Micro-cap Protalix Biotherapeutics, focused on rare diseases, has 500% upside — Zacks SCR

Protalix Biotherapeutics’ treatment for Gaucher disease uses an enzyme cultivated in carrot cell cultures (pictured). / Photo: protalix.com

Zacks Small-Cap Research (Zacks SCR) values Protalix Biotherapeutics, a small Israeli drugmaker listed in the U.S., at nearly 500% higher than its current market price. The company stands out from peers because it already generates revenue and has recently paid off its debt. This, Zacks SCR points out, takes one of the primary risks associated with small-cap stocks off the table: Smaller companies need to raise capital and dilute shareholders in the process.

Details

Protalix, which has a market capitalization of just $178.2 million on the New York Stock Exchange, is worth $14 per share, on the estimates of Zacks SCR. This target price is nearly six times the current market price: Protalix closed at $2.42 per share on Monday, February 3.

«Protalix maintains an enviable position in the small cap biotech space,» Zacks SCR says.

The company has two regulator-approved products that generate revenue. Additionally, it has eliminated debt and has over $27 million in cash. This makes investing in Protalix safer than in other smaller companies, which have to raise capital and end up diluting shareholders, Zacks SCR points out.

Aside from Zacks SCR, only HC Wainwright & Co covers the company, according to Benzinga data. HC Wainwright & Co rates it a «buy» with a target price of $15 per share.

What Protalix Biotherapeutics does

Protalix Biotherapeutics uses its proprietary platform, ProCellEx, to produce and manufacture proteins through plant cell-based expression systems to treat rare diseases. The company currently has two approved drugs. The first, Elelyso, is used to treat Gaucher disease, a genetic disorder characterized by an enlarged spleen or liver (hepatosplenomegaly) and central nervous system abnormalities.

The second drug, Elfabrio, treats Fabry disease, another hereditary disorder that can lead to kidney and heart failure. Zacks SCR estimates the market for Fabry disease treatments at $2 billion. Currently, three drugs dominate the space: Fabrazyme by Sanofi, Galafold by Amicus Therapeutics, and Replagal by Takeda.

«Many patients develop antibodies against the enzyme in Fabrazyme and Replagal which reduces its effectiveness. Galafold is only appropriate for a subset of Fabry patients that have a certain galactosidase alpha gene (GLA) mutation. This creates a wide opening for Elfabrio to step in and take market share in the underserved Fabry population,» Zacks SCR explains.

In addition, Protalix has two candidates in the pipeline. One is a gout treatment, which is in phase I clinical trials. The other is for diseases associated with neutrophil extracellular traps, the formation of which has been observed in various autoimmune, inflammatory, and fibrotic conditions, as well as diverse forms of thrombosis, cancer, and metastasis, according to the company. This therapy has not yet started clinical trials.

In the third quarter of 2024, Protalix posted a 75% year-over-year revenue increase to $17.8 million. Net income was $3.2 million, versus a $1.9 million loss in the same period in 2023.