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Prothena's Q2-2017 Results & UnMuddy Waters Part II

19:22 EDT 11 Aug 2017 | Biotech Watcher

On August 8, 2017, Prothena (PRTA) announcedQ2-2017 results and updated guidance. It has been a volatile ride but the valuations ends near where it began a year ago. It closed at $40.58 on November 3, 2016 and reached a 52-week high of $69.52 on July 21, 2017.

Strong Opinions

When we last wrote about Prothenaon July 7, 2017, short sellers “issued” a report that critiqued Prothena’s valuation. PRTA had closed at $55.51 on July 6 (and was near $54.45 when the report was published). As Bloomberg described this group of short sellers:

Short sellers like Muddy Waters seek to profit by betting a stock will decline, and sometimes publish research to take their case to the public.

We countered that PRTA was a difficult stock to short or pump, especially in any short-time period.

In the absence of news, this makes it difficult to predict PRTA’s price direction. These groups won’t behave like the typical investment funds. These are indeed muddy waters.

Ironically, Muddy Waters helped PRTA reach its high. PRTA may also drop like a rock without apparent rationale. If you’re a “long believer” in PRTA, you take into stride the price volatility between major milestones. In the long run, there will be days in which the Muddy Waters claims will seem true…and they will take credit.

 “There are no companies on which we have written where we have made mistakes.” 
                                                                                            - Muddy Waters Founder

Who can argue with perfection? J

Less than Perfect

Many avowed short sellers and pumpers express a kernel of truth and then slickly stylize their reports. Keep reading and then make up your own mind. Sometimes you’ll be right, and sometimes you’ll be wrong. Here’s a short list of where we disagreed with others.

Corcept’s drug will likely be approved for Cushing’s syndrome (The internet herd was strongly asserting the opposite)

It’s Spring again and once again acquisition fever hits BMRN. Read my keyboard, it won’t be acquired. (One of the few things in which we took a strong, polarized position)

We displayed more confidence in Capricor’s HOPE trial, but eventually came to cautious optimism over ALLSTAR (We gave ourselves half a noogie)

We’ll be wrong and right, and so will you. Biotech investing is a strange beast. The clear majority of your picks can be wrong and your biotech portfolio can still be solidly profitable.

Financial Summary

Basic Facts for Quarter Ending June 30, 2017
(in Thousands)

Q2-2017
Q1-2017
Q2-2016
Total Revenue
$       26,812
$         259
$         333
  R&D Expense
34,032
25,698
32,359
  G&A Expenses
10,912
10,832
8,134
Total Operating Expenses
44,944
36,530
40,493
Income (Loss) from Operations
(18,132)
(36,271)
(40,160)
Net Income (Loss)
(17,701)
(35,384)
(40,455)
Basic & Diluted (loss) per share
(0.46)
(0.99)
(1.18)
Avg Shares – Basic & Diluted
38,073
35,758
34,358
Recent Price (per share)
       57.16
(8/11/17)
       50.99
(6/6/17)
       58.27
(8/3/16)
Market Capitalization
2.2B
1.9B
2.00B
Cash & Equivalents
471,729
506,550
442,948

Financial Guidance

Management confirmed its financial guidance for 2017:
Net Cash Burn           = $160M to $170M
Net Loss                     = $177M to $191M
Year-end Cash            = $375M

These figures include the $30M milestone payment from Roche for the initiation of the Phase II, PASADENA trial of PRO002 to treat Parkinson’s disease. The company has enough cash to reach early 2019. This will fund the NEOD001 program (to treat AL amyloidosis) to regulatory submission as well as obtain key clinical results from three other programs.

Milestones

Prothena Clinical Milestones
NEOD001 – AL Amyloidosis – Orphan Indication in USA & EU
Prothena intends to fly solo to commercialize NEOD001. It’s the only treatment that seeks to halt and remove amyloid deposits.
Phase II Open-Label Extension – 24 mg/kg every 28 days
Longer-term follow-up of patients currently enrolled in the Phase I/II Proof of Concept.
Ongoing Extension Results
TBA
Phase II/III “PRONTO” Trial – 129 Patients – 24 mg/kg every 28 days
Enrolling previously treated AL amyloidosis patients with cardiac dysfunction. The company will be over-enrolling the trial with patents currently in the screening process. A surrogate primary endpoint (“NT-proBNP best response”) will used to (potentially) enable conditional approval in Europe. The EMA will examine the data “in totality” including secondary endpoints and more. 

NT-proBNP is a cardiac biomarker that predicts survival in patients. Patients enrolled 1:1 into receiving 12 months of NEOD001 versus placebo. All patients were previously treated with at least one (unapproved) therapy and had at least a partial hematological response. Patients have 650 ≤ NT-proBNP levels < 5,000.

