Protalix stock has continued to lose altitude in recent days, after receiving a referral from the FDA for clarification on their latest clinical trials. What is the result of the decline in the share price? There are two rational reasons: the increase in risk, and the extension of the Time To Market that pushes for alternative investment.
However, there is another reason, emotionally, – the disappointment of investors who expected to receive full approval of the drug in this response. An examination of the factual basis for the existence of rational reasons will leave us in my opinion mainly with the emotional reason. Therefore, I anticipate an interesting opportunity to collect Protalix shares at an attractive price.
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plant protein
In the hearts of quite a few drugs is some protein. While proteins can be extracted from their origins in nature, for industrial production they must be produced commercially. To this end, they "take over" the protein production systems of laboratory bacteria, causing them to produce the desired protein.
Protalix has developed a system for the production of proteins in plants, giving it an advantage over normal production methods. With this system, the company strives to replicate (Biosimilar) recognized and proven drugs, reducing the risk involved in its operations. The company's flagship product is a cure for Gosha's disease.
According to the company's publications, about 5,000 patients with the disease were treated in 2006 in the U.S. alone, at a cost of $200,000 per patient (do the math), and there is currently only one similar product on the market to treat the disease.
WHAT DID THE FDA WANT?
Protalix tested the company's flagship product in the third phase of clinical trials required by the FDA. Based on the successful trial results according to its publications, the Company applied in December 2009 for approval for the marketing of the drug (NDA). In the agency's response, it asked for explanations on two issues. The first is supplementary information about the two experiments submitted to her by Protalix.
In order to understand the meaning from the point of view of the company, it is necessary to understand that experiments consist of three stages: planning, execution and analysis of the information received. The most expensive and prolonged stage is execution, whereas in order to analyze the data you usually only need a computer... The clarifications demanded by the Authority, according to the company's publications,require only further analysis of the data. Therefore, the time and funding required to carry them out is relatively small compared to the experiments.
The estimated time varies but is estimated in months to a year. This depends on whether Protalix submits a 1-year-old or type 2 (over six months) discussion. In addition, Protelics had $35 million in its coffers earlier this year, which should last it to get through the year. The second issue mentioned in the agency's Complete Response Letter touched on production processes. However, according to the company's publications on form10K it submitted, theAuthority had already requested clarifications regarding the production processes as early as January 2010, and following the clarifications sent by the company, the agency approved the finality of the request for marketing approval of the company.
It is not clear, therefore, why the agency requires additional clarifications at this stage, but it can be assumed that they are not significant (concerning the lack of uniformity between production series, etc.) but more minor (tightening supervision, additional quality tests, etc.). In addition, the 10K indicates that the Israeli Ministry of Health conducted an inspection of the company's facilities and found that they meet the strict production standard. This point contributes to the assessment that the time for reaching the market will not be significantly longer.
other things to think about
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in November 2009, the company signed a strategic agreement with pharmaceutical giant Pfizer to develop and market the product worldwide, except in Israel. the company is expected to receive 40% of the revenues derived from the product sales, as well as revenue from its sale in Israel. in addition, the agreement included tens of millions of dollars in proteins investment and additional investments as the company progress in the company's approval processes.
please note that this means a risk of diluting shares to investors in the long run. however, this is an impressive vote of confidence on the part of the pharmaceutical giant, which will ensure funding for the company's future operations, and will make Protonix's product available to Pfizer's massive marketing and distribution system. in addition, a request for marketing approval was submitted in Europe.
