Carson Block is short Prothena, predicting one of its key drugs will not be effective.
Block is chief investment officer of activist investment firm Muddy Waters Capital. He is known for his short selling research, which led to several government fraud investigations and financial restatements.
"We are short PRTA. The publicly-available data, in our opinion, does not show that NEOD001 is efficacious. Our impression appears to run contrary to that of the sell-side," said the report on Muddy Waters' website.
The company's NEOD001 drug is a treatment for AL amyloidosis, a disease that occurs when bone marrow "produces abnormal antibodies that can't be broken down," according to the Mayo Clinic.
"We believe that perceived positive responses to the drug are quite possibly – if not likely – due to previous plasma cell directed ("PCD") therapy, and also to the manner in which some early trial data has been presented. Further, NEOD001's proposed mechanism of action is not proven," the short seller added.
The investor said even if the drug gets approved, the current Wall Street expectations for peak annual sales of more than $1.5 billion are "unrealistic."
"The patient population is small, and we believe most payers are unlikely to reimburse for this drug if it were priced at a level sufficient to put the peak annual sales estimates within reach," he wrote.
Prothena did not immediately respond to a request for comment.
The company's shares declined 3 percent mid-afternoon Thursday.