The Prognosis For Protalix BioTherapeutics Stock (NYSE:PLX)

The smallest deed is better than the greatest intention.” ~ John Burroughs

Today we take a deeper look at a small cap developmental firm whose key asset just garnered an FDA PDUFA date and that has a somewhat interesting developmental approach. An analysis follows below

Company Overview:

Protalix BioTherapeutics, Inc. (NYSE:PLX) is an Israeli based, Hackensack, New Jersey headquartered commercial-stage biopharmaceutical concern focused on the development of recombinant therapeutic proteins derived from plants. The company has one approved therapy, one for which it has received a PDUFA date from the FDA, and a third that should enter the clinic in 1Q23. The company was founded as Metabogel in 1993 and went public when it merged into OTC Bulletin Board shell company Orthodontix on the last day of 2006, with its first trade executed at $140 a share, after giving to a 1-for-10 reverse stock split. Shares of PLX trade just above $1.50 a share, equating to a market cap of approximately $80 million.

ProCellEx Platform

The company’s assets are the output of its ProCellEx technology platform that leverages the ability of agrobacterium to transfer a DNA fragment into plant chromosome, compelling the plant cell to code for specific proteins. Produced on industrial scale, these proteins are extracted and purified, after which they can be put to therapeutic use.

Elelyso

The first and only approved compound from ProCellEx is taliglucerase alfa, an enzyme replacement therapy {ERT} for type 1 Gaucher disease that is marketed as Elelyso or Uplyso by Pfizer (PFE) worldwide ex-Brazil and as alfataliglicerase by Protalix in Brazil. Approved by the FDA in 2012, it has been unable to make inroads against Sanofi’s (SNY) Cerezyme and Takeda’s (TAK) Vpriv, only generating revenue of $16.7 million in FY21 and $21.2 million for the first nine months of FY22.

The Ongoing Saga of PRX-102

With taliglucerase alfa’s unimpressive sales, the company has hitched its wagon to PRX-102 (pegunigalsidase alfa), an enzyme and recombinant α-galactosidase-A protein under development for the treatment of Fabry disease. Patients with this disorder lack α-galactosidase-A, which manifests in a progressive accumulation of fatty deposits (known as Gb3) in blood vessel walls throughout their bodies. The end result is pain, impaired peripheral sensation, as well as kidney, heart, and cerebrovascular system failures.

Fabry is believed to afflict ~1 in 40,000 individuals with current treatments comprising a $2.1 billion global market that is expected to grow at a 10% CAGR through 2027. Since 2003, the main treatment option in the U.S. has been Sanofi’s enzyme replacement therapy Fabrazyme (agalsidase beta), which received accelerated (but not full) approval that year and was largely unchallenged until Amicus’ (FOLD) bi-daily oral enzyme booster / pharmacological chaperone Galafold received approval from the FDA in 2018 (EU 2016). Fabrazyme and Shire’s (now Takeda’s) Replagal (agalsidase alpha) both received approval in the EU in 2001. With Fabrazyme and Replagal requiring bi-weekly infusions, Protalix believes that PRX-102 could provide a more tolerable and potentially less frequent dosing option.

Having completed a Phase 1/2 study in 2015 in which PRX-102 demonstrated a half-life of 78.9 hours, Protalix embarked on what would be three Phase 3 trials (BRIDGE, BRIGHT, and BALANCE) in Fabry patients with impaired renal function in 2017. After PRX-102 demonstrated mean overall annualized change in eGFR slope improved from -5.9 to -1.2 mL/min/1.73 m²/year (-1.0 to -1.2 is normal) in the 22-patient BRIDGE study, Protalix (and partner Chiesi Farmaceutici) filed a BLA with the FDA in May 2020. While the application was accepted and pending, the FDA converted competitor Fabrazyme to full approval and an “available therapy” in March 2021. Then in April 2021, Protalix received a CRL letter from the FDA, stating that due to the pandemic, it was unable to complete inspection of its Israeli manufacturing facility during the review cycle. The FDA also stated that given Fabrazyme’s new status, any BLA resubmission would have to take this into consideration (translation: demonstrate superiority in the head-to-head (PRX-102 vs Fabrazyme), 77-patient BALANCE trial).

That said, management was later able to sell the FDA on a primary efficacy endpoint of non-inferiority for BALANCE in 4Q21 – more on that shortly.

