Receptos (RCPT) Big Gains After Phase 2 Results an Overreaction?

June 10, 2014 • Top News • Tags:

On June 9th, Receptos announced that a portion of its Phase 2 results in relapsing multiple sclerosis (RMS) met the primary endpoint of reducing MRI brain lesion activity. News of being a potential best in class profile has caused RCPT shares to shoot up 50% in a matter of two days. Detailed results of the RADIANCE trial are expected to be presented in coming months.
The MS market is valued at around $16B, but faces competition from existing products (below). Positioning a successful therapy will prove to be difficult even if FDA approval is attained. With Phase 3 initiation just announced, RPC1063 is years away from the market.

Multiple Sclerosis Drugs

Given the competitive landscape and Receptos’ top line results, the company may be seen as a potential takeover target by the investing community. For example, Teva’s Copaxone lost US market exclusivity May 2014 and has patents expiring in May 2015 in most of the rest of the world. As a result of generics, Teva expects to take a $550M hit during 2014. A therapy such as RPC1063 could minimize these losses in the upcoming future.

Before bidding the company up to a billion dollar valuation, investors must remember that Phase 3, the longest stage, was just initiated  and the company has a relatively small float of 15M shares. Due to this, the recent volatile action is exaggerated. In addition, the month leading up to the trial results, Receptos directors dumped over 700k shares under $30 stock price. The Receptos party may end sooner than expected.

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