When Praxis Precision Medicines Inc. (PRAX) announced positive Phase 3 results for its essential tremor drug ulixacaltamide back in October, the stock doubled and analysts started penciling in approval odds around 80%. The company quickly raised $567 million in new capital, and suddenly this clinical-stage biotech had a market cap pushing $4.5 billion, with most of that value tied to a single drug.

Now a short seller is arguing the whole thing might collapse under FDA scrutiny.

Culper Research just published a report claiming that Praxis's trial data is riddled with red flags that could derail regulatory approval when the company meets with the FDA later this year. The allegations are serious: endpoint switching without FDA clearance, optimistic statistical handling of a massive dropout rate, and methods that allegedly contradict the very research Praxis cited to justify its approach.

What Went Down in the Trial

The Essential3 program looked promising on the surface. Study 1 showed a statistically significant 4.3-point improvement in the mADL11 score at Week 8 (p<0.0001), with effects sustained from Week 2 through the full 12-week dosing period. All key secondary endpoints hit statistical significance. For a company developing treatments for essential tremor, that's the kind of readout you dream about.

But Culper's report paints a different picture. According to the short seller, Praxis changed its primary endpoint at the last minute without FDA approval, then used what it calls "optimistic assumptions" to account for the 36% of patients in the treatment arm who didn't finish the trial. That's a huge discontinuation rate, and how you handle those missing data points can make or break your results.

The report argues that Praxis presented its statistical analysis as conservative while actually applying methods in ways that contradict the research the company itself referenced. Culper consulted with former Praxis directors, a biostatistician, and multiple former FDA officials with decades of experience, all of whom allegedly raised concerns.

A Drug Nobody Wanted

Here's where the story gets interesting. Praxis acquired ulixacaltamide in 2018 for just $1 million after the previous owners walked away. The short seller sees that price tag as a warning sign that the drug never had much promise to begin with.

And the mechanism itself has a rough track record. Three prior compounds with similar biology failed in early-stage essential tremor programs. Even ulixacaltamide didn't succeed in its own Phase 2 Essential1 study, yet Praxis pushed forward to Phase 3 anyway.

Then in March 2025, an independent data monitoring committee recommended stopping the Essential3 study for futility. Praxis decided to keep going. A few months later, they announced positive results and raised over half a billion dollars.

The Valuation Question

Sell-side analysts have embraced the drug's potential, with some valuing ulixacaltamide near $3 billion, which represents the majority of Praxis's current market capitalization. That's a remarkable transformation for a drug that cost $1 million seven years ago and has failed multiple times along the way.

Culper argues those expectations are built on shaky ground. The firm believes that when Praxis heads into its fourth-quarter 2025 pre-NDA meeting with the FDA, regulators will spot the same issues they're highlighting. If that happens, the stock faces serious downside risk.

The short seller's conclusion? Ulixacaltamide is "a house of cards" that won't survive regulatory scrutiny.

PRAX Price Action: Praxis Precision Medicine shares were down 9.10% at $172.10 at the time of publication on Thursday.