Proteostasis Tumbles 25% After Short Seller Calls Leading Drug Candidate 'A Dud'

Proteostasis Therapeutics Inc PTI stock is down more than 25 percent on Tuesday after short seller Kerrisdale Capital revealed a new report and short position in the company. Kerrisdale said on Twitter the “data is terrible” for Proteostasis lead drug candidate PTI-428, calling the drug “a dud.”

We're short $PTI. Report available at https://t.co/zgP1zj7Chp. Stock has run up on unimportant breakthrough-therapy designation, but the underlying clinical data is terrible. The drug is a dud. Conf call 10:30am (866-834-3313), reference Kerrisdale call (1/5)

— Kerrisdale Capital (@KerrisdaleCap) March 20, 2018

Kerrisdale claims the “breakthrough status” for PTI-248 that has sent the stock soaring by about 100 percent in a matter of days was based on a Phase II clinical trial demonstrating questionable efficacy.

“The main reason that PTI-428 looks good is not that patients who received it performed unusually well but that the four placebo patients to whom they were compared performed unusually poorly,” Kerrisdale said. “Judged by a more reasonable benchmark, PTI-428 seems to do little – echoing an earlier, more obviously disappointing Phase 1 trial in which the drug yielded no statistically significant improvement in lung function.”

STAT News biotech reporter Adam Feuerstein responded to Kerrisdale’s claims, agreeing with the idea that Proteostasis data is lackluster and competitor Vertex Pharmaceuticals Incorporated VRTX makes Proteostasis “basically irrelevant.”

I’m in agreement with Sahm & crew re: $PTI. The magically deteriorating placebo patients undermine what little CF data they have + $VRTX makes them basically irrelevant. https://t.co/hWGHs2DtiT

— Adam Feuerstein (@adamfeuerstein) March 20, 2018

Kerrisdale concluded that PTI-428 has little value and that Proteostasis has few prospects in its pipeline as a fall-back. Kerrisdale estimates Proteostasis shares have between 70 and 90 percent downside from recent highs based on the company’s current cash balance.

At time of publication, the stock was trading around $5.22, down 25.4 percent on they day. After Monday's market close, the company announced a 9-million share common stock offering.

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