PRAX - Praxis Precision Medicines: Long List Of Failures And Mixed Data

2023-07-24 19:01:51 ET

Summary

• In the last one year, Praxis stock has been decimated because of many trial failures.
• The company is still planning phase 3 trials of their lead asset.
• They have very little cash.

Sometimes, preclinical stage companies have multibillion dollar valuations. I have talked about a few of these before. Here's another type; a late-stage company with only a $100mn valuation - Praxis Precision Medicine ( PRAX ).

Things weren't so bad at Praxis just a few months ago. It was trading then at a respectable $500mn valuation. But then, in March, it presented poor data, and the stock crashed overnight.

But first, the pipeline:

Praxis develops medicines for CNS diseases. They have a small molecule platform called CEREBRUM, and an antisense oligonucleotide platform called SOLIDUS. Lead candidate Ulixacaltamide (PRAX-944) is a small molecule currently in a registration enabling trial in essential tremor, and in a phase 2 trial in Parkinson's.

Here's the trial pipeline from TickerBay.com:

This tool lets you look up relevant previous trials for any molecule, see their efficacy and safety data, and provides you with a lot of analytic tools. So anyway, we see here that they completed a phase 2 trial in the essential tumor, and are currently running one more phase 2 trial, this one being registration-enabling, for the same indication. Among other differences, there's a difference in dosing.

So I quickly looked up the data from the TickerBay tool:

This is a 24-patient PK/PD, safety and early efficacy signal trial. Using the Natural Language Processing function of the same tool, I looked up the data as well:

This is from May last year and is perhaps the only good news about data the company has produced in a while. A month before, in April 2022, an IND from the company's ASO program, for epilepsy drug candidate PRAX-222, was put on clinical hold. PRAX-222 has a similar mechanism to Sage Therapeutics' ( SAGE ) zuranolone, which are both extrasynaptic GABAA receptor preferring positive allosteric modulators. Praxis once appeared to challenge zuranolone, but not any longer. While zuranolone has its ups and downs and an uncertain market future, it has a PDUFA in August, and a good chance of approval.

Coming back to Praxis, in June 2022, the company announced that a phase 2/3 study of "PRAX-114 for monotherapy treatment of major depressive disorder ((MDD)) did not achieve statistical significance on the primary endpoint of change from baseline in the 17-item Hamilton Depression Rating Scale (HAM-D17) total score at Day 15, or on any secondary endpoints." This was their lead program at that time, and this trial failure was a major blow that decimated the stock. The company resorted to a reduction in workforce and cut down on some of its R&D expenses.

Then in March this year, the stock crashed 44% overnight after the company announced data from the phase 2b study of lead candidate PRAX-944, whose positive phase 2a data I presented earlier. This study produced mixed results, the company claiming that while the 132-patient trial did not meet the primary endpoint of change in the modified Activities of Daily Living (mADL1) score after 56 days from the baseline. With a statistical significance (p=0.126), it did show benefit compared to placebo. Note the data from the ADL endpoint in phase 2a:

[Till day 42,]... patients treated with PRAX-944 demonstrated a mean improvement from baseline of 42% in the Modified Activities of Daily Living (ADL') score. Following randomization, the difference between patients who remained on treatment through Day 56 and those randomized to placebo was clinically and statistically significant.

That last sentence is confusing. The phase 2a was an open-label study, and it appears that the same patients were randomized later, but if that was in the phase 2b, there's the lack of stat sig we just discussed. However, certain secondary endpoints, including the TETRAS-ADL subscale (p=0.026), saw stat sig.

While the company released positive safety data from an epilepsy candidate in phase 1, PRAX-628, the stock has continued crashing. In May, the company published highlights from its end-of-phase-2 meeting with the FDA, which was more or less positive given the trial situation. The highlights included "arrangements to test a single dose of 60 mg across two Phase 3 trials: A 12-week, parallel design study and a 12-week randomized withdrawal study." While there was a small bump in the stock price that day, the general slump of the stock from last year's prices has not been stemmed.

Financials

PRAX has a market cap of $128mn and a cash balance of $86mn as of March. In June, the company made an effort to raise $59mn from the market. Last year, it laid off a number of its people to preserve cash. Current R&D expenses are $25.5 million for the three months ended March 31, 2023, while G&A expenses are $13.3 million. This is quite high for a company in a situation such as Praxis is right now. At this rate, the company has no more than a 2-quarter runway. Last year, their R&D expenses were much higher, at above $50mn, but that has gone down after the restructuring. However, that is still not enough.

Among the few rare pieces of good news was a late-2022 deal for collaboration between Belgian giant UCB and Praxis for another epilepsy molecule called PRAX-020, targeting KCNT1-related epilepsies, which currently have no approved treatments. UCB paid an upfront fee and may pay up to $100mn in milestone payments to PRAX.

Risks

I never recommend investing in such low market cap, low-priced nanocaps because they are inherently risky. Apart from such general risks, PRAX has very little cash, and its planned phase 3 trials for the lead asset are based on phase 2b trials whose data is, at best, mixed. As such, PRAX is in a very risky position right now.

Bottom Line

There's nothing to see here. I began with a discussion of multibillion dollar preclinical companies, and while those often seem unjustified, these ones with late-stage trials, but low valuations usually have too much baggage, like we have seen here. I will firmly stay on the sidelines.

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