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Raptor Pharmaceutical Corp. (NASDAQ:RPTP)

Cowen and Company 33rd Annual Health Care Conference

March 5, 2013 08:40 ET

Executives

Julie Smith - Chief Operating Officer

Unidentified Analyst

Good morning everyone. Hi, welcome to the session and my name is (Yung Chung) and I am a member of the biotech team at Cowen. It’s my great pleasure to introduce the next presenting company Raptor Pharmaceuticals, which was covered by Cowen with an outperformed rating. Raptor’s lead product DR Cysteamine and then this PROCYSBI is currently under review at the FDA with the PDUFA date of April 30 and Raptor also has multiple other programs in targeting huge unmet medical needs. So, presenting today from the company is Julie Smith, Chief Operating Officer. And with that, I am going to turn over this to Julie.

Julie Smith

Thank you. And it’s my pleasure to give an update on Raptor Pharmaceuticals. We are a small public biotech company focused on developing therapies for rare diseases. Start at the beginning, reminder that this presentation contains forward-looking statements. Our lead product opportunity, PROCYSBI, for the potential team of nephropathic cystinosis has a near-term PDUFA date of April 30. Cystinosis is an ultra-orphan market opportunity and that affords us the ability to commercialize the product on our own. We have two Phase 2 programs in development and our goal is to become a fully integrated biotech company.

Taking a look at our pipeline, you can see that we are building a franchise around the cysteamine molecule, and because of its unique properties it may have broad potential applicability. The first of the two Phase 2 programs that we will have a read out in 2014 is Huntington’s disease and that will read out near the beginning of 2013. The second is a juvenile non-alcoholic steato-hepatitis or NASH and that will read out in the second half of 2014. We continue to add IP to our cysteamine patent estate, and we have early clinical exploration work done in fibrosis, Parkinson’s and malaria, but we are not going to advance these programs further until we secure external non-dilutive funding and we are in the process of doing that right now.

Now, let’s turn our attention to nephropathic cystinosis, which comprises 95% of cystinosis, a rare life threatening metabolic disease caused by a defective lysosomal transporter. And this results in toxic cystine accumulation in every cell tissue and organ of the body. Now, bio-chemically, it’s characterized by detectable levels of cystine in the white blood cells, which is a well validated biomarker for cystine accumulation in other tissues. And when cystine accumulates, it’s toxic to any cell, but one of the most sensitive cells is in the proximal tubule of the kidney. And so when these babies are born, they rapidly begin to develop signs of kidney dysfunction. On the other hand, it’s the good thing, because it leads to a diagnosis, but unfortunately when those babies are diagnosed they have – they already have irreversible kidney damage.

The current systemic therapy has very high compliance hurdles. Long-term clinical outcomes are poor and these patients still die at an average age of 28. The current systemic cysteamine is incompatible with chronic use, because it requires strict adherence to win every six-hour dosing schedule, including a middle of the night dose. This is not a four times a day drug. You really have to take it every six hours. And when patients try to extend the dosing interval to get us online safety, you can see here in the graph on the right that the amount of toxic cystine in the white blood cells doubles during that period. And it’s these short-term excursions above a safety threshold that explain the long-term – the poor long-term clinical outcomes.

Cystinosis also causes gastrointestinal distress in these patients. And the currently available immediate relief cysteamine dissolves when it hits the acidic compartment of the stomach, and not only exacerbates the GI distress. And so, these patients become addicted to the PPIs and H2 antagonists, and this is something that is explicitly recommended against by FDA and EMA, especially in the pediatric population. And finally, one of the key metabolites in cysteamine is DMF, which produces in these patients a very strong rotten-egg odor about an hour after every administration, huge problem for a largely pediatric and young adult population in whom social functioning – normal social functioning is extremely important.

When you ask patients what their challenges are with the current cysteamine molecule, it’s dosing both the frequency and that middle of the night dose, may also complain about the GI side effects and the odor. So, about 10 years after this product was approved, the patients became so fed up with the lack of clinical development and advances in therapy that they themselves funded work at UCSD to improve the treatment. And the primary goals of this work, was to extend the dosing interval to at least every 12 hours. They wanted to make sure the community picked out a full night sleep. They also wanted to increase the GI tolerability and decrease the odor, and then importantly improved cystine depletion control in patients with difficulty swallowing. And that includes both the infants as well as the older patients that have very advanced disease and already have developed muscle atrophy.

During this work, it was discovered that when you deliver cysteamine directly to the duodenum, you increase the bioavailability by about 30%. And so it’s further theorized that you would be able to lower the total daily dose of the drug, reduced the PPI use, because you are bypassing the stomach, obviously this would allow an uninterrupted night sleep, and there were significant improvements made to the drug’s stability and shelf life as well.

