Short Prothena

Prothena Corp. PLC (PRTA) is a $2.4 billion development-stage biotechnology company whose stock has climbed more than 700% since its spin-off from Elan (ELN) in December 2012. We are certain that its lead asset, NEOD001, will fail its ongoing Phase 2b and Phase 3 trials.

NEOD001 is a monoclonal antibody designed to treat amyloid light chain amyloidosis (AL amyloidosis). AL amyloidosis is a condition caused by light chain proteins misfolding, which then leads to the light chains sticking together and forming amyloid structures. These amyloids are then deposited within tissues and organs of the body where they interfere with organ function, and can potentially lead to organ failure/death. NEOD001 is intended to bind to and induce the removal of amyloid deposits.

While this sounds good in theory, all clinical and scientific evidence points to disappointment. In the Phase 1/2 trial, NEOD001 failed to achieve meaningful clinical response, durable response, dose response, control over catastrophic events, or any apparent benefit at all.

The Phase 2b and Phase 3 trials will be no different. The imminent failure of NEOD001 comes as no surprise to amyloidosis researchers; in the words of one amyloid antibody co-inventor, the probability of NEOD001 succeeding in its Phase 3 trial is “almost zero.”  Another co-inventor believes that NEOD001 “is just not going to work.”

Antibodies targeting AL amyloidosis have been around since at least 2000 but have performed poorly in practice. The principal issue is that AL amyloid deposits are far too heterogeneous for a single antibody to work consistently among patients. On top of the heterogeneity, researchers believe that organ-specific occlusion and amyloid proteolyzation could further contribute to the inability of AL amyloid antibodies to bind to their target epitopes and achieve meaningful responses. Radio imaging studies for other AL amyloid antibodies have shown that even in situations where investigators have achieved binding between antibodies and amyloid deposits in patients, there is virtually no effect on amyloid deposits in the heart or kidneys — the key targets in Prothena’s trials. Prothena conspicuously opted against publishing such a radio imaging study for NEOD001.

In its Phase 1/2 trial, Prothena declares any patient who achieves a decline in NT-proBNP of ≥30% from baseline at any single point during its trial to be a responder. But NT-proBNP has been shown to have a week-to-week clinical variance of 35% — so seeing 53% of patients temporarily achieve a ≥30% decline in NT-proBNP at one point over a median of 12+ monthly measurements tells investors nothing. Using best response also masks patients who see their condition worsening because it only reflects the single best change in NT-proBNP. For instance, one patient saw his NT-proBNP levels skyrocket by 300% at which point he quit the trial, and another patient died during the trial. Both patients were recorded as “responders” under Prothena’s hollow best response endpoint — but this will still not translate to statistically significant results in the placebo-controlled Phase 2b and Phase 3 trials because precedent published data shows that a control group can be expected to achieve a comparable NT-proBNP response rate. Prothena’s purported cure is nothing but a deception to prop up its stock.

Prothena’s valuation implies a high probability that NEOD001 will succeed in its Phase 2b and Phase 3 trials. This optimistic outlook is driven by management’s guidance that the drug’s Phase 1/2 results as presented to investors, specifically the cardiac best response rate, are far better than would be expected from a placebo group and proof that NEOD001 works.

We strongly disagree with this assessment. Prothena’s cardiac best response rate is merely a byproduct of well-documented natural variance, and we believe there is no chance of NEOD001 producing statistically significant results in its current Phase 2b and Phase 3 trials.

NEOD001 is the most poorly understood “future blockbuster” drug currently pending pivotal results. Its best response measure merely confirms what is already well-known: there is high variability in month-to-month NT-proBNP measurements among patients. Investors should ask themselves why a company would be so opaque with its clinical results and avoid releasing more detailed data.

Kerrisdale Capital Management and affiliates are short shares of Prothena Corporation Plc (PRTA) and stand to benefit if the price of the stock decreases. Please read full legal disclaimers at