BST Trade Alert: October 17, 2013
October 17, 2013
Recommendation:
Buy Prana Biotechnology (NASDAQ: PRAN) up to $4.40 per share.
About the Company:
Prana is a stock that we’ve traded before with great success. Back in October 2012, we closed out a trade in this exciting biotech for a terrific 55% gain.
Now, we have an opportunity for even better returns.
I’ll explain why in just a moment.
But first a brief introduction is in order.
Prana is an Australian biotech that is developing drugs for the treatment of neurological disorders. It’s primary focus is on Alzheimer’s, Parkinson’s, and Huntington’s diseases.
The company’s leading drug candidate is in mid-stage testing for both Alzheimer’s and Huntington’s. And critical results from both trials are due in early 2014.
Make no mistake, the results from these trials have potential to drive PRAN into the stratosphere.
The company also has two drug candidates in preclinical testing. These drugs are targeting Parkinson’s Disease and brain cancer. As an interesting side note, a good portion of the company’s work on its Parkinson’s drug has been funded by the Michael J Fox Foundation.
Let’s take a closer look at Prana’s leading drug candidate now…
About the Drug:
Before we dig deeper into Prana’s top drug, it’s important for you to understand a few details about how Alzheimer’s Disease (AD) works. Actually, it would be more accurate to say how scientists believe Alzheimer’s works.
No one has figured out yet exactly how AD develops.
For the past 20 years, Alzheimer’s research has been guided by the “amyloid hypothesis”. The theory is AD is caused by plaques (also known as amyloid beta deposits) that build up between nerve cells in the brain.
These plaques are essentially microscopic clumps of protein believed to block cell-to-cell signaling.
As the disease progresses, plaques tend to spread through the cortex in a predictable pattern. The patient begins having problems with learning, memory, thinking, and planning. And the problems get worse as the plaques cover more and more of the brain.
By the time the patient has advanced Alzheimer’s, their brain has shrunk dramatically.
The cortex is seriously damaged due to widespread cell death. And the patient will have lost all ability to communicate, recognize loved ones, and care for themselves.
The good news… Prana’s developing a novel drug that may not only treat AD symptoms, but also cure the disease!
The drug is called PBT2.
It’s designed to correct an imbalance of metals in the aging brain. Scientists believe this imbalance is one of the underlying causes of AD.
PBT2 has been studied extensively in pre-clinical testing as well as phase 1 and phase 2a clinical trials. Here’s a quick recap of what these studies have revealed about PBT2 so far…
Preclinical testing showed PBT2 can rapidly improve cognition in Alzheimer’s mice and prevent the formation of toxic amyloid beta oligomers. In other words, PBT2 helped improve neurotransmission in Alzheimer’s mice.
That’s great for the rodent population, but how does PBT2 work on people?
In 2007, Prana conducted a phase 2a trial of PBT2 in elderly Alzheimer’s patients. The study met the primary endpoints of safety and tolerability along with several secondary endpoints. The key finding was that patients treated with 250 mg of PBT2 showed significantly improved cognitive executive function.
In fact, 81% of these patients showed more improvement in cognitive executive function than the best performing patient on the placebo.
Then in March 2011, Prana published new data which appears to explain how this drug works. The research indicates PBT2 accomplishes two key functions.
First, the drug facilitates the growth of more spines on the branches of neurons in the hippocampus, a memory center of the brain specifically affected by AD. By increasing the number of spines, PBT2 enables many more neurons to interconnect with any particular neuron.
And this helps increase the brain’s capacity to carry out learning and memory functions.
Second, PBT2 neutralizes the toxicity of the Alzheimer’s amyloid beta protein by preventing the formation of toxic oligomers. Specifically, the drug liberates copper and zinc that is trapped within the amyloid deposits. PBT2 then returns these essential metals to neurons, where they’re needed for normal function.
And in March 2013, Prana provided data which shows PBT2 reduced damage to brain cells in mice caused by the accumulation of the tau protein.
This data suggests PBT 2 has the ability to prevent neuronal damage via multiple metal mediated pathways. This is important as several developmental drugs targeting just the amyloid beta protein have failed recently in clinical testing.
With the ability to target both amyloid beta protein and tau protein deposits, PBT2 has a greater chance of being a successful treatment for AD.
Prana’s scientists believe PBT2 may also be a safe and effective treatment for Huntington Disease (HD) as it develops in a similar way to AD.
HD is a brain disorder in which there is progressive neurodegeneration leading to motor, cognitive, and psychiatric symptoms. HD patients ultimately experience problems with speech, discoordination, memory, sequencing, new learning ability, reasoning and problem solving.
Medical evidence shows that the mutant Huntington (Htt) protein aggregates inside the amyloid beta protein outside neurons. And there is further medical evidence that the protein aggregation in both diseases is driven by the interaction with metals.
