Shares of Prana collapse after long-shot Alzheimer's study flops

Small-cap Australian biotech Prana Biotechnology was tilting at windmills when it set out to vanquish a biomarker for Alzheimer's disease in a Phase II study of a lead drug pursuing an odd avenue in fighting the disease. And this morning, when it acknowledged that the study was a bust, the rout of investors popped its stock price ($PRAN), pumped up in a speculative bubble in the lead-up to the results.

Prana's drug--PBT2, which promised to address the disease by triggering a chemical balancing act in the brains of Alzheimer's victims at a prodromal or early stage of development--failed the primary endpoint of reducing signs of a toxic protein known as amyloid beta and it failed the secondary endpoints of brain activity, cognition and function compared to a placebo.

Prana's executives tried to prevent a rout by pointing to what they claimed were positive signs of future success, but the stock was eviscerated on the news, dropping 62%.

It's important to note that other experimental drugs have reduced levels of amyloid beta in the brains of patients, without significantly altering the course of the disease. While the toxic clusters are considered a culprit in the development of the disease, that's yet to be verified, as it is possible to see heavy brain deposits among people who don't develop the memory-wasting ailment. And there have been scores of trial failures when it comes to Alzheimer's, led by Phase III debacles for solanezumab and bapineuzumab.

Prana, though, insists that it still has a perfectly valid approach to treating Alzheimer's, sticking to its position that the biotech holds a golden lottery ticket that could pay investors a fortune. And it came up with a list of reasons to remain a believer. There was, for example, a high and unexpected placebo effect that scuttled a portion of the trial, the company claimed. Investigators had set a high bar by checking the drug's effect on insoluble plaques as well as soluble peptides, tracking the impact in spinal fluid. And there was less atrophy in the brains of patients in the drug arm--2.6% compared to 4% for the placebo arm.

PBT2 promised to address the disease by rebalancing brain metals that spur toxic tangles, heralding the work of cofounder Rudy Tanzi, a neuroscience investigator at Harvard Medical School.

Prana CEO Geoffrey Kemple

Like many others in the field, Prana says it is undeterred by failure.

"Whilst not meeting all of our hopes, this result does not deter us from the future development of PBT2, a safe and well tolerated drug candidate for Alzheimer's disease," says CEO Geoffrey Kemple in a statement. "Our scientists and those from other institutes have developed a strong body of evidence for the efficacy of PBT2 in Alzheimer's disease. The suggestion of beneficial effect of PBT2 on brain volumes first seen in the Reach2HD Huntington disease trial and now in this Alzheimer's disease IMAGINE trial is intriguing. We are consulting with experts in the field to further assess these results and to consider how best to progress PBT2 in Alzheimer's disease. Indeed, the IMAGINE Extension trial is continuing, and data from this trial is likely to inform the next steps for an AD program."

Prana may well find it impossible to maintain credibility for this long-shot approach. But Alzheimer's R&D is one of those fields that always seems to be able to maintain the faith of a credulous group of investors, no matter what the data say.

- here's the release

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