On May 05, 2016 Raptor Pharmaceutical Corp. (NASDAQ:RPTP) ("Raptor" or the "Company"), a biopharmaceutical company developing and commercializing transformative treatments for rare diseases, reported its financial results for the first quarter of 2016 and provided an update on recent corporate developments (Press release, Raptor Pharmaceutical, MAY 5, 2016, View Source [SID:1234512059]).

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Summary

Global net product revenue for PROCYSBI was $27.5 million for the first quarter ended March 31, 2016, a 34% increase compared to $20.5 million for the same period in 2015.

Net loss, including In-Process R&D (IPR&D) impairment and changes in the fair value of contingent consideration liability, on a GAAP basis was $41.6 million, or $0.49 per share, for the first quarter of 2016 compared to a GAAP net loss of $19.7 million, or $0.28 per share, for the same period in 2015.

Non-GAAP net loss, which excludes non-cash expenditures such as stock compensation, impairment of intangible assets and adjustment to the fair value of contingent consideration liability, was $14.1 million, or $0.17 per share compared to a net loss of $16.8 million, or $0.24 per share in the first quarter of 2015.

Cash and cash equivalents were $132.0 million as of March 31, 2016.

"Raptor achieved several significant milestones during the quarter, underscoring the progress we are making in building a premiere rare disease company," said Julie Anne Smith, President and CEO of Raptor. "PROCYSBI continues to deliver strong growth as a result of significant market penetration and continued high levels of patient compliance and we now look forward to revenues from the commercialization of QUINSAIRTM. We are focused on prioritizing key clinical programs to drive growth and being measured with our investments in selected development to extend our cash runway. As a result we are adjusting our non-GAAP cash operating expense guidance favorably for 2016. We look forward to continuing momentum as we work to bring QUINSAIR to patients in Europe and Canada, to make progress towards an NDA filing for MP-376 in cystic fibrosis (CF) and to initiate a Phase 2 MP-376 study in non-cystic fibrosis bronchiectasis (BE)."

First Quarter 2016 Business Highlights

Four new patents related to PROCYSBI were listed in the Orange Book during the quarter, bringing the total number of Orange Book-listed patents to five. In addition, PROCYSBI was granted additional U.S. orphan exclusivity in the two-to-six year old nephropathic cystinosis population until August 2022.

In March 2016, MP-376 received Qualified Infectious Disease Product (QIDP) designation for three distinct indications: the treatment of chronic pulmonary infections due to Pseudomonas aeruginosa, in patients with CF and in patients with BE, and in patients with nontuberculous mycobacteria infections (NTM). QIDP designation confers five years exclusivity under the Hatch-Waxman Act, which, in the case of CF, would be added to the seven years of orphan exclusivity for a total potential of 12 years of exclusivity, if approved for the indication.

In March 2016, Health Canada accepted the new drug submission for PROCYSBI in nephropathic cystinosis with Priority Review, which provides for a shortened review period of 180 days, compared to a standard review of 300 days. If approved, the shorter review time is expected to enable Raptor to bring PROCYSBI to market faster in Canada.

First Quarter 2016 Financial Results

Raptor provides non-GAAP financial measures, which it believes can enhance an overall understanding of its financial performance when considered together with GAAP figures. Refer to the section of this press release below entitled "Non-GAAP Financial Information and Other Disclosures" for further discussion on this subject.

Net Product Revenue

PROCYSBI global net revenue for the first quarter of 2016 was $27.5 million, compared to $20.5 million for the first quarter of 2015. The 34% revenue growth was driven by further market penetration in the U.S. and in Europe and named patient sales in other international territories.

Cost of Sales

Cost of sales was $4.3 million for the first quarter of 2016, compared to $3.7 million for the first quarter of 2015. The increase was due to higher quarterly sales year-over-year, which yielded higher direct costs and royalty expenses, and lower inventory reserves in 2016.

Research & Development (R&D)

R&D expenses for the first quarter of 2016 were $14.0 million compared to $16.6 million for the first quarter of 2015. The change was primarily due to a decrease in clinical trial expenses.

Selling, General and Administrative (SG&A)

SG&A expenses were $20.4 million for the first quarter of 2016 compared to $14.8 million for the first quarter of 2015. The increase in SG&A expenses was primarily a result of increased staffing and promotional support for commercial operations of PROCYSBI worldwide and administrative expenses.

In-Process R&D (IPR&D) and Contingent Consideration Liability Related to QUINSAIR Acquisition

The Company has revised its clinical development plans for MP-376. As a result, for the quarterly period ended March 31, 2016, based on a fair value assessment, Raptor recorded a non-cash impairment charge to IPR&D of $39.6 million and a partially offsetting contingent consideration credit adjustment of $14.7 million related to R&D stage projects from its October 2015 acquisition of QUINSAIR.

Interest Expense

Interest expense for the first quarter of 2016 was $5.0 million, compared to $4.5 million for the first quarter of 2015. The increase in interest expense was due to an increase in royalty fees based on net sales for the period.

Net Loss

GAAP net loss in the first quarter of 2016 was $41.6 million, or $0.49 per share, compared to a net loss of $19.7 million, or $0.28 per share, in the first quarter of 2015.

Non-GAAP net loss, which excludes the non-cash expenses of stock compensation expenses, impairment of intangible assets and adjustment to the fair value of the contingent consideration liability, for the first quarter of 2016 was $14.1 million, or $0.17 per share, compared to a net loss of $16.8 million, or $0.24 per share, in the first quarter of 2015.

