Pluristem's Plant Approval From The FDA Could Provide Pathway To New Drug Partners

| About: Pluristem Therapeutics, (PSTI)
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The FDA approved Pluristem’s 3-D PLX cell manufacturing plant, a noteworthy accomplishment as the agency is known for its insistence on high quality and precision.

Additional partnering with pharmaceutical and biotechnology companies may be more likely with this approval, as Pluristem furthers its strategy that began with United Therapeutics and CHA Bio&Diostech.

Pluristem is one of a few companies that can deliver a therapeutic solution to potential partners that are seeking new ways to treat a particular disease.

Risks to owning the stock includes indifference from potential partners and early commercialization by stem cell competitors.

Closely following German regulatory approval of Pluristem Therapeutics' (NASDAQ:PSTI) pioneering facility for large-scale PLX cell production, the first in its history since the plant was completed not long ago, the company can now add to its credit consent for same from the FDA, an agency known worldwide for its rigorous inspection and exacting demands. With this blessing, Pluristem has full rein to mass produce PLX cells possibly destined for clinical trials in the US where a host of potential partners with problem drugs chasing various disease states may look to cell therapy as the next best thing.

Making cell therapy a fully automated procedure with consistent batch to batch results has been a long-term goal of Pluristem and its competitors, under the reasoning that if it quality control can be demonstrated, then manufacturing can ramp up to support any number of clinical trials throughout their longevity, including Pluristem's own. To date, Pluristem has been successful, using a patented 3-D cell expansion platform within a bioreactor and related equipment to most effectively mimic the matrix of cellular function. Economies of manufacturing scale are important in making biologic products - Pluristem's plant has capacity for more than 150,000 doses of its PLX cells; as I had described in an earlier article, cells can be produced at a low cost that can be passed on to its future pharmaceutical partners for healthy margins all around. An added benefit, this kind of advantage gives them a strong position in licensing.

Pluristem's 'build it ourselves' attitude is reminiscent of companies first making monoclonal antibodies, a prime example being Cambridge Antibody Technology Group, inventor of the first human antibody blockbuster Humira for rheumatoid arthritis marketed initially by Abbott Laboratories (NYSE:ABT) and eventually bought for $1.3 billion by AstraZeneca PLC (NYSE:AZN) in 2006. Besides its manufacturing expertise, Pluristem sees to the supply chain, that is, from laboratory bench to bioreactor, to packaging, to the clinic, and finally to the patient. Cells are alive and changes in environment may affect their performance. "Industrializing" cell therapies has been challenging, according to Philip Vanek, general manager for Cell Therapy Technologies at GE Healthcare Life Sciences, a division of General Electric Company (NYSE:GE) who recently spoke on a panel about partnerships under a collaborative model for commercializing these new methods of treating sickness.

Mr. Vanek recognizes cell therapy's triumph in early clinical trials; however, translation to larger ones with more patients requires greater logistical expertise to ensure uniformity of biological product so that later studies have a better chance of replicating any validated efficacy. Safety is rarely an issue. There has been a technological gap between the variations in the biology of the cell and how well engineering can fill the void. Every patient is unique, yet Pluristem's prowess shows that its human placental stem cells are identical despite difference in donors and can go the distance in clinical trials. As evidence, two months ago the company announced results from its Phase I/II trial using PLX cells in muscle injury, where a primary endpoint of the change in gluteal muscle contraction was statistically significant at six months after total hip replacement, as were MRI images showing an increase in muscle mass, also suggesting that cell therapy is highly useful in orthopedic injuries involving muscles and tendons.

Pluristem's business model appears to have no place for an outright acquisition; instead, it seeks to supply a stable biological product to pharmaceutical partners that it makes itself, controlling manufacturing and lending a hand in research and development setbacks where cell therapy might prove a better solution. Medical conditions addressed by PLX cells have been growing fast, creating for Pluristem a pipeline rivaled by larger biotech and pharma players. Central to its importance in the clinic is the fact that PLX cells adapt to certain - though not all - human ailments, giving them flexibility as a treatment option and value for partners looking for products in new indications.

