Protalix Biotherapeutics Inc. (NYSE MKT:PLX; TASE: PLX), which produces drugs for treatment of rare diseases in stem cells, is set to lay off 50 of its 248 employees in its plants and offices in Karmiel
Hearings for the company employees began today, and will continue in the coming days. The company's share price was down 1.5% in TASE trading as of web posting, pushing its market cap down to NIS 333 million. Most of the employees being laid off are production workers residing in northern Israel. The production workers at Protalix are high education graduates, most of whom are young, and will find it relatively easy to get another job. At the same time, their training at the plant was very specific, and they will have to find places in the few biotech companies operating in the north.
Protalix said today, "Protalix has decided to concentrate most of its development efforts on Fabry disease, and to develop its other products with partners. As a result of this focus, given the cut of nearly 50% in the support received by the company from the Israel Innovation Authority ($3.2 million, instead of $6 million), we are now being forced to cut costs, including reducing our labor force. The measure is taking place after the company increased the number of its employees by 30 over the past two years in order to bolster its activity and prepare for supplying the future market needs."
$60 million debt
This measure follows a period of stability in the company. Protalix has rescheduled its burdensome debt, and its repayments will probably begin only in 2021. It signed a commercialization agreement in Europe with Chiesi Farmaceutici for the leading drug in its pipeline for treatment of Fabry disease. The agreement gave Protalix $50 million immediately and $370 million more in royalties.
Why is the company laying off employees? Protalix currently produces and markets only one product, which is designed for treatment of Gaucher's Disease. Over the past two years, it prepared enough inventory for years ahead for the entire demand in the Brazilian market, where it markets the drug by itself, and for the needs of Pfizer, its partner, which is marketing the drug in the rest of the world, but has failed to gain a substantial market share. The Fabry product in the agreement is likely to reach the market in 2019 at the earliest, so that Protalix can cut back on its labor force without affecting its activity.
Protalix still has a $60 million debt, payable in 2021 (although most of it is in convertible bonds, and the company does not believe that it will really have to repay the debt in cash). The company burned $27.6 million in the first nine months of 2017, leaving it with $40.6 million in cash, even before it received its full advanced from Chiesi. The layoffs will enable Protalix to cut its expenses and reach its repayment date in a stronger position.
Published by Globes [online], Israel Business News - www.globes-online.com - on November 26, 2017
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