PSTI driven by High-Volume Manufacturing Capabilities, Proprietary Stem Cells and New positive Phase I clinical data for PAD Print E-mail
By Ray Dirks or Ray Dirks Research   
Monday, 14 November 2011 08:53
Pluristem (Nasdaq:PSTI) is a small stem cell company that can drive revenue from two different sources and thereby reduce risk to investors and provide potential upside.

The company is the only one capable of providing 3D manufacturing, which positions Pluristem to serve the rest of the stem cell industry with high-volume, low cost manufacturing services. Pluristem also has proprietary PLX stem cells that are showing safety and efficacy for several important indications, with peripheral artery disease being the latest. Here are some recent events that shed more light on the potential valuation for Pluristem:

1.    The 12 month results for Pluristem’s Phase I clinical trials in peripheral artery disease (PAD) presented on November 4, 2011
2.    Investment research relating to Mesoblast from Macquarie Securities, an Australian investment bank.
3.    Pluristem’s 8K filing of November 1, 2011

The CLI Trial

I had the opportunity to review the presentation given by Dr. Horwitz, President of the International Society for Cell Therapy, when he gave the combined results of Pluristem’s Phase I clinical trials completed in both the USA and Germany using PLX-PAD cells in the treatment of Critical Limb Ischemia (CLI), the end stage of peripheral artery disease (PAD).  Although the studies were open label with a small number of patients, I believe the findings suggested four major things:

1.    PLX-PAD cells given Intramuscularly were not associated with any tumor formations after one year of follow-up.
2.    When PLX-PAD cells are given intramuscularly, they are not shielded 100% from immune system of the patient.  However, the sophisticated immunologic tests conducted on the patients indicated the changes in these immunologic parameters were of no consequence to the patient.
3.    PLX-PAD cells are safe to be given intramuscularly.  Importantly, they can also be given to the patient twice from the same placental source.  Bone marrow derived cells may not be able to do this and when they were tried in baboons, an immune response occurred.
4.    The 12 month amputation free survival rate of 85%, when compared to the historical average of approximately 63% is very impressive and convinced Pluristem to proceed to more advanced clinical trials using PLX-PAD for different subsets of PAD, including CLI, intermittent claudication, a less severe form of PAD, and Buergers Disease, a rare form of PAD where Pluristem has received orphan drug designation.

The MesoBlast Research Report

I reviewed what I believe to be a very well researched, recent investment analysis of Mesoblast from the Australian investment bank, Macquarie Securities.  In this report, it is noted that Mesoblast can trigger a process that requires Lonza to construct a manufacturing facility exclusively for Mesoblast’s products which Mesoblast can then exercise its right to buy at a pre-agreed purchase price two years after the facility receives regulatory approval.  All capex incurred in the creation of manufacturing facilities will be assumed by Lonza which is estimated to be in the range of $200 million.  

Pluristem’s 8K Filing

On November 1, 2011, Pluristem issued an 8K stating the company had engaged a contractor to build out their manufacturing facility in Haifa at a cost of approximately $6.2 million

How I look at this

Both Lonza’s and Pluristem’s facilities will be used to produce commercial quantities of the clinical grade cells for patients in the future.  Our queries indicate Pluristem will be able to supply approximately 150,000 doses annually when their new facility is in full production and we assume roughly a similar number of doses will be manufactured when the new Lonza/Mesoblast facility is in full production.  The obvious deference is that the Lonza/Mesoblast facility is estimated to cost approximately 33 times more that Pluristem’s facility ($200 million vs. $6.2 million)!  This translates into huge differences in the COGS for a cell produced in a Petri dish (the Lonza method) versus cells produced in a 3D method (The Pluristem method)…

Additionally, this doesn’t even address the fact that pluristem has already proven batch-to-batch consistency to the regulators using their 3D manufacturing process while Mesoblast has yet to accomplish this..

As I mentioned to BioMedReports readers in my article in early October when shares were trading significantly lower: As Stem Cell Therapies Move From Development Into Mass Manufacturing, Look To Pluristem Therapeutics As The Market Leader In Therapies and Manufacturing.

Add to this Pluristem’s recent Phase I results that indicate PLX-PAD cells are safe and patients being able to re-dose from the same placental source (a significant finding because it is likely that patients will need re-dosing for most of the indications pursued by these companies), and a very strong cash position, and it would seem Pluristem is several steps ahead of Mesoblast in its cell commercialization process.  Despite this, we see a huge valuation difference between Mesoblast, with a market value of approximately $2.3 Billion and Plurisem, with a market value of approximately $120 million. 

Any Readers of this Article who wish to contact Ray Dirks of Ray Dirks Research personally may reach Ray at [email protected]

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