Protalix BioTherapeutics: It's All About The Technology

Protalix's (NYSEMKT:PLX) novel bioreactor plant cell system, based on disposable plastic vials, is the first of its kind. The closed system provides stable, optimized conditions, with manufacturing capabilities for the entire range of proteins, including antibodies, complex enzymes, and plant-derived pharmaceuticals.

Plant cell cultures are grown on aqueous media consisting of highly purified water and defined inorganic nutrients in a completely closed and controlled environment. Protalix's patented bioreactor system utilizes sterilized, large flexible plastic containers for culturing and harvesting cells in consecutive cycles, with a central unit providing oxygen and nutrients. The vials have been designed to allow for the removal of excess air and waste gases, as well as the introduction of inoculants and culture media.

The entire process is conducted in a GMP (Good Manufacturing Practice), approved production suite with optimized temperature, lighting, air and nutrient supplies. Because all components of the system are fixed, purification techniques for each specific protein are highly efficient.

The main advantage Protalix holds is its ability to manufacture biologic drugs at a very low cost. Plant line may allow for cost-effective, large-scale production of recombinant drugs that are at least as safe, if not safer than, traditional mammal cell drugs. An entire plant has been set up for a total outlay of roughly $10MM, a fraction of the $150MM-$1B estimated cost range for traditional mammalian cell-based biopharmaceutical manufacturing facilities. In addition, the cost per production run for Protalix's lead drug UPLYSO is a fraction (estimated at 15%-20%) of what it costs Genzyme (NYSE:SNY) to product Cerezyme or Shire (SHPGY) to produce velaglucerase. Accordingly, therefore, in an environment where all the approved products are essentially the same enzyme, Protalix would clearly have the upper hand in terms of ability to compete on price.

Protalix's lead drug candidate UPLYSO (taliglucerase alfa) data gives good proof of concept to Protalix's plant-based protein expression platform, which could be the basis of additional clinical programs and partnerships. The fact that a pharmaceutical giant like Pfizer (NYSE:PFE) was willing to partner this drug and provided Protalix with such a favorable profit-sharing split indicates that Pfizer may believe that the drug is significantly greater than the others.

In addition, with this amazing technology, Protalix can develop recombinant proteins that can produce and commercialize without infringing upon the method-based patents or other intellectual property rights of third parties. In several cases, the marketed biotherapeutic protein is not itself subject to patent protection and is available for use in the public domain. However, the process of expressing the protein product in mammalian or bacterial cell systems is protected by method-based patents. Using plant cell-based protein expression technology, Protalix is able to express the equivalent protein without infringing upon these method-based patents. In some cases, Protalix may be able to obtain patent protection for the compositions of the proteins themselves.

Given the broad applicability of Protalix's plant cell-based recombinant technology - a potential paradigm shift in the biotech industry - the firm 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 Protalix would provide.

Protalix and Pfizer have an upcoming PDUFA date of May 1, 2012 for their Gaucher's disease treatment, UPLYSO. Steven Breazzano wrote in his article: "Successful approval will represent a validation of the entire plant-base cell expression system." I definitely agree with him.

Meanwhile, another catalyst you should keep your eyes on is the presentation of the new clinical data on taliglucerase alfa that will be presented at the 8th Annual Meeting of the Lysosomal Disease Network: World Symposium 2012 being held February 8-10 in San Diego, California.

As for the risks: Drug discovery and development involve a high degree of risk. Factors that might cause material differences include, among others: risks relating to the review process of the FDA, the European Medicines Agency EMA, other foreign regulatory bodies and other governmental regulatory bodies, including the risk that regulatory authorities may find that the data from the clinical trials and other studies is insufficient for regulatory approval.
Moreover, there is always a risk for a capital raise to have a margin of safety and further the clinical pipeline.

Disclosure: I am long PLX.

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