In response to announcing that it is stopping all clinical development of its lead product candidate, Prothena (PRTA 1.96%), a clinical-stage biotech focused on neuroscience and orphan diseases, saw its shares fall 69% as of 11 a.m. EDT.
Prothena stated on Monday that it is discontinuing development of NEOD001, which was a hopeful treatment for AL amyloidosis.
The company made this decision after data from its phase 2b PRONTO trial showed that NEOD001 failed to reach its primary or secondary endpoints. In response, management asked the independent data monitoring committee (DMC) to perform a futility analysis of the company's ongoing phase 3 VITAL study. After doing so, the DMC recommended that the study should be abandoned.
Here's the commentary that Prothena's CEO Gene Kinney shared with investors:
We are deeply disappointed by this outcome, particularly for patients suffering from this devastating disease. We are surprised by the results from these two placebo-controlled studies and will continue to analyze the resulting data to share insights with our collaborators in the scientific, medical and advocacy communities. We thank all of the patients, their families, caregivers, investigators, study staff and our employees. Their participation in and commitment to these studies are indispensable to advancing our shared goal of improving the lives of patients with amyloidosis.
Given the update, it isn't hard to figure out why shares are being mauled today.
The bull case for owning Prothena's stock today now rests on the shoulders of PRX002/RG7935, which is in phase 2 development as a hopeful treatment for Parkinson's disease that is being co-developed with Roche. All of the company's other compounds remain in the preclinical or discovery phase, including all of the drugs that were optioned out to Celgene as part of its recent $150 million deal.
On the plus side, Prothena's balance sheet held more than $421 million in cash at year end, and the Celgene investment should only add to that number. That means that the company won't need to raise capital anytime soon, which is good news given where its share price is heading today.
Still, there's no doubt that today's update blows a hole in the investing thesis for owning this stock. That's why I have no plans to buy shares in response to today's massive drop.