PRTX: Zacks Initiates Coverage of Protalex, Inc. With $3.50 Target

Zacks Small Cap Research
September 16, 2013

Zacks Small-Cap Research initiated coverage of Protalex, Inc. (PRTX) with a Neutral rating and a $3.50 price target. Protalex is developing PRTX-100, a highly purified form of the bacterial protein Staphylococcal protein A (SpA) as a treatment for rheumatoid arthritis and other autoimmune disorders. Analyst Jason Napodano, CFA of Zacks states, "We believe the company has significant upside potential provided that the safety and efficacy seen in its early clinical trials of PRTX-100 in rheumatoid arthritis (RA) patients holds up on testing in larger numbers of patients in later-stage studies."

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Rheumatoid arthritis is a chronic and progressive autoimmune disorder primarily involving the joints of the extremities. Patients experience pain and tenderness of the joints, morning stiffness, and over time, disability and deformation of the joints due to loss of bone and cartilage. Early stage treatment has historically involved NSAIDs and steroids, but growing realization of the adverse effects of long-term steroid treatment and of the long-term benefits of disease suppression have shifted the paradigm toward early use of disease-modifying anti-rheumatic drugs (DMARDs) such as methotrexate and biologics such as anti-tumor necrosis factor alpha (TNF ) agents.

These and other biological treatments provide approximately 40% of treated patients with a 50% reduction in symptoms by American College of Rheumatology (ACR-50) criteria. However, most carry so-called black box warnings against immunosuppression-related infections and malignancies, and many involve relatively inconvenient dosing schedules. Additionally, biologics like Enbrel and Humira cost over $25,000 per year. Nevertheless, the U.S. market for biologic therapies for RA exceeded $10 billion in 2012, and many such drugs find applications in the treatment of other autoimmune disorders as well.

"By interfering specifically with the proliferation of a subset of B cells, and by the interacting with and down-regulating activated monocytes and macrophages, PRTX-100 potentially offers a more selective and safer treatment for RA," states Zacks Analyst, John Tucker, PhD. 

In early clinical trials it induced low disease activity by European (DAS-28) and U.S. (CDAI) criteria in 6/29 (21%) patients across dose levels, and a >50% reduction in symptoms in 4 of 5 patients at the highest dose examined. The most common treatment-related adverse events were those typical of cytokine release, and included mild-to-moderate headache, myalgia, fever, and chills. Anti-drug antibodies were observed in most patients on repeated dosing, but while these affected the drug s clearance rate, no effect has been seen on efficacy to date. "This is something to keep an eye on in future, longer-term studies. Nevertheless, efficacy appears to persist for many weeks following the last dose in some patients who received at least 4 weekly doses. It's very encouraging," notes Tucker, PhD.

A second and ongoing Phase 1b trial (Study-104) of PRTX-100 examines higher doses and the effect of up to 5 drug administrations, as well as the benefit of additional monthly doses. Results of this trial are expected to be available in mid-2014, and to provide additional information regarding the safety and efficacy of PRTX-100, the potential significance of the anti-drug antibody response, and provide additional data regarding the duration of response. Provided that the results of this trial are positive, the company expect the company to initiate a Phase 2a trial in early 2015 and out-license PRTX-100 in 2017. Additionally, the company has indicated its intent to file an IND for PRTX-100 in an orphan indication in the fourth quarter of 2013. 

"Our DCF calculation, performed using an analysis of comparable deals in the RA treatment space, suggests a net present value (NPV) for the shares at around $3.50. There is upside to this figure based on orphan indication strategy and presentation of additional data in 2014," concludes Napodano, CFA.

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