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Prana Biotechnology Limited releases trial results: But is it set for blockbuster success?

Small-cap biotechnology company Prana Biotechnology Limited (ASX: PBT) (NASDAQ: PRAN) has gained publicity recently due to its attempts to develop treatments for some of the world’s most common diseases, in particular Alzheimer’s, Parkinson’s and Huntington’s.

Proven treatments have been described as the Holy Grail of biotechnology and overnight the company released the results of its Phase 2 clinical trials into the effectiveness of its flagship PBT2 drug as a treatment for Huntington’s disease.

The company is claiming success in a trial that involved 109 patients suffering the hereditary degenerative brain cell disorder for which there is currently no effective treatment.

Huntington’s patients received daily doses of either PBT2 250mg, PBT2 100mg, or placebo for 26 weeks. Prana’s results showed a statistically significant improvement in cognitive function in patients administered the strongest 250mg dose daily at both the 12 and 26 week stages. No significant improvements were seen on other secondary efficacy measures in the study including motor performance, behaviour and functional capacity. Results for patients on the lower dose were only very marginally better than those on the placebo.

Dr Rudi Tanzi, Professor of Neurology at Harvard Medical School and Prana’s Chief Scientific Advisor commented: “In my opinion, these findings significantly elevate the potential for PBT2 as an effective therapy for both Huntington disease and Alzheimer’s disease.”

Shares have been on a wild ride in the last year, up more than six times in value as investors follow the news flow and speculate on the company’s chances of commercialising the drugs. Eventual U.S Food and Drug Administration (FDA) approval would be investing nirvana but that’s an awful long way off.

The Phase 2 trial results were not as conclusive as perhaps some had hoped for. Prana now plans to advance to a “confirmatory” Phase 3 clinical trial that may allow PBT2 to be approved for the treatment of Huntington’s disease. It says it will seek a future trial with the FDA, with the aim of launching a drug into the market in the next four to five years. The big picture has not stopped excited investors piling into the shares this morning, sending them up more than 20% at $1.12.

Foolish takeaway 

It must be said that Prana has been banging the PBT2 drum for a long time now. In fact back in 2008 it was issuing press releases surrounding potentially “successful outcomes” of the drug. Today’s results appear far from the game-changer hoped for and for my money any investment in Prana remains highly speculative, with the news flow now driving the share price. If investors are to try and chase the next big thing, they should be sensitive to the sometimes dubious nature of that news flow.

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Motley Fool contributor Tom Richardson has no financial interest in any company mentioned in this article. You can find him on twitter @tommyr345

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