Shares of Vertex are up 60% today due to positive results in a recent clinical trial for the company's cystic fibrosis drug. Bear in mind that Vertex already has multiple drugs on the market and has a multi-billion-dollar market cap.
Alzheimer's is a far more prevalent disease than cystic fibrosis. And Prana is a tiny company with negligible market cap and no drugs on the market. Thus, a positive result in the current Alzheimer's trial for PBT2 could have a much greater impact on Prana's share price than today's news has had on the price of Vertex stock.
Exactly. Vertex is a (relatively) big company, and CF is nothing compared to the AD market, and throw in the HD market too. They just built a shiny new headquarters on the Boston waterfront. They ain't pinching pennies over there at VTRX. The landscaping probably cost more than Prana's clinical trials have so far.
So the stock skyrockets on these results. I suppose I should have bought some of their stock back in 1994 when I first read about them. Those 3 or 4 dollar shares would look pretty good today at 160 (2 for 1 split). But I was a struggling graduate student making 14k a year, so ... sigh.
While I liked the approach Vertex was taking to drug design way back then, I really like what Prana is doing today. Solid science that's far less speculative than most would think. Funding their trials with a nickel here, a dime there, and making it go a long way. Being confident enough to lay it all on the outcome of the well-designed trials.
This stock is designed to rocket on positive HD results, and absolutely explode on impressive AD results. There's no big pharma deal to mortgage the future, no fancy digs in the high-rent district (AFAIK) and they don't have a boat load of debt to weigh on them. Just a boat load of intellectual capital. The value of that will change a lot this year no matter what. On the downside, it's a buck or two. On the upside, it's almost unlimited.
I will try to find the example, but about a month ago a small biotech company stock fell 82 percent on disappointing clinical trial results where the drug was their main candidate of promise, and the value of their other drugs were at a stage where they were negligible. It appeared to be a reasonable expectation for what could easily happen to Prana on a disappointing outcome.
It seems to me that many companies are watching both Reach2HD & Imagine trials, and on positive results a 60 percent gain could be a serious understatement.
Yes, that's the flip side of the coin. A disappointing outcome for Vertex's cystic fibrosis drug might have resulted in something like a 40% drop in share price. A disappointing outcome for Prana's current clinical trials, by contrast, could result in a drop of 80% or 90% in Prana's share price.
Prana has a lot more leverage than Vertex in the sense that its share price could react in a much larger way to either positive or negative trial results. Leverage works both ways.