The Protalix Drama


FDA rejects Gaucher Drug. Market reacts.


By: YOSEF TASTASSA  
Published: February 26th 2011
in Economics » World

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Investing in the Bio-Medical industry

 

Investing in the Bio-Medical industry is unlike any other public industry. Before even sniffing a whiff of potential profits, the Bio-Medical companies must first face the regulators and decision makers of the FDA. This in some instances is similar to trial, where the defendants must prove themselves in the court of law, or in this instance, the Bio-Medical court, however, in this case, it’s the principals and investors who become the defendants.

 

Should the FDA not approve your product, your investment are gone. Should they approve it, then it’s the first major hurdle passed to realizing large profits.

 

It’s that FDA approval hurdle that has made or killed the potential for billions in realized profits for investors. Of course, this is much riskier when investing in young companies with one or two potential products, but this is also where the higher profit percentages are earned. Investing in Bio-Medical institutions like Teva, Roche or Novartis are fairly low risk as they have large amounts of SKUs and a few failures will not greatly effect their bottom line.

 

Protalix Gaucher drug

 

As covered before in Shalom Life, Protalix is an Israeli Bio-Medical company that has a cooperation and funding agreement with Pfizer. Protalix has been developing a drug that contains Taliglucerase alfa, a unique molecule that replaces the body’s enzyme that doesn't function among Gaucher patients.

 

After high expectations, rumors and gossip the FDA did not approve Protalix' drug. As an immediate response, Protalix' shares lost over 30 per cent in the early trading in New-York. By the end of the trading day Protalix lost around 18.5 per cent of its market value. The trading volume was $7.7 million.

 

Is Protalix an opportunity?

 

When looking at the FDA decision, one should understand that it is not a final "no", but a request for extra data and information about the clinical experiments. Both Pfizer and Protalix have announced that they will take all necessary measures in order to reply to the FDA requests. At the moment it seems like a very complicated situation and that another round of speculations are on the way.

 

There is no doubt that many investors are acting very emotionally. Those who saw millions in their vision are now selling shares for pennies.

 

However, for some investors current prices are seen as an opportunity. Those who believe that the experience of Pfizer and the potential of Protalix will overcome the FDA obstacle may see current prices as "money on the floor" and are picking up cheap shares that may sell for much higher prices in the near future. The high trading volume proves that this is the situation.

 

Protalix shares are traded in New-York and in Tel-Aviv. On Sunday, after the Tel-Aviv market will open, the Israeli investors will response to the negative news after knowing the New-York trading results and after a very long and nervous weekend. An Israeli investor commented on the FDA rejection as the following: "I lost my house, I lost my children's saving, I lost everything, and I'm such an idiot".

 

What to do and what not to do?

 

Investing in any start-up, whether it is high-tech or bio-tech is always a matter of a high risk. If investing, always consider that odds are that you may never see your money again. Make sure that your portfolio has other components such as other shares, bonds, cash, low interest deposits etc. Always make sure that ultra-risky investments will consume in the worst case no more than 10 per cent of your capital.

 

Summary

 

The Israeli Bio-Medical industry is very promising but also very risky. Besides new drugs that help patients around the world there are financial risks that should be strongly considered. Choose your steps wisely and consider all options before taking any decision.



Related articles: (Protalix, FDA, Gaucher, Pfizer)
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