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Another Look At Raptor Pharmaceutical Corp.

Summary

I wrote about Raptor last year, and was not particularly excited about its upside potential.

In the meantime, the company has continued to deliver solid growth with Procysbi, and has launched Quinsair in the EU in April.

A solid balance sheet and revenue and cash expense guidance point to low cash burn, which means that there is no near-term threat of dilution, but there is a catch.

There are some potential medium-term catalysts that could drive the share price higher, and the company could be an interesting takeover target.

I wrote about Raptor Pharmaceutical Corp. (NASDAQ:RPTP) in late October 2015, and said that the company has potential, but that the two alternatives in the orphan space were actually better - Corcept (NASDAQ:CORT) and Vanda (NASDAQ:VNDA). As of this writing, Corcept has outperformed significantly while Raptor and Vanda had almost the same return.

10-28-15 03-06-16 Change %
RPTP 5.89 5.58 -5.3%
VNDA 11.53 10.87 -5.7%
CORT 3.93 5.82 48.1%

Click to enlarge

In this article, I will revisit the long case for Raptor and discuss the latest changes and the potential catalysts. I have also seen some social media chatter about Horizon (NASDAQ:HZNP) being interested in buying Raptor and will discuss the potential upside in a takeover scenario.

Procysbi's growth on track, Quinsair launched in the EU in April

Raptor continues to see solid growth with Procysbi, especially in ex-U.S. territories. Procysbi's revenues increased 34% Y/Y to $27.5 million in Q1 and revenues outside of the U.S. rose 81% (though the actual number was not reported). The company plans to expand to more EU countries and in Canada, assuming it gets approved in Q4 2016. Procysbi remains Raptor's most valuable asset, and it has more growth potential going forward despite the very limited patient pool (estimated to be around 2,000 worldwide). I assume that the market penetration in the EU and the Middle East is still low, and the company expects combined peak sales in those regions to be in the $50 million to $75 million range. I estimate the worldwide peak sales between $200 million and $250 million.

Raptor now has two marketed products. The company launched Quinsair in April in Germany and Denmark. Around one-fifth (3,750 patients) of the EU patient population is in these two countries, and the monthly treatment cost will be in the EUR3,000 to EUR3,500 range (or between $3,350 and $3,900). Raptor is targeting $35 million to $40 million in annual revenues in the EU and Canada by 2019 and $150 million to $250 million worldwide if approved in the U.S. But the approval in the U.S. remains questionable - Quinsair did not meet its primary endpoint of increased time to pulmonary exacerbation in phase 3 trials, but there were improvements in lung function. The company expects to engage with the FDA this year, but I am still skeptical about Quinsair's potential in the United States, at least for the current indication.

When we combine the revenue potential of Procysbi and Quinsair in current indications and approved markets, we get a range of $235 million to $280 million, which is not that bad considering the current valuation.

A look at the...


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