Protalix Undervalued Due To Ghost Of Shire, Upside On Fabry Approval Significant
Summary
- Protalix has a BLA already submitted with the FDA for the approval of PLX-102 for Fabry Disease.
- Sanofi’s competitor, Fabrazyme, almost reached $1B in global revenue last year.
- PLX-102 has significant advantages over Fabrazyme, including lack of immunogenicity and easier administration schedule.
- The main risk is what happened to Shire in 2012 with a similar drug molecule for Fabry, which is why I believe the stock is trading very cheap here.
- If Protalix can get past the ghost of Shire, now Takeda, and achieve FDA approval, the upside from here could be significant.
What would you value a developing biotech with BLA submission just filed with the FDA? In this case, a BLA filed for a drug with the potential to outcompete a Sanofi (SNY) near-blockbuster, and the company is flush with cash after closing a $44M private placement. Somewhere near all-time lows? That's where Protalix BioTherapeutics (NYSE:PLX) is, and to me, it looks unjustified, though understandable. If the FDA approves its BLA application for its Fabry disease drug, though, I believe the upside revaluation could be particularly significant.
Though there is one major hangup for the stock (I'll get into that in a minute), the lack of enthusiasm for a stock like Protalix in this particular scenario would make sense if the chances for approval were a long shot. It would also make sense if the chances for success in the market were slim, even if approval looked likely. If you look at the data and the partnerships involved, though, the drug in question, PLX-102, looks to have both a high probability of FDA approval and market success if approved.
Background
Fabry disease is a genetic disorder affecting 1 in 40,000 people where they lack an enzyme that normally breaks down a fatty substance in the blood, preventing it from sticking to the arterial walls. People with this disease can’t break it down and it gets stuck, mimicking cardiovascular disease. Patients generally take enzyme replacement therapy once every two weeks, and the current market leader is Sanofi’s Fabrazyme. Fabrazyme is the most popular drug for Fabry disease, selling €410M and €813M worldwide (see page 64) last year, putting it just under blockbuster status.
The other option for patients is Galafold, which works differently. Developed by Amicus Therapeutics (FOLD), it is advantageous because it is an oral therapy. It works by binding to and stabilizing the dysfunctional protein produced natively rather than replacing it. Approved in 2018, Galafold lags and will continue to lag Fabrazyme despite its advantages of oral administration and a lower price because it can’t be taken by every Fabry patient. It only works with certain variants of the disease amenable to the enzyme being functionally repaired rather than replaced entirely.
Clear Advantages
PLX-102, however, has other advantages over Fabrazyme, and they could prove significant in terms of market access. First is its stability. The half-life of PLX-102 in the blood is about 80 hours, compared to about 2 hours for Fabrazyme. The stability of the molecule means it can be administered about half as frequently, once every 4 weeks instead of every 2.
That’s an issue of convenience, but there is another significant positive, and that is immunogenicity, or immune reaction to the drug. Compared with Fabrazyme, it is very low. The original 2002 briefing document from the FDA for Fabrazyme noted that the majority of subjects produced antibodies to the drug (see page 14). A study conducted 2 years later in 2004 concluded similarly that 11/16 male patients (females unaffected) produced a significant antibody response against the drug, which can prevent patients from clearing the enzyme from their kidneys. By comparison, PLX-102 was seen to have an immunogenicity rate of about 19%, but the antibodies turned out to be transient, since all patients who tested positive for these anti-drug antibodies, tested negative in the second year of treatment.
The Main Risk
If PLX-102 has clear advantages over Fabrazyme in terms of administration and immunogenicity, then why is it so undervalued at just over $100 million in market cap? What is the big risk here? As I see it, I think investors are fretting over the FDA causing Shire - now Takeda (TAK) – to pull Replagal from FDA consideration in 2012. It is unclear why exactly Shire withdrew its application with the FDA back then, but it seems Shire was under the impression that the FDA would have required more trials and it wasn’t worth it. Since PLX-102 and Replagal are based on the same molecule, it would stand to reason that PLX-102 could have similar problems getting approved.
That is possible, so it is a significant risk, but consider that Replagal suffered from similar problems of immunogenicity and did not offer significant advantage in administration for patients, taken as a 40-minute infusion every two weeks like Fabrazyme. I believe that investors may be drawing false parallels here, and that PLX-102 has a much better chance of approval due to the improved immunogenicity profile and the administration advantages for Fabry patients.
Cash Runway and IBD Prospects
Having just completed a $44 million private placement, Protalix has plenty of cash on hand. As it is partnering with Chiesi on marketing on a 15-40% tiered royalty structure, it can save its resources for furthering other projects. CFO Eyal Rubin told investors in a call in Q1 that he expects the company to keep a $7.5 million net burn rate for the next two quarters, and then that burn rate will fall as Chiesi is funding trials and open label extensions. There is enough cash to last the next two years without any further financing, well into the time frame of the expected FDA decision on PLX-102 and for revenues to start flowing if approved.
