On May 28th, 2020, Protalix BioTherapeutics (PLX) and its commercial partner, Chiesi Global Rare Diseases, announced the submission of their Biologics License Application (BLA) to the U.S. Food and Drug Administration (FDA) for pegunigalsidase alfa for the treatment of adult patients with Fabry disease via the FDA’s Accelerated Approval pathway. Accelerated approval allows companies to file for approval based on a surrogate endpoint, such as a biomarker, for serious unmet medical needs. The company is typically still required to confirm clinical benefit in a confirmatory, post-approval trial, but ultimately, this pathway allows unmet needs to be met faster. With Protalix approaching commercialization of its differentiated enzyme replacement therapy for Fabry disease, I explain why the shares could be undervalued based on this one pipeline candidate.

Introduction

Fabry disease is expected to become a $3-4 billion market by 2025-2026, according to various reports [1, 2]. The current treatment of care is enzyme replacement therapy, where the missing functional alpha-galactosidase A is dosed frequently. Improvement in treatments is needed, and therefore, there is an unmet need to improve patient outcomes.

I will explain how Protalix BioTherapeutics may be able to gain a significant market share in Fabry disease, given the critically important and encouraging data it obtained that showed improved kidney function in Fabry patients. This could mean that the company is significantly undervalued, especially given its proprietary ProCellEx manufacturing platform technology and the team’s significant expertise in protein design optimization. This is very significant for Protalix, as it validates its platform technology and its ability to produce differentiated therapeutic candidates. Looking forward, investors could expect that high-quality proteins, or mABs, can be produced from Protalix’s platform.

Lysosomal Storage Diseases

Cells have ways to break down unwanted debris, such as surplus organelles, misfolded proteins, or protein aggregates, so that protein homeostasis or generally quality control can be maintained, which is essential for healthy cell functioning. Cells have various way pathways to dispose of unwanted proteins. For instance, specific proteins can be marked for destruction by ubiquitination, which is the attachment of ubiquitin to the protein, which directs it to the proteasome for degradation into smaller peptides. This is shown below in the graphic below, on the left.

(Source: Wang, X., & Robbins, J. (2014). Proteasomal and Lysosomal Protein Degradation and Heart Disease, Journal of Molecular and Cellular Cardiology, 71, 16-24. doi:10.1016/j.yjmcc.2013.11.006)

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The ubiquitin-proteasome system (UPS)) generally degrades proteins in a very specific manner. Alternatively, lysosomes degrade cytoplasmic components, including some individual proteins, protein aggregates, and defective or surplus organelles, through autophagy. The lysosomes contain enzymes that can break apart these components.

Thus, genetic mutations that affect the correct production of these enzymes in the lysosome prevent the lysosome from working perfectly, and this can lead to the buildup of certain compounds in cells that cannot be broken down properly. These (~70) diseases are referred to as lysosomal storage diseases (LSDs). In most LSDs, the buildup of proteins or macromolecules cause disruption of molecular transportation, or specifically, they can build up in the lysosomes, both of which cause cellular damage. Over time, generally patients with LSDs have progressive disease onset early in life. Also, since various cellular processes can be disturbed or altered, LSD pathogenesis can be complex, and many of these diseases and their pathogeneses are not completely understood.

Fabry Disease

Fabry disease is a specific genetic, X-linked LSD caused by a faulty GLA gene, which encodes alpha-galactosidase A, an enzyme active in lysosomes. Alpha-galactosidase A (alpha-GAL A) breaks apart globotriaosylceramide (Gb3), a glycolipid. Gb3 is normally broken down as part of the normal recycling of old cells, such as red blood cells. When mutated, the GLA gene leads to abnormal alpha-GAL A function, which results in the build-up of globotriaosylceramide (Gb3) and globotriaosylsphingosine (LysoGb3) in endothelial cells – causing blood vessels to narrow – and in the blood that can lead to damage the heart, central nervous system, liver, or most notably, the kidneys, eventually causing organ failure.

(Source: Svarstad, E., & Marti, H. P. (2020). The Changing Landscape of Fabry Disease. Clinical Journal of the American Society of Nephrology, 15(4), 569-576)

Pathophysiology, Diagnosis, and Standard of Care

Gb3 buildup in endothelial cells causes them to swell and proliferate, which eventually causes stroke-like symptoms, extreme pain in the extremities, skin lesions, renal insufficiency or failure, and heart attacks, even in young patients. Since the symptoms can be nonspecific, or since the organs involved can sometimes be considered in isolation of other organs or symptoms, Fabry can be difficult to diagnose. Much like endometriosis, Fabry diagnosis is a challenge because its clinical manifestations can overlap with symptoms of more common illnesses.

