Huntington's and Alzheimer's diseases are often described as being among the last great frontiers modern medicine has yet to deliver effective treatments for. However, Aussie biotech business Prana Biotechnology Limited (ASX: PBT) has long trumpeted its PBT2 drug as one potential treatment and today announced it has received Orphan designation from the European Commission for PBT2 for the treatment of Huntington's.
Orphan drug designation gives the business additional support in trialling the drug and a ten-year period of market exclusivity if the drug were ever approved for commercialisation.
The company also has Orphan drug designation with the US Food and Drug Administration (FDA) and recently announced what it says were positive results for a Phase II clinical trial for Huntington's.
However, it's the neuro-degenerative and genetic nature of diseases like Huntington's that has curtailed attempts to develop an effective treatment so far, with some medical professionals even on record as suggesting an effective treatment will never be developed.
Although, the stock has jumped 6 cents or 33% to 24 cents on today's news, which shows just how happy some investors are to back a biotech growth story even when the odds against it remain strong.
Notably in early 2014 the stock soared to $1.26 as the company and others talked up its chances of success in developing a cure for Alzheimer's. However, once the Phase II trial results showed the drugs were largely ineffective in their trial goals the stock crashed around 80% to near today's levels.
That experience suggests only the most gullible of investors will bid the stock up much higher in the expectation that the company is now on the path to blockbuster success. That's not impossible, but history suggests investors should be aware of the risks and treat the company's prospects with a healthy dose of scepticism.
Another company that's been on a wild ride recently is Prima Biomed Limited (ASX: PRR), although it also looks a risky prospect as it attempts to pioneer immuno-oncology therapies.
Why would a smart investor chase a biotech stock with the odds stacked against it when they could buy a gangbusters growth stock on an attractive valuation with the odds of success looking genuinely strong…
