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Dilution is a feared event in the biotech market. Most investors try to prevent dilution; however it can create an entry point for investors if the Company is financially well established.

Protalix (NYSEMKT:PLX) has high chances to get approved considering the facts:

  • It is an NDA resubmission and under SPA protocol.
  • The FDA did not request long term or new clinical trials in the previous Complete Response Letter (CRL).
  • Had good results of the Switch-Over trials presented at the 8th Annual Meeting of the Lysosomal Disease Network: WORLD Symposium 2012, held on February 8th in San Diego, California.
  • The FDA is already allowing Protalix and Pfizer (NYSE:PFE) to treat Gaucher's patients under a compassionate use program so the drug's efficacy and safety are not an issue.
  • Have passed a "GMP" good manufacturing practices, audit of the Company's manufacturing facility was performed and it was found compliant with the FDA, the Israeli MOH, ANVISA and the IMB on behalf of the EMA.

Following the completion of Protalix's secondary offering, the Company has ~$52M in cash. They are now moving forward to face the main hurdle, the FDA decision on May 1st for taliglucerase alfa, which is partnered with Pfizer. Biding approvals in the US and EU, Protalix will receive milestone payments from Pfizer totaling an additional $50M.

Protalix, located in Carmiel, Israel, is a biotechnology company focused on the development and commercialization of recombinant therapeutic proteins made from transgenic plant cells. The company's lead product, taliglucerase alfa, is an enzyme replacement therapy for Gaucher disease partnered with Pfizer. Following several delays, the PDUFA date for the drug is May 1, 2012. Protalix is also seeking regulatory approvals in other global markets. Prior to approval, the enzyme has been available under expanded access and named patient programs in the United States, France, and Brazil. Beyond taliglucerase alfa, Protalix also has several other early-stage pipeline candidates, including (PRX-105) acetyl cholinesterase for biodefense applications, as well as biosimilar/bio-better versions of Fabrazyme (PRX-102) and Enbrel (PRX-106).

On February 10, Protalix presented new clinical data on taliglucerase alfa at the 8th Annual Meeting of the Lysosomal Disease Network WORLD Symposium 2012 held in San Diego, California. Protalix presented long-term safety and efficacy data from the Company's double-blind, follow-on extension study of taliglucerase alfa for the treatment of Gaucher disease in naïve patients. The major endpoints of the study were spleen volume, liver volume, hemoglobin concentration, platelet count, and chitotriosidase activity. Patients treated with taliglucerase alfa in the extension trial continued to demonstrate a statistically significant reduction in mean spleen volume after 24 months, compared with baseline, in both treatment groups. Both groups demonstrated statistically significant mean reductions in liver volume and statistically significant mean increases in hemoglobin concentration, The data also demonstrated statistically significant mean increases in platelet count for both groups. Last, statistically significant mean reductions in chitotriosidase activity were demonstrated by both groups.

The safety analysis presented for both treatment groups demonstrates that taliglucerase alfa was well tolerated, and no drug related serious adverse events were reported.

To get clarification about the coming events I had a phone interview with Dr. David Aviezer, Protalix's President and CEO:

Q: Good evening, Dr. Aviezer- I would like to start with the last financing. In your last interview with the Globes newspaper on the 9th of February, you mentioned that the company has enough cash and the company is waiting to receive the $50M from Pfizer in approval milestone payments. However, the timing of the Company financing seemed strange and raised many concerning questions, since it occurred just two months before the PDUFA. Is there any concern about the approval chances?

A: First of all, Protalix is like most companies in the Biotech industry; we cannot and will never declare that we will not raise money. We have conviction in our progress toward FDA approval. That said, we did not want to be with only ~$10M in cash around the May 1st date.

We also want to continue our other product development plans and thus secured an amount of money that would allow us to continue advancing these clinical candidates.

We were pleased that many leading institutional investment funds from the U.S. & Israel participated in the offering. We had a relatively small dilution and discount factor, and the financing closed overnight.

Q: So now you have enough cash for the Fabry PRX-102 IND submission?

A: This is correct. We are in preparation to submit the IND in the second quarter of this year. We also want to advance the clinical development of the drug PRX-106 (the plant cell protein equivalent to Enbrel), and the Gaucher oral gglucocerebrosidase. We now have the financial base required to advance these programs.

Q: What's new regarding PRX-102 for Fabry disease?

We conducted a pre-IND meeting with the FDA in the 4Q 2011, at which we discussed the initiation of a Phase I/II clinical study. The goal of this trial is to evaluate the safety, tolerability and efficacy of the drug.

Q: So, the submission will be in 2Q 2012?

A: Yes. The IND submission will be in the second quarter. We are not waiting for the taliglucerase FDA approval; these are two different clinical development programs and have no direct connection to each other.

Q: What about the approval of taliglucerase in Europe?

A: We are progressing with the review process with the EMA. We are working closely with Pfizer to meet all the EMA requirements on time, but I cannot estimate the exact date for approval in Europe since their process goes according to their own schedule.

Q: Protalix presented new clinical data on taliglucerase alfa at the WORLD Lysosomal Disease Network Symposium? Was this data included in your submission of approval, and if not, is it possible the FDA will delay the approval again and ask for the additional data?

A: The data presented in San Diego this year were included in the resubmission to the FDA. At the conference we presented the latest data. The feedback from physicians and analysts was positive. Our main advantage is that taliglucerase is produced in plant cells that have no risk of contamination with mammalian cells, and the efficiencies of this production system enable us and Pfizer to price and position the drug competitively.

Q: What are your (and Pfizer's) market estimates after receiving the approval? What market share you are looking to capture during 2012, since you are currently building up inventory? What are your estimates for the years 2013 and 2014?

