Kerrisdale Capital Management’s Sahm Adrangi has issued another negative report concerning a medication that is currently being developed. This time, the medication in question is Proteostasis Therapeutics’ new cystic fibrosis medication known as PTI-428. While it may have received the designations of Orphan Drug and Breakthrough Therapy by the Food and Drug Administration, Sahm Adrangi believes that the chances of the medication actually being effective for the medication are very unlikely.
When Proteostasis was granted these designations by the FDA, the company saw their stock price rise significantly but Kerrisdale Capital has taken a short position on the company. After researching the medication and company, he determined that they were not completely honest about the results or the drug’s effectiveness. He found that several key data points that showed negative outcomes of the Phase 2 trials were omitted in the releases to the public. This does not fare well for the drug or the patients that were hoping it would help to treat their difficult disease. Additionally, Sahm Adrangi believes that the small size of the placebo group in Phase 2 trials also contributed to the medication’s appearance of effectiveness. The negative instances in the small placebo group made the results of the therapy group appear to be much better than they actually were, especially with the omission of certain key details of the trial.
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— Adam Milstein (@AdamMilstein) May 18, 2018
Sahm Adrangi is the Chief Investment Officer of Kerrisdale Capital Management as well as the founder. The company that was founded in 2009 with $1 million was managing around $150 million in capital in July 2017. Sahm Adrangi first earned recognition in the investing world after short-selling the stocks of Chinese companies that were operating fraudulently and trading in the United States. He and Kerrisdale Capital Management are well known for the published research about the companies that they have chosen to short. If Proteostasis’ new cystic fibrosis drug does fail during its Phase 3 trials, Sahm Adrangi and Kerrisdale Capital stand to make a good deal of money for their investors.