While that highly peculiar set of circumstances was playing out, Protalix’s two other clinical trials were ongoing. Both, in theory, could demonstrate some form of superiority. The 30-patient BRIGHT trial, which comprised PRX-102 at 2mg/kg via IV every four weeks to 30 patients who were previously treated every two weeks with Fabrazyme or Replagal for at least three years, produced decent results in a March 2022 readout. From a safety and tolerability standpoint, 29 of 30 patients completed the trial – one withdrawal due to an auto accident – without serious adverse events, although one patient completed on a lower dose. Furthermore, PRX-102 demonstrated stable disease at 52 weeks.

As for the two-year BALANCE study, in which both Fabrazyme and PRX-102 were administered every two weeks, its data were released in April 2022, hitting its revised primary endpoint of non-inferiority in change in eGFR slope: -2.514 in PRX-102 versus -2.155 in the Fabrazyme arm, with large overlaps in their 95% confidence intervals (-3.788, -1.240 and -3.805, -0.505, respectively). On the safety and tolerability side of the ledger, PRX-102 had 72% fewer treatment emergent adverse events on a per patient basis than Fabrazyme. Furthermore, the percentage of anti-drug antibody (ADA) patients decreased from a baseline of 94% to 64% at 24 months on PRX-102 versus an increase from 88% to 100% at 24 months in the Fabrazyme arm. ADAs are a marker for reduced drug efficacy.

Armed with this data, Protalix and Chiesi resubmitted the PRX-102 BLA on November 9, 2022, which was preceded by an MAA filing with the EMA in February 2022. On December 5, 2022, the company announced that the FDA had accepted the application with a PDUFA date of May 9, 2023. A decision out of Europe is anticipated in 1H23.

While this saga unfolded, PLX stock traded at $3.55 at the time of the initial BLA submission in May 2020; rose as high as $7.02 in February 2021 in anticipation of FDA approval; fell 33% to $3.93 on the CRL news in April 2021; traded down to $0.70 in February 2022; and then surged 42% to $1.49 when it announced achievement of non-inferiority in BALANCE; and fell back to the $1 area for most of the balance of 2022 until the PDUFA date announcement in December 2022.

PRX-115

In addition to PRX-102, the company is expected to enter PRX-115 – a recombinant PEGylated uricase enzyme designed to lower uric acid levels in the treatment of patients with severe gout – into the clinic in 1Q23.

Chiesi Licensing Deals

If approved for Fabry, PRX-102 will not be marketed by Protalix but rather Chiesi, who has assumed its worldwide commercial rights in two deals inked in 2017 and 2018. In return, Chiesi paid Protalix $50 million upfront, promised up to $45 million in development cost reimbursements, up to $1.0 billion plus in potential milestone payments, and tiered royalties of 15%-35% (ex-U.S.) and 15%-40% domestically. The specific milestone payment amounts for FDA and/or EMA approvals have not been disclosed. However, in return for $10 million cash in FY21, Chiesi was permitted to lower one of its potential future regulatory payments by $25 million.

Balance Sheet & Analyst Commentary:

To fund PRX-102’s advancement, the company held cash and equivalents of $20.8 million, which, along with its revenue from Elelyso, should provide a cash runway into 4Q23. However, this runway could be significantly extended by milestone payments from Chiesi if PRX-102 is approved in the U.S. and Europe. The company does have $28.75 million 7.5% convertible notes outstanding that are due September 1, 2024.

With its small valuation, Protalix is barely noticed by the Street. Only H.C. Wainwright formally covers the company, last making commentary after the CRL notice in May 2021, reiterating a buy but lowering its price objective from $11 to $7.

With a PDUFA date established, Board member Aharon Schwartz is increasingly bullish, adding 110,000 shares to his position (now 174,000) at an average price of $1.42 on January 3, 2023.

Verdict:

There are three questions relating to Protalix: 1. Will the FDA and EMA approve PLX-102? 2. Will the agencies approve it for administration every four weeks or every two weeks? 3. Absent approval for every four-week administration, are the superior safety and tolerability profiles enough to convert doctors and patients away from already approved therapies?

The answers to all the questions are obviously unknown, but the odds (75/25) favor approval, yet don’t (35/65) favor approval for four weeks. Given that the more-likely outcomes occur and PLX-102 is approved for every two week administration, the odds of doctors switching patients when efficacy data slightly favors Fabrazyme seems slim. However, the market is big enough to support another entrant and with an approximate $80 million market cap, there is potential upside here.

That said, the recommendation for risk-tolerant investors is to purchase a small ‘watch item‘ position PLX for the EMA and FDA approvals, as they should trigger significantly large enough cash payments from Chiesi to make its current market cap seem significantly undervalued. At that point, it is probably time to sell.

He is no fool who gives what he cannot keep to gain what he cannot lose.” ~ Jim Elliot

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.