By Ivan Deryugin
Raptor Pharmaceutical (RPTP) is developing treatments for rare diseases and has a compelling pipeline positioned to take advantage of unmet medical needs. The company has a strong chance to secure approval for its lead product candidate Procysbi (previously known as RP103) in several months for the treatment of nephropathic cystinosis, and clinical data is solid, offering patients a more convenient and safer choice relative to existing treatments. Raptor is working on several new indications for Procysbi, and if the treatment is approved on its PDUFA date of April 30th, the company is likely to quickly gain a leadership position in the nephropathic cystinosis treatment market; analysts see annualized sales of up to $153 million (Raptor's current market capitalization is around $271 million). Investors who add to or initiate positions in the stock should see profits leading up to approval as the average price target for Wall St. analysts is $9.00 a share, indicating up to a doubling of the stock on positive news and PR103's commercial potential.
Big advantages and pay offs for treatments of ultra-rare disorders. Developing drugs for ultra-rare diseases continues to offer significant opportunities for niche biotech companies and their shareholders. A focused strategy aimed at filling an unmet need in a very small patient population provides key advantages such as patient and physician advocacy, faster and more efficient regulatory review, government funding and special market exclusivities, and nearly guaranteed health insurance coverage. Companies like Alexion Pharmaceuticals (ALXN), which sells Soliris for the treatment of PNH and aHUS, have proven that the business strategy can generate substantial returns. Sarepta Therapeutics (SRPT), for instance, with its focus on treating Duchenne Muscular Dystrophy, outperformed the broader markets YTD by roughly 400% despite that its candidates are still in development. Raptor Pharmaceutical, with a development program geared towards ultra-rare disorders and an upcoming FDA decision on its lead candidate, is a prime example of a company positioned to benefit from a substantially underserved market.
Procysbi: A Promising Treatment with an Upcoming PDUFA Date
Raptor is a development-stage biotechnology company with several assets in its pipeline, the most notable of which is Procysbi. The drug is a treatment for nephropathic cystinosis, an extraordinarily rare disease with only 2,000 cases worldwide and just 500 in the United States. The disease, which causes the amino acid cysteine to accumulate in the body's cells, affects 1 in 100,000-200,000 newborns each year and leads to poor growth, kidney failure, brain damage, and often-premature death. Nephropathic cystinosis is currently treated primarily by cysteamine therapy, marketed as Cystagon by Mylan (MYL). Procysbi, a delayed release version of standard cysteamine therapy, aims to make treating this disease far easier with half the dosing frequency that its predecessor requires and fewer side effects. Procysbi is designed to be delivered only twice a day, versus the four daily doses required for Cystagon, including one in the middle of the night. It's no wonder then that providers report high instances of patient noncompliance when using Cystagon, particularly as this population is largely children and adolescents.
FDA decision anticipated at the end of April, with a PDUFA date on April 30th. Raptor presents an opportunity for biotech investors to take advantage of a stock well off of its 52-week high ahead of a major value-driving event. Raptor's Phase III trial for Procysbi ended in July 2011 and, importantly, met its primary endpoint by demonstrating non-inferiority to Cystagon. Furthermore, Procysbi is an enteric-coated microbead formulation, which furthers the company's competitive position relative to Mylan. Procysbi has been granted orphan drug status by both the FDA and EMA, implying that these government agencies recognize the need for improved treatment options
Procysbi clinical results were compelling. Raptor enrolled 41 patients in its pivotal Phase III trial, and clinical data was analyzed from 38 (3 patients did not meet protocols). In the trial, which reported data in 2011, patients who took Procysbi had average peak white blood cell (WBC) cysteine levels of 0.62 ± 0.05 nmol of half cystine/mg protein, versus 0.54 ± 0.05 nmol of half cystine/mg protein for patients who took Cystagon. Per trial protocol, the endpoint of this trial was to establish non-inferiority of the new treatment. Raptor has stated that its confidence interval for the trial was 95.8% (with a one-sided p-value of 0.021). The mean difference in WBC cysteine levels in the company's Phase III trial was 0.08, far below the upper limit of 0.3 set forth by the FDA, meaning that Procysbi's efficacy is comfortably within the FDA's acceptable range. The dosing frequency for Procysbi was every 12 hours, versus every 6 hours for Cystagon, and the finalized, steady state dose for patients taking Procysbi was 82% of their base-line dosage of Cystagon.
