Bloomberg News

Biotechs Rally on Bet Protalix to Win Approval: Israel Overnight

October 25, 2011

Oct. 25 (Bloomberg) -- Israeli biotechnology companies led by Protalix BioTherapeutics Inc. and Prolor Biotech Inc. are outpacing gains in the country’s benchmark index as investors speculate that new products and patents will boost shares.

Protalix, the Carmiel, Israel-based company working on a treatment for Gaucher disease, jumped 6.4 percent at the 4:30 p.m. close in Tel Aviv. The shares surged 14 percent in New York yesterday to $6.13, taking the rally to 18 percent since a Canaccord Genuity analyst said Oct. 19 its first drug is likely to be approved. Prolor, which develops proteins to treat diseases, rose 1.2 percent in Tel Aviv after climbing 3.4 percent in New York.

The Tel Aviv Biomed Index of biomedical companies on the Tel Aviv Stock Exchange has gained 20 percent since hitting a record low on Sept. 12, outpacing the benchmark TA-25 Index and the Bloomberg Israel-US 25 Index. Investors are speculating that Protalix’s treatment for Gaucher disease will be approved by the U.S. Food and Drug Administration, Ritu Baral, an analyst at Canaccord Genuity, said in an interview.

“It’s their lead drug and it’s basically the first one” to be presented to the Food and Drug Administration for approval, Baral said. “It’s a huge proof of concept for the entire technology platform.”

Protalix will probably submit a safety update to the agency and report no adverse events of note, she said, citing conversations with company officials. Approval of the drug may validate Protalix’s unusual approach to making the treatment and help the company earn a profit for the first time next year.

Benchmark Rate

Shares of Protalix traded in Tel Aviv climbed to 23.10 shekels, the equivalent of $6.32. Prolor advanced to 16.42 shekels, or $4.63, in Tel Aviv today. The New York shares gained 3.4 percent yesterday to $4.50. The Bloomberg Israel-US 25 Index increased 1.3 percent yesterday. The TA-25 Index slipped 0.5 percent today.

Global stocks rose yesterday, extending last week’s gains, as European leaders made progress in talks to resolve the debt crisis and some U.S. companies reported earnings that beat estimates. The MSCI All-Country World Index dropped 0.6 percent today, after jumping 1.7 percent yesterday.

The Bank of Israel left the country’s benchmark lending rate unchanged at 3 percent amid increased optimism about the global economy. It was the first time that a monetary policy committee of six made the rate decision, rather than Bank of Israel Governor Stanley Fischer alone. Fischer unexpectedly cut the benchmark rate last month.

The shekel weakened 0.3 percent to 3.6525 per dollar at 4:37 p.m.

$300,000 Treatment

Protalix is working on a new method of creating a protein known as taliglucerase alfa using plant cells, rather than animals. The enzyme is missing in people who have Gaucher disease, which can cause fat to build up in the liver, spleen, bone marrow, and nervous system. Gaucher disease affects about 1 in every 50,000 to 100,000 people, according to the National Human Genome Research Institute.

Protalix’s approach may allow the company to offer its drug at a 25 percent discount to the leading treatment, Cerezyme, Baral said. It can cost $300,000 a year to treat a patient using Cerezyme, which is made by Sanofi’s Genzyme unit.

This is Protalix’s second attempt to win FDA approval for taliglucerase after an earlier attempt in February. If sales are allowed, it will take the company one month to six weeks to begin distributing it commercially, Baral said.

“It is obviously up to the FDA to determine if the drug will be approved,” Protalix Chief Executive Officer David Aviezer wrote in an e-mailed response to questions. “The drug has already been used for treating hundreds of patients worldwide in our trials.”

Pfizer Deal

Pfizer Inc., the world’s largest drugmaker, paid $60 million for rights to taliglucerase in November 2009 and promised Protalix an additional $55 million if the drug passed certain regulatory hurdles. New York-based Pfizer is entitled to 60 percent of the drug’s revenue under the agreement.

Tel Aviv shares of Prolor, the third-largest company in the Biomed index, have gained 5.7 percent since the gauge hit its record low Sept. 12. The stock has gained 12 percent this month in the U.S. as the Nes Ziona, Israel-based company received notices of allowance for two patents, one for the production of human growth hormone and the other for a type of proteins known as interferons. A notice of allowance is issued by the U.S. Patent and Trademark office if “it appears that the applicant is entitled to a patent,” according to the agency’s website.

‘Appetite for Risk’

Prolor will start phase 3 trials of its human growth hormone in the first half of 2012, said Bart Classen, an analyst at Summer Street Research Partners. The company makes a type of long-acting hormone that’s more efficient, meaning that patients can be given about 50 percent of the usual dose, he said.

Given Imaging Ltd., the Yokneam, Israel-based maker of a pill-sized camera for digestive diagnosis, is the second-largest company in the Biomed Index. The shares traded in New York have gained 8.1 percent since Sept. 12 to $16.22. The Tel Aviv shares have advanced 13 percent to 58.93 shekels, or the equivalent of $16.14. They fell 0.7 percent today.

The biotechnology stocks may be advancing because investors are becoming more comfortable purchasing riskier securities as the market rallies, said Jamia Jasper, president of AmerIsrael Capital Management LLC in New York.

“Right now, the market just has a bigger appetite for risk,” she said.

Israel, whose population of 7.7 million is similar to Switzerland’s, has about 60 companies listed on Nasdaq, the most of any country outside North America after China. It is also home to the largest number of start-up companies per capita in the world.

Raising Funds

Israeli technology companies raised $522 million in capital during the third quarter of 2011, $47 million less than in the second quarter, according to the Israel Venture Capital-KPMG Quarterly Survey released yesterday.

Sixteen percent of the funds went to life sciences companies, according to the report.

Israel’s stock market was upgraded to developed market status by MSCI Inc. in May 2010, the same month the 63-year-old country was accepted to the Organization for Economic Cooperation and Development.

Ormat Technologies Inc., which develops geothermal power plants, gained 1.8 percent to $19.17. A unit of the company was awarded five exploration concessions in Chile, the company said in a statement. Ormat Technologies is a unit of Yavne, Israel- based Ormat Industries Ltd., which dropped 0.9 percent in Tel Aviv today.

Internet Gold-Golden Lines Ltd. the Israeli Internet service provider, surged 19 percent, the most in two years, to $15.40 in New York. The shares rose 1.1 percent to 55.30 shekels, or the equivalent of $15.15, in Tel Aviv today.

--With assistance from Alisa Odenheimer in Jerusalem, Catherine Larkin in New York and Zahra Hankir in Dubai. Editors: Brendan Walsh, Marie-France Han

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net;

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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