Proteostasis Therapeutics' Abrupt Turn-Around on Share Offering

Little more than 24 hours after announcing a proposed public offering of 9,000,000 shares of common stock, Proteostasis Therapeutics announced that it is withdrawing the offering. The reason given for the withdrawal is that the company believes that current market conditions are not conducive for an offering on terms that would be in the best interest of its current stockholders.

In that short time frame an investment firm, Kerrisdale Capital, a company that bills itself as a research-oriented investment firm issued a report questioning the results of a recent PhII proof of concept trial that supposedly showed Proteostasis' drug, PTI-428, for treating cystic fibrosis showed improved lung function relative to placebo.  Proteostasis had received a “breakthrough therapy” designation from the FDA on the strength of the PhII results.

Kerrisdale's report pointed out that rather than the drug performing well, the small placebo group of four patients performed unusually poorly. The report went on to say that, “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.”

The report also highlights an absence of dose-response relationships. Additionally, it questions Proteostasis' ability to  reliably measure its favored biomarkers. The complete report can be found here:

In addition to the negative report, two law firms announced investigations on behalf of share investors. This is par for the course when a public company experiences a large drop in share price. The share price dropped over 18% after Kerrisdale dropped its report. As of this writing, however, the price had recovered 11.24% in after hours trading.