Prothena Corporation PLC (NASDAQ:PRTA), the US biotech backed by star fund manager Neil Woodford, lost more than two-thirds of its value on Monday after its lead drug failed in a mid-stage study.
As a result, Dublin-based Prothena said it is axing all further development of NEOD001 – a treatment for a rare disease called AL amyloidosis – including a planned Phase III trial.
“We are deeply disappointed by this outcome, particularly for patients suffering from this devastating disease," said Chief Executive Gene Kinney.
“We are surprised by the results from these two placebo-controlled studies and will continue to analyze the resulting data to share insights with our collaborators in the scientific, medical and advocacy communities.”
The news will be another blow to British investor Woodford, whose funds have, on the whole, endured a difficult year. Shares in his Woodford Patient Capital Trust, which has an 8.56% stake in Prothena, fell more than 10% on Monday.
There were high hopes for NEOD001, which had previously been granted orphan drug status by the US Food and Drug Administration and the European Medicines Agency to try to speed up the approval process.
But several short-sellers – including Kerrisdale Capital and muddy Waters – had taken aim at Prothena, believing that the drug would ultimately fail and they are now set to profit from today’s share price fall.
Analysts have commented that the failure of NEOD001 was the worst-case scenario, with many suggesting the shares could fall to the level of cash in the company.
Prothena has around US$480mln in the bank, which would work out to around US$12 a share.
In early deals on Monday, the stock was down 69% to US$11.42; only a couple of weeks it was trading at more than US$40.