The result of this work is RP103 or PROCYSBI with a slower adoption rate, a similar Cmax at a long stable Tmax that provides consistent and continuous protection over the entire 12-hour dosing period for these patients. Our Phase 3 study was published in 2012. And just as a reminder, this was a randomized multi-center active-controlled crossover designed study in 43 patients with white blood cell cystine that was well-controlled at baseline. In other words, these patients were compliant. And the pre-specified primary endpoint was white blood cell cystine equivalents at steady state measured between RP103 or Cystagon administration.

And RP103 readily met the primary endpoint with a high degree of statistical significance. In an intent to treat analysis of patients who comply with the protocol for the entire dosing period, RP103 was statistically superior to Cystagon. It achieved these results using lower total daily dose and substantially fewer PPIs. There was no unexpected safety issues and importantly all patients on RP103 had continuous white blood cell cystine depletion and control. This is incredibly important when you go and talk to payers who questioned the value proposition of ultra-orphan drugs, they want to know that the drug works in all patients and works consistently.

40 of 41 patients who completed dosing continued on the extension study, and to those patients, we have added the transplant and younger patients for a total of 54 patients still enrolled in the extension study. Last November at the American Society of Nephrology, Dr. Craig Langman presented the results, the long-term clinical outcome and showed for the first time that you could preserve kidney function in these patients. That’s never been shown before in a controlled play. And this is only possible, because patients are controlling and depleting their white blood cystine everyday.

We were very interested in quality of life and you can see that quality of life improved across every parameter studied and importantly in social functioning over on the bottom left, you can see how dramatic it was increased. Remember this is compared to a baseline of Cystagon. These patients are coming in well-controlled on Cystagon. And what you are seeing is a dramatically – a dramatic improvement in social functioning.

From a regulatory perspective, we await the PDUFA date of April 30 with hopefully no more surprises from FDA. And in EMA we expect an opinion sometime just after the middle of the year. Our launch product profile will look something like this. We will have two dosage forms 25 milligrams and 75 milligrams capsules. And this is the cartoon of the enteric-coated capsule with the micro-spherenized enteric-coated these inside. And it’s this delivery system that gives us both the delayed and an extended-release PK profile. And importantly these capsules can be swallowed whole or broken apart and sprinkled on food. We have done the bioequivalent studies to show that you can do that incredibly important for this population.

As we take a step back for a moment and look at the cystinosis market. To me with some experience in orphan commercialization, this is a curiously under developed market for one that’s had a product approved for 19 years and that’s because there has been no investment in clinical development really and in treatment guidelines and diagnostics standard. And so there is no nice cystinosis network for us to drop into. But what does happen because all patients develop kidney symptoms first in the evolution of their disease. They consolidate themselves within the pediatric nephrology and nephrology community. And this allows us to have a very small consolidated target group of physicians and it will be relatively easy for us to commercialize the product focus or message to these physicians.

Now, we should talk about the only excursion that occurs from this treatment flow and that is when the patients experience kidney failure and need a transplant and many of these patients do. They go for their transplant and this is kind of a danger zone for them because after the transplant, the patient sometimes have the misperception that they have a clean bill of health because they have a new kidney. And the transplants are often not always well integrated with the rest of the cystinosis care team. So, we call those patients that have a fallen off systemic therapy prodigal patients and we want to bring them home.

When you talk about commercializing in the ultra-orphan disease base there are two pillars to doing it successfully. The first is patient or physician identification and the second is facilitating access to therapy. When it comes to patient or physician identification this is literally the map of the physicians prescribing Cystagon in the last 10 years and you can see the density of the patients that they are treating. This represents a substantial majority most of the patients in the United States and this kind of clarity with regards to where these patients are has allowed us to target them profile of the practitioners, profile of physicians and develop a report with them.

We have also done a fair amount of market research with these physicians and when we show them a blinded PROCYSBI profile they react very positively. Almost 80% of them feeling that the profile is much more favorable than Cystagon, remember this is based on our Phase 3 data. They predict that this will have a big impact on quality of life and on long-term clinical outcome. And of course importantly almost 90% of them say that there are going to switch to PROCYSBI. When you talk to the physicians look at the physician responses for the 11% or 11% something percent that it didn’t look like that they would switch, they are concerned about the difficulty of swallowing, so we need to just amp up that message a little bit.

The patients on the other hand are a very well organized community. There are three U.S. advocacy organizations, so they have been very active and in fact one of them the CRF funded the early research that led to PROCYSBI. Patients and the caregivers have largely been left to their own devices and manage their own care. I have heard a lot of stories about them having to educate their own physicians about cystinosis. And accordingly their focus has become rather myopically – myopic on near-term quality of life instead of thinking more long-term about quantity of life. There is a high degree of fatigue and the usual range of compliance and motivation. We have already begun offering disease education and support to these individuals through our Raptor Cares Program. And this will become our reimbursement financial assistance and education support hub after launch.