Cash, Cash Equivalents

As of March 31, 2016, Raptor had $132.0 million in cash and cash equivalents compared to $157.4 million in cash and cash equivalents at the end of 2015.

2016 Full-Year Financial Guidance

Reiterating 2016 global net revenue guidance of $115 to $125 million.
Reiterating PROCYSBI revenue growth of 25% to 30% over 2015 revenues.
Lowering non-GAAP operating expense guidance, which excludes non-cash expenditures such as stock compensation, amortization and impairment of IPR&D and adjustment to the fair value of the contingent consideration liability, to $125 to $135 million from $135 to $145 million.
Product and Pipeline Updates

PROCYSBI for Nephropathic Cystinosis

PROCYSBI is currently commercially available to patients in the U.S., where it is the market leader in nephropathic cystinosis. PROCYSBI is also commercially available in Europe and is made available in additional markets through named patient sales.
In March 2016, Health Canada accepted for review the Company’s New Drug Submission (NDS) for PROCYSBI for the treatment of nephropathic cystinosis, with Priority Review status.
QUINSAIRTM

In April 2016, the Company launched QUINSAIR in Germany and Denmark for the management of chronic pulmonary infections due to Pseudomonas aeruginosa in adults with CF. Raptor anticipates launching the product in Canada in the second half of 2016.
MP-376 (Investigational Form of QUINSAIRTM)

In March 2016, MP-376 received QIDP designation for three distinct indications: the treatment of chronic pulmonary infections due to Pseudomonas aeruginosa, in patients with CF and in patients with BE, and in patients with NTM. Granting of the QIDP designation by the FDA highlights the potential of MP-376 to address a number of serious and life-threatening infections and provides Raptor with significant incentives for the development of MP-376, including Priority Review by the FDA, eligibility for Fast Track designation and a five-year extension of marketing exclusivity under the Hatch-Waxman Act. QIDP also paves the way for the FDA to apply greater regulatory flexibility in the case of high unmet medical need for serious life-threatening infections. Raptor holds orphan drug designation in the U.S. for MP-376 for the treatment of CF, which, when added to the five years of exclusivity associated with QIDP designation, would confer 12 years of regulatory exclusivity upon FDA approval.
Raptor expects to provide an update on regulatory discussions with the FDA concerning MP-376 in CF.
The Company intends to initiate a Phase 2 study for MP-376 in BE this year. The Company will provide additional clarity on the timing of key activities once the study design has been finalized.
RP103 for Huntington’s Disease (HD)

Based on prioritization of clinical programs and the best use of current capital, the Company will be exploring non-dilutive funding and partnering options.
RP103 for Mitochondrial Diseases

The second interim analysis, which occurred after 12 patients completed 24 weeks of treatment, indicated the trial should continue as planned. The treatment was generally safe and well tolerated and no unexpected safety signals were observed in this patient population.
Anticipated Upcoming Milestones

4Q 2016 — Potential PROCYSBI approval in Canada
2H 2016 — Potential PROCYSBI and QUINSAIR launches in Canada
2016 — Advancements toward an NDA submission for MP-376 in CF in the U.S.
2016 — Initiation of a Phase 2 study for MP-376 in BE
Conference Call and Webcast Information

Raptor will conduct a conference call and live audio webcast at 4:30 p.m. ET (1:30 p.m. PT) today. The live call may be accessed by dialing (877) 710-6201 for domestic callers or (616) 548-5611 for international callers and using the conference ID number 1390038. A live webcast of the conference call will be available online from the investor relations section of the Raptor website at www.raptorpharma.com. After the call, a webcast replay will be available on the Raptor website for 90 days while a telephone replay will be available for five days. This can be accessed by dialing (855) 859-2056 for domestic callers, or (404) 537-3406 for international callers, and using the conference ID number 1390038.

Non-GAAP Financial Information and Other Disclosures

Raptor uses non-GAAP financial measures, such as non-GAAP net loss, non-GAAP net loss per share and non-GAAP operating expense, to assess and analyze its operational results and trends, provide operating expense guidance, and to make financial and operational decisions. Raptor believes these non-GAAP financial measures are also useful to investors because they provide greater transparency regarding Raptor’s operating performance and exclude non-cash expenditures such as stock compensation, amortization and impairment of IPR&D, and change in the fair value of the contingent consideration liability related to acquisitions. These non-GAAP financial measures should not be considered an alternative to measurements required by GAAP, such as net loss, net loss per share and total operating expense, and should not be considered measures of Raptor’s liquidity. Non-GAAP financial measures should not be considered as a substitute for measures of financial performance calculated in accordance with GAAP and should only be used to supplement an understanding of Raptor’s operating results as reported under GAAP. In addition, these non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. Reconciliations between non-GAAP financial measures and GAAP financial measures are included in the table accompanying this press release after the unaudited consolidated financial statements. Raptor has not provided a GAAP reconciliation for its forward-looking non-GAAP financial measures, such as 2016 operating expense, because such measures are not readily determinable and not available without unreasonable efforts. Raptor cannot reliably predict without unreasonable efforts the timing or likelihood of outcomes that determine future impairments or changes in the fair value of contingent consideration liability nor the timing or amount of the factors that substantially contribute to the projection of stock compensation expense. Both are excluded from the forward-looking non-GAAP financial measures. The Company does not believe that such a reconciliation would be meaningful to stockholders.