From SemBiosys, A New Kind Of Insulin

Peaks And Valleys
Insulin from safflower? That's what SemBiosys (SBS ) Genetics, which trades in Toronto under the symbol SBS, is developing. In a June presentation to the American Diabetes Assn. in Chicago, the company demonstrated that plant-produced insulin is "physically, structurally, and physiologically indistinguishable from pharmaceutical-grade human recombinant insulin," according to Chief Executive Officer Andrew Baum. These results, he says, validate the feasibility of plant production technology for the large-scale manufacture of human insulin, where capacity is in short supply. Baum believes plants offer unprecedented capacity and flexibility for low-cost biopharmaceutical manufacturing and provide by far the most attractive economics in terms of capital and cost of goods. SemBiosys makes protein-based pharmaceuticals and non-pharmaceutical products, using genetic engineering and a proprietary technology. Baum sees demand for insulin rising to 16,000 kilograms in 2012, a big jump from 6,000 kg in 2006, when sales were $7.5 billion worldwide.

Neil Maruoka of Canacord Capital, who rates the stock, now at 3.51 Canadian dollars, a buy, with a target of 7.70 in Canadian dollars, says the results presented by SemBiosys at the American Diabetes meeting were "incrementally positive" and compare favorably with U.S. pharmaceutical-grade insulin. He expects that SemBiosys' next move will be into human testing to get approval from the Food & Drug Administration. Based on the preclinical evidence of functional equivalence, Maruoka anticipates the company could file an investigational new drug application with the FDA to begin clinical trials before the end of the year. With a shortened path to commercialization in the U.S., "we believe SemBiosys recombinant insulin could be launched by 2010, if approved," he says.

Brian Bapty of Raymond James (RJF ) in Toronto says SemBiosys has a diversified pipeline of new products that includes food additives, cosmetics, animal health items, and pharmaceuticals. He rates the stock "outperform," with a target of 6.60 ($1 U.S. equals 96 cents Canadian). Karen Boodram of Pacific International Securities says SemBiosys is well funded, with $30 million Canadian on its balance sheet. She rates it a buy.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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