What’s more, the results of preclinical studies in transgenic mice appear to support Prana’s belief about PBT2’s potential to treat HD.
According to a research paper published in December 2012…
“PBT2 markedly reduced neurodegeneration, significantly increased lifespan and improved motor function and coordination in an aggressive animal model of the disease.”
No question about it, PBT2 has potential to become the first effective treatment for two debilitating neurodegenerative diseases.
So, what happens next?
The next step in PBT2’s development is the release of results from two phase 2 clinical trials.
The IMAGINE trial is a 12-month double-blind placebo controlled phase 2 study involving 42 patients with mild AD. The study is designed to assess the effect of PBT2 on brain beta-amyloid deposits and brain activity. The trial will also seek to evaluate PBT2’s effect on cognition.
The last patient will finish dosing at the end of November. Results are expected in the first quarter of 2014.
The REACH 2HD trial is a six-month double-blind placebo controlled phase 2 trial on 109 early-to-mid stage HD patients. The trial was successfully completed at the end of July 2013, with 95% of participants completing the entire six months of treatment.
Results from this trial are expected in early 2014 as well.
As you can see, Prana has two huge catalysts scheduled for early 2014. If the results from these trials are positive, the stock should rocket higher.
About the Markets for This Drug:
Alzheimer’s Disease
An estimated 5.4 million Americans of all ages have AD right now. This figure includes 5.2 million people aged 65 and over and 200,000 individuals under age 65 who have early-onset AD.
But here’s the really scary statistic…
AD is much more prevalent in older demographic groups. One out of every eight persons aged 65 and over has AD. But of those aged 85 and up, nearly one out of every two has the disease.
In other words, the older you get, the more likely it is you’ll get Alzheimer’s.
With the Baby Boomer generation now past 65, America’s largest demographic group is at an ever increasing risk of developing AD. This means we’re likely to see a surge in the number of AD patients going forward.
In other words, the market for AD treatments is poised for rapid growth.
As I mentioned earlier, there is currently no cure for AD. But the FDA has approved several different drugs for treating various symptoms of AD. In 2010, a whopping $5.4 billion was spent on AD treatments.
However, this figure is expected to soar…
One market researcher, Decision Resources, predicts the AD drug market will nearly triple in value over the next several years. They estimate global sales of AD drugs will hit a mind-boggling $14.3 billion in 2020.
No question about it, PBT2 has blockbuster potential. If the drug is ultimately approved, it could generate billions of dollars in sales every year.
Huntington’s Disease
HD is a rare, genetic disease. Approximately 250,000 Americans have HD right now. And about 200,000 Americans are at-risk of developing the disease.
As with AD, there is no cure for HD. And while the FDA has approved one drug for the treatment of Chorea associated with HD, the disease remains a huge unmet medical need.
HD therapy is currently limited to treating symptoms. And there are no drugs with proven efficacy to slow down disease progression or enhance survival.
Clearly, PBT2 has an opportunity to become the first safe and effective treatment specifically for HD.
And the market for HD drugs is expected to mushroom over the next several years. According to Global Industry Analysts, the global market for HD drugs is projected to exceed $870 million by 2018.
While HD doesn’t offer the blockbuster potential of AD, it still has potential to generate huge sales and profits for tiny Prana.
About the Potential Catalyst:
Results from the two phase 2 trials of PBT2 in AD and HD are expected in early 2014. If the results are positive, PRAN should soar in value.
About the Shares:
As luck would have it, we have an opportunity to snap up shares of PRAN at a nice discount. The stock is off about 38% from its recent high of $6.50 per share set in late August.
The shares have declined as some investors overreacted to mildly disturbing news. In September, the company announced that the results from the REACH 2HD trial would not be provided by the end of this year as originally planned.
Apparently, there was a delay in finalizing the database to achieve “database lock”, which is required before statistical analysis of the data may begin.
We don’t see this delay being a major issue as the results are expected just a short while after the original deadline. What’s more, the trial was conducted and completed according to protocol and will provide the robust data needed for Prana to meet with the FDA in 2014 to prepare for the next PBT2 trial.
As such, we view the drop in share price as a fortuitous buying opportunity.
In just a few months, Prana will be providing the first data showing whether PBT2 is a safe and effective treatment for both Alzheimer’s and Huntington’s diseases. If the data is positive, PRAN is going to soar.
Grab your shares of Prana as soon as possible. It won’t be long before investors pile back into the stock to get positioned ahead of the upcoming trial results.
Key Facts:
| Company: | Prana Biotechnology |
| Ticker: | PRAN |
| Recent Price: | $4.03 |
| Market Cap: | $157 million |
| Avg. Daily Volume: | 758,842 shares |
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Category: BST Trade Alert