According to the Cleveland Clinic, Fabry disease patients’ symptoms include:

  • Pain, mainly in the hands and feet

  • Clusters of small, dark red spots on the skin (angiokeratomas)

  • Being less able to sweat (hypohidrosis)

  • Hearing loss and ringing in the ears (tinnitus)

  • Digestive system problems

  • Cloudiness in the front of the eye (corneal opacity)

Other more serious symptoms include:

Currently, the standard of care for treating the underlying disease is enzyme replacement therapy (ERT), and chaperone therapy (medicine that helps reform the misformed enzymes, only applicable to certain patients). ERT aims to provide the body with the enzyme it is missing. As for prognosis, Fabry patients usually live into adulthood, but have overall decreased life expectancy and high risk of heart attack, stroke, and decreased kidney function or chances of kidney failure are high.

Epidemiology

Fabry incidence is considered to be between 1 in 80,000 live births and 1 in 3,000 live births, considering late-onset variations in the disease. In the United States, it is estimated that between 4 and 5 thousand people are known to have Fabry disease, and up to about 110,000 people may have Fabry, although the severity could be much less significant in some people. Overall, it is difficult to determine exactly how many people have Fabry disease because of how rare it is; missed diagnoses in population samples can offset the calculated prevalence significantly.

Shortfalls of Current Enzyme Replacement Therapies

Current ERTs have three practical shortfalls. First, they typically must be administered every two weeks, which, for the entire life of the patient, is a significant inconvenience. Second, these therapies have a relatively short half-life in the blood, and due to the fact that they are administered two weeks apart, the patients do not have full coverage in between two administrations. Third, a significant proportion of Fabry disease patients develop an immune response against the recombinant enzymes they are administered, known as anti-drug antibodies (ADAs). According to one study, approximately 40% of male patients’ immune systems recognize the enzyme as foreign and develop neutralizing anti-enzyme antibodies, which prevents the enzyme from functioning and helps remove it from the body much faster.

(Source: Lenders, M., & Brand, E. (2018). Effects of Enzyme Replacement Therapy and Antidrug Antibodies in Patients with Fabry Disease. Journal of the American Society of Nephrology, 29(9), 2265-2278)

Of course, this inhibition and removal of the exogenously administered enzyme is associated with worsened clinical outcomes, since it prevents the ERT from doing its job. In addition, these ADAs could potentially cause membranous nephritis. In fact, the authors of that study even proposed treating the patients’ immune system (anti-CD20 therapy) for those patients who have run out of options due to disease progression and enzyme-neutralizing antibodies.

(Source: Protalix Corporate Presentation, September 2020)

As outlined in the slide above, Protalix’s new and improved ERT potentially addresses all of these key issues, with a longer half-life (~80 hours) giving it the potential for monthly dosing as well as lower immunogenicity.

PRX-102

PRX-102 is Protalix’s deliberately designed modified alpha-Galactosidase-A protein:

“Pegunigalsidase alfa is designed to be a plant cell culture-expressed, and a chemically modified version of, the recombinant alpha-Galactosidase-A protein. Protein sub-units are covalently bound via chemical cross-linking using PEG chains, resulting in a more active and stable molecule compared to the current available versions of the molecule as seen in preclinical models. In clinical research, pegunigalsidase alfa appears to have a favorable circulatory half-life, with targeted enzyme activity in organs affected by Fabry disease.”

Protalix is running three trials on PRX-102 currently, all set to read out results within the next 9 months:

(Source: Protalix Corporate Presentation, September 2020)

The three trials are testing, via alternative trial designs, PRX-102 compared with Fabrazyme, Sanofi Genzyme’s (SNY) ERT, switching from Replagal, Shire’s (now Takeda) (TAK) ERT, and PRX-102 for alternative regimen and dosing at 4-week intervals. PRX-102 obtains its potentially superior immunogenicity and half-life from its deliberately designed structure and large molecular weight PEGylation. Pharmacokinetics studies show that PRX-102 has a half-life of more than 35 times current ERTs.

(Source: Protalix Presentation at 1st Canadian Symposium on Lysosomal Diseases, October 2018)

Given the much longer half-life of PRX-102 (2 hours vs. 80 hours), it is entirely possible that PRX-102 can persist in the body and, therefore, be so much more effective that kidney function improves to some extent that is even more than what has already been observed. In addition, the immunogenicity of the drug could be much less than current therapies, such that much more of PRX-102 is active when administered compared with current therapies. The figure below shows that PRX-102 is inhibited less by preexisting antibodies.

