Protalix BioTherapeutics, Inc. (PLX) is a biopharmaceutical company that is revolutionizing the development and manufacturing of recombinant therapeutic proteins through its ProCellEx® plant cell-based protein expression system. Using ProCellEx, Protalix is focused on the development and commercialization of a proprietary pipeline of novel and biosimilar proteins that target large, established pharmaceutical markets and that rely upon known biological mechanisms of action. Protalix’s initial commercial focus is on complex therapeutic proteins for the treatment of genetic disorders, such as Gaucher disease and Fabry disease. Protalix is also advancing additional recombinant biopharmaceutical drug development programs, including a TNF inhibitor for inflammatory diseases.
Potomac Capital Management II, LLC, together with its affiliates, is a significant shareholder of PLX Technology, Inc. announced that they have carefully studied and analyzed PLX’s business, history and prospects. We invested in the Company because we believe the stock represents compelling value. However, for that value to be realized, PLX must pursue a strategic direction that maximizes value for shareholders. We believe that in the current context, in order to maximize value the Board of Directors and management must immediately commence a process of a thorough review of all strategic alternatives available to the Company and we do not believe that PLX should remain an independent public company.
We believe that shareholder value can best be created by capitalizing on the historic interest in PLX from potential acquirers, while leveraging the improved operating model of the Company. However, action must be taken urgently and decisively. Following the collapse of the Company’s contemplated transaction with Integrated Device Technology, Inc. (“IDTI”), pursuant to which IDTI would have acquired PLX, credible alternatives to the current unhealthy limbo can only come from a fair and thorough review of all strategic alternatives. The IDTI transaction failed as a result of antitrust issues and was abandoned by the parties on December 19, 2012, in response to the decision of the United States Federal Trade Commission to file an administrative complaint challenging IDTI’s proposed acquisition of PLX. However, we believe that other potential acquirers, including some who have already expressed interest in acquiring PLX, in whole or in part, will not face similar antitrust roadblocks. The Company’s strengthened focus and technology leadership in its core PCI Express business, $20 million annual operating expense reduction, attractive margin profile, intellectual property and undervaluation in the public market make it an attractive target of both strategic and financial interest. It is imperative that the Board and management translate this interest into a value-maximizing transaction.
It is no secret that even prior to the announcement of the potential transaction with IDTI, PLX was losing money and under the auspices of the majority of the current Board embarked on a failed acquisition strategy that destroyed enormous shareholder value. PLX was also facing pressure from its shareholders to sell itself. Fellow shareholders had made the case that the combination of the emergence of PCI Express as the dominant high speed inter-connect, the strategic value of PLX’s dominant position in PCI Express switches, and the cost synergies a large acquirer could recognize, would enable the Company to achieve an acquisition value substantially higher than what the Company could achieve as a standalone business. The IDTI transaction further demonstrated that strategic buyers could generate significant synergies from a combination with PLX. IDTI was willing to pay a substantial premium to PLX’s share price on the day prior to the announcement of the transaction, largely on the expectation that it could generate an estimated $35 million or more of synergies from PLX by fiscal year 2014.
Perhaps most telling is the market interest in a possible acquisition of PLX during the “go-shop” period contemplated under the IDTI transaction. According to the Company’s public filings, during the “go-shop” period, Deutsche Bank, which conducted the “go-shop” process on behalf of PLX, contacted thirty-seven (37) potential bidders to determine their level of interest in exploring an acquisition of PLX The Company entered into non-disclosure agreements with four (4) of the parties who expressed an affirmative interest in further discussing a potential transaction with PLX. At the request of each of those four (4) parties, PLX gave management presentations about PLX’s business to each of such parties. One interested party submitted a formal competing offer to the Company proposing a potential all-cash acquisition of PLX. After reviewing the proposal and consulting with its financial and legal advisors, the PLX Board determined to continue to pursue the IDTI transaction instead. Now that antitrust roadblocks have caused PLX and IDTI to abandon that deal, it is time for the Board and management of the Company to give this competing proposal some serious consideration.