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In a major setback, Israel-based Pluristem Therapeutics Inc. (PSTI - Snapshot Report) recently announced that it has received notification from the US Food and Drug Administration (FDA), placing a clinical hold on the phase II intermittent claudication (IC) study (IND 15038).

The FDA’s decision was based on a serious allergic reaction in one of the patients which required subsequent hospitalization.

The patient was discharged the next day after the symptoms were managed.

Pluristem pointed out that the patient was suffering from multiple diseases which may have affected the severity of the allergic reaction.

However, the FDA will issue a letter to Pluristem within the next 30 days asking for further information.

Pluristem currently does not have any approved product/therapy. Hence, the clinical hold on the mid-stage trial significantly disappointed investors. The news led to a 14.4% decline in the stock price on Jun 4, 2013.

We expect investor focus in the near term to remain on further updates on the clinical hold.

We note that Pluristem develops placenta-based cell therapies in collaboration with companies like United Therapeutics (UTHR - Analyst Report) or through research and clinical institutions.

The cells from placenta are derived using the company’s proprietary PluriX therapy and are known as PLacental eXpanded (PLX) cells. Pluristem’s first candidate in development, PLX-PAD, is intended to treat peripheral artery disease (PAD).

Meanwhile, the company is also evaluating PLX-PAD for the treatment of critical limb ischemia and Buerger's disease.

Celgene Cellular Therapeutics, a wholly-owned subsidiary of Celgene Corporation (CELG - Analyst Report), is also conducting research on stem cells derived from the human placenta as well as from the umbilical cord for the treatment of different diseases.

Pluristem carries a Zacks Rank #4 (Sell). Right now, Anika Therapeutics, Inc. looks attractive with a Zacks Rank #1 (Strong Buy).

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