A: We expect to gain our fair share of the Gaucher market, but we and our commercial partner Pfizer have not provided specific estimates and guidelines. Leveraging our unique plant cell expression system, we believe we will bring an attractive and competitive product and price, especially in a world of economic pressure. In addition, Pfizer has original and unique ideas regarding patient services; for example, they have developed a comprehensive, centralized and full service patient support program.

Q: Are you ready to start marketing immediately after obtaining marketing approval, and how many patients can you supply with drug?

A: We will have enough supply to provide drug to all the patients requiring taliglucerase alfa treatment; those who are newly diagnosed or would like to switch ERTs. We have expanded and improved our plant and production processes, and we can treat several thousand patients. We believe that the competition will increase the diagnosis rate of Gaucher patients around the world.

Q: Regarding Brazil, why they are delaying the approval and what are the chances to sign a supply agreement with the Brazilian Health Ministry after obtaining the FDA approval?

A: We are in constant communication with the Brazilian Health Ministry but cannot provide more information at this time.

Q: Since Israel is a very important market for Protalix, as the Company has 100% of the rights, what market share are you expecting to capture in this geography? What percentage discount will offer to the Israeli market to capture the largest market share, given that Shire (SHPGY) cut the prices of Vela in order to capture more patients from Genzyme (GENZ) in Israel?

A. We intend to be the dominant player in Israel, and we will do what we can to capture a large market share.

Q: How long will it take you to get approved in Israel after the FDA approval? Will you be able to sell immediately after FDA approval or do you need to wait for Israel approval?

A: We believe that the approval in Israel will occur closely after the FDA approval. After receiving the approval, we will start transferring patients. Pfizer is ready with patient transition plans in other territories where approval is anticipated, and they will facilitate the process worldwide, with exception of Israel.

On February 27th Protalix in the sec filing 10-K annual report mentioned that in the fourth quarter of 2010, Pfizer, Protalix's commercialization partner, filed a Marketing Authorization Application, or MAA, for taliglucerase alfa with the European Medicines Agency, or EMA. As part of its ongoing review of the MAA, the EMA delivered a list of outstanding points to be addressed by the applicant. Among the topics currently in discussion, is the orphan drug designation and exclusivity granted by the EMA/European Commission to VPRIV, Shire plc's, or Shire's, Gaucher disease treatment, which could prevent the marketing authorization of taliglucerase alfa in the European Union for a 10-year market exclusivity period commencing as of the August 2010 marketing authorization of VPRIV in the European Union. As part of the MAA procedure, Pfizer, with Protalix cooperation, is challenging VPRIV's orphan market protection with respect to taliglucerase alfa pursuant to the EU orphan drug regulation. The EU orphan drug regulation provides for the possibility of such a challenge, and for an exception to this exclusivity to be granted, based on a number of factors, including contribution to patient care, clinical, supply, capacity and others.

As my understanding from the timeline, a CHMP recommendation on taliglucerase's approval could come as early as mid of April, making this the most significant potential upcoming event for Protalix, ahead of the FDA decision on 05/01/2012.

If we check back the filing history, Pfizer and Protalix submitted the MAA in late 2010, responded to CHMP's 120-day questions mid October 2011, and should have received CHMP's day-180 list of outstanding questions by late-December 2011 or early-January 2012. The clock stops again until Pfizer and Protalix respond to these 180-day questions; I believe the companies have already responded, end of February or early March.

In March 14, 2012 Shire withdrew its biologics license application Wednesday for Replagal (treatment for Fabry disease) with the Food and Drug Administration FDA as the Philadelphia Business Journal article. It's good news for Sanofi (NYSE:SNY) the only FDA-approved drug for the Fabry as well as for Protalix that will submit its IND for PRX-102 shortly, the market need another approved drug for this rare disease, given the supply shortage of the only FDA-approved drug for the disorder.

Technical Analysis

Protalix's shares price had 52 weeks high at $7.28 and 52 weeks low at $4.06, the price trading in a huge ascending triangle, after the dilution the price dropped from $6.07 to $5.33 closing at $5.45 that day, trading sideways for 17 trading days creating a base around $5.34 while the 50MA keep its uptrend.

On 03/09 we had a bullish "Golden Cross," a well know technical analysis event as long-term indicators carry more weight - the Golden Cross indicates a bull market on the horizon and is reinforced by high trading volumes. Additionally, the long-term moving average becomes the new support level in the rising market.

Technicians might see this cross as a sign that the market has turned in favor of the stock.

On 03/13 had a white Marubozu Bullish Candlestick, with 1.5X average volume, showing a strong buying pressure, The longer the white candlestick is, the further the close is above the open. This indicates that prices advanced significantly from open to close and buyers were aggressive. While long white candlesticks are generally bullish, much depends on their position within the broader technical picture. After extended declines, long white candlesticks can mark a potential turning point or support level.

After the long run and the long candle breaking out the 200MA & the 50 MA, the price retreat to recheck the 200MA and the second day checking the $5.74 level that used as a resistance level, and today it used as a support level, while we can see the RSI-14 in a Positive-Divergence and MACD positive cross.

The next resistance line is around the $6.02 while breaking it up will close the gap from the dilution day.

The real resistance line is the downtrend line (purple line in the chart) while breaking it out with a large volume can lead for a long run-up as PLX is well known as a good runner. Technically we can calculate the target as the base of the triangle (7.16-4.06= $3.10) giving us the target of $9.30.

This technical target set well with the Wells Fargo's price target $8.00 - $9.00, as the PDUFA date is very close, May 01st, so the run-up will be fast and furious.

Click on the chart to enlarge

For the history of Protalix and the long journey you can check my previous article ahead of the NDA resubmission.

Disclosure: I am long PLX.

Source: Protalix: What You Need To Know Ahead Of The May 1 PDUFA Date