Neil Woodford’s controversial and high-profile investment in Prothena (NASDAQ:PRTA) and its development programme for AL Amyloidosis has failed, costing the Woodford Patient Capital Investment Trust (WPCT) an estimated £50m based on the average $40/share acquisition cost of its large shareholding. Prothena’s US-listed stock has fallen by 68% this morning, after the company announced the total failure of its Pronto study and the discontinuation of the wider NEOD001 programme, which includes another Phase III trial.
QuotedData.com has published a number of articles (most recently last Friday) highlighting the risk on this particular binary event, most of which have indicated that the market thought the studies were likely to fail. Following a number of other poorly performing investments in biotech, the Prothena Pronto study outcome was becoming seen as a key test – not least by Neil Woodford himself – of his investment company’s expertise in the biotech sector. As such, the study’s failure could now raise some difficult questions. Prothena was also held by other Woodford-managed investment vehicles and the investment was described by Mr Woodford himself as “the largest bet in my career”.
Woodford Funds has provided an update on Prothena following the announcement of the study results. It says that the outcome was extremely disappointing, but the company still has options in the form of its early and mid-stage clinical pipeline; its technology platform; a world-leading specialism in misfolded proteins, which are implicated in a number of different neurological disorders; and its research platform, which has been validated by two major pharmaceutical companies – Roche (which has licensed PRX002 in Parkinson’s disease, currently in Phase II trials) and Celgene (which recently entered into a collaboration on three earlier stage clinical assets). It also says that Prothena has its unpartnered assets about to enter the clinic and, with more than $500m on its balance sheet, so is very well-funded.
The update states: “The market may not acknowledge the monetary value of these attractions in the near term, but they are important valuation anchors for us, which allow us to maintain conviction in the long-term investment case.” However, it would seem that the market reaction on Prothena was reflected in WPCT, whose shares closed 10.9% down on the day. WPCT held a stake accounting for 9.1% of its NAV in Prothena, according to its March portfolio update which was disclosed earlier today. That stake, which must have cost ~ £81m to acquire, is now worth around £26m, according to an analysis by Marten & Co. This loss follows other poorly performing biotech investments in Northwest Biotherapeutics, Vernalis, Circassia, e-Therapeutics, 4D Pharma, NetScientific and Reneuron.