Sahm Adrangi is a sell side trader that corporate executive do not want to encounter under most, if not all, circumstances. Adrangi runs a hedge fund called Kerrisdale Capital, which manages $180 million of investor funds. Andragi has made his reputation as an activist short seller, detecting corporate irregularities, shorting the shares and then calling attention to a company’s issues by releasing a report, or sending a tweet. Adrangi earned fame, and fortune to boot, by being at the forefront of a wave of short selling that called attention to fraudulent practices of Chinese companies with United States listed securities.
Recently, Sahm Adrangi issued a negative report on shares of Proteostasis Therapeutics, explaining his decision to sell short shares in the company. Proteostasis is a biotechnical company whose product is in the clinical stage. Its main drug is PTI-428, which is intended to treat cystic fibrosis that results from genetic disorders.
Sahm Adrangi’s short thesis for this company is that the Phase Two test results of this drug are not nearly as optimistic as they seem on the surface, as the success only results from favorable comparison to placebo patients, as opposed to any improvement in the patients’ conditions. He believes that the drug is actually ineffective, and that investors misinterpreted the results of the testing. Andragi was particularly disturbed by Proteostasis Therapeutics’ decision to issue nine million additional shares shortly after the release of the Phase Two trial results.
Further, Sahm Adrangi concludes that Proteostasis Therapeutics has a track record of selectively releasing study data, emphasizing the findings that present it in a positive light, while burying data that would reflect poorly upon it. Adrangi maintains that there are other results from tests that the company has performed that are not in the public domain and, if known, would cause investors to cast doubt on PTI-428’s efficacy. Beyond the ineffectiveness of PTI-428, Sahm Adrangi argues that Proteostasis Therapeutics has little in its pipeline of future drugs that would prevent the stock price from realizing a drop of at least 70%.