Recently, Prothena Corporation (PRTA) announced that it will slash its workforce. This comes about a month after it had reported that it was forced to cut its NEOD001 clinical candidate due to failing two studies for AL amyloydosis. The slashing of its workforce, and prior trial failures does not bode well for the future of this biotech. The cuts were done to refocus the organization towards its neuroscience pipeline. However, there are several problems there as well. That’s why I believe that Prothena remains a short.
Workforce Reduction
Prothena is expected to cut up to 57% of its workforce so that it can focus on its neuroscience pipeline. The reason for this move was that last month the NEOD001 program was cut, because of two studies failing. This was the phase 2b study and the phase 3 study. This clinical candidate was testing to see if it could improve prognosis in patients with AL amyloidosis and cardiac dysfunction. The estimated net loss for 2018 includes between $80 to $85 million of operating expenses associated with NEOD001 and the company’s organization strategy. In addition, this includes other corporate activities such as research, development, manufacturing, and other activities particular to the company.
Pipeline Full Of Potential Risks
The biggest issue I have with Prothena is the remaining pipeline. For starters, it is in development of a monoclonal antibody treatment known as PRX002 to treat patients with Parkinson’s disease. This study may or may not work out but it’s too early to tell. However, according to the clinical trials site, results from this study are not expected until 2020/2021. That is a long period of time with no clinical results, and it is the only study in phase 2. The second issue with the pipeline involves the phase 1 study using PRX004 treating patients with ATTR Amyloidosis. There is nothing wrong with the program itself, but the problem is that the ATTR amyloidosis market is getting too crowded. In order for PRX004 to be successful it will have to end up being superior to patisiran from Alnylam (ALNY) and inotersen from Ionis Pharmaceuticals (IONS) and Akcea Therapeutics (AKCA). Alnylam is gearing up to receive potential FDA approval for patisiran by mid-2018 (any day now), and it will be the first to market. With PRX004 in the early stage of testing, it is too soon to tell if this candidate will have superior efficacy or not compared to its current competitors. A big pharmaceutical company who is also throwing its boxing gloves into the ring in this space is Pfizer (PFE). Pfizer is using its drug tafamidis to treat ATTR amyloidosis as well, and it has already reported positive phase 3 results for its candidate in this patient population. As you can see, even if Prothena manages to gain FDA approval for PRX004 it will not have an easy time. The only way it can directly compete with these other pharmaceutical companies is if its drug is superior in terms of efficacy, or a lot safer. The point being is that it’s a huge “if” in this scenario. The last risk in the pipeline involves Prothena’s partnership with Celgene (CELG). This program may end up working out in other neurology targets. The problem is that this program is highly focused for Alzheimer’s disease. As I have stated in the past the success rate for the development of a treatment for Alzheimer’s is not good. A clinical research article describes the failure of Alzheimer’s drug development. Between 2002 and 2012. It states that the inability rate for drug development in Alzheimer’s between those dates was 99%. In other words, during that decade no drug was able to achieve a successful outcome for treating this patient population. It is still the same today because no pharmaceutical company to-date has been able to claim a successful Alzheimer’s study. That means I don’t have high hopes that the Alzheimer’s candidates will work out anyways. All these pipeline risks certainly don’t help out the case that this biotech will end up being successful.
Conclusion
The problem with Prothena is that its pipeline has gotten smaller after the removal of its NED001 program. It has some other candidates I listed above in its pipeline, but they carry big risks. The PRX004 program will be challenged by Ionis/Akcea, Pfizer, and Alnylam with their own ATTR amyloidosis drugs. The neurological pipeline for Alzheimer’s remains very risky because of the big failure rate for pharmaceutical companies developing drugs in this space. Finally, PRX002 is not expected to read out results until 2020/201, which means it could be many years before the results from that study are known. In addition, there is no guarantee that those results will be positive. That’s why I feel as of right now, Prothena remains a good short opportunity. The risk with shorting here is if the biotech announces a positive update with its partner Celgene on one of its partnered programs. Until such time though, I believe that the stock remains in a bearish pattern. The cash position remains strong, which is a positive, because the company has about $433.1 million of cash as of March 31, 2018. Therefore, there is no risk of near-term dilution. Still, I don’t see anything in the pipeline that would lean someone to be bullish.
This article is published by Terry Chrisomalis, who runs the Biotech Analysis Central pharmaceutical investment research service on Seeking Alpha Marketplace. If you like what you read here and would like to subscribe to my Service, I’m currently offering a two-week free trial period for subscribers to take advantage of. My service offers deep dive analysis of many pharmaceutical companies throughout the biotech sector. Come see for yourself if my service is right for you.
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