Kerrisdale Capital issued a negative report last week on the biotech firm, Proteostasis. Proteostasis recently made claims of developing a new drug for cystic fibrosis patients that is able to increase lung performance dramatically. Though the data they have presented is not very good and they have been highly transparent in their testing. This is what urged Sahm Adrangi to do some digging on the company, allowing Kerrisdale analysts to go over the data. Sahm Adrangi is a high-profile investor that has tackled other problem companies in the past and to great success actually. His reputation is good and many in the business world are ready to follow his lead, especially other investors to his successful track record.
This new drug that is being produced by Proteostasis had an extremely small sample size, consisting of just four individuals. For a disease like cystic fibrosis, claiming to have made a breakthrough is a big thing, and this is shattered when looking at the true data, which isn’t in good shape to begin with. According to Sahm Adrangi, Proteostasis’ has very messy data that cannot be understood easily. There results that have announced aren’t even accurate in their own data. With a sample size of four patients, results are skewed and possible just placebo. For a biotech company, offering data that has no actual information or results to be seen is a very bad thing. Whether its due to poor testing or bad management, either way, it’s shady for the business.
Sahm Adrangi’s statements and the report issued by Kerrisdale has had a noticeable impact on Proteostasis already, causing their share value to dip more than 15 percent since the report was released. This also caused the biotech firm to sell nine million of their own shares to recoup money for their continued testing. With that said, Proteostasis currently has more than 70 percent of their stock value invested in their drug, which could prove fatal for the company if it is not effective for patients.