Pluristem/Cha Collaborate in South Korea

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Pluristem Therapeutics Inc. (PSTI) recently inked an exclusive out-license and strategic partnership agreement with Cha Bio&Diostech. The agreement will allow Cha Bio&Diostech to use Pluristem's PLacental eXpanded (PLX) cells for peripheral artery disease (:PAD) in South Korea. The deal is specifically for two indications; critical limb ischemia (CLI), and intermediate claudication (:IC).

As per the agreement, Cha Bio&Diostech will be responsible for performing and funding the clinical trials to treat patients suffering from CLI and IC using PLX-PAD in South Korea. The clinical studies will be conducted under the supervision of the Korea Food & Drug Administration (:KFDA).

Meanwhile, Pluristem will retain rights to its proprietary manufacturing technology as well as cell-related intellectual property. The company will also have rights to use the data generated from the studies, conducted by Cha Bio&Diostech, to advance its PLX candidates outside South Korea.

Pluristem and Cha Bio&Diostech will form a joint venture after receiving the first regulatory approval for a PLX product in South Korea. The joint venture will be co-owned by both the companies and will commercialize PLX cell products there.

Moreover, Pluristem is expected to issue 2.5 million shares to Cha Bio&Diostech on achieving certain milestones (expected by Sep 2013). The issued shares will be in consideration to the issuance of around 1 million shares of Cha Bio&Diostech at a price of $4 per Pluristem share. The total consideration will be around $10 million for Pluristem shares (based on average closing price of CHA common shares over the last 30 trading days).

As per market research firm Clearstate, there are around 1 million people in South Korea suffering from PAD. The prevalence of the disease is expected to increase further. Consequently, Pluristem’s deal with the South Korean company encourages us.

Pluristem was also in the news recently when it announced that it has provided the US Food and Drug Administration (:FDA) with additional safety-related information regarding IC. Pluristem’s action followed the clinical hold placed by the FDA on A phase II IC study.

The FDA action followed a serious allergic reaction in one of the patients in the trial who was subsequently hospitalization. The patient was discharged the next day after the symptoms were managed. The IC study in Germany has also been put on hold.

Pluristem develops placenta-based cell therapies and currently does not have any approved product/therapy. Hence, a hold on the mid-stage trial in the US and Germany is a major setback for the company. We expect investor focus to remain on further updates on the clinical hold.

Pluristem presently carries a Zacks Rank #4 (Sell) reflecting short-term pressure on the stock. Companies that currently look attractive include Santarus, Inc. (SNTS), Jazz Pharmaceuticals (JAZZ) and Salix Pharmaceuticals (SLXP). All the three carry a Zacks Rank #1 (Strong Buy).

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