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Why Prana Biotechnology Limited Got Pummeled

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Prana Biotechnology Limited (NASDAQ: PRAN  ) plummeted 70% on Monday after its most advanced drug candidate, PBT2, failed to meet its primary endpoint in a study of Alzheimer's disease patients.

So what: The stock has soared over the past year on optimism over PBT2's potential, but today's phase 2 results -- Alzheimer's patients treated with PBT2 failed to show a statistically significant reduction in the levels of beta-amyloid plaques relative to a control group -- are forcing Mr. Market to quickly sober up. So while Prana is also studying PBT2 as a potential treatment for Huntington's disease, investors are clearly interpreting the news as a sign of more disappointing news ahead. 

Now what: Management said it will consult with experts in the field to determine how best to progress PBT2 in Alzheimer's disease. "Whilst not meeting all of our hopes, this result does not deter us from the future development of PBT2, a safe and well tolerated drug candidate for Alzheimer's disease," CEO Geoffrey Kempler said. "Our scientists and those from other institutes have developed a strong body of evidence for the efficacy of PBT2 in Alzheimer's disease. The suggestion of beneficial effect of PBT2 on brain volumes first seen in the Reach2HD Huntington disease trial and now in this Alzheimer's disease IMAGINE trial is intriguing." Prana remains far too speculative for Fools, and today's massive decline underscores the risk in small-cap biotechs.

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  • Report this Comment On March 31, 2014, at 7:28 PM, Calico wrote:

    So here is my less than expert observation...the study failed to meet endpoint because compared to the "control group" there wasn't significant reduction in beta-amyloid....etc....

    OK, now I get that-however-I listened to the conference call this morning and unless I was dreaming I heard this...I thought I heard Tanzi say that there HAD BEEN A SIGNIFICANT REDUCTION in the patients taking the PBT2.....etc, but that for some reason the control group also had a reduction. He even said in other studies done (outside the realm of Prana and private sector)-control groups normally see an INCREASE in beta-amyloid plaques.

    So what explains that? Is the drug a failure still? I don't know-it may be a risky investment, but as a potentially life altering Alzheimer treatment I am not so quick to say the study was a failure if what they said was true and I understood them correctly. I have seen Alzheimer's rob people of their memories of their lives. Its devastating.

    I want to know why the control group didn't have the same and/or increase beta-amyloid plaques that were obviously anticipated. Also, how SIGNIFICANT should the reduction have been in beta-amyloid plaque in the patients taking the PBT2 versus how they were expecting the control group to react.

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DocumentId: 2897186, ~/Articles/ArticleHandler.aspx, 9/2/2015 2:52:02 AM

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Brian Pacampara

I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

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Related Tickers

9/1/2015 4:00 PM
PRAN $0.90 Down -0.04 -4.15%
Prana Biotechnolog… CAPS Rating: ***