(Source: Analysis of the baseline characteristics of Fabry disease patients screened for the pegunigalsidase alfa Phase III BALANCE study)

Both of these traits contribute to much more drug exposure, both in duration and concentration. As for a translation into the clinic, preliminary data from the BRIDGE study showed that PRX-102 was able to improve kidney function for 6 months in deteriorating patients previously on Replagal.

(Source: Pegunigalsidase alfa for the Treatment of Fabry Disease – Phase III Open Label, Switch-Over Study from agalsidase alfa – Preliminary Results)

This data as well as 1-year follow up data (albeit a bit less optimistic) suggests that potentially ~40% of patients who are struggling on current ERTs due to anti-drug antibodies or deterioration in function might safely and effectively switch over to PRX-102. However, various studies suggest that ERT has no impact on proteinuria, nor can it improve kidney function. So, it will be interesting to see if this kidney improvement on PRX-102 is transient, or if PRX-102 can offer continuous improvement or at least prevent further decline.

Competition

When compared to current therapies, it is clear according to available data that PRX would be the drug of choice for Fabry disease patients. However, there are other competitors developing novel treatments for Fabry, and Amicus Therapeutics (FOLD) markets Galafold for amenable Fabry patients (where the misfolded enzyme can be mended), which accounts for ~40% of patients. Some therapies under development are discussed below.

For Fabry, Genzyme is developing Venglustat, an oral substrate reduction therapy (SRT) which inhibits glucosylceramide synthase, which is an enzyme that turns ceramide into GL-1, a precursor to Gb3, but also other enzymes. Venglustat can therefore affect Gb3 accumulation regardless of the presence of ERT. It is currently in a phase 2, which has completed enrollment and was awarded Fast Track Designation by the FDA. It has been proposed that SRT would be best used in combination with ERT:

“The differential efficacies of SRT and ERT in the different tissues indicate that the combination approach is both additive and complementary suggesting the possibility of an improved therapeutic paradigm in the management of Fabry disease.”

Another SRT is being developed by Idorsia Ltd. (OTCPK:IDRSF). Lucerastat is also a glucosylceramide synthase inhibitor and is currently recruiting in a phase 3 trial.

The most formidable competition Protalix faces is the group of various gene therapies being developed to be potential one-time lifetime doses for endogenous enzyme production. The goal of these gene therapies is to abrogate the need for ERT. The most notable of the gene therapy pack is Sangamo Therapeutics (SGMO), whose ST-920 adeno-associated virus (AAV) encodes alpha-galactosidase A such that the body uptakes the virus inside the liver so that the liver produces alpha-Gal A. Preclinical evidence is strong, but it remains to be seen in Sangamo’s Phase ½ whether or not the effect is sustained and if it is dosed properly. Safety could also be an issue long term. AAV therapies such as ST-920 are not supposed to integrate into the host’s genome, and therefore, bear low risk of insertional mutagenesis. Other gene therapy candidates include Freeline Therapeutics’ (FRLN) FLT190, which is another AAV encoding alpha-galactosidase A, and AVROBIO Inc.’s (AVRO) AVR-RD-01, which is a lentiviral therapy administered into a patient’s own stem cells ex-vivo. Those stem cells then integrate the lentiviral gene, and when the stem cells are administered back into the patient, the daughter cells (after the stem cell divides) should each carry the lentiviral gene.

AVROBIO has encouraging data so far. According to Clinical Trials Arena:

“In phase one (NCT02800070) secondary efficacy endpoint, plasma globotriaosylsphingosine (lyso-Gb3) levels [also accumulated in serum like Gb3 in cells] were reduced by between 33% and 41% across four patients, according to a July 2019 company presentation. Lyso-gb3 is the deacylated form of Gb3, Shayman explained. The two are likely related as Gb3 is the precursor for lyso-Gb3, but there is limited data to draw firm conclusions about their relationship, he added. While it is promising that a lyso-Gb3 reduction was attained, said Shayman, this marker lacks real-world clinical meaning, said Schiffmann.”