The secondary endpoints include: 6-minute walk test, proteinuria, patient-reported survey of health, and the NIS-LL.
Top-Line Results
Q2-2018
Scientific Presentation – Full Results
(Expect ASCO 2018 – June 1 to June 5 in Chicago, IL and then again at ASH 2018 – December)
TBA
Phase IIb Extension Trial100+ Patients - 24 mg/kg every 28 days
Open-label extension for the PRONTO trial. We expect ongoing results to be reported at periodic intervals (e.g. yearly).
Final Results
Q4-2020
Phase II/III “VITAL” Pivotal Trial – 260 Patients – 24 mg/kg every 28 days
Enrolling treatment naïve patients with AL amyloidosis and cardiac dysfunction. The primary endpoint is a composite of all-cause mortality or cardiac hospitalization as events. While reaching the primary endpoint is crucial, the FDA has yet to clarify its position regarding approval criteria. This could imply that all the endpoint data is important for a successful regulatory submission, VITAL and PRONTO studies.
Top-Line Results
YE-2018
PRX002– Parkinson’s Disease – Roche Leads Development
These early trials focus on indications of α-SN reduction. Upon satisfaction of milestones, Prothena may receive up to $600M, of which PRTA already received $45M. In the USA, all development & commercialization costs, as well as profits, are shared on a 70/30 basis (70% Roche / 30% PRTA) for the Parkinson’s indication plus any other indication in which Prothena opts to co-develop. Outside the USA, Roche bears sole responsibility and PRTA receives up to double-digit royalties on net sales.
Phase II PASADENA Study – 300 Parkinson’s Patients – High Dose and Low Dose
Patients will be over 40 years old and have early-stage Parkinson’s disease. It is a Randomized, Double-Blind, Placebo-Controlled, 52-Week Study followed with a 52-Week Blinded Extension.

During the first 52 weeks, patients are randomly assigned to treatment groups: 1) Placebo; 2) Low-Dose; or 3) High-dose.
During the second 52 weeks, all patients on treatment (blinded extension) with placebo patients randomized into low-dose and high-dose groups. 

The low-dose group receives 1500 mg infusion every 4 weeks.
The high-dose groups receive (every 4 weeks) 4500 milligrams (mg) for participants with body-weight greater than or equal to (>/=) 65 kilograms (kg) or 3500 mg for participants with body-weight less than (<) 65 kg.

The primary endpoint is the change From Baseline in Movement Disorder Society-Unified Parkinson's Disease Rating Scale (MDS-UPDRS)
Top-line Results
Q3-2019*
CAPTURE PD Study – 104 early-stage Parkinson’s patients undergo periodic cutaneous autonomic pilomotor testing. In Parkinson's disease (PD), early diagnosis may enable timely symptomatic treatment and improvement of quality of life but few techniques are available to assess early symptoms. Autonomic nervous system problems, like sweating and cardio symptoms are frequent in PD patients. Furthermore, these autonomic problems usually precede the decline in motor skills and quality of life. 
Top-line Results
YE-2019*
PRX003 – Psoriatic Arthritis and Related Indications
PRX003 potentially treat many large indications and currently remains unpartnered. PRX003 targets the MCAM (melanoma cell adhesion molecule) for treating psoriasis, psoriatic arthritis, and other inflammatory diseases. If good results arrive from a Phase II trial for psoriatic arthritis, we expect Prothena to add indications for development.  
Phase II Program
Launch Phase II – Psoriatic Arthritis
1H-2018*
Phase 1b  Multiple Ascending Dose – 32 Psoriasis Patients
Top-line Results
Oct. 2017
PRX004 – TTR Amyloidosis
This mAb will target the amyloid transthyretin protein. In animal models, these mAb candidates enhance the clearance of TTR-related amyloids and suppress toxic fibril formation but does not hurt the functioning of native, non-pathological proteins. It is possible that clearance of unhealthy transthyretin amyloids will also treat other diseases.

TTR Amyloidosis is much more common in West Africa and Northern Portugal (1/35 to 1/540). Among certain Portuguese families, the incidence may run as high as 70%.  In the United States, it only affects 1/100,000 people. There are about 200,000 patients worldwide.  Tafamidisis approved in Europe but was rejected by the FDA. Ionis Pharmaceuticals is partnered with GSK over an antisense drug (inotersen) and reported positive Phase III results for familial amyloid polyneuropathy (FAP). Inotersen is intended for all forms of TTR amyloidosis. Despite the positive efficacy, the Phase III data also contained safety issues  Alnylam Pharma is working with Genzyme with anRNAi drug (patisiran) that is also in Phase III trial to treat FAP. Patisiran requires patients to have extensive pre-treatment with high-dose steroids.Phase III results should arrive in Q3-2017 
File IND
1H-2018*
Launch Phase 1a – Healthy Volunteers
Mid-2018
*Guesstimate

Our Thoughts

Prothena has some industry leading science and some really bright scientists. Up to now, the early clinical data has looked good especially for the Parkinson’s and Psoriatic Arthritis program. Wall Street has rewarded Prothena with a robust valuation.

We also repeat our usual caution.

The odds are strong that there will be a trial failure in its current pipeline. While we like each program, the overall probability for at least a single failure is high. Prothena is deploying biologics into difficult diseases. It’s simply the nature of the biotech beast.

Upcoming Milestones

Top-line results from the Phase 1b trial of PRX003 in psoriasis patients is scheduled for October 2017. We “guesstimate” that the results will not surprise, but the meat will be with the nuanced validation of 003’s elegant mechanism of action. If the higher-dose patient cohorts respond well, then we’ll be mildly surprised. These better than expected results should then impact PRTA’s valuation.

Investors are strongly focused on the upcoming PRONTO results that arrive in Q2-2018. While investors expect the primary endpoint to be satisfied, smarter eyes will examine the clinical utility exerted by NEOD001.  

NEOD001 is also in an ongoing Phase 2, open-label extension trial of patients from the first clinical trial. While no announcement have been made, the release of ongoing results should meaningfully inform the PRTA investors.

(At the time this was written, one or more BioWatch staff own a long position in PRTA)
This blog post is from The Biotech Watcher
And about us, see http://alanhobbes.blogspot.com/2014/12/welcome-to-my-personal-thoughts-about.html

Original Article: Prothena's Q2-2017 Results & UnMuddy Waters Part II

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