BMY - Prothena: Dunn Appointment And Bristol Opt-In Boost Validation

2023-07-27 07:23:03 ET

Summary

• Prothena, a late-stage biotech firm, has appointed former FDA official Dr. Billy Dunn to its board and is developing therapies for neurodegenerative and rare peripheral amyloid diseases with strategic partners.
• The company's key candidate, Birtamimab, shows potential survival benefits for advanced-stage AL amyloidosis patients, representing a significant market opportunity.
• Despite recent financial losses, Prothena's strong cash position, promising pipeline, and external validation position it as a potential 'Buy' investment.

Introduction

Prothena (PRTA) is a prominent biotechnology firm at the late clinical stage, specializing in protein dysregulation. The company is developing a pipeline of therapies aimed at altering the progression of severe neurodegenerative and rare peripheral amyloid diseases, including AL amyloidosis and Alzheimer's disease. With partnerships with Roche (RHHBY) and Bristol Myers Squibb (BMY), Prothena is also exploring potential treatments for Parkinson's disease, synucleinopathies, and ALS. In addition, a share purchase agreement with Novo Nordisk may lead to milestone payments related to their ATTR amyloidosis business. The company's diverse portfolio, encompassing antibody, small molecule, and vaccine approaches, exemplifies their commitment to combating a broad spectrum of diseases.

Recent developments: Prothena appointed Dr. Billy Dunn, former Director of the Office of Neuroscience at the FDA, to its Board. Bristol Myers Squibb acquired global rights to Prothena's anti-tau antibody, PRX005, for Alzheimer's treatment, committing $55 million.

The following article discusses Prothena's financial performance, pipeline of potential treatments for neurodegenerative diseases, and investment prospects.

Financial Performance

In Q1 2023, Prothena experienced a net loss of $46.9 million and a per-share loss of $0.89, compared to a net loss of $36.3 million and per-share loss of $0.78 in Q1 2022. Total revenue reached $2.2 million, primarily from their collaboration with BMS. R&D and G&A expenses increased due to higher clinical trial costs, personnel expenses, and legal costs. Prothena's cash stood at $688.4 million, with no debt. By end of 2023, cash is expected to be around $512 million. The company's market cap is $3.43 billion, with their stock outperforming the S&P 500.

Birtamimab: Development & Potential for AL Amyloidosis

Prothena's candidate, birtamimab , addresses AL amyloidosis, a fatal disease affecting "200,000 to 400,000" individuals globally. The disease, triggered by clonal plasma cells producing misfolded light chain proteins, leads to organ dysfunction and eventual failure. Birtamimab targets these misfolded proteins, promoting their clearance and potentially mitigating organ damage. Current therapies aim at reducing new protein production but don't target the toxic amyloid deposits directly.

In the early stages of development, birtamimab showcased two critical mechanisms: neutralizing toxic light chain aggregates and clearing amyloid deposits through phagocytosis. Clinical studies have proven the drug to be generally safe, having been tested in 302 patients over an average period of 15 months.

In 2022, a post hoc analysis of Mayo Stage IV AL amyloidosis patients treated with birtamimab revealed a significant survival benefit, confirming its potential. Prothena has advanced birtamimab into Phase 3 AFFIRM-AL study based on the promising results of the VITAL study. This Phase 3 trial will continue until 2024 and will determine the potential of birtamimab as a life-saving treatment for AL amyloidosis patients, representing a significant market opportunity.

PRX005: Promising Early-Stage Data Peaks Bristol's Interest

PRX005 is a promising anti-tau antibody designed by Prothena to tackle Alzheimer's disease. It specifically binds to parts of the tau protein involved in the disease's pathological progression. Tau proteins and their spread in the brain have been linked to the progression and clinical decline of Alzheimer's patients. PRX005 aims to block this transmission, as suggested by preclinical research, which has shown it to effectively reduce tau pathology and prevent behavioral deficits in tau transgenic mouse models.

A unique feature of PRX005 is its potential for broad application. It is part of a global neuroscience collaboration with BMS, targeting three proteins implicated in several neurodegenerative diseases. This has attracted the attention of BMS, who has chosen to exercise its option to license PRX005, paying Prothena $80 million. The partnership has the potential for substantial financial return for Prothena, with up to $2.2 billion in regulatory and commercial milestone payments and royalties.

In the Phase 1 study, PRX005 demonstrated safety and positive pharmacokinetic and immunogenicity secondary endpoints. The drug exhibited robust exposure in the cerebrospinal fluid, suggesting significant target engagement in the central nervous system.

BMS's interest in PRX005 likely stems from the significant unmet medical need in the Alzheimer's space, the novelty of the therapeutic approach of PRX005, and the robustness of the preclinical and early clinical data. Given the global prevalence of Alzheimer's and the lack of effective treatments, a successful drug could have significant market potential. The collaboration is also aligned with BMS's strategic focus on neuroscience and its commitment to finding solutions for hard-to-treat neurological disorders.

My Analysis & Recommendation

In conclusion, Prothena stands out as a potential strong investment due to its robust portfolio targeting a range of severe neurodegenerative and rare peripheral amyloid diseases. Its late-stage clinical development, scientific expertise, and strategic partnerships position it for success in a market with significant unmet medical needs. Notably, recent developments such as the appointment of Dr. Billy Dunn, a former FDA official, and the BMS opt-in for PRX005, signal external validation of the company's scientific approach and potential.

Particularly, birtamimab and PRX005 represent promising prospects. Birtamimab, a potential treatment for AL amyloidosis, is the only candidate demonstrating a survival advantage in patients with advanced disease stages, representing a significant market opportunity. PRX005, targeting Alzheimer's disease, is part of a collaboration with BMS, a partnership that could provide up to $2.2 billion in regulatory and commercial milestone payments and royalties.

However, investing in biotech always carries inherent risks, mainly associated with clinical trial outcomes and regulatory approval. For instance, both birtamimab and PRX005 are still in trial phases, and their success isn't guaranteed. Similarly, the company's recent financial performance with increased net losses might also raise concerns. Despite these risks, the company's strong cash position, its performance against the S&P 500, and absence of debt, further strengthen its financial position.

In light of these considerations, I believe Prothena represents a 'Buy' opportunity at the current price. The combination of its pipeline's potential, external validation, strategic partnerships, and financial strength, alongside the vast unmet medical needs in the neurodegenerative disease space, contribute to my positive investment outlook.

Risks to Thesis

When the facts change, I change my mind.

As with any investment recommendation, there are several risks to consider before moving forward with Prothena. Firstly, the biotech industry is inherently high-risk due to the uncertainty and volatility tied to drug development. Prothena's drugs, including birtamimab and PRX005, are still in clinical trial stages, and there's no guarantee they will receive regulatory approval or prove commercially successful.

Moreover, even though Prothena has strong collaborations and partnerships, any changes or disruptions in these relationships could negatively affect the company's progress. Their financial performance also presents some concern. The company has reported increased net losses, and while they have a solid cash position now, future financial stability largely depends on successful drug development, partnership income, and the potential for additional financing.

Finally, the overall market conditions and broader economic factors can also influence the company's performance and stock value.

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