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Biotech Stock Mailbag: Prana Biotech

I have a shorter Biotech Stock Mailbag this week due to a mild but still-annoying flu epidemic that ran through every member of my household. I'll try to answer a few more reader questions in subsequent days on my new Biotech Beat blog.

David T. emails to ask about Australian-based Prana Biotech (PRAN):

Just wondering if you have looked into Prana Biotech? It has an Alzheimer's trial that will be announced in March. There has been a big run up over the last few weeks. Just wondering if you have been following it.

Prana is conducting simultaneous phase II studies of its experimental drug PBT2 in Huntington's disease and Alzheimer's disease. As David said, Prana has guided to announcing results from the Alzheimer's study in March, but the outcome of the Huntington's study should be made public first. The exact guidance from Prana is "early 2014," so let's focus there.

I don't have a high-conviction prediction either way for Prana's Huntington's data except to say it's a tough-to-treat disease and a high-risk study. In my daily encounters with the biotech buyside, I haven't found many professional investors who believe Prana's drug will work. I'd say sentiment generally runs negative. The stock has been relatively under-owned by U.S.-based healthcare funds.

Prana's stock price (the Nasdaq-listed ADR) has been on a roll, which I'd chalk up to the customary run-up into anticipated clinical data. The stock was at $6.27 on Jan. 14 and closed Thursday at $8.85. Prana's market value has essentially doubled since November. Company executives are in the U.S. now on a "non deal road show" hosted by Credit Suisse.

The clinical work in neurodegenerative diseases like Alzheimer's and Huntington's done by Prana centers on the theory that metals like copper and zinc play a role in the formation of protein plaques in the brain. The accumulation of protein plaques gradually destroy brain cells and lead to loss of cognitive function, memory and motor function.

Prana's experimental drug PBT2 is designed to work in two main ways: 1) Bind to copper and zinc to prevent the metals from playing a role in the buildup of these protein plaques; and 2) restore copper and zinc levels in the brain to levels that are normal and beneficial to neuron function.

Huntington's disease (HD) is caused by a mutated gene which results in the production of an abnormal protein in the brain. This abnormal protein kills certain brain cells, leading to gradual loss of cognition and physical function.

Prana believes PBT2 can interfere with the HD mechanism by which the mutated gene causes brain cells to die. The company's phase II study -- dubbed "Reach2HD" -- enrolled 109 patients with early to mid-stage HD. The patients are randomized to one of three 26-week treatment arms: PBT2 100 mg, PBT2 250 mg or a placebo.

The primary endpoint of the HD study is the safety and tolerability of PBT2 compared to placebo. This is not much of a challenge, so don't get excited if you see a headline from Prana that reads, "PBT2 Huntington's study achieves primary endpoint."

The meat of the study data will be evident in the secondary endpoints, which is where Prana is evaluating PBT2's ability to improve motor and cognitive function in HD patients. Pay particularly close attention to PBT2's performance measured by the Unified Huntington Disease Rate Scale (UHDRS) and its components because these are the most decisive measures of cognition and motor function.

Prana is also measuring PBT2's effect on biomarkers and brain imaging. Be wary if the company only declares victory on these measures, or doesn't say anything about motor function and cognitive assessments.

A couple more points to consider about PBT2 and the HD trial:

Prana made the following disclosure about the data analysis procedure for the HD study in its most current 20F filing with the SEC

We completed the study at the end of July 2013 and project reporting out in early 2014, a delay from the fourth quarter reporting of results that was previously anticipated. The decision to delay reporting permits additional time for us to reconcile data inconsistencies between the source data and the database prior to database lock. This 'cleaning' of clinical trial data is a normal and necessary process to ensure database integrity ahead of executing the statistical analysis on the data contained in the locked database. One of the steps to ensure database integrity being undertaken is the re-entry of the original source data from all of the sites into a database and checking the veracity of the data within the database. We believe this is a prudent step as we prepare for an end of Phase II meeting with the FDA during 2014.

"Data inconsistencies" which required "cleaning." OK, good to know.

Lastly, the mice say PBT2 isn't likely to be effective, according to @AF_biotech. Who is @AF_biotech and why should you care about what he thinks about PBT2 and mice? He's an M.D. and a Ph.D in neurophysiology who conducts neuroscience research and teaches at SUNY Stony Brook. I happen to follow him on Twitter, where he's been skeptical about Prana and PBT2.

Now, about those mice. They're actually R6/2 transgenic mice, genetically engineered to develop HD similar to humans. Preclinical studies of Prana's PBT2 in R6/2 mice don't look as robust as similar R6/2 studies of other experimental HD drugs, says @AF_Biotech. This is a concern for Prana because HD drugs that worked well in R6/2 mice have all later failed when tested in humans. Partly on this basis, @AF_Biotech is skeptical about PBT2. [Disclosure: He owns a small amount of puts in Prana.]

Admittedly, this is more of an overview of Prana and a preview of the looming PBT2 HD data. Like I said above, I have no big prediction to make. With as many secondary endpoints as Prana has built into the study, the chances are high that the company will find something positive to say. The key is the clinical meaningfulness of the data, particularly around the all-important motor and cognitive assessments.

I'm sure there will be much more to say about Prana once the HD study results are announced.

>>Read More:

AstraZeneca Drug Shrinks Lung Cancers Typically Hardened by Genetic Mutation

Northwest Bio Exploits Cancer Patient to Promote Stock Ahead of ASCO '14

-- Reported by Adam Feuerstein in Boston.

Follow Adam Feuerstein on Twitter.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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