Now, on the other pillar, which has to do about payer access or facilitating access, we have also reached out and surveyed payers that cover almost 300 million lives. And they reported that they will treat PROCYSBI exactly the same way that they treat other ultra-orphan diseases. That is, they hate the price points, with the resign to reimbursing, because they get the value proposition of these drugs. And how they treat other ultra-orphan drugs is shown here. And 70% to 75% of the time, they require a prior authorization or sometimes also a Step Edit. And this is a basket of ultra-orphan drugs. You have recognized most of them except the most recent launches are represented here. So, this is exactly the reimbursement scenario that we are preparing for and staffing up for. And this means importantly that we will not get the claims adjudicated on day one, or even potentially month one, but it’s going to take some time to work through the system. It’s not walked on us that we have two major geographical launches in front of us this year and we are going to focus 2013 is going to be the year of the U.S. launch. And in the U.S. it’s all about conversion from PROCYSBI. And we are going to be very focused on the mechanics of benefits adjudication. That’s a big focus of ours operationally.

Once Europe comes online, we are going to focus on those markets, those countries that have stable economies and well defined paths of reimbursement and that’s as you can imagine not that many countries. And we are going to be very careful about how we will out the European launch, so you should not expect us to be coming online and all the EU five for instance at once. We are going to continue to expand in 2014 horizontally to additional European countries, and even rest of world geographies very selectively. And then we are going to also expand vertically within the patient community path to PROCYSBI conversions to those prodigal patients that need to come back to therapy. And then to I think, what is a rather large cache of hidden patients today that are misdiagnosed and probably being treated for some form of chronic kidney failure. We are launching PROCYSBI into a market with good exclusivity and IP protection. The base case in the U.S. is exclusivity, regulatory exclusivity, along with our patent – issued patents going up to 2027. And it’s a similar story in Europe.

Now, we don’t have time, and I am not the right person to talk about all of the known and unknown or proposed mechanisms of action of histamine, but it is a really interesting molecule. And it was first delivered by the U.S. government to the service men in the 1950s as a radio protective agent to protect against nuclear fallout. It kind of explains some of our clinical development program. I did just want to touch on a few highlights, which probably represents my entire knowledge about this, but when histamine is absorbed it begins to react with a number of disulphide partners, including proteins. And this helps to rise the proteins right into the cells. Once it gets into the cell, it induces a number of – it up regulates the number of protein dis-aggregation mechanisms, particularly through the heat shock protein pathway, and also inhibits transglutaminase. And this is extremely helpful to prevent some of the protein aggregation before it comes for its starters. When it enters the cell, it also induces a beneficial homeostatic stress response and that along with the inhibition of transglutaminase is what explains the increase in BDNF both in the CNS and serum. And that has important benefits on obviously on neuronal survival.

And finally through a number of direct and indirect anti-oxidation mechanisms it reduces inflammation and mitochondrial dysfunction. So, I think just even touching on these three proposed mechanisms of action you can see how it has potential applicability and Huntington’s, NASH, fibrosis and we didn’t get to talk about malaria. Some upcoming catalysts are the PDUFA action date, April 30th and then followed by the U.S. launch. At the time of the launch we will communicate further details about the launch metrics that will be important for product uptake. Then we will look for Europe to come online our decision at least in Europe. And then we will also by the end of the year we anticipate interim results from our study looking at superiority of OP1 and 3 compared to Cystagon and patients who have poorly controlled white blood cells cystine at enrollment. And we think that this represents most of the patients. This will also be important data for us to have conversations with the European reimbursers. First half 2014, is Huntington’s disease data followed by NASH.

From a financial perspective, we have got a little over 50 million shares outstanding. Our market cap is $270 million, and we have about $60 million of cash on the balance sheet. So, just to recap we have a late stage product in front of the FDA with a near-term PDUFA producer date this is an ultra-orphan market opportunity. We have got a rather material Phase 2 clinical program and our goal is to become a fully integrated biotech company. Thanks.

Question-and-Answer Session

Unidentified Analyst

(Question Inaudible)

Julie Smith

Question was about the cash flow, we have about $60 million in cash on the balance sheet.

Unidentified Analyst

(Question Inaudible)

Julie Smith

No, I didn’t say financing it was just not – we just want to seek external funding for these programs. And so we’ve been connecting with organizations, foundations that sort of thing to support those early programs.

Unidentified Analyst

(Question Inaudible)

Julie Smith

The question was about the number of patients, the size of the market in the U.S. and how many of those patients will be able to reach EMA at Raptor. So, patient numbers and in ultra-orphan market are very challenging, you can – is epidemiology in our case, we actually have IMS data, we’ve gotten a back door to the IMS state on the Cystagon users today. And I think the published estimates which are everywhere about 500 Cystagon patients or 500 cystinosis patients is probably fair. And I think that the very addressable market for a company of Raptor size.

Unidentified Analyst

(Question Inaudible)

Julie Smith

Cystagon in the United States their price, I think it’s currently under $10,000.

Unidentified Analyst

(Question Inaudible)

Julie Smith

The question is about the price of PROCYSBI which we haven’t set yet. If there is a question?

Unidentified Analyst

(Question Inaudible)

Julie Smith

Okay. It’s a popular question. Any other questions. Great, thank you.

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