some thoughts..Mega-Blockbuster Potential That’s Ready to...

some thoughts..
Mega-Blockbuster Potential That’s Ready to Run
Prana Biotechnology (ASX: PBT) is a small Melbourne based biotechnology company in search of a cure for one of the few remaining unmet medical needs with mega-blockbuster potential, Alzheimer’s Disease. A cure for this neurodegenerative disorder would be a massive relief for AD sufferers, their families, and society, as the worldwide annual cost of AD is reported to be $600 billion per year. It would also be hugely rewarding for shareholders of the company that wins the AD development race. And there’s a chance that could be Prana!

A cure for AD is estimated to be worth around $25 billion in annual sales. Consequently it is an area that has attracted significant research. Unfortunately neurological trials are the graveyard of clinical development. Trials have an expensive and difficult development path as highlighted by a number of AD Phase III failures; including Eli Lilly’s Semagacestat in 2010 and Pfizer’s Dimebon in 2012. So far the front runners have all fallen at the final post.

A Quick History
Prana was founded in 1997 to commercialise research into Alzheimer’s Disease and other major age-related neurodegenerative disorders. It listed on the ASX in March 2000 with the ticker PBT and a Nasdaq listing followed in September 2002, ticker PRAN. More interestingly, Prana is Sanskrit for “vital life”, it is the notion of a vital, life-sustaining force of living beings. Yes, I did award bonus marks for a totally cool name!

Prana’s key compound, PBT2, recently commenced a Phase IIb clinical trial for the treatment of AD and a Phase IIa trial for Huntington’s disease. Flipping back to the past, PBT2 successfully completed PIIa trials in February 2008. Investors were expecting a partnering deal to be announced soon after, and rumours about a deal surfaced on message boards towards the end of 2008.

However, it’s now 4 years since the Phase IIa trial, and not only did no deal eventuate, but it took Prana until the end of 2011 to commence recruitment for its next trial.

Looking Forward
Prana commenced recruitment for its 12 month PBT2 Phase II imaging trial, called IMAGINE, in November 2011. This double blind, placebo-controlled trial will enrol 40 patients with early or mild Alzheimer’s Disease in Melbourne. The first patient was dosed in early March 2012.

Due to limited capital, Prana is developing its pipeline at a snail’s pace. So let’s take a closer look at its funds. The company had $5.64 million in cash at the end of June 2012 and $5.45 million in net current assets at 31 December 2011. Operations consumed $3.9 million in the second half of last year, but that was without major trials. Cash burn will skyrocket this year, and while the IMAGINE trial has received funding from the Alzheimer’s Drug Discovery Foundation (ADDF), Prana’s funding position is unclear.

Massive Market Potential
Alzheimer’s Disease is a massive unmet market. Recent reports suggest that there are now over 26 million Alzheimer’s sufferers worldwide.

Current AD drugs provide little more than symptomatic relief. They neither cure AD nor meaningfully improve cognition. Yet, those drugs still ring up around $6 billion in annual sales. So the race is on to find a disease modifying drug.

The market size for AD drugs that do improve cognition has been estimated at $25 billion annually. It is one of the few remaining potential mega-blockbusters and big pharma would dearly love to be first to market with a cure.

PBT2 is well protected by patents, and supported by solid science. Its Phase IIa study was published in The Lancet Neurology journal and there are numerous peer reviewed papers by leading AD scientists demonstrating that Prana’s approach to finding a cure for Alzheimer’s is sound. PBT2 has been designed to be a disease modifying drug that prevents the formation of toxic forms of the Abeta protein in the synapses of the brain and to improve neurotransmission, resulting in improved cognition.

It’s All in the Pipeline
The Phase IIa results in early 2008 demonstrated that PBT2 was safe and tolerable, and able to modify the course of Alzheimer’s disease by reducing the patient’s levels of amyloid beta, a protein understood to be a significant factor in Alzheimer’s. It demonstrated an improvement in executive function, an important aspect of cognitive performance, and reduced the levels of Abeta in the spinal fluid of patients.



Source: Prana’s website 14 August 2012

To date, Prana’s 800 strong novel compound library has yielded a phase II candidate for Alzheimer’s and Huntington’s with PBT2, Parkinson’s with PBT434 and brain cancer with PBT519.

Prana announced in early January that it has received approval from the United States Food and Drug Administration (FDA) to start recruiting patients for the company’s first clinical trial using PBT2 in patients with Huntington’s Disease (HD). Enrolment of the planned 100 patients in the 34 week, double-blind, placebo-controlled study has recently commenced. HD affects 30,000 people in the US and about 70,000 worldwide.

In August 2011 Prana announced it at had received a grant from The Michael J. Fox Foundation to support the initiation of pre-clinical studies for PBT434.

Competition
As we live longer the number of people suffering with AD is growing. This already large un-met medical problem continues to grow, and with baby boomers now approaching the age of AD onset, a cure becomes all the more important. The potential market is huge and growing.

So it’s no surprise that big pharmaceutical companies are lining up to take a shot on the AD goal. For the sake of sufferers I desperately hope someone scores a goal soon. If it’s Prana all the better!

Competitors include a ‘who’s who’ of large pharmaceutical companies, but it is rumoured there is not a lot of promise among their compounds. Recent research has highlighted that many of the current compounds including Pfizer’s bapineuzumab, which is in phase 3 trials, may be aiming at the wrong target. As Prana’s Chairman and CEO, Geoffrey Kempler, said in the 2011 annual report, “PBT2 is strongly placed to avoid many of the issues that have emerged, as it works in a unique way that is very different to these failed approaches.”

AstraZeneca has one drug in phase 2 and three in phase 1. Roche’s pipeline is more advanced, it has three compounds in phase two trials and a fourth in phase one.

Despite Dimebon’s failure, Pfizer still has bapineuzumab, a beta amyloid inhibitor, in phase 3 trials along with three other drugs and a vaccine in early clinical trials. GSK also have a drug in phase 2 trials.

Foolish Bottom Line
With significant news flow expected over the next year Prana will gain more attention. There will be trial updates, publications and possibly more patents. The news flow should underpin the share price and attract the attention of more investors.

As a valuation benchmark, Pfizer paid an industry high US$225 million upfront with up to $500 million in milestones, for the rights to Medivation’s Dimebon. Prana is unlikely to get such an incredible deal for PBT2 rights, but with a market cap under $50 million any deal should deliver massive upside.

PBT2 is a good asset that has shown promise in trials. The current IMAGINE trial should trigger fresh interest by large pharmaceutical companies. If the trial confirms that PBT2 can improve cognition, this speculative punt should be highly rewarding.