Prolor Biotech: De-Risked And Ready To Begin Phase 3 Trials

| About: PROLOR Biotech (PBTH)

Upcoming Events - Initiation of Phase 3 in adults (2012), and Phase 2 in children (Q4 2011 – Q1 2012).

Prolor Biotech (NYSEMKT:PBTH) – based in Nes-Ziona, Israel engages in the development and commercialization of bio-better proteins and peptides. Utilizing their proprietary CTP enhanced recombinant proteins, the company aims to leverage its technology platform to provide new, enhanced (long-lasting and efficacious) versions of currently marketed recombinant proteins. Unlike much of the competition, Prolor’s CTP technology utilizes an endogenous (natural) sequence, de-risking its therapeutic candidates. With this strategy, Prolor hopes to achieve less expensive and faster clinical trials since endpoints and study protocols will be the same as those used for existing therapies. I have extensively analyzed Prolor over the past 10 months (background, interim Phase 2 data, risk-adjusted net present value) and although the share price has declined during the time, the company has had many positive developments that warrant further examination.

The lead candidate, long-lasting human growth hormone (hGH-CTP), has successfully completed Phase 2 trials for hGH deficient adults and the company is preparing for additional clinical trials (children and adults) in the coming months. The goal of this program is to replace daily, single injections, with a weekly (or more) injection, In addition, with a cost of goods sold approximately 50-75% of commercially available hGH, the candidate is truly a bio-better.

Phase 2 Data Review - Prolor’s Phase 2 open label switchover trial was designed for responding adult patients (i.e. normal IGF-1 levels, the clinically accepted biomarker for hGH levels) currently on daily injections of hGH. Patients were placed into one of 4 dosing cohorts (receiving either 30%, 45%, or 100% of the cumulative weekly total of hGH), patients were injected once weekly for a month and their IGF-1 levels monitored. A fourth experimental cohort was given a 100% cumulative dose every other week (still awaiting data). The goal of the study is to determine the dose ranges that provide hGH deficient adults with IGF-1 levels within the normal range (+/- 2 standard deviations, SD).

Consistent with the preliminary data, the result demonstrated that Prolor’s hGH-CTP has a half-life approximately 10 fold longer than commercial hGH, providing the ability to replace daily injections with weekly, at a minimum. Delving more deeply into the numbers, at the 45% dosing range, patients’ IGF-1 levels were within +/- 2 SD, the range endocrinologists look for, 100% of the time over the 7 days. Furthermore, IGF-1 levels stayed within a tighter range, +/- 1.5 SD 93% of the time. Importantly, no spike of IGF-1 was observed at the start of the week in either cohort. As with the earlier Phase 1 trial, safety and tolerability remained excellent with no antibodies formed.

Phase 3 Trials - Prolor is currently preparing additional pediatric and adult trials for hGH-CTP. First, PBTH plans to initiate a 12 month safety and efficacy trial in children (52-26 patients) in which the efficacy endpoint will be growth. Soon after, PBTH plans to initiate a larger (120-150 patients), and longer (6 months efficacy with an additional 12 months safety) Phase 3 study in adults for hGH where endpoints will include body composition metrics.

Pipeline - In addition to the clinical hGH-CTP program, Prolor has done significant preclinical work on its obesity candidate, MOD-6030. Injecting a long lasting version (not CTP, but a reversible pegylation technology) of the natural human appetite suppressant oxyntomodulin, Prolor aims to use this natural, endogenous weight loss tool to help in the fight against obesity and diabetes. Much of the preclinical and scientific publication data is promising (suppression of appetite without loss of energy levels), and a once weekly injection of a small amount of MOD-6030 would be reasonable. Recently signed partnerships [Marcadia and Roche (OTCQX:RHHBY), 2010], [Zealand Pharma and Boehringer Ingelheim, 2011] demonstrate the significant interest in this area. Notably, Zealand Pharma’s oxyntomodulin variant is targeted for single, daily injection.

Additionally, PBTH plans to initiate clinical trials for its hemophilia programs: factor IX (F-IX-CTP), a long lasting version of the clotting factor needed in patients with hemophilia B, and long lasting factor VIIa, also for the treatment of hemophilia. These diseases require constant hospitalizations and infusions of biologics, and long-lasting subcutaneous injections would represent a substantial improvement in the standard of care.

Risk Factors - Much of the risk for Prolor revolves around the competitive landscape. Prolor is not the only company that understands improving the deficiencies of biologics is a potentially profitable endeavor. Other firms have initiated programs in the long-lasting hGH space. While Prolor appears to be the front-runner (they have obtained orphan drug designation in both adult and pediatric indications), major delays could prove fatal. LG Life Sciences is involved in the space as well, and appears to have successfully completed Phase 3 trials. Many people using standard PEGylation technologies have abandoned their programs. However, modified PEGylation platform-based companies have emerged (Versartis, Ambrx, etc.)

In the hemophilia B (factor IX) market, Biogen (NASDAQ:BIIB) has Orphan Drug Designation in the indication and is currently ahead in trials. However, Prolor plans on using subcutaneous injection and a less frequent administration profile to capture market share. In a competing factor VIIa program, Bayer (OTCPK:BAYZF) has completed a Phase 1 study with their recombinant, long-lasting therapeutic [licensed from Maxygen (NASDAQ:MAXY)].

Financials -With cash and cash equivalents of $18 MM (September 30, 2011) expected to anticipated through 2012, PBTH doesn’t need have a pressing need to access the capital markets or ink a partnership in the immediate future. However, Prolor will need far more than $18 MM to successfully launch their products! It also must be said that Prolor has run an extremely lean operation ($7-8 MM cash burned annually in 2009-2010, and ~$10 MM for the first 9 months of 2011), but as clinical trials grow in size and cost, Prolor will need to access capital in order to further all clinical and preclinical programs.

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Conclusion and Future Directions - Overall, I believe Prolor’s de-risked, flagship hGH-CTP candidate paves the way for the higher risk (and high reward) preclinical programs (obesity and hemophilia). More globally, I view the approach of greatly improving existing biologics by increasing their convenience and therapeutic life as an attractive, unmet, and ultimately profitable niche and believe Prolor possesses a healthy competitive advantage in this area with its technology.

Disclosure: I am long PBTH.