Protalix-Pfizer Collaboration Disappoints

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Protalix Biotherapeutics Inc. (NYSE MKT:PLX; TASE: PLX) is not yet seeing any substantial revenue flow from its agreement with Pfizer Inc. (NYSE: PFE; LSE: PFZ) to distribute the company’s treatment for Gaucher’s disease, Elelyso (also marketed as Uplyso outside the US), according to Protalix’s financial report for 2013. The companies’ deliberately fudged the numbers in the financial statement, but reading between the lines shows little growth in this activity.

Protalix’s revenue fell to $10.5 million in 2013 from $34.8 million in 2012, when it recorded a one-time $25 million payment from Pfizer, after the US Food and Drug Administration (FDA) approved its treatment for Gaucher’s disease. Excluding this payment, Protalix’s revenue grew by an unimpressive 7%, because there was no commercial marketing of the drug for most of 2013.

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Protalix’s revenue in 2013 included $5 million from independent sales of Elelyso in Israel, and $1.1 million from an accounting recognition of previous revenue, leaving no more than $4.4 million from sales of Elelyso to Pfizer. 2013 was the first full year of the drug’s sales, but if this figure is repeated, it means that it is immaterial business for Protalix, which has a market cap of $473 million (NIS 1.7 billion).

Protalix earns a percentage on Pfizer’s profits from Elelyso sales – 40% in principle – but the agreement has confidential clauses, so it is impossible to estimate the joint venture’s profitability. Protalix posted a profit of $1 million on its share of the venture in 2013. The quarterly breakdown shows that Protalix posted a loss of $1 million on the joint venture in the fourth quarter, after rising profits in the preceding three quarters. For the year as a whole, Protalix net loss narrowed to $27.8 million in 2013.

Boost from Latin America

Protalix is now pinning its hopes on its Brazilian operations, which is due to begin generating revenue in the first quarter of 2014, and from pending business in Chile and the entry into the pediatric Gaucher’s disease market, which the company hopes will give it the boost it has expected. The company has $86.3 million cash, enough to complete its clinical program, but it also has to redeem $67 million in bonds in 2018.

On Friday, Protalix competitor Shire plc (LSE: SHP; Nasdaq: SHPG) recalled one batch of its VPRIV treatment for Gaucher’s disease in the US because it was contaminated by “visible particulate matter, identified as stainless steel and barium sulfate.” The company believes the safety risk to patients is very low. It is premature to assess if the share price will be affected, but previous problems at Shire have created opportunities for Protalix.

Published by Globes [online], Israel business news – www.globes-online.com