Proteon Therapeutics Inc (NASDAQ:PRTO) lost just shy of 75% of its market capitalization on Tuesday, on the back of a data release from its kidney disease trial. The data disappointed, with the late stage trial missing its primary endpoint, but it wasn’t a total wipeout, and there are some elements that point to the drug’s efficacy.

With such a steep dip in market cap, and a path forward in sight, there may be an opportunity to get in at a discount to last week’s price.

Here’s our take.

So, the drug is called vonapanitase, and it’s under investigation in the above mentioned chronic kidney disease (CKD) indication. Well, that’s not entirely accurate. It’s designed for use in patients with CKD, but it doesn’t treat the CKD directly. When patients have CKD they often undergo hemodialysis, and when they undergo hemodialysis, they have what’s called a radiocephalic arteriovenous fistula. This is a surgically created connection between a vein and an artery in the lower arm, designed to create a substantial increase in blood flow and vein dilation. The increased blood flow aids the hemodialysis.

The fistula only lasts so long however (variable from patient to patient) and when it reverses, the hemodialysis efficacy reduces. Vonapanitase is designed to improve the lifespan of the fistula. It is topically administered to the surface of the blood vessels, where it penetrates into the outer region of the vessel wall and starts to generate elastin peptide fragments. These fragments attract the cells that would normally migrate to the inner layer of the vessel wall in response to injury, and in turn, cause a thickening or blockage of the vessel in question. The theory is, that by stopping this migration, the drug can mitigate the development of what’s called neointimal hyperplasia, which is the most common cause of vascular blockage after fistula creation.

So, that’s the theory. Unfortunately, the data just released doesn’t back it up convincingly. It was a phase III, with a primary endpoint of the length of time from fistula surgical creation to the first occurrence of a fistula thrombosis or corrective procedure to restore or maintain patency (blood flow), as measured against placebo. In the study, control arm patients demonstrated a 17% reduction in the risk of primary unassisted patency loss over one year, compared to placebo. That’s a hit at first glance, but the p value for the study came in a 0.254, which is a good distance from statistical significance, so the endpoint classes as a miss.

In contrast, however, the secondary endpoint, secondary patency, which is the length of time from surgical creation until fistula abandonment (final failure), came in as a hit. Active arm patients had a 34% reduction in the risk of secondary patency loss over one year, compared to placebo, with a p of 0.048.

For us, this secondary endpoint hit is enough to warrant further development. There aren’t many assets like this right now, and it’s a real issue (and in turn, a real market), and as an adjuvant to the current SOC procedure (the fistula creation) we think secondary patency could be enough to justify an FDA green light.

That, and there’s the potential for a follow up on the primary endpoint by way of a second phase III that’s ongoing right now. The second phase III is working towards the same goals, and is enrolling currently. Sometimes when the difference between a hit and a miss is a p value, a follow up can turn the result around. P values, although widely used in biotech, and for good reason, are not as reliable as many give them credit for. They are nominal values, and the 0.05 threshold is just something that has become generally accepted as the difference between sig and not sig.

Of course, the second trial may replicate the primary endpoint miss. Even if it does, however, the potential for advance on the secondary hit is enough to undermine the 75% hit that Proteon just took to its market capitalization on the back of this release.

Data from PROTEON 2, the second phase III, should hit press at some point during the second quarter of 2018. There’s plenty of time to pick up a position between now and then, therefore.