Globes, Tel Aviv, Israel, Tali Tsipori column
Jan 09, 2011 (Globes - McClatchy-Tribune Information Services via COMTEX) -- Over the past week Pluristem Therapeutics Ltd. (Nasdaq:PSTI; TASE:PLTR; DAX: PJT) saw its share price rise 30 percent on Nasdaq. On Friday, the stem cell developer's share closed at $1.86, giving a market cap of $49 million, a two-year high. The share price rose 10.6 percent on the TASE today to NIS 6.77.
Yet the company, which was founded eight years ago to transform medical refuse into treatments for diabetes and cholesterol, and which has raised $39 million on Nasdaq, DAX, and TASE, has made no announcements. Nor has the management made any special appearances at this or that conference.
The reason for the jump in Pluristem's share price can be attributed to an announcement by an Australian company working in the same field -- Mesoblast (AU: MSB).
But before telling the story of Mesoblast let us go back to Pluristem. The company recently began processing stem cells taken from the placenta (considered medical refuse) and placing it into a bioreactor that it has developed (a device that simulates biological conditions suitable for growing tissues or organisms). Then the cells are injected into the patient's body to treat specific illnesses. Pluristem's processed cells, designed mainly to treat peripheral blood disorders such as an ailment causing creeping paralysis in the arteries leading to the legs which indicates a potential heart attack or stroke. In most instances patients with diabetes and high levels of cholesterol are at greatest risk.
Now back to Mesoblast. The Australian company uses bone marrow as a basis for its stem cell treatments. Mesoblast reported last month that it had signed a cooperation agreement with the US pharmaceutical company Cephalon to commercialize novel therapeutic products for regenerative medicine. Cephalon is traded on Nasdaq with a market cap of $4.5 billion.
Cephalon can commercialize Mesoblast's cells for various disorders and in exchange it will pay half the coats of Phase IIa trials for one family of treatments, and all costs after Phase IIa for other treatments. Cephalon will also pay Mesoblast $100 million cash and a further $30 million for shares worth 19.9 of its equity (at a price of $4.35 per share, a premium of 45 percent on the day of the announcement). And as if all that is not enough, Mesoblast will receive royalties that could reach $1.7 billion.
In other words, a dream deal that virtually every R&D company would go for without thinking twice. Investors did not remain indifferent to the deal and in just two days of trading Mesoblast's share price rose 51 percent. The share price has risen 159 percent over the past year without the company earning so much as one dollar.
Consequently many analysts like Ray Dirks of the investment house of the same name believe that Pluristem is underpriced. Dirks sees Pluristem's share price rising to $6 this year and $10 next year, which would give the company a market cap of $263 million.
Pluristem recently completed Phase I/IIa trials on its cells involved in the treatment of peripheral blood disease, while Mesoblast for its part is about to begin Phase III trials for sells as an alternative to bone marrow transplants for cancer sufferers, and Phase II trials as an alternative treatment for orthopedic problems.
Ray Dirks wrote in his report, "Mesoblast is further advanced than Pluristem but I believe that Pluristem will reach the stage next year where Mesoblast is now."
And Dirks in not alone. Three other investment houses have covered Pluristem and most of them are optimistic about its future and give the share a "Buy" recommendation with a target price that seems a distant dream.
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Tali Tsipori
Copyright (C) 2011, Globes, Tel Aviv, Israel
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