A biotech bonanza may be just hype

Biotechs are causing a stir. Photo: James Davies

Prana Biotech, which is researching a cure for Alzheimer's disease and the better known stem cell therapy researcher Mesoblast are two companies that are definitely in the sweet spot when it comes to investor hopes.

At 26 cents Prana Biotechnology (PBT) has climbed almost 60 per cent in the past month in the wake of a bullish report by its house broker in New York, MLV & Co and its analyst Dr George Zavoico about its drug PBT2. The company alerted the ASX to this report yesterday.

Its market cap is only $81 million, but the Victorian-based Prana's claims that it is world leading in neurodegenerative diseases could actually be true in the wake of the recent high-profile failures last month by industry giants Pfizer, Johnson & Johnson and Eli Lilly.

Pfizer alone has spent about $1.6 billion on research and development on Alzheimer's, which affects one in 200 people and has the effect of causing early dementia and memory loss. The industry giants were all in the last stages of clinical trial programs, so the outcomes were particularly galling for sufferers as they were failures among many.

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Prana has only $6 million or so in cash, very early stage human trial data, and no big pharma partner with big pockets. It will not be able to fund even the conclusion of its existing trials for Alzheimer's and for Huntington's disease.

Prana listed way back in 2000 after raising $8 million, and in 2006 had to abandon a 400-person clinical trial of a forerunner to its latest drug after concerns of side effects. But now its chief executive Geoffrey Kempler insists his company is on the right track, and alludes to the failures of his much bigger competitors.

It's an up story and a down story, but our strategy has always moved forward, albeit at different speeds, which compares to strategies that haven't worked at all.

Radar does admit that the science behind the drug does sound promising, and, just as importantly, different from that conducted by the pharma giants. All treatments target a naturally occurring protein in the body called beta-amyloid, which turns toxic in the brain of Alzheimer's patients.

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A biotech bonanza may be just hype