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Here's Why Raptor Pharmaceuticals Corp. Plunged Today

By George Budwell - Sep 14, 2015 at 11:39AM

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Raptor Pharmaceuticals' shares cratered after a top clinical candidate missed the mark in a mid-stage study.

What: Raptor Pharmaceuticals (NASDAQ: RPTP), a small-cap biopharma company specializing in the development of treatments for rare diseases, saw its stock plunge by nearly 40% today on heavy volume. This massive downward move was precipitated by the announcement that the company's experimental drug for nonalcoholic steatohepatitis (NASH) in children, RP103, failed to meet its primary endpoint in a second mid-stage trial. Because RP103 reportedly failed to make any meaningful impact on liver fibrosis, Raptor expects to discontinue the drug's clinical program for NASH following these disappointing results. 

So what: Given the lack of therapeutic options for children with this serious liver disease, this particular indication for RP103 was seen as one of Raptor's most promising commercial opportunities. 

Now what: While this clinical setback is no doubt unfortunate for investors and patients alike, it's not the end of the world for Raptor. After all, Raptor's FDA-approved treatment for the management of nephropathic cystinosis, Procysbi, is on track to generate $80 to $90 million in net sales this year, and RP103 is still being evaluated in other rare conditions such as Huntington's disease and various mitochondrial disorders.

The company also exited the second quarter with a relatively decent cash and cash equivalent position of $193 million, giving it some headroom to find additional value drivers going forward. Finally, its recent acquisition of Quinsair, a medicine approved in the EU and in Canada for chronic pulmonary infections due to Pseudomonas aeruginosa in adult patients with cystic fibrosis, should also help provide a revenue lift next year. 

Having said that, Raptor looks, to me, to be fairly valued, on a risk-adjusted basis, following RP103's clinical miss in pediatric NASH. So I personally don't plan on picking up any shares today, but may do so if the stock continues moving lower in these days ahead. 



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