Undervalued Biotech Stocks In Non-U.S. Markets: Part 1

by: Bioassociate Consulting

Home-biased investment is the tendency to invest only in companies that are based in one's country. Investors that are capable of overcoming this bias can be exposed to investment opportunities in the form of undervalued companies in non-U.S. markets.

In the area of biotech investment, geography is almost irrelevant due the borderless nature of the life sciences industry. Liquidity can reflect a 20%-30% gap when pricing similar biotech companies traded in different countries, but in most cases, "under the radar" public companies in non-U.S. markets can reveal a greater upside.

In this series of articles we will highlight several interesting markets outside the U.S. with a strong national emphasis on life sciences and a collection of investment opportunities with potential upside.

The Israeli market

More than 1,100 life science companies currently operate in Israel, with 40 to 60 new companies established each year. 46% of all Israeli life science companies are less than 5 years old, with a further 34% of these young companies already generating revenue. On the Tel Aviv Stock Exchange, life sciences represent the largest sector, with 57 listed life science companies, and several other Israeli companies are also listed on foreign stock exchanges.

Despite the plethora of encouraging facts, Israeli companies remain gravely under-funded in comparison with their U.S. counterparts. Per capita, Israeli life sciences actually attract more venture capital dollars than the ones state-side, and Israel currently ranks 4th in the Global 2012 Venture Capital Confidence Survey conducted by Deloitte. However, particularly in the bio industry, deal sizes are on average smaller and less meaningful in Israel than in the U.S. By the number of public life science companies, Israel competes only with the likes of the U.K. and Sweden, and significantly supersedes Switzerland, Denmark and Germany.

Below we focus on six public Israeli companies with a favorable cash-to-market cap ratio, solid technologies and strong management teams.

All data is in $m (1Q 2012 data)

Company Name


Market Cap. (NYSE:MC)



Lead product


Mazor Robotics







Pluristem Therapeutics





Ph2/3 ready









Itamar Medical







BioLine Rx





Pivotal study









Mazor Robotics markets an innovative bone mounted robotic guidance system for spine surgery. Mazor's Renaissance system is aimed at increasing the accuracy and safety of spine surgery, as well as facilitating the transfer to minimally invasive spine procedures, while decreasing the patient's and surgeon's exposure to radiation by minimizing the need for fluoroscopy imaging during the surgical procedure. Mazor is currently expanding the clinical applications of its robotic guidance system to cranial procedures, such as cranial biopsies and deep brain stimulation implant placements.

Aposense is one of the world's leading companies in the development of tracers for PET imaging for early assessment of tumor response to anti-cancer therapy. The company's leading product, ML-10, which is based on targeting apoptotic cells, is approaching the end of phase 2b clinical trials in three different cancer types. From the business environment viewpoint, ML-10 has an advantage over existing and pipeline technologies for early assessment of cancer therapy efficacy, in parameters relating to diagnosis speed, specificity, and the quality of information obtained. Aposense has a marketing agreement with IBA, one of the world's leaders in marketing and distribution of PET imaging tracers, which also includes the participation of IBA in funding the remaining clinical development of this tracer. Moreover, Aposense has a partnership agreement with Teva Pharmaceuticals (NASDAQ:TEVA) to develop a targeted drug for cancer therapy, based on the same technology platform.

Pluristem Therapeutics is a leading developer of placenta-based cell therapies. The company's patented PLX cells platform releases a variety of therapeutic proteins in response to a host of local and systemic inflammatory diseases. PLX cells are grown using the company's proprietary 3D micro-environmental technology and are a unique off-the-shelf product that requires no tissue matching prior to administration.

Pluristem's comprehensive clinical plan focuses primarily on peripheral artery disease, and includes a Phase II/III multinational pivotal study with critical limb ischemia patients, as well as a Phase II multinational study with intermittent claudication (a less severe form of peripheral artery disease) as potentially preventive treatment which may have an impact on the disease progression. In addition to in-house R&D, Pluristem has entered into an exclusive out-license agreement with United Therapeutics (NASDAQ:UTHR) for the use of the PLX cells to develop and commercialize a cell-based product for the treatment of Pulmonary Hypertension.

Kamada is a biopharmaceutical company developing, producing and marketing a line of specialty therapeutics using a sophisticated chromatographic human plasma purification technology. Utilizing its proprietary know-how, Kamada manufactures more than 10 biopharmaceuticals aimed at niche markets, and generated revenues of close to $60m in 2011. Kamada's lead products is Glassia - an intravenous alpha-1 antitrypsin (AAT) product, which is the only treatment for AAT deficiency-associated emphysema that is available in a stable, ready-to-use liquid form. Kamada has a marketing agreement with Baxter International (NYSE:BAX) for Glassia.

In full manufacturing capabilities of Glassia, which will be available by the end of 2012, Kamada will be able to reach revenues of $100m from this product alone. In addition, the company is currently developing an inhaled version of the AAT-based therapy, which is undergoing phase 3 studies, with top-line results expects during the first half of 2013. The inhaled version of the AAT therapy, which has already been proven as safe in interim results of the current study, can revolutionize the AAT deficiency-associated emphysema market.

Itamar Medical is a medical device company which develops, markets and sells diagnostic medical devices based on the PAT (Peripheral Arterial Tone) signal - a non-invasive "window" to the cardiovascular system and the autonomic nervous system. Itamar markets two devices based its technology: Endo-PAT - a non-invasive diagnostic cardiac tool, aimed at early diagnosis of heart disease, and Watch-PAT - a portable, wrist-worn, diagnostic device used for accurate screening, detection, and follow-up treatment of sleep apnea, that dismisses the use of cannulas and head straps. Itamar's products are FDA approved, and the company has recently initiated marketing operations in the U.S., following receiving Current Procedural Terminology (CPT) codes. Roche (OTCQX:RHHBY) has shown interest is Itamar's EndoPat device, by signing an agreement under which Itamar will develop the device for use in animals, for advanced trials of drug development.

BioLine RX is a pharmaceutical company that seeks and develops technologies under exclusive global licensing agreements, from early stage R&D through clinical development, and outlicenses them to strategic partners for further advancement and commercialization. The company's pipeline consists of five clinical stage candidates, including two in advanced stages of development:

  1. BL-1020, an anti-psychotic drug indicated for the treatment of schizophrenia, including cognition deficits, which is currently in a Phase 2/3 clinical trial.

  2. BL-1040, an innovative solution directed at supporting damaged cardiac tissue following acute myocardial ischemia (AMI), aimed at preventing post AMI cardiac remodeling and subsequent congestive heart failure. BL-1040 has been out-licensed by BioLine to Ikaria Inc., which develops it under the name IK-5001 (also termed Bioabsorbable Cardiac Matrix) and is currently conducting a CE Mark pivotal trial that is predicted to produce results in H2 of 2013, and scheduled to initiate an additional pivotal clinical trial towards registration in the U.S. in the near future.

To sum up so far, a U.S. bio-investor who seeks high-growth companies with great potential and an undervalued price tag can find them in foreign stock markets, including the Tel-Aviv Stock Exchange in Israel. In part 2 of the article we will look at biotech opportunities in other non-U.S. markets, such as Switzerland, Germany and China.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.