So far, Pluristem's ideal relationship with partners is working. United Therapeutics Corp. (NASDAQ:UTHR) cut a deal in 2011 to fund clinical trials using PLX cells to treat pulmonary arterial hypertension (NYSE:PAH), a critical condition of high blood pressure of the vessels that run from heart to lung, under a milestone arrangement that could amount to $48 million. Pluristem retains all manufacturing rights, provides commercial-grade PLX cells and, if marketed, will sell the cells to United Therapeutics above cost and share in gross profits as royalty. Phase I trials are underway in Australia. United Therapeutics has a vested interest in using PLX cells for PAH: Last April the company stumbled with an oral version of its lead drug Remodulin after failing to reach necessary endpoints, prompting a rejection letter from the FDA.

Treatment for PAH, a $3 billion worldwide market by my estimation, has caused other pharm companies to reach for the brass ring in search of the next blockbuster, but with an array of nasty side effects causing potential patient non-compliance. First on the market was an injectable vasodilator to allow blood to flow through arteries more easily, marketed by GlaxoSmithKline (NYSE:GSK) but long connected to sepsis (infections of the blood) and fever. Leading the handful of PAH remedies is Tracleer, an oral formulation by Actelion Ltd. (OTCPK:ALIOF) introduced in 2001. Also designed to facilitate the flow of blood, it however carries a risk of liver poisoning. Actelion released Veletri in 2010, a potent intravenous vasodilator that carries relatively low-level adverse events for patients whose PAH has a known cause. A problem arises if PAH is idiopathic (of unknown source), which accounts for many cases. Then side effects become more serious, such as rapid heartbeat.

Gilead Sciences (NASDAQ:GILD) dabbled with vasodilator cicletanine, only to halt Phase II clinical trials when endpoints in exercise did not pan out, resulting in an $11 million write-off. Pfizer, Inc. (NYSE:PFE) has also gotten into the PAH game with Revatio, a repackaging of its popular Viagra, which unfortunately carries all the risks of the erectile dysfunction drug group and is contraindicated for a long list of other medications. In sum, not only its current partner United Therapeutics but also a number of other firms sorely need a new, safe and effective product to keep and promote an active PAH franchise.

Continuing its partnership strategy, last June Pluristem joined up with CHA Bio&Diostech, a far-reaching South Korean biopharmaceutical firm with a strong interest in stem cell therapy. In addition to an equity investment, CHA will fund Phase II clinical trials in peripheral artery disease (PAD) that will include the exploration of treatment into intermittent claudication (IC) and critical limb ischemia (NYSE:CLI), areas comprising Pluristem's primary clinical focus. Upon regulatory approval in Korea, a joint venture will be formed to make the product available commercially.

Like PAH, current treatment for PAD, characterized by an often dangerous decrease in blood flow to the legs brought on by arterial clogging, has not always been best for the patient. PAD, a $2 billion market in the US alone is viewed as a 'silent killer' whose diagnosis often comes too late for effective control. Trips to the hospital are common and account for 75% of total cost outlay for any given patient who typically undergoes admission within two years of identification of the condition and often presents with problems related to PAD, like respiratory or cardiovascular events.

Brilinta, by AstraZeneca PLC (AZN), is a currently-marketed oral tablet to reduce the rate of heart attack and cardiovascular death, going head-to-head with blockbuster Plavix, made by Bristol-Myers Squibb (NYSE:BMY), Faced with disappointing sales after taking 14 years to be made available in the US. The drug giant thrust Brilinta into an 11,500 patient trial for PAD - PLATO - pitting it against Plavix in the study. Besides overcoming an onerous side-effect profile, Brilinta now has bigger problems: Last October, the US Justice Department launched an investigation into PLATO, with allegations of a poorer outcome with the drug versus Plavix as seen in interim results and worse, buried or deleted data that point to an estimated 23 cardiovascular adverse events, including death, for trial subjects on Brilinta.

