Protalix Soars on Report It May Be Sold for $1 Billion

Biotech company confirms it retained Citigroup.

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Shares of Protalix BioTherapeutics soared in trading in New York and Tel Aviv Tuesday on reports that the company is preparing for a possible $1 billion sale.

Late Tuesday the Carmiel-based company confirmed a critical aspect of the rumor, saying it had retained the U.S. investment banking arm of Citigroup to review a range of strategic alternatives.

"The company has engaged Citigroup to assist it in reviewing a broad array of product partnering, technology sharing and other strategic alternatives. There is no assurance that Protalix will undertake any such strategic alternative," the company said, insisting that it would not provide any further details for now.

On Monday, before the reports began circulating, the company was trading at a Tel Aviv Stock Exchange market capitalization of NIS 1.7 billion, or $460 million. In TASE trading Tuesday, Protalix shares jumped more than 19% to NIS 22.60 each, giving it a market cap of NIS 2.05 billion. The rise was also seen on the New York Stock Exchange, where shares were up 15.9% at $6.21 as of midafternoon.

Industry sources said Tuesday that Protalix's board aims to sell the company for at least a 50% premium to the Monday market cap, or about $750 million. Other reports put the sale price at more than $1 billion.

Protalix's asset is its ProCellEx technology, a plant-cell-based protein expression system based on research by Dr. Yosef Shaltiel that makes use of genetically engineered carrot cells.

Last May, Protalix received approval from the U.S. Food and Drug Administration to market its Eleyso drug, its first-ever product based on ProCellEx, for the treatment of Gaucher's disease, a rare genetic deficiency of a critical enzyme that breaks up fatty buildup. The disease allows fatty deposits to accumulate around the spleen and liver, and causes decreased production of red blood cells and skeletal damage.

Eleyso is marketed by Pfizer in every country but Israel, as part of an agreement signed between the two companies in November 2009.

Protalix manufactures the drug for the joint venture, which is 60% owned by Pfizer and 40% by Protalix, with profits split along similar lines. Eleyso is targeted at a global market estimated at $1 billion a year. But Protalix is in a considerably worse position than its rivals due to a two-and-a-half year delay in winning FDA approval. In addition, Shire, an Irish company, won exclusivity for its VPRIV Gaucher's treatment in Europe until 2020.

The board's decision to put Protalix up for sale likely stems from frustration by the company's major shareholders, including U.S. fund Federated Investors and the Israeli firm Biocell, which is controlled by Alfred Akirov.

Although the company received FDA approval for its flagship drug and groundbreaking technology last May, the company's shares have risen just 2% in the past 12 months, compared with a 19% gain by the NYSE pharmaceuticals index. Its stock price has also dropped 33% since it signed the marketing agreement with Pfizer.

Given the company's weak position in the Gaucher's market, and with all its other drugs at an initial phase of clinical development, the board decided there was nothing in the foreseeable future that would boost its share price.

Pfizer is the leading candidate to acquire Protalix, as it already owns 60% of the rights to Eleyso. In this sense, the November 2009 agreement between the two companies effectively handcuffed the management of Protalix and limited the company's possibilities in offering to sell the company to anyone but Pfizer.

Protalix's stable of products in development include PRX-102, for the potential treatment of Fabry disease, a rare genetic lysosomal storage disorder. In December, Protalix announced that the first patient was treated in a Phase I/II study of PRX-102.

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