So far on the year Raptor has had a pretty solid performance, with shares up 50% year to date. However, Oppenheimer is taking a more pessimistic view on the stock and does not see it rising any higher. In fact it sees the stock plummeting.
The second half of 2015 trial readouts are unlikely to drive value in the firm’s view and are fundamentally more risky indications for Procysbi than cystinosis. Oppenheimer believes the failure of Phase 2b in non-alcoholic fatty liver disease (NAFLD) is likely, but also highlights that the market for this drug is highly limited. New opportunities for Procysbi will require long, risky, costly, placebo-controlled studies for approval and dilutive financing.
According to Oppenheimer:
We believe Procysbi is unlikely to be effective in NAFLD, which is not [non-alcoholic steatohepatitis]NASH, and is infrequently suspected/diagnosed. Literature highlights 75% of docs don’t sufficiently investigate symptoms/lab results to even suspect NAFLD let alone continue with unappealing biopsy required for definitive diagnosis; lifestyle changes, vitamin E, DHA, probiotics to prelude drugs.
The company’s market cap of roughly $1.25 billion makes it too expensive for a strategic acquirer. Procysbi is over $300K per year for its price versus $10,000 for a generic price. The firm considers this to be a poster child for “specialty” drug pricing. At the same time, this may present a significant liability to an acquirer.
A couple of other analysts chimed in within the last quarter as well, however they did not see Raptor being fully priced in at this level:
- Citigroup initiated coverage with a Buy rating and a $20 price target
- Janney initiated coverage with a Buy rating and a $16 price target
Shares of Raptor were down 7.6% at $14.59 on Monday afternoon. The stock has a consensus analyst price target of $18.83 and a 52-week trading range of $7.85 to $16.28.
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