Clal Finance curbs BiolineRX enthusiasm

"Cypress Bioscience is not the optimal partner."

Clal Finance Ltd. (TASE:CLFN) issued a cool response to yesterday's announcement by BiolineRX Ltd. (TASE:BLRX) that it had granted an out-license to Cypress Bioscience Inc. (Nasdaq: CYBP) for the company's BL-1020 drug for the treatment of schizophrenia in the US, Canada, and Mexico, in a deal worth up to $365 million, not including royalties.

BiolineRX's share soared in response, to a high ofNIS 4.90, before settling back to NIS 4.45, a rise of 6.4% for the day, giving a market cap of NIS 558 million. Turnover was NIS 60.9 million - about 30 times its daily average. The share fell 0.7% in morning trading today on a turnover of NIS 5.3 million.

Clal Finance analyst Yuval Ben-Zeev and Dr. Yoav Keidar, an expert advisor to Clal Finance, are cool about BiolineRX's announcement. "Ostensibly, this is a promising deal for BiolineRX, but we believe that caution is still warranted. Although we assume that BiolineRX hoped to license the drug to a larger pharmaceutical company more than six months ago, the very fact of finding an American partner at this point in time is a positive development."

Ben-Zeev and Keidar caution, however, that Cypress is a small company with a market cap of $160 million, and they doubt that it is an optimal partner, at least for commercialization of the drug. "We believe that more conservative pharmaceutical companies raised questions about the cognitive improvement model and the trials conducted by the company, which included second line countries like India, and they are waiting for supporting data."

Cypress has also not formulated its regulatory policy for continuing development of BL-1020. It is not clear whether more Phase II clinical trials will be necessary before beginning a Phase III trial and recruiting the necessary number of patients. The need to prove that cognition in maintained in schizophrenics taking the drug is likely to be complicated. It is possible that Cypress will not commercialize the drug itself, but that it will have to reach another licensing agreement with a larger company after making improvements.

Ben-Zeev and Keidar conclude that while the deal is positive for BiolineRX, they believe that the company had sought a stronger partner than Cypress. They add that BiolineRX's share price reflects a fair value for the company and that caution is warranted.

Published by Globes [online], Israel business news - www.globes-online.com - on June 21, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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