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Protalix Plunges on FDA Rejection

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Protalix CEO insists there is no concern about safety or effectiveness of his company's drug for Gaucher disease. An opportunity to cut into Genzyme's sales missed.

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Protalix BioTherapeutics (PLX) appeared to have a golden opportunity to cut into Genzyme's (GENZ) sales for a treatment of the rare condition known as Gaucher disease.

Given the short supply due to Genzyme's manufacturing debacle, it seemed plausible US officials would be ready to sign off on an alternative treatment. Instead, the Food and Drug Administration told Protalix its drug application for taliglucerase alfa isn't ready yet.

That's all investors needed to hear. Protalix lost more than a quarter of its market value as its shares dropped 28% to $6.77 in morning trading. Before today's drop, the stock gained more than a third of its value in the past six months on hopes for FDA approval.

Pfizer (PFE), which is helping Protalix develop the drug, fell less than 1% to $18.86. Israel-based Protalix and Pfizer are hoping to cut into sales of Genzyme's Cerezyme, which once exceeded $1 billion in annual sales. Due to Genzyme's production contamination issues that halted manufacturing of the drug over the past couple of years, Cerezyme revenue fell to about $720 million last year.

However, fourth quarter sales of Cerezyme more than doubled as the company begins ramping up its production again. Genzyme is being acquired by Sanofi-Aventis (SNY) for $20 billion (See Sanofi Nabs Genzyme).

Rare diseases are an increasingly important focus area for drug and biotech companies. The trade group Pharmaceutical Research and Manufacturers of America said a record 460 treatments for rare diseases are being tested in late-stage human studies or are waiting FDA reviews for approval.

Protalix developed a plant-based treatment for the ultra rare Gaucher disease. The treatment would be the second competitor to Cerezyme in the US. Irish drug maker Shire (SHPGY) was allowed to introduce a rival drug last year.

Before signing off on Protalix's treatment, the FDA wants plenty of proof that the drug is safe and effective. Protalix officials insist that the product meets that criteria but gave little detail of what it needs to do exactly to satisfy the regulators.

The company said it's committed to working with the agency to get the drug approved but didn't say how long the process will take. One positive for Protalix is that no new human studies are being requested.

"We believe they're all addressable (issues) technically, and scientifically we do not see anything that is a challenge," CEO David Aviezer said on an investor call this morning.

Aviezer said the company's $36 million in cash will fund operations for at least the next 12 months. Through last year, Pfizer paid Protalix $65 million as part of its partnership, securities filings show. Protalix can receive up to another $50 million in milestone payments and would share revenue from its drug. Protalix will market the drug in Israel and Pfizer will sell throughout the rest of the world, according to the agreement.

Today's news marks the second day in a row that a drug company announced an experimental treatment was getting the boot from the FDA. On Thursday, Salix Pharmaceuticals (SLXP) said the agency is poised to turn down its application to sell a new medicine for irritable bowel syndrome (See Salix Tanks After Drug Setback). After dropping more than 20% Thursday, Salix shares rose 5% to $33.20 in morning trading Friday.
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No positions in stocks mentioned.
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