* Shares in Australian company dive after drug fails mid-stage study
* May need more money, partner for larger study - analysts (Adds analyst comment)
By Vrinda Manocha
March 31 Prana Biotechnology Ltd lost nearly three-quarters of its value after the company said its experimental drug to treat Alzheimer's disease failed a mid-stage study, raising doubts about the drug's future.
The company's shares, which quadrupled in the past year to hit a high of $13.29 in January, fell as much as 72 percent to $2.78 in early trading on the Nasdaq on Monday.
Research into Alzheimer's treatments have attracted a lot of interest as there are still no licensed drugs that can slow the progression of the disease, which affects about 5 million people in the United States. Currently approved medications only treat symptoms.
Big pharma companies including Roche Holding AG, Eli Lilly and Co and Merck & Co are developing Alzheimer's treatments, but have faced setbacks and failures.
Prana's drug received a boost in February when it was found effective in treating Huntington's disease, a degenerative brain disorder.
But the setback in Alzheimer's study raised concerns that the company will have to raise funds to conduct a larger trial and may find it difficult to attract a partner for the drug.
"The key question is, given the data that are available, what company is going to partner this program?" MLV & Co analyst Graig Suvannavejh told Reuters.
"The hurdles to get this drug across the finish line are much higher now."
He said a late-stage study would be expensive for a small company to conduct, and unless new data from an extension study of the drug was positive, Prana would have to drop the drug.
HC Wainwright and Co analyst George Zavoico said it would be more than a year before Prana started another trial since the results of the extended portion of the mid-stage study due at the end of the year would help the company design the next study.
"They need to do a trial that would show a meaningful clinical benefit rather than just a structural change in the brain without an improvement in quality of life," HC Wainwright and Co analyst George Zavoico said.
Prana said the drug did not show a statistically significant reduction in the levels of beta-amyloid plaques in the brain when compared with a placebo in patients with a mild form of the condition.
An increase in the level of such plaques is considered a major cause of the disease's progression.
Prana also said the drug, codenamed PBT2, did not improve brain metabolic activity, cognition and function in the study.
The Australia-based company said it had A$25.4 million ($23.47 million) as of March 31.
The trial enrolled 42 patients who either received the drug or placebo over a period of 52 weeks.
The company said the drug was safe and well tolerated and 40 patients completed the treatment period.
"Whilst not meeting all of our hopes, this result does not deter us from the future development of PBT2, a safe and well tolerated drug candidate for Alzheimer's disease," Prana Chief Executive Geoffrey Kempler said in a statement.
Alzheimer's disease, the sixth leading cause of death in the United States, is a type of dementia characterized by loss of memory, speech impairment and aggression.
The company's shares were trading down 71 percent at $2.83 in late morning trading on the Nasdaq. ($1 = 1.0824 Australian Dollars) (Reporting by Vrinda Manocha in Bangalore; Editing by Saumyadeb Chakrabarty)