Protein Design Labs' Pipeline Shows Some Promising New Drugs

Nadine Wong is the editor, publisher and co-founder of the monthly BioTech Sage Report. Wong writes a weekly column that appears on this page as part of her business relationship with TheStreet.com.
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Protein Design Labs

(PDLI) - Get Report

is a company I've liked for a while that recently has become more attractive as it approaches several milestones.

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On Monday, the company, which discovers, develops and licenses humanized antibodies for the treatment of a variety of diseases, released preliminary Phase I/II clinical results treating Crohn's disease, an autoimmune condition that affects the digestive tract. These results showed that patients who received the antibody exhibited a reduction in their Crohn's disease activity index and a greater number of remissions with higher doses.

An estimated 1 million people worldwide suffer from Crohn's, which is characterized by abdominal pain, diarrhea, anemia and fever, and usually attacks men and women under age 35. There is no cure for it.

The encouraging data have nudged the stock 77 cents higher from Monday's opening price to close at $36.23 Wednesday, a gain of 2.2%. Volume has been subdued, though, which is indicative of broader market conditions. About 2 million shares have been trading daily, compared with the 10-day daily average of 3 million shares.

Despite the appearance of short-term price resistance, though, Protein Design Labs still has upside potential that I feel will cause its share price to rally. One catalyst could be the upcoming Dec. 7 American Society of Hematology conference to be held in Florida. At this conference, Protein Design Labs will present data on Zamyl's Phase III trial for acute myeloid leukemia, and interim Phase II data on Remitogen for non-Hodgkin's lymphoma. Another catalyst could be the that the company is expected to release data on Zenapax used with cyclosporine this coming March. This combination is now being tested for the maintenance of remission in psoriasis. In this trial, the expectation is to see if patients can achieve a 75% reduction in PASI scores (a test for itchy, red, scaly patches of the skin).

Before I forge ahead, though, let's take a closer look at monoclonal antibodies for those who don't know what they are. Monoclonal antibodies are highly specific molecules that serve as a form of "molecular glue," binding to a single antigen. Their extreme binding specificity allows for the explicit targeting of diseased cells.

Monoclonal antibodies were once viewed as a novel therapy with great promise, but it took 20 years to prove their effectiveness. In fact, these antibodies were called "magic bullets" because of their specificity and targeting capabilities. But initially, these products did not prove as successful as anticipated due to the shortcomings of the first-generation antibodies. These compounds were developed in mice and failed because the human body developed an immune response to them. Since then, advances have been made in antibody technology, from creating chimeric therapies -- which are partially human antibodies -- to more-humanized antibodies, and recently, to fully human antibodies. Producing more humanlike antibodies has finally led to the success of the "magic bullet."

Having said all that, I believe Protein Design Labs is well-positioned to benefit from monoclonal antibodies, with seven proprietary drugs in this area in more than 15 clinical trials. The company's share price continues to outperform as it transforms its business model from one reliant on licensing fees, milestone and/or royalty payments, to one with revenue based on marketed, proprietary products. Given that information, analysts expect Protein Design Labs to post a 2 cent profit for 2001, doubling the penny a share it earned last year.

Our outlook for Protein Design Labs remains extremely positive. Upcoming milestones and a maturing proprietary product pipeline should drive the firm's stock appreciation in the near term. Buy below $35.

Nadine Wong is the editor, publisher and co-founder of the

BioTech Sage Report

and contributes a weekly biotech column to this site. At the time of publication, Wong had no position in any of the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While she cannot provide investment advice or recommendations, Wong invites you to send comments on her column to

Nadine Wong.

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