Raptor Pharmaceuticals Corp. (RPTP) is a biotechnology company which is developing drug therapies for the treatment of genetic diseases, such as nephropathic cystinosis, Non-alcoholic Steatohepatitis ("NASH"), Huntington's Disease ("HD"), aldehyde dehydrogenase deficiency ("ALDH2"), and thrombotic disorder.
Cystagon is the only treatment for nephropathic cystinosis and is not liked by its current patients which must consume a large handful of tablets every six hours. This interferes with normal sleep patterns as they have to awake at least once in the night to take their dose. Moreover, a high percentage of patients experience adverse GI events. Furthermore, patients emit a foul body order relating to maximum concentrations of Cystagon in the body. With RP103, patients can take the medicine every 12 hours instead of every six, without disrupting sleep and it also has fewer side effects like nausea and gastric discomfort, because the medicine bypasses the stomach and goes directly into the duodenum.
RP103 is currently under FDA review (PDUFA) which Raptor anticipates an approval decision on January 30, 2013. Raptor's E.U. marketing application of RP103 is under review by the EMA and Raptor expects a decision in the first half of calendar 2013.
This week I held an interview with Ms. Liisa Bayko, a Managing Director and senior research analyst covering the biotechnology industry at JMP Securities. In 2011, Liisa ranked first among all stock pickers in the Pharmaceuticals category and fourth in the Biotechnology category in the annual "Best on the Street" analyst survey conducted by the Wall Street Journal. In 2010, she ranked second in the Biotechnology category. Prior to joining JMP, Liisa was a Director and senior biotechnology analyst at Next Generation Equity Research. She previously served as an equity research associate at Prudential Equity Group and worked as a research analyst at Baker Brothers Investments. We discussed the future of Raptor Pharmaceutical Corp.
Ben Yoffe: Ms. Bayko, can you share with us your expectations regarding the upcoming PDUFA date of January 30, 2013 for RP103?
Bayko: We assign a 80% chance of approval for RP103 by the PDUFA date based on the positive Phase 3 data and orphan indication.
Yoffe: Do you see the upcoming FDA approval decision as a big catalyst for the company?
Bayko: As a first drug approval for the company, we think there is some discount applied to shares of RPTP which will alleviated upon approval, making for a meaningful catalyst. Following approval, we anticipate management will disclose the price of RP103, which has been a source of debate for the stock. Given the ultra orphan nature of the target indication, cystinosis, and the significant improvement in quality of life this drug affords to patients and their families, we believe the company has significant pricing power for RP-103 hurtles.
Yoffe: How many sales from RP103, if approved, do you expect to see in the U.S.?
Bayko: We anticipate peak sales in the US of $60M.
Yoffe: A European approval decision for RP103 is expected in the first half of 2013. What is the market potential for the drug in Europe?
Bayko: The market in Europe is larger than the US - we estimate $93M in sales ex-US.
Yoffe: What would be the price of RP103 in the U.S. and Europe?
Bayko: We anticipate pricing of $200,000-$300,000. Our model assumes the midpoint of $250,000 per patient per year and the company will ensure all patients have access to RP103, regardless of individual reimbursement.
Yoffe: When we should hear a decision on orphan exclusivity for RP103 in the U.S. and Europe and what are your expectations?
Bayko: I expect exclusivity in Europe because RP103 qualifies as the first drug to be approved under orphan drug status. However, in the U.S., orphan drug exclusivity is less likely given that Cystagon holds this determination. We will learn about these decisions at the time of approval.
Yoffe: How important it is for the company to have orphan exclusivity for RP103?
Bayko: While the company will push for U.S. orphan exclusivity, we do not think it necessarily provides any additional value as RP103 is patent protected until 2026.
Yoffe:: In early July, JMP Securities hosted a cystinosis patient panel. Can you tell us more about that?
Bayko: We hosted a panel with one adult cytinosis patient and two parents of children with cystinosis (one has twins with cytinosis) for investors. We spend a couple of hours learning about the disease in detail, the hardship of current treatment, as well as the impact that RP103 has had on the lives of the patients who have had a chance to be on the trials. To be honest, the stories were heartbreaking and put RP103 into context. We learned the parents and patients are desperate for approval of RP103 and at the same time are worried about pushback from payors. Given the ultra orphan nature of the disease and the support that we believe Raptor will provide (they have already initiated a program called RaptorCare) to patients, we think this will be a lower barrier to treatment than patients fear.
Yoffe: Is there any other significant products in Raptor's clinical-stage pipeline?
Bayko: RP103 is being investigated in two other indications - NASH and Huntington's disease. Each could mean significant upside for the company.
Yoffe: What is the financial picture for Raptor?
Bayko: Raptor has $43M in cash, which we think is enough to get them through drug approval.
Yoffe: What is your price target for RPTP?
Bayko: Our price target is $12, based on a risk adjusted discounted cash flow analysis assigning RP103 an 80% chance of approval in cystinosis. We currently do not value the other programs as part of our cash flow model.
Yoffe: For closing, Do you think now is a good time to buy RPTP?
Disclosure: I am long RPTP.