Protalix's Regulatory Approval: Analyst Q&A

Recently, I interviewed two well-known analysts and consultants that have been following Protalix (NYSEMKT:PLX) closely. We have discussed their perspectives on the upcoming approval decisions for Protalix's Gaucher disease treatment (Taliglucerase Alfa).

Protalix's lead product candidate, Taliglucerase Alfa, is a plant cell-expressed recombinant glucocerebrosidase enzyme for the treatment of Gaucher disease. Protalix is partnered with Pfizer (NYSE:PFE) for the exclusive worldwide commercialization of Taliglucerase Alfa in all territories, except in Israel, where Protalix has retained exclusive rights.

In February 2012, Protalix announced long-term safety and efficacy data from the Company's 15-month, double-blind, follow-on extension study of Taliglucerase Alfa, which was comprised of 26 patients who had previously completed nine months of treatment in the pivotal Phase 3 trial. Patients treated with Taliglucerase Alfa continued to demonstrate:

  • Statistically significant reductions in mean spleen volume, the primary endpoint, after 24 months in both dosing groups (30 units/kg and 60 units/kg).
  • Statistically significant improvements in all secondary endpoints, including decreased liver volume, increased hemoglobin concentration, increased platelet levels, and reduced chitotriosidase activity
  • No drug-related serious adverse events were reported; two patients developed neutralizing IgG antibodies that were determined to be positive in an in vitro assay and were negative in a cell-based assay. One patient in the 60 U/kg dose group experienced a hypersensitivity reaction at month 10, but the patient has continued with pre-medication, without any treatment-related adverse events.

In addition, In February 2012, Protalix also announced full data from the switchover study, reflecting results for all 26 enrolled adults. Results of the switchover study after 9 months of treatment demonstrate:

  • Patients remained stable with regard to the efficacy endpoints - spleen volume, liver volume, platelet count and hemoglobin concentration - after switching to Taliglucerase Alfa from imiglucerase
  • Taliglucerase Alfa was well tolerated, and no drug related serious adverse events were reported
  • One patient developed neutralizing IgG antibodies that were determined to be positive in an in-vitro assay and were negative in a cell-based assay; another patient experienced a hypersensitivity reaction, which was treated in a physician's office and resolved.

The positive clinical data regarding both the 24-month follow-up as well as the switch over study from Cerezyme, had already been submitted to the FDA and may increase the chances of success for approval.

The PDUFA date for Taliglucerase Alfa is set for May 1, 2012, but Protalix can get an earlier decision as the original date was extended by three-month and the FDA may complete its final review before that period. If Protalix will win FDA approval, the health agencies in Brazil and Israel will most likely follow a short time later. Taliglucerase Alfa is also pending in the European Union and Pfizer and Protalix expect to hear a decision from the European medicines agency in the next few months.

I would like to introduce Dr. Yoav Kedar, a biotechnology consultant for Clal Finance Brokerage. I have been told that Dr. Kedar is "the best person to talk to about Protaix," so I had to see for myself.

Ben Yoffe: Can you tell us what are your expectations regarding the upcoming PDUFA date of May 1, 2012 for Taliglucerase Alfa?

Kedar: An approval is a major milestone for PLX and its core technology.

We expect a 70% chance of approval for Taliglucerase by the FDA this May. However, we see a more difficult Gaucher market than previously estimated, and think the company's delay and the recent capacity increases within Genzyme (NYSE:SNY) and Shire (SHPGY) put further pressure on the effort. New comers such as Genzyme's Eliglustate haven't been heavily factors into our math yet, but we want to be more careful when building the model.

Yoffe: What can you tell us about the European approval?

Kedar: We expect a Q2 European approval. As for as the Orphan drug issue in Europe recently raised, Shire had apparently spoke with analyst emphasizing its orphan drug protection status for VPRIV in Europe and its potential use to block new entrants. We carefully estimate the case is not strong as Shire is practically the second company to introduce GCD to Europe after Genzyme. Furthermore, the source technology of the two products is different enough not to allow Shire to block.

Yoffe: What is your price target for PLX?

Kedar: We think an $8 price for the stock post a positive FDA decision is likely. We use a modest $170m in sales for 2014 implying $68m in revenues for PLX, Apply a 7-8 sales multiple and a $150 technology value at present to get the number.

The next interview is with the well-known analyst from Auriga USA, Dr. Difei Yang. Dr Yang spent many years in the pharmaceutical/biotech industry in various functions from R&D, marketing, to business analysis and business development/M&A. Dr. Yang has 14 years of industry experience, holds multiple US patents and has written several scientific publications.

Yoffe: Can you tell us what are your expectations regarding the upcoming PDUFA date of May 1, 2012 for Taliglucerase Alfa?

Yang: Given the back and forth between the FDA and PLX, we think the odds should be incrementally better. Given that The FDA request have been focused on CMC section of the NDA as we would expect for a new manufacturing platform and it appears that the FDA is satisfied with the clinical data, we believe the probability of approval should be 80%.

Yoffe: What do you think about the Orphan drug issue in Europe?

Yang: We are not too worried about it. The enzyme made by Genzyme, Shire and Protalix uses different cell lines which we believe is an adequate amount of differences to qualify as a new product. As we all know, protein folding plays a significant role in drug functionality so having identical sequence is far from guaranteeing comparable efficacy/safety.

Yoffe: If there isn't a real problem, why did the EMA notified Protalix regarding this issue in the first place?

Yang: The original orphan drug designation was granted before Vpriv was approved. So I think it is just a standard process to revisit the justifications and adapt any new changes. In this case, Vpriv was approved between then and now. The original argument for Taliglucerase was based on Cerezyme shortage, similar to the argument that Vpriv was based on. I think as of now, the justification holds.

I think the discussion would be a bit more difficult if we have ten manufacturers serving the Gaucher's market. However, with only three, I see risk mitigation in supply is still highly desirable.

Moreover, if orphan drug exclusivity is truly an issue, then EMA would refuse the filing of Taliglucerase as it was filed post Vpriv approval.

Yoffe: When you except for European approval?

Yang: I think EU approval will be behind FDA approval and Q1/2013 for EU launch.

Yoffe: What is your price target for PLX?

Yang: By using the risk adjusted DCF (discount rate of 13%), we reached a price target of $8. We think revenue of WW Taliglucerase in 2016 could top $400 million.

I believe that the real significance of Taliglucerase Alfa's successful approval is the validation of the entire plant-base cell expression system. PLX could represent an attractive acquisition target to a firm seeking to become a player in generic biologics. The most likely acquirer is Teva (NYSE:TEVA), but several other firms could be highly interested because of the cost advantage and other benefits that Protalix would provide. In recent discussion with Protalix's CEO I asked if there is any collaboration with Teva. The CEO responded that several elements of Protalix collaboration with Teva, are currently ongoing; however, Protalix can not disclose any specific details on collaborations or discussions with Teva.

Disclosure: I am long PLX.