Pluristem's valuation discrepancy hard to ignore given move into Phase II/III Print E-mail
By Ray Dirks   
Tuesday, 25 January 2011 08:59
On January 3, 2011, when the stock was trading at $1.50, I issued a note reiterating a BUY recommendation on Pluristem Therapeutics, Inc. (NASDAQ:PSTI) pointing out the discrepancy in valuation between PSTI and Mesoblast Limited (MSB.AX). On January 3rd PSTI’s and MSB’s market was approximately $35 million and $745 million respectively, due in part to the announcement of a collaboration between MSB and Cephalon (NASDAQ: CEPH) potentially valued at over $1.9 billion.

Meeting with management of Pluristem Therapeutics

EMA and FDA acknowledge Pluristem's proposed clinical development plan

PSTI and MSB are both cell therapy companies and are considered comparables. PSTI, an American company with headquarters in Haifa Israel, uses the Human placenta (afterbirth) as a source of their therapeutic cells while MSB, an Australian company, uses bone marrow as their source of cells.  Additionally, PSTI grows their cells in-house in a proprietary bioreactor while it is felt that MSB outsources the expansion of their cells where they are grown in Petri dishes or tissue flasks.

At the time of the January 3rd note, PSTI had completed two Phase I/IIa trials in the US and Germany using their PLX-PAD cell product in peripheral artery disease (PAD) while MSB was entering Phase III trials for the use of their cells as an alternative to bone marrow transplantation in hematological malignancies and in Phase II trials for orthopedic and cardiovascular indications.
On January 18, 2011 PSTI announced the successful completion of a parallel scientific advisory process with the European Medical Agencies (EMA) and the U.S. Food and Drug Administration (FDA) regarding the Company’s planned clinical development program for PLX-PAD. Based on the positive feedback from the EMA and FDA, Pluristem is now advancing towards two clinical studies with PLX-PAD: a joint FDA-EMA Phase II/III study for critical limb ischemia (CLI) and a Phase II study for intermittent claudication (IC), both diseases being subsets of PAD.

From my viewpoint, both PSTI and MSB now have products entering Phase III pivotal trials. However, the discrepancy in valuation between the two companies is still quite large. PSTI and MSB currently have market values of approximately $70 million and $900 million respectively. MSB, therefore, is almost 12.5 times larger than PSTI. Although MSB does have the collaboration in place with CEPH, I believe it is just a matter of time before PSTI also has one or more collaborations in place. Therefore, I am recommending investors take advantage of this valuation discrepancy before it ceases to exist.
Disclosure: No Positions

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