The Biotech industry is filled with companies that promise big breakthroughs. However, one investor has posted a scathing, negative report on one biotech stock that should be avoided. That investor, Sahm Adrangi, is using his extensive experience to warn investors too stay away from the Biotech company Proteostasis.
In the recent negative report, Sahm Adrangi of Kerrisdale Capital Management LLC said that the company Proteostasis is overly optimistic about their new drug tackling cystic fibrosis. According to the negative report, the drug cocktail tested, CFTR amplifier PTI-428, did not significantly outperform the placebo in a recent test.
Going into detail, the PTI-428 group only improved 2.5%, while the placebo group – made up of only 4 patients – worsened by 6.7%. Taking these numbers into account, the company’s drug only realized an improvement of just 9.2% over the placebo. Sahm Adrangi and Kerrisdale Capital does not believe that Proteostasis does not have a big breakthrough on their hands. And that the recent rise in the biotech stock is unjustified.
In the Kerrisadale Capital report, the investment company said that Proteostasis is worth about 70% to 90% less than its current stock value. That would put the value of Proteostasis at about cash. This estimate in value is due to the fact that Kerrisdale Capital believes that Proteostasis no longer has a real lead drug in their pipeline.
Kerrisdale Capital is known as a short-selling investment group. Short-selling is the practice of borrowing shares of a company to sell in the open market. When the price of the company drops, the short-seller will buy back the shares and “cover” their position.
Sahm Adrangi is the Chief Investment Officer as well as the founder of Kerrisdale Capital Management LLC. Mr. Adrangi has been involved with the company since its founding in 2009. Mr. Adrangi has been known as one of the top performing short-selling investors on Wall Street. His company’s negative reports are known to expose companies who overstate the profitability or effectiveness of their products.
Prior to founding Kerrisdale Capital Management, Mr. Adrangi worked as an Investment Analyst at Longacre Fund Management, LLC as well as a analyst, in bankruptcy restructuring group, at Chanin Capital Partners. Mr. Adrangi was educated at Yale University where he received a Bachelor of Arts in Economics.