Plus, while the exact numbers are not disclosed, Protalix is eligible for up to $1 billion in milestone payments related to PLX-102.
While I don’t expect PLX-102 alone to put the company on the road to full independence and sustainability, I do expect success with the Fabry drug to give it the momentum it needs to advance its irritable bowel disease prospect in OPRX-106, which uses similar technology as PLX-102 in its plant-cell based manufacturing. OPRX-106 unlike other IBD treatments targeting tumor necrosis factor alpha, is orally administered and works locally in the gut rather than systemically as IV infustions do, minimizing off-target side effects.
Protalix is still looking for a partner to advance this candidate through the clinic, but trial results to date are as follows:
- 67% of patients experienced a clinical response in all dosages.
- 44% of patients experienced a clinical remission in the high dose and 11% in the low dose.
Further, mucosal improvement was observed in the gut for 61% of patients, and 33% mucosal healing.
Because OPRX-106 was developed on the same platform as PLX-102, there is a similar advantage in lack of immunogenicity. I don’t expect imminent movement on this front, but it gives Protalix significant long-term prospects other than the imminent catalysts involved with Fabry Disease, and should give shareholders what to look forward to in the years ahead, and should help stabilize the stock over the longer term.
Conclusion
Considering the circumstances and the clear advantages of PLX-102 over competitors, and that a BLA has already been submitted and the company is now just waiting for a PDUFA date, Protalix looks undervalued here. Its undervaluation, though, can be justified by what happened in 2012 to Shire with Replagal, and that is the main risk here. The fear of rejection I believe has pushed the price down substantially, which means if Protalix can get past the FDA with PLX-102, I believe the immediate upside will be quite significant.
This article was written by
Analyst’s Disclosure: I am/we are long PLX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Comments (16)
OPRX-106 possible future treatment for Inflammatory bowel disease (IBD) not for "irritable bowel disease" (do you mean Irritable Bowel Syndrome ?)
There is of course the matter of future competition:
- Gene therapy products in phase 1/2 from Sangamo and Avrobio.
- Glucosylceramide synthase inhibitors: Venglustat (Sanofi, phase 2) and Lucerastat (Idorsia, phase 3).Do you have any insight as to how they fare compared to PLX product?
From the article, skipped from Phase 1 trial to Phase 3 trial, no Phase 2. But certainly a potential competitor.
investorshub.advfn.com/..."Lucerastat:Phase III clinical trial endpoint is Pain which as described above is a subjective measure and not that great specifically regarding keeping patients alive.Secondly the Phase III trial is investigating Lucerastat as a MONOtherapy vs placebo if you believe it. Which means that in the trial they are not even going to be giving ERT to the patients.The prior Phase I which showed interesting results was at least in combination with ERT to provide some sort of support to the patients.Thus the Phase III design is in a sense dooming the patients and their physicians to accepting providing no clinically beneficial product to the patients when there is some available and that the new monotherapy is not even being investigated to improve the basic important clinical outcomes of Fabry disease.Not a good trial design.Secondly, initially they planned to enroll 100 patients acorss 29 sites in 9 countries. We can see that hasn't worked well for them at all, as currently on the clinicaltrials website, they are now planning for 108 patients across 58 sites across 15 countries. But while 23 of the planned sites are still not yet recruiting.Also Perhaps the increase of 8 is also due to drop-out of the initial patients?
www.idorsia.com/...
clinicaltrials.gov/...This Phase III was started in May 2018.With regards potential time-frame to completion let us remember that it took Protalix 3 years to recruit the 100 patients needed for the BALANCE and BRIDGE studies. And that was with good pre-clinical data on Heart, Kidney function and better than current ERT data from Phase I/II on eGFR slope data in humans.
BALANCE the largest of the PLX studies with 78 patients recruited from 51 sites across 21 countries.So we can see that it's not going to be easy to get patients into this trial.And we know this isn't working out for them as on that presentation that Dr Warnock made last December, he stated without mentioning the name that there was a study in Fabry looking to use Pain as its primary endpoint, but for which as per explained above they are having issues with enrollment, surprise surprise.Thus given the May 2018 start, the minimum 3 years to recruit if all centres are online, but that presently half of them are not, would put the timing to enrollment at a logical 6 years, but then add the lower reason for patients and physicians to enter the trial would probably put enrollment at about 9 years, even as new sites come online?? Then the endpoint in pain is at 6 months, so we are looking at about 10 years to data from this study??If PRX-102 is approved it will be even more difficult to find the patients physicians wanting to enter this monotherapy trial. Even if it does complete the data are largely meaningless without heart or kidney function assessment in addition to nothing to compare against."
