West Coast Editor

Public shell company Orthodontix Inc. is gaining a Phase III-ready drug for Gaucher's disease along with a plant-cell bioreactor for making proteins in its merger with Israeli firm Protalix Ltd.

The arrangement, which will create an entity to be known as Protalix Biotherapeutics Inc., calls for each ordinary share of Protalix to be converted into about 594.5 shares of Orthodontix stock, leaving Orthodontix shareholders with about 0.84 percent of Karmiel, Israel-based Protalix on a fully diluted basis.

Orthodontix's shares (OTC BB:OTIX) closed Tuesday at $3.99, up 9 cents.

As part of the deal, expected to close in the fourth quarter, majority shareholders of Miami-based Orthodontix - including Glenn Halpryn, president of Orthodontix, and Phillip Frost, former chairman and CEO of IVAX Corp., also in Miami, as well as other investors - are buying $15 million in Protalix stock, or about 14 percent of the company.

Investors also will get warrants to buy another 5 percent of Protalix shares, and the stock purchase, expected to be completed within a month, is not subject to completion of the merger. The new firm will apply for listing on a major stock exchange.

Halpryn said SEC rules limited his ability to comment on the deal. "There was an internal valuation given in negotiating with Protalix, but we're not at liberty to disclose that," he told BioWorld Today.

Orthodontix's second-quarter SEC filing shows the firm had about $924,900 in cash and equivalents, mainly in certificates of deposit, with liabilities of $13,500.

"Management intends to continue devoting substantially all of its time to consummating a merger or acquisition with an operating business and has evaluated numerous companies and other business combinations," noted the filing, about a week ago.

Frost bought control of Orthodontix late last year through a trust, paying $494,000 for about 2.9 million newly issued shares, giving him a 51 percent stake (about 3 million shares) in the firm, previously known as Embassy Acquisition Corp.

Ranked as number 645 on the list of the world's richest people by Forbes magazine this year, Frost became vice chairman of the board of Teva Pharmaceutical Industries Ltd. when Jerusalem-based Teva took over IVAX in January 2006. Eli Hurvitz, chairman of Protalix, also is chairman of Teva, which reported $6.5 billion in revenue in 2005.

Frost is known for inventing a disposable biopsy device, and for founding Miami-based Key Pharmaceuticals Inc., which Schering-Plough Corp., of Kenilworth, N.J., bought in 1986 in a stock deal valued at about $587 million. Key's products, delivered through the skin, included the asthma drug Theo-Dur (theophylline) and a patch therapy for angina called Nitro-Dur (nitroglycerin).

In the merger of Orthodontix with Protalix, Frost will become member of the Protalix board, as will Jane Hsiao, formerly vice chairman of IVAX and one of the new Protalix investors. David Aviezer, Protalix's CEO, will serve in that position for the merged company. The Miami office of Orthodontix will close, and Protalix's operations will remain in Israel.

Protalix's lead compound for the enzyme-shortage disease is glucocerebrosidase, which seeks to enter a market dominated by Cambridge, Mass.-based Genzyme Corp.'s Cerezyme (imiglucerase) - the only approved Gaucher's product, selling $254 million in the second quarter.

The Protalix compound, due for Phase III this fall, is made differently from Cerezyme, "and it's a slightly different isoform," said Curt Lockshin, chairman and director of Orthodontix. "Everything else [in the Protalix pipeline] is very early," he added.

Revenue for the merged Protalix also will come from providing large-scale protein and antibody production to head off an anticipated capacity shortfall, Lockshin said, and the firm already has made strategic and license-based deals with others.

Halpryn would not estimate how much of Protalix's appeal involved the manufacturing technology and how much was related to the Gaucher's product. "We looked at both and were impressed by both," he said.