With Prothena up over 500% this year, is it too late to enter?

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When a biotech company develops a drug candidate that can help millions of people fight a monstrous disease like Alzheimer’s disease, it is sure to attract the attention of scientists, the media, and the United States Food and Drug Administration. .

For Prothena (NASDAQ: PRTA), a huge wave of attention has also come from investors since the start of the year. But has its share price gone too high too quickly? Or is this just a sign of further gains to come as it develops a potentially best-in-class Alzheimer’s disease portfolio to enter a market that is expected to grow 5.4% per year to the next level. ‘in 2026, to reach $ 9 billion?

Image source: Getty Images.

Promising evidence gives new hope

On July 26, Prothena presented new data at the Alzheimer’s Association International Conference, providing evidence to support the further development of its drug candidates to treat and prevent Alzheimer’s disease.

The first of the candidates, PRX012, is a very potent antibody treatment that can remove modified and unmodified plaque in brain tissue on a convenient schedule, and be administered as an injection.

There are several reasons to be excited about the potential of this next-generation antibody, including its many advantages over Biogen‘s Aduhelm, which was approved by the FDA in June amid controversy (more on that later). For example, PRX012 may “offer greater accessibility and compliance” than Aduhelm, according to Prothena Chief Medical Officer Hideki Garren. The treatment can be administered at a lower dose and its method of administration is injection; this is often preferable to intravenous treatments, which can be longer, anxiety-inducing in some patients, and often require hospital or clinic visits. Additionally, Prothena claims PRX012 is 11 times more potent than Aduhelm.

That said, Garren attributes some of the treatment’s success to that of its competitor, noting that the FDA approval of Aduhelm “has really opened up potential accelerated pathways for other anti-amyloid beta antibody candidates” (“accelerated “being the key word). Aduhelm did not show efficacy in phase 3 trials until it was used at a higher dose, meaning it showed minimal efficacy based on the review guidelines . But the FDA has cleared fast-track approval based on the drug meeting its interim endpoint.

For this reason, Prothena’s PRX012 now has the potential to benefit from similar accelerated approval. As the company continues its efforts to show new evidence that PRX012 successfully reduces plaque buildup in the treatment of Alzheimer’s disease, it plans to submit a new drug application in the first quarter of 2022.

But the company does not base everything on a single candidate. He is also working on a vaccine candidate (PRX005) that helps reduce plaque in the brain while treating abnormal tau bindings and tangles that interfere with neurons, slowing the communication of information. PRX005 is an antibody developed in partnership with Bristol Myers Squibb for use in a vaccination program for the prevention and treatment of Alzheimer’s disease. Described by Prothena as the best experimental antibody in its class, it is currently undergoing phase 1 trials.

Big pharma brings in a lot of money

Having Bristol Myers Squibb on board brings an influx of income for Prothena. In June, it was announced that the former company had agreed to pay $ 80 million upfront for an exclusive U.S. license for PRX005. Through this collaboration, Prothena could potentially end up with a total of $ 2.2 billion, including all funds put forward by Bristol Myers Squibb for US and global rights and regulatory and commercial payments. In addition to this, the company has the potential to collect royalties on commercial sales in its other programs.

The second quarter of 2021 was a turning point – 99% of revenue and revenue for the first six months of this year was made in the second quarter. The company went from a net loss of $ 26 million in the second quarter of 2020 to a net profit of $ 27.6 million in the same period of 2021. That was without cashing a check from Bristol Myers Squibb.

The revenue injection is the result of collaborative milestone payments from rock for Parkinson’s disease treatment, as well as $ 100 million in upfront and short-term milestone payments from Norvo Nordisk for the treatment of cardiomyopathy. In addition, the company sold its ATTR amyloidosis business to Norvo Nordisk in July.

Amyloidosis is a disease that affects approximately 50,000 people worldwide with an abnormal buildup of proteins in tissues and organs that can lead to organ failure. The sale of this business could generate total revenue of $ 1.2 billion if development and sales milestones are met.

Prothena expects $ 80 million milestone payments from Bristol Myers Squibb in the third quarter as part of its PRX005 collaboration, with a potential option of $ 55 million for global rights upon completion of phase 1 trials.

With no revenue-generating products in the market, management will continue to rely on expense control and meeting milestones to generate additional net income. So far, spending is increasing a bit, but at a manageable rate of 18% for the first six months of the year on an annual basis, for a total of $ 22 million. On a sequential quarterly basis, spending remained stable at around $ 11 million. Much of this is expected to be offset by milestone payments planned for the remainder of the year and through the first quarter of 2022, when the company plans to submit its investigational new drug application for PRX012.

Lots of money brings a launching pad for the stock

Looking at last year’s price chart for Prothena, you might think it looks like a freshman drawing for the trajectory of a space flight: straight up with a little nervousness. The share price rose from $ 12 at the start of the year to $ 75, an astronomical gain of over 520% ​​in just nine months.

PRTA Total Return Level Graph

Total performance level PRTA given by YCharts

This type of spike, supported by the exciting details of a promising pipeline, can cause investors to fear missing out. Some might be wary of the wind to get on board.

But a more thoughtful consideration reveals that the preparation may be over for now. Analysts have a 12-month average price target of $ 70 on the stock, slightly below its current level. Even with an experimental NDA for Alzheimer’s disease treatments slated for the first quarter of 2022, fast-track approval could take up to eight months (and regular approval even longer). For reference, after Aduhelm’s fast-track approval, Biogen’s stock went from $ 269 to $ 406 in one week. It has since dropped back to $ 300.

Personally, I will need a little more conviction as the Prothena pipeline expands into additional clinical trial phases. The company has said it will provide additional study results at unspecified medical conferences in 2021. For now, I’ll keep it on my radar.

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Jeff Petit has no position in any of the stocks mentioned. The Motley Fool owns stock and recommends Bristol Myers Squibb. The Motley Fool recommends Biogen and Novo Nordisk. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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