In the past few months, as larger pharmaceutical firms have shown an appetite for platform technology companies, shares for companies like PROLOR Biotech, which possess access to platform technologies with broad-based applicability across a range of product types, have been getting more attention from investors and watching their valuations increase.
Analysts like Morgan Joseph's Raghuram Selvaraju, Ph.D., watch trends in the sector for institutional and smart-money clients.
Selvaraju gives Prolor a value of $900 million, of which $320 million is based on the company's most advanced drug candidate alone. He also believes that firms such as AstraZeneca (NYSE:AZN), GlaxoSmithKline (NYSE:GSK), Merck & Co. (NYSE:MRK), Pfizer (NYSE:PFE) and Teva Pharmaceutical Industries (NASDAQ:TEVA) are currently searching for new assets to shore up their declining product portfolios and enable them to leverage their substantial expertise in marketing drugs aimed at large patient populations. Unlike other speculative investments in emerging biotech, Selvaraju says PROLOR represents a substantially more risk-mitigated opportunity because of the fact that the company is simply seeking to improve existing drugs as opposed to "reinventing the wheel."
Mr. Shai Novik M.B.A., the President, Director and Member of Governance Committee for Israel based PROLOR Biotech knows a thing or two about these subjects first hand. Rumors persist that his firm has substantial attention from Big Pharma, especially since PROLOR's protein longevity approach to create improved versions of existing drugs is so appealing. In addition, analysts point out that the the risk associated with developing follow-on biologic agents is substantially lower and have significant implications for physician and patient benefit as well as the potential for an improved outlook on the reimbursement front.
PROLOR's largest individual shareholder - Dr. Phillip Frost - owns roughly 21% of the company and also happens to be the Executive Chairman of Teva Pharmaceutical Industries, one of the world's largest pharmaceutical firms. There is little doubt, following recently published reports, that Teva may has significant interest in PROLOR's technology and could be seeking to deploy PROLOR's platform in the development of biobetter drugs.
BioMedReports sat down with Novik for a candid back and forth about topics on the minds of investors who feel his company may be one of the next big winners in biotech.
Can you please explain why your science has attracted so much attention lately? What makes it so exciting, etc.
Novik: I don't think it is the science that suddenly got attention. The science has been well accepted for quite a while. We announced its plans to submit a Phase III application to the regulatory authorities in 2012 for its lead compound, long-acting growth hormone. We believe this product will be first to market of long-acting growth hormones, and could potentially capture a large portion of this $3 billion market quite rapidly. We announced very positive results from a pilot study in which we injected patients only twice-a-month instead of 30 daily injections. We are in quite a unique position.
Do you think there is interest from Big Pharma for a technology like yours?
Novik: Most of the large companies know us quite well. The technology and the products could potentially fill some gaps for some of the companies. However, we are not commenting on any specific discussions.
Which products in your pipeline are you/your team most excited about and why?
Novik: Each garners a different kind of excitement. The long-acting growth hormone product has terrific clinical data to date and we believe it will be first to market in the long-acting segment. That combination in a $3 billion market makes it a highly-valuable asset in our opinion. The hemophilia long-acting drugs have data that looks better than anything else we've seen out there, and the clinical trial path is not that complex. Lastly, the diabetes/obesity drug has truly remarkable preclinical data in our opinion, and could potentially be the big winner in a very large market. Because all we do is create improved version of existing drugs or drugs with well-know biological mechanisms, we believe our pipeline of drugs offer greater potential return at lower degrees of risk compared to many other projects we are familiar with.
What are the challenges for PBTH at this point? Is there anything that keeps you up at night?
Novik:We need to make sure that if/when we sign partnerships with large companies for the various indications we do so while ensuring the right financial and structural terms. We need to make sure that all relevant institutional investors get to know the company as it is progressing towards a planned Phase III clinical trial, as at that stage the company may be suitable for inclusion into many of the leading life sciences portfolios in the country.
Over the past several days, PBTH has seen some depreciation in share price. What is the cause of this?
Novik: We have no idea - we stopped following the logic of our stock volatility long time ago.
Can you summarize upcoming catalysts for PBTH?
Novik: Regarding clinical development, we are planning to initiate 2 clinical studies in 2012 with our long-acting growth hormone, Phase III in adults and Phase II in children. We would consider approval of the regulatory authorities to initiate the studies major catalysts.
One analyst who knows your science and follows your company closely has placed a $16 per share price target on PROLOR. It would seem that given the slight drop in your share prices recently that investors may be even feeling PBTH is a strong buy at these levels?
Novik: It has been our policy not to comment on stock price, just on activities, milestones and data.
Prolor announced very positive data on February 14th from the Company's Factor VIIa hemophilia drug. You've also announced that more data will be presented at the upcoming EAHAD conference. Can you comment on the success of this program to-date as well as the Company's longer-term expectations on it?
Novik: Typically one would not pay too much attention to drugs that show good efficacy results in animal models. The reason is obvious - who knows whether the drug would work the same in humans? And if it does work, maybe it will be toxic? There have been so many failed attempts in drugs that succeeded in animals. However, there are some drugs that one should get very excited with, despite having results only in animal models.
One of those rarities is PROLOR's long-acting Factor VIIa-CTP drug. The main point to take home, is that unlike most other drugs that are novel and work on new biological mechanisms - and thus one would have no idea how they would actually work in humans - all PROLOR has done is take a hemophilia drug that has been in the market for a very long time and sells close to $1.5 billion per annum, and attached CTP to it so the patient would be able to inject less frequently. Therefore, no new and novel biological mechanism, but same exact mechanism as the drug which is already in the market. Because the addition of CTP to drugs has shown great results (Merck got their CTP drug Elonva already on the market, PROLOR has shown great safety and efficacy results with their hGH-CTP), we believe the likelihood of getting safety issues with a long-acting Factor VIIa attached to CTP is very low. Therefore, the main question was whether the long-acting Factor VIIa attached to CTP actually would stay longer in the system, and have a longer, more potent effect on blood clotting. Well, this question was answered quite clearly in the hemophilic mice model PROLOR has conducted. Long-acting Factor VIIa attached to CTP has outstanding efficacy in blood clotting and could be injected much less frequently. We believe the likelihood that these results will be the same in humans is very high, because these mice have been genetically altered to imitate humans with hemophilia.
Bottom line - PROLOR's long-acting Factor VIIa attached to CTP is just an improved version of a drug that sells close to $1.5 billion per year. It is not really a new drug like most that you are familiar with. To top it all, there are only 2 companies in the world that are racing to get approval for a long-acting Factor VIIa - one is the large German drug company Bayer, and the second is PROLOR. Bayer is not that far ahead of PROLOR, and we are of the opinion that animal models conducted with the Bayer product show that PROLOR's product is way superior. Unlike most drugs, the regulatory authorities' guidelines for hemophilia products call for marketing approval after less than 100 people have been treated in clinical trials with the drug. That is vastly different than most drugs. We are therefore very excited about the potential for this drug.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.