These gene therapies will likely be subject to long-term follow-up, and so, the totality of safety and efficacy is not quite known yet. However, they pose existential risks to the value proposition of other ERTs. Thus, the key piece of data Protalix has going for it is its potential positive impact on kidney function (glomerular filtration rate – GFR), which is clinically relevant and extremely important. This suggests that PRX-102 is significantly superior to other ERTs and will succeed where others have failed. In fact, it has been suggested that differential outcomes of ERT in different tissues (kidney, CNS, heart) over time is potentially due to the lack of long-term drug exposure, which prevents the drug from optimally penetrating certain tissues. PRX-102 would likely abrogate these issues, potentially lowering the risks of cardiovascular complications for patients as they age. This potential enhanced drug exposure is shown below, which is exposure simulation based on PK parameters of both ERTs:

(Source: Analysis of the baseline characteristics of Fabry disease patients screened for the pegunigalsidase alfa Phase III BALANCE study)

Management

A strengthened management team, led by CEO Mr. Dror Bashan, has turned the company around in recent years, putting the company in an acceptable financial position. Bashan had a long career in business development at Teva Pharmaceutical, and received his Economics and Business Management bachelors and MBA from Tel Aviv University. In the past few years, along with Bashan, various other new members of the management team, mainly on the business side (as opposed to operations and R&D), came on board. To highlight the team’s recent business development achievements, Protalix expanded its partnership with Chiesi in 2018 to include ex-US rights to PRX-102 for Fabry disease.

Risks

Protalix is a commercial and development biotechnology company. It faces substantial competition in the Fabry disease market with upcoming gene therapy products that have the potential to make ERT a method of the past.

Protalix also is cash flow-negative at this point in time; however, with the potential commercialization of PRX-102 with Chiesi as a commercial partner, the royalties to Protalix could be very substantial and permanently right the company’s finances.

In addition, like all biotechnology companies, certain products in Protalix’s pipeline may fail in clinical trials. The BLA could require refiling. Also, PRX-102 could fail to sell as well as expected.

Value of PRX-102

Protalix has “entered into two exclusive global licensing and supply agreements for PRX-102 for the treatment of Fabry disease with Chiesi. The agreements have significant revenue potential for Protalix. Under the agreements, Protalix Ltd. has received $50.0 million in upfront payments and was entitled to development cost reimbursements of up to $45.0 million, up to more than $1.0 billion in potential milestone payments and tiered royalties of 15% – 35% (ex-US) and 15% – 40% (US).”

Since the milestone payment structure is not known nor the tiered royalty structure, an estimate with respect to peak sales can be made based on converting some portion of the 40% of ADA+ Fabrazyme and Replagal patients to PRX-102. This is meant to be a conservative estimate. First, it’s possible physicians and specialists will realize that PRX-102 is a potentially superior ERT that can either be dosed monthly instead of biweekly, and it can also potentially better preserve kidney function. So, while PRX-102 may be applicable to all Fabry disease patients, it will be much more important for those who have declining health. Additionally, Protalix might face substantial commercial competition from upcoming gene therapy products.

While substrate therapy or chaperone therapy may be dosed concurrently with ERT (more likely substrate therapy), these products may limit the market penetration of PRX-102. Thus, the following assumptions are made:

  • Total ERT sales of $1.5 billion, sales price equivalent to current ERT

  • 20% peak market penetration (rather than 40%) of ERT

  • Sales ramp of 5 years

  • Discount rate of 15%

  • 80% margin after tax

  • Average royalty rate of 20% (conservative)

  • P/E ratio of 15

  • Diluted shares of ~50 million total

  • 70% probability of approval

  • NOLs not taken into account

Thus, peak sales might be $300 million. This yields an estimated value of $900 million in royalties to Protalix before tax, which, discounted 6 years to the present and discounting for regulatory risk, equals $218 million. That doesn’t take into account the potential ~$1 billion in milestone payments. Using ⅓ the value of the potential milestone payments (estimated discount for regulatory risk, commercial risk, and time value of money), Protalix is estimated to be worth $551 million, or $11 per share. The shares do, therefore, appear undervalued given the company has a marketed product for Gaucher, which Pfizer (PFE) was sold all the commercial rights to ex-Brazil, and Protalix brings in about $9-10 million in revenue from Brazil. Additionally, the company has other pipeline candidates.

Conclusion

Protalix’s ERT product is potentially much improved compared to current ERTs and has the potential to bring much value to the company, which can further use that cash flow to develop more innovative and improved biologics for the rest of its pipeline. With the Protalix team’s experience in biologic optimization as well as the company’s history of successfully developing and licensing products, this should be a profitable investment at the current price.

#Investors #Take #Note

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.