Biotech and Pharma

Receptos CEO: Building for the long term

Who can beat the 'superbug'?
Who can beat the 'superbug'?

A year ago, Receptos was a billion-dollar company looking to compete with drugmakers sometimes a hundred times its size, in therapeutic areas already served by several medicines on the market. Since then, its shares have more than doubled to about $120, and analysts say they may have more room to run.

The company's strategy? Offering a potent benefit to what's already available in diseases from multiple sclerosis to ulcerative colitis to Crohn's disease. The company's lead compound, RPC1063, is furthest along in testing in MS. It will present more data this weekend from a study in ulcerative colitis, which causes inflammation in the digestive tract, which already drove the shares up 50 percent in October.

The drug works in a similar way to Novartis' Gilenya in multiple sclerosis—a market with 12 disease-modifying drugs already approved. Analysts say Receptos' medicine may work as well as Gilenya, but could come with fewer side effects.

"1063 may have similar efficacy to Gilenya with less hepatotoxicity and only a mild, benign first-dose heart rate effect," Joseph Schwartz, an analyst with Leerink Partners, wrote in a research note Thursday. Gilenya is associated with increased liver enzymes and requires monitoring for slowed heart rate on the first dose. Still, it draws more than $2 billion annually for the Swiss drugmaker.

Receptos' medicine is in the third and final stage of testing generally required for regulatory approval, with data expected in MS in 2017, CEO Faheem Hasnain said in a telephone interview Thursday. The company is also testing the compound in areas Gilenya isn't approved—ulcerative colitis and Crohn's disease—where it would compete with inflammatory drugs such as Johnson & Johnson's Remicade and AbbVie's Humira.

There, the advantage is that RPC1063 is a pill, rather than an infused drug like existing options.

"That differentiation is obvious," Hasnain said. "But our efficacy looks to be in line with those biologics, if not better."

The data reported in October from a mid-stage study in ulcerative colitis, a chronic inflammatory bowel disease that may affect as many as 700,000 people in the U.S., were "arguably about as good as it gets," Hasnain said. The company is due to present additional data from the study Saturday at the European Crohn's and Colitis Organisation meeting.

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Credit Suisse analyst Ravi Mehrotra raised his price target on Receptos shares ahead of the presentation, to $140 from $125, and estimates peak sales of the drug, in all indications, of $4 billion. He noted a 22 percent difference between RPC1063 and placebo in mucosal healing, an important measure of disease activity.

The next question for Receptos is timing for a partnership to help it sell the drug, or whether an acquirer may look to buy the whole company. Receptos has been the target of takeout speculation before, though Hasnain said he's not building the company with an eye on a buyout.

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"We are going to be looking at the possibility of partnering to ensure that we've got as rapid an uptake as possible, especially in the MS space, given that it's more competitive," Hasnain said. "We certainly think it would be appropriate for a company like Receptos to be doing that alongside a good, strong, global partner. But it is our intent to build out a commercial infrastructure globally."

As for takeout speculation?

"There's only one strategy to run a business, and that is to try to think about building for the long term," Hasnain said. "Everything we've been doing from the get-go is all about building a sustainable business."