Summary
- SWOT analysis reveals a strong medicine pipeline that can unlock substantial value in the niche market of orphan diseases, including cystic fibrosis, Gaucher, and especially Fabry.
- The Gaucher franchise is delivering meaningful revenues.
- The therapeutic innovation for cystic fibrosis has the potential to become the new gold standard treatment to generate near blockbuster sales.
- The drug development program for Fabry disease has the most unlocked value in the form of a potential blockbuster.
- Comprehensive analytical and field research elucidate highly asymmetric investing risks to rewards with an Integrated BioSci Score of 70%.
Background
Previous two years witnessed significant share price recession in the biopharma market, which relates to the legislative concerns that could potentially lower drugs’ price. In this background of uncertainty that gravitated into pervasive market fear, even firms that are genuinely innovating and delivering life-saving therapeutics suffered similar fates. BioShares Biotechnology Products Fund (NASDAQ: BBP), an aggregate holding of more than 30 life science companies, receded from its 2015 peak of $37.41 to $21.90 in early 2016. Amidst this ambiguity arises opportunities as investors pessimism is starting to abate in the latter months of 2016.
Renewed optimism is seemingly based on the realization that medical innovation necessitates adequate funding via premium pricing. For a typical medicine, it takes substantial capital in the $1B ballpark to fund development from bench research to commercialization: the decade-long process has a failure rate of more than 95%. With improved outlook in recent months, BioShares appreciated by more than 70%. Riding on the 2017 biotech bulls is the Israel-based firm, Protalix BioTherapeutics (NYSE: PLX), which focuses on protein innovation to treat rare genetic diseases. Founded in 1993 by Dr. Yoseph Shaaltiel, Protalix commenced as a greenhouse company in Kiryat Shmona, a small town in Northern Israel. Corporate strategies centered around the development of proprietary proteins with superior clinical profiles; the execution of late stage clinical trials; and the advancement of early pipeline products into clinical development.
Compared to 2016, Protalix shares traded by a premium valuation of more than 100%. After the phase 2 data release for cystic fibrosis on April 12, 2017, the market depreciated the stock by more than 50%. Nonetheless, the stock is highly undervalued and unknown to whale investors (as indicated by a mere 8% institutional ownership). There are only two analysts—Peter Welford of Jefferies & Company and Dr. Raghuram Selvaraju of Rodman & Renshaw—covering the firm.
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