BioLineRx: An Israeli Biotech Incubator

| About: BioLineRx Ltd. (BLRX)

BioLineRx (NASDAQ:BLRX) is an Israel-based biotech incubator which receives government funding support (i.e. Office of Chief Scientist, Israeli Trade Ministry) to identify and develop compounds at an early (preclinical) stage.

The Company develops these compounds through early-stage, proof-of-concept Phase 2 clinical trials and then seeks to partner with larger pharmaceutical companies for late stage development and potential commercialization. Below is a summary of the Company's clinical development pipeline.

BL-1020 (GABA-enhanced dopamine antagonist anti-psychotic agent) is the Company's lead product candidate in development which is being evaluated in an ongoing Phase 2b / 3 (CLARITY) Clinical Trial ( ID NCT01363349).

During 2Q11, the Company began enrolling patients in a Phase 2b/3 clinical trial being conducted in Romania and India. BLRX expects to enroll 450 patients and report results mid-2013 and the study is evaluating cognitive function and safety at six weeks and six months compared to both approved drug RISPERDAL and placebo. Previous clinical trials have demonstrated cognitive improvement for BL-1021 similar to approved drugs in the same class with minimal side effects and patent protection through at least 2022 with pending applications that may extend through 2030.

BL-1040 (Bioabsorbable Cardiac Matrix or BCM) (IK-5001) (liquid polymer injected into coronary arteries) is the subject of a Pivotal (PRESERVATION I) Clinical Trial to Support CE Mark Approval ( ID NCT01226563) by licensing partner Ikaria.

In JAN 2012, BLRX announced the start of a pivotal study to support CE Mark approval in Europe for medical device intended to prevent cardiac (heart) remodeling following acute heart attack (NYSE:MI), and the drug is licensed to privately-held Ikaria w/ results expected in 2013 (2H13 estimate) along w/ $265M in remaining development / sales milestone payments and 11-15% global royalties if commercialized.

BL-7040 (orally available anti-inflammatory compound) is being evaluated in an open-label Phase 2 Clinical Trial ( ID NCT01506362) for patients with moderately active ulcerative colitis (a type of inflammatory bowel disease or IBD) and results are expected by 1Q13.

BLRX is conducting a Phase 1 clinical trial ( ID NCT01121380) with results expected mid-2012 (2-3Q12 estimate) in healthy volunteers for a compound being developed for the treatment of nerve pain, and in early JUN 2012 reported two notices of allowance for patents thru 2022 and 2028 for BL-1021.

The Company has also completed a Phase 1 / 2 clinical trial for BL-5010 for the non-surgical removal of skin lesions. Early this year, shares of BLRX spiked to 52-week high levels in the upper $6s on news that the Company licensed the rights to an oral drug for chronic hepatitis C virus (HCV) infection. BLRX currently has two pre-clinical drug candidates for HCV (BL-8020 and BL-8030) with patent protection through 2031 and 2030, respectively.

In February, BLRX received net proceeds of $14.1 million upon the successful completion of a private placement with US-based institutional healthcare-focused investors, including the sale of 5.25M shares @$2.86 along w/ warrants to purchase 2.6M additional shares @$3.57. Last summer, BLRX completed the successful listing of the Company's American Depositary Shares (ADS) on Nasdaq.

In addition to an extensive clinical and pre-clinical pipeline for a micro-cap biotech company, BLRX is well funded with about $36M in cash as of 3/31/12, negligible debt and 17.6M shares of common stock outstanding (along with 2.6M warrants as outlined above and 0.6M stock options outstanding). BLRX has a relatively low cash burn rate, which is estimated at $15-18M per year and the Company has adequate liquidity to fund planned operations into 2Q14.

BLRX has 55 employees and an estimated public float of about 12M shares of common stock (66% of total outstanding shares) with major shareholders that include the Pan Atlantic Investment Fund (15% ownership stake) and Teva Pharmaceuticals (NYSE:TEVA) (7% ownership stake).

As illustrated by the surge in trading volume and share price earlier this year on news of licensing the rights to a pair of oral HCV drug candidates in preclinical testing, BLRX is a low float / price stock that has the potential for major moves in share price based on news events beyond just clinical trial results (i.e. patent news, partnerships, licensing, etc.). In addition the Company has a very strong balance sheet with two years of liquidity and multiple mid-late stage clinical trial catalysts expected over the next 6-12+ months.

With a two year cash cushion and shares of BLRX currently trading near cash levels (approximately $2/share in cash); I expect the stock price to make another big move at some point on patent, clinical trial, partnership, and/or licensing news and there is little if any risk of dilution in the near-term as the Company has no urgent need for cash and significant potential milestone payments from Ikaria for BL-1040 in addition to potential partnerships for other compounds in development-especially the Company's late-stage drug candidate for schizophrenia (BL-1020) with Phase 2b/3 results expected mid-2013 and potential for extended patent protection through 2030.

Aside from the universal risk of bad news in ongoing clinical trials that is a major risk factor for investors in small-cap biopharmaceutical stocks; other headwinds for BLRX include the low average trading volume that results in heightened volatility, the lack of late-stage clinical trial results until mid-2013, and the recent trend by biotech stock traders to focus on companies with pending near-term late-stage clinical trial and/or FDA catalysts.

Disclosure: I am long BLRX.

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