Not only was this the worst August since 2001 for all three major stock market indices, it was also one of the most volatile, with the Dow recording the most 400-point swings in the history of the index. Sentiment turned extremely bearish as investors pulled over $14B from the equity market, the most since the “flash crash” in May 2010. But instead of hiding in cash, investors might want to take advantage of the recent market volatility to pick of shares in companies with a positive outlook and near-term catalysts. One example is Protalix BioTherapeutics (NYSEMKT:PLX), an Israeli-based biotech company that has experienced a lot of important news flow over the past several months.
Protalix does not currently have any approved drugs on the market, but its lead pipeline candidate, taliglucerase alfa, is under review by the FDA for approval for the treatment of Gaucher disease. Gaucher disease is a genetic disease caused by a deficiency of the enzyme glucocerebrosidase, which helps the body process fatty substances known as lipids. Patients accumulate excessive levels of lipids in their liver, spleen, lungs, bone marrow and sometimes even their brain. This accumulation of fatty material in tissues interferes with how your body works and may cause organ enlargement and bone pain.
Gaucher disease is a rare condition – there are approximately 20,000 individuals with gaucher disease in the United States, two-thirds of whom are Ashkenazi Jews. The impact of the disease varies depending on the subtype a person has. The infantile version may lead to early death during childhood, while adults with the type 1 form of the disease can expect normal life expectancy with enzyme replacement therapy.
The FDA and European Medicines Agency (EMA) have both granted orphan drug designation to taliglucerase alfa, and the FDA granted Fast Track Designation in order to get this important drug to the market as quickly as possible. In addition, the company inked a agreement with Pfizer (NYSE:PFE) in 2009 to develop and commercialize taliglucerase alfa, giving Protalix the global marketing muscle and expertise it will need in order to have a successful launch, if the drug is approved.
In February 2011, the FDA issued a Complete Response Letter (CRL) for the New Drug Application (NDA) Protalix had previously submitted regarding taliglucerase alfa. The FDA requested additional data from the company's switchover trial and long-term extension trial. The full data from these trials was not available when the NDA was originally submitted, but earlier this month Protalix submitted a response to CRL that included this additional data. The FDA accepted the updated NDA and set the new PDUFA date to February 1, 2012.
The stock was trading at just under $10 a share right before the FDA issued a CRL, and within a few days of the news, the stock price plunged to just under $6 a share. Throw in the general stock market sell-off this summer, and the shares are now under $5, roughly 50% lower than the pre-CRL level. This is despite the fact that Protalix did not need to do complete any additional trials to address the CRL, has already submitted its updated NDA to the FDA, and has received a specific PDUFA date from the FDA regarding approval of taliglucerase alfa. Furthermore, the company raised additional capital and has stated that it is sufficiently capitalized to reach the new PDUFA date.
The phase 3 trial data for taliglucerase alfa demonstrates both efficacy and safety, and the long-term extension trial looking at patients receiving taliglucerase alfa for over 24 months is also positive. Furthermore, the switchover trial data shows that patients can be switched from the leading competitor drug, Cerezyme, to taliglucerase alfa without compromising the efficacy and safety of their treatment. This means Protalix could not only gain approval for its drug, but also be clear to compete head-to-head with Genzyme (GENZ), which manufactures Cerezyme, for patients already being treated with enzyme replacement therapy. If Protalix proceeds with the right pricing strategy and executes a strong launch, the company has a good shot at capturing a significant portion of a $1B+ market for gaucher disease.
Based on their partnership deal, Protalix would receive a $25 million milestone payment from Pfizer if it receives U.S. approval for the drug, as well as 40% of the profits and losses (worldwide except in Israel where Protalix would retain 100% of revenues). Additionally, Protalix already submitted a Marketing Authorisation Application to the EMA in November 2010, so approval may come even sooner in the EU, which would also trigger a $25 million milestone payment from Pfizer upon approval. More importantly, approval in either of these markets would validate the company’s plant-based technology and provide cash flow to complete trials for its pipeline drugs, which include an oral drug for gaucher disease.
Although the stock will likely continue to fluctuate along with the market, Protalix provides investors with an opportunity to use this volatility for their own benefit. Investing in biotech stocks is always risky, especially when the company is awaiting approval of its first product. However, Protalix provides investors with a several clear, near-term (less than 12 months) catalysts and could provide a lot of upside in an otherwise volatile and potentially downward trending market.
Disclosure: I am long PLX. The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.