Upon the completion of the primary Phase III study, Raptor commenced an extension study to monitor longer-term WBC cysteine levels in patients, as well as the long-term safety of Procysbi. Of the 41 patients enrolled, 38 in the Phase III trial elected to enroll in the extension study, for which Raptor released data this November. The company stated:
"After 20 months of treatment, the total daily dose of Procysbi given every 12 hours needed to achieve optimal WBC cystine levels was on average 72% of the initial immediate release cysteamine bitartrate dose. Kidney function was well-preserved over the length of the study, as indicated by steady eGFR levels. Additionally, the study showed that patients taking Procysbi are able to reduce concomitant use of anti-acid medications by nearly half, with 22% of patients taking proton pump inhibitors ("PPI") or histamine 2 ("H2") blockers during the extension vs. 42% upon initially entering the Phase III study when they are taking immediate-release cysteamine bitartrate."
The extension study also showed key improvement in quality of life across a variety of metrics. PedSQL 4.0 scores (an analytical system for measuring quality of life in children and adolescents) showed a statistically significant improvement. The selling point for Procysbi is that it is just as effective at treating nephropathic cystinosis as Cystagon, but is both safer and easier to use (and with fewer side effects). Because patients with nephropathic cystinosis must take treatments for their entire lives, factors such as convenience and safety become even more important in determining what kind of treatment they will choose. The clinical data for Procysbi makes a strong case as to why it should become the leading treatment for nephropathic cystinosis.
The FDA will decide whether to approve Procysbi by April 30, 2013, and Raptor expects the EMA to make a decision on the drug within the first quarter of 2013. The PDUFA date for Procysbi has been pushed forward to April 30, from a prior date of January 30. However, Raptor noted that this was a standard 3-month extension, and that the FDA made no requests for additional clinical trials or data. Raptor has full global rights to Procysbi, with the exception of milestone payments that must be made to the University of California, San Diego totaling $1.25 million as Procysbi achieves approval in the United States and European Union. Because the patient population for Procysbi in nephropathic cystinosis is so small, Raptor will have minimal marketing and sales expenses. With just 500 patients in the United States and 800 in Europe, the primary issue for Raptor will be how quickly it can secure reimbursement for Procysbi should it be approved. However, orphan drugs have historically had far less difficulty in securing reimbursement than other drugs, so we expect Procysbi to have little difficulty with insurance coverage.
Pipeline Assets and Financial Overview
Procysbi for Huntington's disease & NASH. Raptor is also testing Procysbi for Huntington's disease, a rare genetic disorder with between 20,000-30,000 patients in the United States, and a similar number of patients in Europe. Raptor enrolled 96 patients in a Phase II/III study in June 2012, and the trial is set to last 18 months, with clinical data to be reported in the first half of 2014. Raptor has also received orphan drug status for Procysbi in Huntington's disease. Additionally, Raptor is developing Procysbi for the treatment of Non-alcoholic Steatohepatitis (NASH), a progressive liver disease for which there is no available treatment. NASH causes an accumulation of fat and inflammation in the liver, and while many patients can lead normal lives with NASH, the disease does lead to cirrhosis in a subset of patients if left untreated. According to Raptor, NASH affects between 2-5% of Americans, and the company began dosing patients in a Phase IIb trial for the disease in June. The trial will, over the course of a year, evaluate whether or not patients see a reversal of liver damage, which patients in a Phase IIa trial previously demonstrated. That data is also due in 1H14. And, the company is performing formulation studies on RP104, an extended release formulation of Procysbi, for use in future clinical trials.
Conviva for alcohol intolerance. Conviva, another Raptor candidate, is a potential treatment for ALDH2 deficiency, an inherited metabolic disorder that affects between 40-50% of East Asian populations. Because many Asians have this deficiency and are unable to metabolize alcohol properly, recurrent drinkers are more prone to diseases like cancer. Development partner Uni Pharma is responsible for commercialization efforts in Taiwan, with an option for commercialization in South Korea. In Phase IIa trials, Conviva showed a significant reduction in heart palpitations in ALDH2 patients who consume alcohol recurrently. We anticipate more color on Conviva on the company's next earnings conference call, which will likely occur in February (the company's fiscal year ends on August 31). The timing is good, considering that investors will be itching to hear about Procysbi's prospects for approval in April.
Cash should be sufficient to reach key milestones. Raptor ended the fourth quarter of its fiscal 2012 with $38.9 million in cash & investments, and when subsequent at-the-market sales are taken into account, the company had about $41 million in cash & investments on its balance sheet. On Thursday Dec. 20, Raptor announced a term loan for $50M, payable in two equal tranches, the second of which will be paid following FDA approval for Procysbi. If the company receives approval for Procysbi, it should be well positioned financially to execute an adequate launch, and hopefully move toward positive cash flow. Raptor is building inventory of Procysbi, and work is underway to secure reimbursement of the drug as rapidly as possible, once approved.
Creating new treatment options for rare diseases is a lucrative opportunity for small, focused companies. Raptor is positioned to bring a beneficial product to an underserved market, a proven strategy for increasing shareholder value.
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