RAY DIRKS Research Update PSTI July 5, 2011
by Ray Dirks
RAY DIRKS Research reiterates Buy recommendation of Pluristem (NASDAQ: PSTI) for significant capital appreciation in the near future.

Valuation Discrepancy Justifies Aggressive Buy Recommendation for PSTI

Pluristem Therapeutics, Inc (NASDAQ: PSTI)

Current Price (July 2, 2011) Per Share: $ 2.76
Year End Price Target: $10.00
12 Month Price Target: $17.00
Market Misperception with Pluristem Offers Buying Opportunity

In fact, Pluristem Therapeutics made a truly major announcement on Monday, June 20th, but that was the week that was weak for the Stock market, so PSTI is still way undervalued at $2.98. PSTI entered into an Exclusive License Agreement with United Therapeutics (UTHR.nasdaq) for the use of Pluristem’s Placental eXpanded (PLX) cells to develop and commercialize a cell-based product for the Treatment of Pulmonary Hypertension (PH).

Under the terms of the Agreement, United Therapeutics, a $3.2 Billion Market Cap Company, will receive Exclusive Worldwide Licensing Rights for the Development and Commercialization of the Future Product for Treating PH patients. Pluristem will Retain All Manufacturing Rights, Participate in the Pre-Clinical and Clinical Trial Activities, as well as Provide the Commercial Grade Product.

Under the terms of the agreement, United Therapeutics will make an up-front payment of $7 Million to Pluristem. PSTI is eligible to receive Regulatory Milestone Payments and Other Payments Accumulating Together with the Upfront Payment to a Total of Approximately $55 Million and Reimbursement of Costs of its Development and Clinical Activities. United Therapeutics will bear All the Costs of Conducting the Clinical Trials for this Indication. Following Commercialization, United Therapeutics shall purchase commercial supplies from Pluristem at a specific margin over Pluristem’s cost. In addition, United Therapeutics will pay PSTI specified royalties as a percentage from its gross profits generated from the developed product.

The Chairman and CEO of Pluristem, Zami Aberman, said, “This is an important milestone for our company, as it exemplifies our belief that Pluristm’s PLX cells are a Platform Technology that can be used for the Treatment of Numerous Diseases. This agreement is in line with our strategy of being a state-of-the art cell manufacturer while maintaining all the Production and Intellectual Property Rights for future production candidates. We are very pleased to partner with UTHR, an Expert and a Leader in the area of PH, and to Cooperate with their Talented Team to Quickly Bring this Product to Market and Improve the Quality of Life of Pulmonary Hypertension Patients.”

Roger Jeffs, President and Chief Operating Officer of United Therapeutics, said “our mission to help patients suffering from PH has led us to seek companies exhibiting Innovative Approaches and Cutting Edge Technology with whom we could Partner for Developing New Therapies. Pluristem’s Impressive Results in their current Clinical Trials, their Strong Intellectual Property, and Unique Manufacturing Capabilities, convinced us to select Pluristem as Our Partner in Developing an Important Cell Therapy for treating PH. We are excited to enter into this partnership and to work alongside Pluristem in advancing this exciting Platform.”

This deal outlines the basic structure of a transaction that Pluristem can repeat many times for the many indications applicable for PLX cells.

The market’s reaction to Pluristem’s (NASDAQ:PSTI) announcement that they were out-licensing their PLX (PLacental eXpanded) cells to United Therapeutics (NASDAQ:UTHR) leads me to believe there are misperceptions in the market surrounding the deal that affords investors the opportunity to invest in PSTI at excellent prices.

On June 20, 2011, Pluristem announced, that for the single indication of Pulmonary Hypertension, they had licensed their PLX cells to United for the following financial considerations:
- $7M upfront
- milestone payments totaling approximately $48M
- reimbursement of additional development costs
- a cost+ supply agreement for commercial production
- royalty on gross profits

I was present at a recent Pluristem presentation and believe what the street is missing is that, although it is a nice deal for Pluristem, it is what the deal represents, especially to other companies looking to fill their R&D pipeline, that is important.

Pluristem had not focused on Pulmonary Hypertension (PH) and the Company has no data for the use of PLX cells in this disorder. This suggests that United Therapeutics was very impressed by the data Pluristem does possess, not only on the potential clinical efficacy of PLX cells in other inflammatory diseases, but also on the Company patent portfolio and manufacturing expertise in producing these cells.

PH is an inflammatory process where the high blood pressure in the arteries taking blood from the heart to the lungs cause the inside lining of the vessels (endothelium) to become inflamed. PLX cells act as potent anti-inflammatory agents, which is how they would probably work in treating PH. The point is that the United deal illustrates the immense potential of these cells for a variety of inflammatory conditions.

I believe the deal outlines the basic structure of a transaction that Pluristem can repeat many times for the many indications applicable for PLX cells. Pluristem assumes the role of the master of PLX cell manufacturing and the licensing company takes the cells through the clinical trials for the indication they have licensed from Pluristem. The “Intel Inside” label that appears on so many computers comes to mind. Pluristem would be Intel and PLX cells would be the micro-chip for the cell therapy market in this analogy.

Mesoblast licensed their cells to Cephalon for indications where they had no data (e.g. diseases of the central nervous system). They have been rewarded for this agreement by more than a doubling of its market cap over what it was prior to its December 9, 2010 announced agreement with Cephalon. Pluristem’s share price has, thus far, been essentially flat. I recommend aggressive purchase of the common stock of PSTI under the assumption this misconception on the street will be corrected and PSTI shares will appreciate to a more appropriate value.

Readers are encouraged to make any comments or ask any questions of Ray Dirks regarding this report by contacting Ray – rdirks@nyc.rr.com

Disclosure:

The information contained in this Report contains forward-looking statements relating to the developments of the featured company’s products, services and future operating results or the future of the market. Statements contained in writing or in interviews are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected.

The words “believe,”, “expect,” “intend,” “anticipate,” variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Factors that could affect performance include, but are not limited to, those factors that are discussed in each Company’s most recent reports and/or registration statements filed with the Securities and Exchange Commission. Visitors to this Internet Site are cautioned not to place undue reliance on these forward-looking statements. These statements have not been independently verified by the officers, directors or employees of Corporate Profile, LLC .com.

The information on this Internet Site has been submitted by journalists and analysts or provided by the companies contained herein or other sources believed to be reliable. Corporate Profile, LLC has not independently verified the information provided to it by third parties. Each individual should perform his or her own independent analysis before investing. The information contained herein is neither an offer nor a solicitation to buy any of the securities of the companies contained herein. Investing in securities is speculative and contains a high element of risk.