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Why Raptor Is Down, Despite Possibility of New Drug Approval

Here are some numbers.

Procysbi costs $250,000 a year as a treatment for cystinosis. Since RP103 for Huntington's is the same molecule, it would likely cost the same or at least be in the same range. There are only 2,000 known cases of cystinosis in the world, but an estimated 30,000 in the U.S. alone have Huntington's. Roughly speaking, an FDA approval for cysteamine in the Huntington's indication would therefore increase Raptor's potential market by a factor of 15 just in the U.S. Right now, Raptor's only source of income is Procysbi. Approval in Europe would increase income even more.

Read More: Biotech Stock Mailbag: Raptor, Chelsea, Oncogenex, More Hate Mail

Speaking of Europe, cysteamine for Huntington's received orphan status from European regulators last week.

The bottom line: Cysteamine has already been approved once, the patient size and scores for the phase 3 on which it was approved are similar to the approval for Xenazine, Europe seems favorable, and the number of medications currently available for Huntington's is precisely one. An approval will expand the addressable market Raptor has by at least 15x and likely more, but Raptor's share price is still depressed because people are fretting about the lack of (public) communication with the FDA since top line phase 3 results were published in February.

The fact that the company lost 6 cents a share less than analysts estimated rocketed the stock up 36% in two days. Imagine what would happen if the FDA gives Raptor the go-ahead to treat Huntington's disease.

At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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