Proteonomix, Inc. (OTCBB: PROT) enjoyed incredible growth last week, moving from a 2.35 opening on Monday to a 6.43 closing on Friday; producing an unbelievable payday for those investors who managed to build a sizeable position in the biotechnology company when shares were sitting at a 52-week low of 0.30 back on December 28, 2011. While PROT, which focuses on developing therapeutics based upon the use of human cells and their derivatives, spiked last week there has been a steady pullback this morning as shares have dropped to 5.83, causing considerable panic among those investors who bought on the high end last Friday, a day that saw shares hit a 52-week high of 7.18.
The pullback should come as no surprise given the simple fact that PROT didn’t release any groundbreaking news last week. In fact, the only press release PROT distributed last week concerned their upcoming presentation at the Investor Summit 2012 on February 1, 2012, sponsored by Merriman Capital at the Intercontinental Time Square Hotel in New York City. Even knowing that PROT will be addressing the investment community regarding their UMK-121 technology, specifically, according to company President, Michael Cohen, “the use of the technology in the emerging markets, particularly in Africa where large numbers of cases of severe cirrhosis and accompanying End Stage Liver Disease exist.”
Earlier this month PROT announced that their clinical trial of UMK-121 had received Institutional Review Board (IRB) approval, providing them the opportunity to study their UMK-121 drug therapy on patients with End Stage Liver Disease.
Obviously this was positive news for PROT and the fact that they had already entered into an agreement to conduct the clinical trial with the University of Miami, an agreement that requires the University to pay expenses associated with the clinical study while PROT assists financially with the clinical study, is certainly a bonus. According to the agreement PROT was required to pay $105,000 to the University and the University will absorb all other costs associated with the study. PROT also agreed to pay a 3% net royalty in the event of commercialization of UMK-121.
For any investor who has been following PROT, knowing that they won’t have to pick up the cost of a clinical trial is a relief; PROT hasn’t exactly been bringing in the money to fund an FDA study. For the nine-month period ended September 30, 2011 PROT saw net revenues of $18,994 compared to $68,972 for the same period in 2010. As stated in the financial operations overview of their most recent quarterly filing “Our revenues and associated direct costs since inception are a result of our sales of donor sperm samples from our Sperm Bank of New York subsidiary, a company engaged in reproductive tissue banking.”
Clearly this source of revenue can’t keep PROT afloat much longer as they attempt to advance their way into the development of their UMK-121 technology. In their January 4, 2012 press release announcing the IRB approval PROT provided a link for investors that outlined estimated costs associated with a typical research and development program; that figure was placed between $1.3 billion to $1.7 billion.
It would appear that the University of Miami has considerable faith in UMK-121 and its potential in patients with End Stage Liver Disease but they hold the purse strings, leaving PROT vulnerable if the financing ends. Additionally, even if everything goes according to plan, it could still be years before FDA approval is granted, this is simply the first step in human trials.
This is why PROT is also hoping to convince the investment community that their other areas of business operations, including Cosmeceuticals, in which they have developed a range of anti-aging and wound care products that they intend to manufacture, market and sell through their Proteoderm subsidiary based on a stem cell secreted matrix of proteins that stimulate collagen as well as their Stem Cell Therapies, specifically StromaCel, a post Myocardial Infarction Treatment using Allogenic Stem Cells from Bone Marrow donors, are worth an investment.
PROT has their work cut out for them and the disappointing financial results from their Tissue Banking operations conducted through their subsidiary Sperm Bank of New York will put additional pressure on the company to raise money. The process of gaining FDA approval is lengthy and while they say Proteoderm is ready for initial market entry as an over the counter Anti-Aging product, something that could provide some financial relief, the truth is this is an extremely tough market to enter and actually succeed.
Right now shares of PROT appear to be higher than they should be given the fact they are financially limited and almost completely reliant on outside money to advance any of their planned business operations.