StemCell Therapy

Medical science has proven time and again that when the resources are provided, great progress in the treatment, cure, and prevention of disease can occur. - Michael J Fox

It makes sense right now to have exposure to biotech stocks, especially companies working on COVID-19 treatments. Over the past six months, the returns on biotech stocks have been much higher than the broader market indices, as attempts to contain coronavirus are on the rise. The WHO predicts there are approximately 70 vaccines in development worldwide, with experts expecting it to take between 12 and 18 months before approval of a vaccine for mass use. Apart from companies working on vaccines, many companies are developing treatments for conditions related to COVID-19, including Acute Respiratory Distress Syndrome (ARDS). Pluristem Therapeutics (PSTI) is one of the companies which received significant financing to work on COVID-19 and ARDS-related treatments.

Pluristem Therapeutics is an Israeli company. It signed a 50 million financing agreement with the European Investment Bank to develop therapies related to COVID-19 in April. This agreement comes one month after PSTI announced its use of patented PLX cells in severely ill COVID-19 patients suffering from ARDS achieved positive results. ARDS is the condition, brought on by COVID-19, which causes severe, often fatal, lung damage. Stem cell therapy treatments hope to treat and reverse the overreaction of the immune system caused by ARDS. The ICU patients, which were on respirators, all survived. Some of the patients saw the regeneration of lung tissue after hospitalization. One additional patient has received treatment in New Jersey. This news led PSTI's price to triple from approximately $3.00/share throughout April to approximately $9.00/share in May.

Twenty-eight days after this announcement, of the eight patients studied, there is an 87.5% survival rate of the patients treated with the PLX cells, with 75% of them being off mechanical ventilation and 62.5% discharged alive from the hospital. This rate compares to 3.3% of patients suffering from ARDS discharged alive from the hospital in the New York area from March-April 2020 after being on ventilation. While this is a small sample, these numbers are promising as PSTI moves forward with Phase II clinical trials in the United States.

The company uses stem cells derived from placentas, which are easy to collect and accepted as ethical in parts of the world that reject other kinds of stem cells. In the past month, PSTI increased by 206.2%, significantly outperforming the sector as a whole and making noise in the biotech field.

In general, stem cell therapy shows promise in treating ARDS. Fellow Seeking Alpha contributor Wall Street Titan discussed five stem cell companies moving quickly toward an ARDS therapy. This contributor's article discusses many of the positives and negatives of the five companies, including PSTI. The article is worth a read, but the main argument the author has against PSTI is that its scalability lags behind the other companies. I see this as more of a long-term issue, not an issue that would impact its value in the short term. In the meantime, it has outperformed three of the five stem cell companies working on ARDS therapy over the past six months.

I am relatively bullish on this stock in the short term. The FDA cleared PSTI's application for a Phase II study of its ARDS treatment, with 140 adults, intubated, and mechanically ventilated patients receiving various injections and dosages of the PLX-PAD cells. The number of ventilator-free days will measure efficacy during the twenty-eight days from day one to twenty-eight of the study. At least one investment bank is betting that, despite the company producing no revenue, continued positive news from the company is bound to increase the stock price. There may be truth to this. The company which outperformed PSTI over the past six months - Capricor Therapeutics (CAPR) - saw its shares spike April 28 after positive news about its product (100% survival rate for six patients). For now, it seems good news means big spikes in the share price.

However, I will not say this company does not have its share of risk over the long term.

First, when looking at biotech companies, one of the main factors is whether it has a history of approved drugs. Pluristem does not have any approved drugs yet, but it does have several treatments in its pipeline. Before the COVID-19 outbreak, it had two PLacental eXpanded (PLX) products that had reached phase 3 clinical trials in the U.S., Europe, and Israel. These products treat Critical Limb Ischemia (an obstruction of arteries decreasing blood flow to the extremities, causing pain and ulcers) and muscle regeneration following hip fracture.

Further, Pluristem received an orphan drug designation from the FDA to treat Acute Radiation syndrome, which will potentially accelerate this therapy's path to approval and other benefits. The company was also cleared by the U.S. government to treat victims exposed to high doses of radiation due to a nuclear attack or accident. It is also in phase 1 or 2 for treatments involving intermittent claudication, graft versus host disease, and bone marrow transplant treatments. So, in the absence of any approved products, it's nice to see that there are at least several clinical studies underway and near completion.

Second, the company's books are not in great shape. According to its March 2020 10-Q filing, its revenue was $22,000 over the prior nine months, compared to a net loss of $21,016,000, amounting to a loss per share of $1.28. This net loss is slightly less from the nine months ending 2019, which was $27,547,000. Its primary source of funds has been the sale of common stock and government grants. It is eligible for grants from Israel's Law for the Encouragement of Industrial Research and Development and has received almost $28 million from these grants. It also receives numerous grants from the Israel Ministry of Economy and Industry and some private grants. Between April 1 and May 7, the company sold 4.3 million shares of common stock. These funds are in addition to the non-dilutive finance contract from the European Investment Bank, which will be paid in tranches when the company reaches certain milestones.

Third, there is always the chance that ARDS treatments are developed more quickly by different companies. However, I am slightly optimistic Pluristem could maintain a place in the recovery even if a different company produces a similar cell therapy before them. For instance, PSTI uses intramuscular administration (injection into the muscle), instead of intravenous (injection into the vein). Some studies show that intramuscular administration is preferable. I am not a doctor, but there is a possibility that different variations of these treatments will serve different purposes.

In the short term, I believe this stock has the momentum to be a good buy, especially with good news likely coming on the horizon. Trading volume exploded in April, with it remaining strong in comparison to its price. While there is a risk to this stock, if your portfolio can handle it, it may be a good buy. If Pluristem ends up being one of the major players in solving this crisis, it may end up being one of the better bargains you can find during this period.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This writing is for informational purposes only and Lead-Lag Publishing, LLC undertakes no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Lead-Lag Publishing, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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Pluristem Therapeutics: The Search For An ARDS Treatment, And Whether Its Growth Will Continue - Seeking Alpha

This entry was posted on May 20, 2020 at 12:43 pm and is filed under Stem Cell Therapy. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed. |