Protalix Biotherapeutics Inc (NYSEMKT:PLX) Is A Clear Cut Discount

Protalix Biotherapeutics Inc (NYSEMKT:PLX) is getting beaten down despite just putting out some positive interim data, and we believe this is a serious misinterpretation of the news; that, or the company is being completely overlooked by the biotechnology investment community. Either way, it's an opportunity to pick up a cheap exposure to a company that has a lot more potential than many seem to be giving it credit for.For those new to Protalix, it's a biotechnology company based out of Israel, and it's working on the development and commercialization of recombinant therapeutic proteins based on its proprietary ProCellEx protein expression system. We won't go into too much detail on how this system works, as the mechanics of it aren’t overly important, but what is important, is to recognize that there are companies that can produce the kind of therapies that Protalix is creating, but it has to create them out of mammalian cells. Protalix's system is plant cell derived. Why is this important? Because it reduces the cost by a factor of more than 10. To get a mammalian protein production plant up and running, it costs around $250 million. That's just the initial outlay. With the ProCellEx system, this number is $20 million.This reduced cost persuaded Pfizer Inc. (NYSE:PFE) to come on board with Protalix's first approved product, a drug called Elelyso, which targets Type 1 Gaucher disease. Pfizer bought all rights to the commercialization of the drug, all except Brazilian rights. To get our bull thesis kicked off, Protalix just announced that the Brazilian government has confirmed the purchase of $24 million of the drug throughout 2017. Remember this company has a current market cap of just $48 million.Now to the best bits. Protalix has used its system to create three different drugs – PRX-102, 110 and OPRX-106, targeting Fabry disease, cystic fibrosis (CF) and ulcerative colitis (UC) respectively. The first is in phase III, and the second two are in phase II. The key thing to note here is that all these conditions have standard of care treatments available, but each one has a limiting factor. In other words, they don't work as well as they might, for various reason. Protalix's aim is to bring drugs to market that work as well as the current SOCs, but then build on them by addressing the limiting factor.The CF data that just came out is a great example. The current SOC in CF is DNase1, and it works to reduce sputum levels in CF patients. However, an enzyme called actin inhibits DNase1 action, and limits its efficacy. Protalix's answer, PRX-110, is the same active ingredient as DNase1, but it's also resistant to actin.And the data illustrates the impact of this strategy. It demonstrated a mean absolute increase in the percent predicted forced expiratory volume in one second (ppFEV1) of 4.1 points from baseline. A commercial formulation of DNase1 called Pulmozyme only achieved 2.5 points from baseline.These are interim data, sure, but they show the potential of this approach, and this is just the secondary asset in the company's pipeline. There's the Fabry disease target, which is in an ongoing phase III, and could be targeting a $1.2 billion market if it gets an FDA green light, and the UC drug, which is looking at targeting a $5.5 billion market if it reads out positive on the current phase II, and can build on the data in a pivotal trial. For reference, the CF target is worth around $2 billion annually.So there's a drug at market with a big name partner and tens of millions of dollars in revenues slated for 2017, a pipeline that could be worth $8 billion or more if it runs through to commercialization, and a near term catalyst in some top line data from the CF phase II, slated for this quarter. There must be a downside. Cash? The company is capitalized through end 2019 with more than $80 million on its books.Bottom line - Protalix should be break even by early 2018. This really is a clear cut play. Yes, the drugs may end up failing, despite the spate of positive data already seen. It's drugs may end up killing someone come their pivotals, and the pipeline may be scrapped on FDA recommendation. These are the risks we take with biotech.That's it as far as we see it.We will be updating our subscribers as soon as we know more. For the latest updates on PLX, sign up below!Disclosure: We have no position in PLX and have not been compensated for this article.