Investors who managed to load up on Prana Biotechnology Ltd. (NASDAQ: PRAN) last week while shares were trading between the 1.43 and 1.55 range couldn’t be happier with the biotechnology company as the price has soared to a high of 4.50 on Tuesday, one day after they announced that new data was being published which supported their drug candidate PBT2’s ability “to repair the damage in an Alzheimer’s affected brain thereby facilitating the restoration of cognition in Alzheimer’s Disease (AD).”
As is often the case with biotechnology companies the reporting of positive news concerning drug development, regardless of what stage those drug trials may be in, generally result in a significant spike in share price. Unfortunately for many of those shareholders who believe that the prices will only climb higher they get caught when the excitement wanes and the share price slips back down to its previous level.
While there is nothing to indicate that Prana Biotechnology is certain to fall at any moment it is important to remember that the company does have a history of spikes and dips.
On April 7, 2004 in opened at 4.88, sank to 4.68, climbed to 9.00, and then closed at 7.30; six trading days later it was above 10.00 but by the end of the month it was sitting at 6.25 and by the end of the year it was at 4.10.
April 2005 was far from a good month for PRAN as well as they announced they were cancelling plans for a clinical study involving their PBT1, an announcement that sent shares from 3.40 the Friday before the news down to 1.26 on the day of the news.
On July 24, 2006 shares soared from a Friday close of 1.66 to 3.05 following an announcement that they would begin their Phase II trial of PBT2 in the fourth quarter of that fiscal year. They managed to maintain that share price in the 2.50 – 3.20 range for the better part of 2007 and eventually climbed their way back over the 4.00 mark in late December.
In February of 2008 they jumped from 4.10 to 6.73 after they outlined results of a successful Phase IIa trial for PBT2 for the treatment of early Alzheimer’s disease and a month later shares were trading at 4.55. Those looked like positive days compared to how they ended the year, eventually sipping all the way down to 1.38 on December 31, 2008.
Throughout 2009 and 2010 shares floated around the 1.10 – 2.10 range and that range held steady into 2011 until Monday’s news concerning the positive publication of new data in the science journal PLoS One which maintained that PBT2 helped repair brain damage in mice stricken with Alzheimer’s disease as well as helped restore healthy levels of key proteins involved in learning and memory, and in some cases, “the levels of many of these proteins were restored to the levels seen in healthy, cognitively normal animals.” PRAN has said “the findings help to explain the rapid improvement in cognition previously reported in transgenic Alzheimer’s mice and in patients in a Phase IIa clinical trial with PBT2.”
With shares popping 86% on Monday and adding another 40% to their share price on Tuesday it seems like PRAN is once again on the upswing but is it just a matter of time before shareholders are forced to endure another dry spell? According to Prana’s Head of Research, Associate Professor Robert Cherny, “The ability of PBT2 to promote the forming and reforming of connections between neurons is fundamental to the repair of brain tissue damaged by AD, and the expression of key neuronal receptors and signaling proteins indicates that the repaired tissue is functional.” This leaves many to believe that PRAN is on the right course and if they are able to move forward in their clinical trials and produce further positive results then there is no reason to think that share prices can’t hold, but this is a timely process and at times the FDA waiting game can be too much for investors to handle.
Everybody wants a cure for Alzheimer’s and PRAN may be in the process of developing the treatment and they have a detailed description of the workings of PBT2 on their site, giving any potential investor or interested party the information on just how groundbreaking their treatment is. What could be of particular interest is that right alongside PBT2’s potential concerning Alzheimer’s Disease, it’s potential concerning Parkinson’s and Huntington’s is also being investigated.
The bottom line for investors is that it may still be too early to start banking on PRAN and judging by its history of fluctuating prices jumping in at the top of the price surge may not be the best idea. There is still a long way to go before PRAN ever sees FDA approval and digging through their 2010 10-F they clearly state “We have been unprofitable to date and expect to incur losses over the next several years as we expand our drug discovery and development programs and pre-clinical testing and as we conduct clinical trials of our product candidates.” They are far from completing their research and development of any pharmaceutical product candidate which means they will likely be forced to once again seek additional funding through public or private financings, of particular concern to shareholders, or license assets or create strategic alliances with corporate partners, both of which could mean sacrificing substantial potential revenue.
None of this is to say that PRAN is not a viable company with a great treatment in the works but investors need to be honest with themselves and not get caught jumping in without knowing how deep the hole is.