Marty Biancuzzo's technology research is already the most sought after in the industry. Since joining Tech & Innovation Daily, he's broken news on some of the biggest market-moving catalysts of the year, including the digitization of city infrastructures, neuroengineering breakthroughs and the Twitter IPO. Marty's work has been featured on Capitol Hill Daily, Wall Street Daily, MarketWatch, CNBC, Bloomberg and Forbes.
Why is My Track Record So Damn Good? Published Sat, Feb 22, 2014 | Marty Biancuzzo, Chief Technology Analyst
Over the course of my twice-weekly missives to you here, I’ve covered many tech topics and alerted you to some of the best companies within today’s fastest-growing trends.
In fact, I’ve profiled 17 different stocks and, as I write, 15 of them are trading well in the green.
I want to update you on one of those stocks today – Prana Biotechnology (PRAN) – a small Australian firm that develops drugs for neurological disorders. Its primary focus is on the most deadly diseases – Alzheimer’s, Parkinson’s and Huntington’s.
I first covered Prana on August 28, 2013, when the stock was trading at $4.83. By late January, shares had surged to a high of $13.29. That’s a 175% gain. Since then, however, it’s dropped back to the $8 level.
So what gives? Is the stock still a viable investment?
Let’s find out…
Prana Behaving Like a Moody Teenager
If you’ve followed Prana recently, you’ll know that the stock has experienced quite a rollercoaster ride…
Now, I’m no psychiatrist, but I’d still like to explain these wild mood swings to you…
Mood Swing #1: When biotech firms are approaching clinical trial results, traders like to buy into the speculation of successful results. The buildup to that 175% gain came in anticipation of the company’s trial results for PBT2 – its drug therapy for Huntington’s Disease. (The results came out this Tuesday – more on that in a moment.)
Mood Swing #2: Prana’s share price tumbled on heavy selling volume. Why were investors selling? Because those same traders buying into the trial results dumped their shares before the actual announcement to get a quick gain without the risk from a potential negative result.
Mood Swing #3: Prana shares did an immediate 180-degree turn and bounced back into double-digit territory. This Tuesday, Prana reported that PBT2 had met its primary safety and tolerability endpoint. It also reported that PBT2 met its secondary endpoint. The formula showed significant statistical improvements in cognitive functionality. Preliminary evidence also suggests that PBT2 reduced atrophy tissue in the areas of the brain affected by Huntington’s. A stellar 95% of the patients who started the study ended up finishing it.
Mood Swing #4: Prana’s stock then tanked on fears that PBT2 didn’t show significant enough improvement in restoring cognitive function over its placebo.
And that’s where we stand today. So, what next?
The Holy Grail of Catalysts
Prana is chasing arguably the biggest prize in pharma – a cure for Alzheimer’s.
After all, Alzheimer’s is the sixth-leading cause of death in the United States. It’s also the leading cause of dementia, and costs $5.3 billion in treatment costs for the 5.2 million people who are affected.
Currently, there are only five approved drugs for treating Alzheimer’s – Galantamine, Memantine, Donepezil, Rivastigmine and Tacrine. But these drugs are barely effective, acting more like “stop-gap” measures by only mildly slowing the progression of the disease. With no new drugs approved since 2003, it’s safe to say that Alzheimer’s victims and their families are begging for a new drug.
And Prana is answering their pleas with the same PBT2 compound that just reported Huntington’s disease trials.
Why Next Month is Crucial
PBT2 has already been studied extensively in pre-clinical testing, as well as Phase 1 and 2 clinical trials.
Pre-clinical testing showed that PBT2 rapidly improves cognition in mice with Alzheimer’s.
In 2007, Prana met primary safety and tolerability goals in its Phase 2 trial of PBT2, along with several secondary endpoints. And 81% of patients showed significantly improved cognitive function than the best-performing patient on the placebo.
Today, PBT2 for Alzheimer’s is running through “The IMAGINE Trial” – a 12-month, double-blind, placebo Phase 2 study involving 42 patients with mild Alzheimer’s. The study is designed to assess the effect of PBT2 on brain activity. It’ll also evaluate PBT2’s effect on cognition.
The last patient finished dosing at the end of November, with results expected next month.
“IMAGINE” the Profits
Analysts from The NeuroTherapeutics Research Institute (NTRI), who are close to the IMAGINE trial, have made estimates for probable March outcomes…
Best Outcome (20% Likelihood): Phase 2 IMAGINE trial results are a home run, with massive improvements in cognitive scores and physiological data. PBT2 proceeds to Phase 3 trials. The stock’s market valuation hits $2 billion or more.
Intermediate Outcome (60% Likelihood): The trial results show positive imaging and physiological data without a measurable improvement in cognition. PBT2 proceeds to Phase 3 trials. The stock’s market valuation reaches $782 million or slightly higher.
Disaster Outcome (20% Likelihood): The trial results show no measurable change in physiology or neuropsychological testing. Game over. PBT2 becomes worthless.
In other words, according to NTRI’s analysis, there’s an 80% chance that PBT2 will move on to Phase 3 trials – which would significantly boost Prana shares again.
But if that doesn’t convince you, maybe this will…
A Multi-Billion-Dollar Alzheimer’s Opportunity
Healthcare market research group, Decision Resources, projects that global sales for Alzheimer’s drugs will triple to $18.5 billion by 2020.
Much of that gain will come from new Alzheimer’s drug breakthroughs. So any successful new drug coming to market would have immediate and massive adoption. If that’s PBT2, Prana’s sales would catapult from the $4.75 million it notched over the past year into billions of dollars.
As it stands, Merck (MRK), Eli Lilly (LLY) and privately held TauRx also have Alzheimer’s drug candidates. But what makes me so sure that PBT2 will go from “candidate” to “approved drug?”
Well, the FDA has given its guidance on what’s required for a new Alzheimer’s drug to be approved…
It demands a cognitive or functional benefit for a new drug, but also acknowledges that the goal is to develop drugs that stall the development of dementia.
Benchmarks that PBT2 has already hit in previous trials.
As for Prana’s stock, keep in mind that it’s still volatile and will continue its mazy runs higher and lower. If you can tolerate that, consider any weakness as a great buying opportunity before the PBT2 Phase 2 Alzheimer’s trial results are announced next month.
Your eyes in the Pipeline,
Marty Biancuzzo
PBT Price at posting:
86.0¢ Sentiment: Buy Disclosure: Held
(20min delay)