Protalix Tumbles to Two-Year Low on Notes as Sales Drop

Protalix BioTherapeutics Inc., the Israeli drugmaker that has never posted a profit, tumbled to an almost two-year low in Tel Aviv as the sale of $60 million in convertible notes added to concern over declining revenue.

Shares of the Carmiel, Israel-based drugmaker plunged 10 percent to 16.75 shekels, or $4.72, the lowest since October 2011, at the close in Tel Aviv. The New York shares declined 11 percent to $4.65 last week. Trading volume in New York on Sept. 13 was eight times the average over the past 90 days.

Thirty-day volatility for Protalix surged to a 15-month high last week in the U.S. amid concern that the sale of convertible notes will sink its stock value. Protalix, whose sales have trailed forecasts in three of the past four quarters, will post a wider loss this year amid a drop in revenue, according to the average estimate of analysts surveyed by Bloomberg.

The company “is not performing well operationally,” Raghuram Selvaraju, analyst at Aegis Capital, said by phone Sept. 13. “There is no long-term upside. It is difficult for Protalix to take patients away from entrenched competitors as the pool for patients for orphan drugs is already small.”

Protalix said it sold $60 million of convertible notes through a private placement. The offering gives buyers the right to exchange the bonds for common shares at $5.76 per share at a later date. Protalix will pay a 4.5 percent interest rate on the debt, which is unsecured and matures in five years.

Drug Approvals

The proceeds of the sale will go toward funding clinical trials, research and development, and enhancing manufacturing capabilities. Protalix’s first drug, taliglucerase alfa, was approved by the U.S. Food and Drug Administration in May 2012 and has since been approved by authorities in Israel and Brazil. The Gaucher Disease drug was rejected by the European Medicines Agency in June 2012 because a competing treatment from Shire Plc was granted exclusive market rights for ten years.

Last week’s drop in the U.S. was the biggest since the week ended Feb. 17, 2012 when the stock declined 12 percent following a secondary offering of 5.2 million shares of common stock at $5.25. The stock has had a 20 percent or lower buy rating over the past 14 months from analysts, according to data compiled by Bloomberg, from an 80 percent ratio in April 2012. Sales at Protalix will drop 23 percent in 2013, according to the mean estimate of four analysts compiled by Bloomberg.