Plavix - whose own side effects are not insignificant, including life threatening bleeding in up to 2% of users - is widely prescribed for PAD. Several years ago the FDA put its most severe warning on the drug, a 'black box', while citing a lack of efficacy in an astounding 14% of patients. It was also discovered that certain genetic characteristics render the drug worthless and may not come to light until years after taking Plavix, time for the body to suffer greater degrees of arterial blockage. The anti-cholesterol drug Lipitor, some antibiotics, Prilosec for gastroesophageal reflux and even Prozac may inhibit Plavix' effectiveness.

Both IC and CLI are closely related to PAD and are often prescribed the same medicines. Teva Pharmaceuticals (NYSE:TEVA) sells Pletal as a generic specifically indicated for IC, but counts headache and diarrhea as its common side effects and improvements in walking may take up to 12 weeks. Pletal, however, cannot be used in patients with heart disease, a medical contradiction of sorts because the two conditions often overlap. Aastrom Biosciences, Inc. (ASTM), in a Phase II study with cell therapeutic ixmyelocel-T autogenically harvested from a patient's own bone marrow, reported positive results in late 2011 but then abandoned the effort in October 2013, citing lack of interest from potential partners, and has since then focused on research into enlarged hearts. This is unfortunate given that treatment options are limited for those with CLI; up to 40% are not viable candidates for surgery and limb amputation is often the only cure.

In instances of PAH, PAD, IC and CLI, Pluristem's PLX cells delivered intramuscularly offer a quicker, more convenient approach with a much better risk profile and, in the case of PAD, drugs do not have to be taken until death, enhancing quality of life considerably.

In addition to the above indications, Pluristem could be given the opportunity to partner with drug firms looking for better ways to treat blood-born cancers, for which it has an Orphan Drug designation in aplastic anemia implicated in bone marrow transfer, where all that exists in this multi-billion dollar market today are new compounds to ameliorate the devastating effects of chemotherapy such as Aranesp by Amgen, Inc. (NASDAQ:AMGN) or Mesnex by Baxter International (NYSE:BAX). Hormone therapy is another option, led by Herceptin by Roche Holding AG (OTCQX:RHHBY) and Faslodex by AstraZeneca. Unlike PLX cells, all show adverse side effects and do not contribute to revitalization of tissue.

Regeneration of muscle tissue has been an exploding area for Pluristem; within the orthopedic industry, sports medicine, specifically soft tissue repair, is a US market estimated at $1.5 billion. Besides its work in downstream problems associated with hip repair, Pluristem's PLX cells have been getting attention in areas such as tendon injury where preclinical studies done at New York's Hospital for Special Surgery produced an impressive effect on connective tissue healing and tissue regeneration, a long-sought after target for orthopedic surgeons. Regeneration of heart muscle is another area of interest to Pluristem and could be strong bait for partnering. In 2012, heart function in animals induced with diastolic dysfunction improved after administration of PLX cells. This also suggests the ability of the therapy to repair existing damage.

An obvious and overriding risk to investing in Pluristem is that partners may not materialize at all, or agreements delayed until more clinical data is evident. This is mitigated somewhat by the company's existing relationships that have been established with very favorable terms. Other cell therapy companies could outpace Pluristem in one of its therapeutic categories; although most publicly traded stem cell competitors strive to develop new methods of treating diseases of a more neurological or ophthalmic nature, Biotime, Inc. (NYSEMKT:BTX) is developing Premvia for tendon repair and could beat them to market (not necessarily a bad thing - brand new modalities take time for acceptance and more than one market entrant tends to hasten the process). The biologic landscape for PAD and PAH, however, appears to belong to Pluristem.

With its manufacturing facility accepted by the FDA, Pluristem has been given an 'all clear' signal to explore affiliations with the largest pharmaceutical partners that may have been waiting in the wings for this moment. Pluristem's exclusive place in cell therapy has been endorsed and defined. The addition of corporate collaborators will not only validate the company's mission, but also add significant shareholder value while promoting better medicine.

Disclosure: I am long PSTI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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