Rapport Therapeutics, Inc. (RAPP) stock intrinsic value fair value estimate & owner earnings analysis

Rapport Therapeutics is a clinical-stage neuroscience drug developer with no products on the market. Nearly all of its value hangs on one compound, RAP-219, a pill that selectively dampens an AMPA-receptor partner protein (TARP gamma-8) concentrated in the brain regions where focal seizures start. In a Phase 2a trial in drug-resistant focal onset seizures (topline September 2025), patients saw large reductions in seizures, sustained in follow-up data presented in April 2026. After an end-of-Phase-2 meeting with the FDA in December 2025, the company began two global Phase 3 trials (FOCUS-1 and FOCUS-2, each over 300 adults) in the second quarter of 2026. It is also running a Phase 2 trial in bipolar mania (results expected October 2026), plans a Phase 3 trial in primary generalized tonic-clonic seizures in the first half of 2027, and has earlier work on a long-acting injectable version and a non-opioid pain candidate (RAP-641). A planned Phase 2 trial in diabetic nerve pain was placed on FDA clinical hold in late 2024. RAP-219 came from Janssen under a 2022 license; Janssen is owed up to $116 million in milestones plus mid-to-high single-digit royalties if the drug succeeds. In March 2026 Rapport licensed Greater China rights to Tenacia Biotechnology for $20 million upfront, up to about $308 million in contingent milestones and tiered royalties. What the business has actually earned: nothing yet. Cash spent on the business after treating stock-based pay as a real cost was about $35 million in 2023, $76 million in 2024 and $111 million in 2025, with the loss widening 46% last year. Spending is now accelerating: research costs were $51 million in the second quarter of 2026 alone, against $23 million a year earlier, because the Phase 3 program started. Annualized, the business now consumes roughly $190-200 million a year. In these figures we counted stock compensation as an expense, paired lease payments with the non-cash lease charge, and used reported share counts, which make the 2023 and 2024 per-share losses look larger than they really were because preferred shares had not yet converted. What it owns and owes: $436.1 million of cash and short-term investments at June 30, 2026, no borrowings, and about 48.0 million shares. The office lease (about $13 million of remaining payments) is part of normal operating costs. Management says the cash funds operations into the second half of 2029. How we valued it: we credit only earnings that are already secured or come from a proven, repeatable process. An experimental drug, however promising its Phase 2a results, has no approval, no sales and no earnings record, and a successful Phase 3 trial is an event that has not happened. So none of the cases include revenue from RAP-219, and the Tenacia milestones are also left out, since each depends on development progress that has not happened and the filings don't split out the amounts. What the cases measure is how much of today's cash will still be there once the Phase 3 trials report, which we estimate around the end of 2028 for trials of this size started in mid-2026. Stock compensation is charged as dilution of that remaining cash. Bear case ($0.00 per share): spending stays at the second-quarter 2026 pace (about $50 million a quarter in cash) and steps up when the generalized-seizure Phase 3 starts in 2027. The cash runs out around the end of 2028, before or at the Phase 3 results, and if those results fail, nothing is left for current shareholders. The business is worth nothing on what can be credited today; with no debt, shareholders are not liable beyond the value of their shares. Base case ($0.27 per share): spending averages about $42 million a quarter, between the current quarterly pace and the pace implied by management's runway, through about the end of 2028. Roughly $16 million of cash would remain when the Phase 3 trials report. Discounted at 6% and after dilution from stock pay, that is worth about $13 million. The business owes nothing, so equity is worth the same $13 million, or $0.27 per share. Bull case ($2.72 per share): spending holds to the roughly $35 million-a-quarter pace that management's 2029 runway implies, and faster enrollment (Chinese sites start recruiting in the fourth quarter of 2026) brings Phase 3 results by mid-2028. About $156 million would remain, worth about $130 million today after discounting and dilution. With no debt, that is $2.72 per share. What would make this wrong: the gap between these figures and any market value reflects the drug's prospects, which this method does not credit until they are proven. If FOCUS-1 and FOCUS-2 succeed and RAP-219 is approved and sells, the business would be worth far more than these cases. That would happen through approval, launch and a sales record, and we would reassess once those exist. On the other side, if cash spending runs above the second-quarter 2026 pace, the base case moves toward the bear case. One part of the record could not be fully reconciled: management's runway into the second half of 2029 implies lower spending than the second quarter of 2026 shows. We used the guided pace only in the bull case. Margin-of-safety price: with a very thin remaining-cash cushion even in the base case and a single-asset story, the estimate calls for a wide margin of safety, and the margin-of-safety price is around $0.12 per share.