November 2012, Protalex, Inc. initiated a U.S.-based Phase 1b clinical study, dubbed Study-104. Study-104 is a multicenter, randomized, multiple-dose, dose-escalation study of PRTX-100 in combination with methotrexate and leflunomide in adult patients with active rheumatoid arthritis . Back in 2012 when the study initiated, the goal was to enroll up to 40 patients into five cohorts ranging from 1.50 micrograms/kg up to 18.0 micrograms/kg of PRTX-100 or placebo. The primary endpoint of the study is safety and tolerability of intravenous PRTX-100 administered weekly over five weeks in patients with active RA on methotrexate therapy. Secondary objectives include determining the effects of PRTX-100 on measures of disease activity, assessing the immunogenicity and evaluating the pharmacokinetic (PK) parameters after repeated doses, and determining possible relationships between the immunogenicity of PRTX-100 and safety, PK and efficacy parameters.
In August 2013, following a planned interim safety review by the independent Data Safety Monitoring Committee (DSMC) and upon completion of the fourth cohort, the company expanded the 3.0 microgram (mcg), 6.0 mcg, and 12.0 mcg/kg dose cohorts of the study, and an additional nine patients were enrolled in the expansion cohort that was completed in October 2013. In total, the first four dose-escalating cohorts of the study, which included these three expanded cohorts, enrolled 41 patients with doses ranging from 1.5 mcg/kg up to 12.0 mcg/kg.
In November 2013, following completion of the Cohort 4 expansion cohorts, management initiated enrollment of the fifth and final cohort (Cohort 5) in the study. The Cohort 5 sub-study is expected to enroll up to 16 patients and include additional monthly maintenance doses of PRTX-100 in the 3.0 mcg/kg to 6.0 mcg/kg range. Patients could receive up to nine doses of PRTX-100 over the six month study visit period, but the cumulative dose will not exceed that of Cohort 4 (12 mcg/kg ). The primary objective of the Cohort 5 sub-study is to assess safety and tolerability of one of these doses administered on a modified schedule. As of December 14, 2013, a total of 12 patients have been enrolled in Cohort 5 at six study sites in the U.S. A total of nice study sites have been used in Study-104 to date.
We expect the company to report top-line data from the first four cohorts in February or March 2014. The reason we believe the data will be positive are three-fold. Firstly, the company has already published data in the Journal of Clinical Pharmacology from the Study-103, an earlier-stage Phase 1 program. Secondly, the company recent just presented very encouraging data at the October 2013 American College of Rheumatology (ACR) meeting. We highlighted this data in a previous article for Seeking-Alpha. For those interested, the presentations have been archived on the company's website, and can be found HERE and HERE. Finally, the mechanism of action for PRTX-100 has been previously validated by the ProSorba Column, marketed by Cypress Biosciences, Inc.
Quick Review Of The Financials
On December 26, 2013, Protalex, Inc. reported financial results for the second quarter ended November 30, 2013. As expected, Protalex did not report any revenues in the quarter. Net loss in the quarter totaled $1.5 million, and was comprised of $0.7 million in R&D, $0.7 million in G&A, and $0.1 million in D&A and other expenses. Net loss equated to $0.05 per share based on 28.3 million shares outstanding. This was in-line with our financial projections for the company. Total cash burn in the quarter was $0.935 million. Protalex exited the quarter ended November 30, 2013 with just over $1.083 million in cash.
We find this to be sufficient to fund operations into March 2014. We believe the company may look to expand upon the current senior secured note with Niobe Ventures, LLC to fund operations until the completion of Study-104, and then look to enter into a larger public financing upon those results, which we expect to be positive and offer up top-line data late in the first quarter of 2014. Protalex has been funding operations through debt offerings to Niobe, now totaling $9.2 million, for the past several years. Entering into a financing transaction securing greater than $7.5 million in cash triggers a mandatory payment of 25% of the gross proceeds from the transaction to debt repayment held by Niobe.
Valuation of Protalex has been a challenge given the early-stage nature of the clinical trials and questions around the long-term funding. Niobe has been a secure and reliable funding source for the company, but long-term financing to the completion of Phase 2b studies will be required to draw in significant new investor interest to the story. We believe the reporting of positive top-line data from Study-104 will be a significant milestone for the company, and allow for new investors to enter and venture capital to exit. We believe the inflection point will be marked by a substantial increase in volume and interest from potential pharmaceutical partners that may look to fund the registration programs for PRTX-100. Valuation following positive top-line data from Study-104 ranges between $10 and $15 per share. We expect to narrow this wide range down after the company reports results and the completion of long-term funding. In the meantime, Protalex remains squarely on our radar for a breakout in 2014.