Sarepta Therapeutics (NASDAQ:SRPT) and Amicus Therapeutics (NASDAQ:FOLD) are two fast-growing biotech stocks that are trading at price-to-sales multiples north of 50, yet biotech investors may still want to add them to their portfolios despite their sky-high valuations. Both companies already market fast-growing, FDA-approved drugs and each is developing new drugs for rare diseases that could significantly expand their peak sales opportunity. 

Small start, big finish

Sarepta Therapeutics markets Exondys 51, an exon-skipping drug that helps restore dystrophin production in about 13% of Duchenne's muscular dystrophy (DMD) patients. 

A gold pill rest on top of a pile of gold coins.


DMD is a rare, life-shortening, muscle-wasting disease, and when Exondys 51 won FDA approval last year, it became the first FDA-approved therapy in this indication. Despite a small addressable market totaling about 3,400 patients, sales of Exondys 51 are already tracking at an annualized pace of about $140 million, and sales are growing rapidly. Its second-quarter revenue more than doubled its revenue in the first quarter.

However, Exondys 51's growth isn't why I think Sarepta Therapeutics shares could continue higher. Instead, it's the company's progress toward developing additional exon-skipping drugs that make me optimistic. 

The company is evaluating drugs that skip exon 53 and exon 45, and in September, it reported its exon 53 skipping drug boosted dystrophin levels in a small phase 1/2 trial. If this news leads to the FDA eventually giving a green light to the use of drugs that skip exon 53 and exon 45, then Sarepta Therapeutics' addressable market increases to about 30% of all DMD patients, or roughly 7,600 patients. 

Since Exondys 51 costs $300,000 per year, and future exon-skipping drugs will likely command similar prices, additional approvals could push Sarepta Therapeutics' annual sales over $1 billion after rebates and discounts. Peak revenue could end up being even higher than that, though, because Sarepta Therapeutics is also developing exon-skipping drugs that could allow it to address 47% of DMD patients, or about 12,000 patients per year.

A chart showing the breakdown of patients with various exon mutations.


The company's current $3.2 billion market cap becomes far less frightening if these efforts pan out. Admittedly, there's no telling if it will win more approvals, or when it may turn a profit -- it lost more than $60 million last quarter -- but I do think the opportunity here can justify a higher price.

Second time a charm?

Amicus Therapeutics' shares have been on a roller-coaster ride since the FDA rejected the company's first attempt to file for approval of Galafold, its Fabry disease drug.

Fabry disease is a genetic disease that causes the buildup of a fatty substance called GL-3 in vital organs. Over time, a buildup of GL-3 can lead to kidney failure, stroke, and heart attack. As a result, the average life expectancy for Fabry disease patients is shorter than the general population.

Currently, Fabry disease patients are treated with enzyme replacement therapies. Shire's Replagal is sold in Europe, and Sanofi's Fabrazyme is sold in Europe and North America. Both drugs replace a missing or under-produced enzyme that's necessary to breakdown GL-3. Unlike these drugs, Galafold is a chaperone drug. It maximizes the ability to breakdown GL-3 in patients who still produce some of the necessary enzymes. An estimated 35% to 50% of Fabry disease patients could benefit from Galafold's approach.

Though Galaford won an OK in Europe, the FDA initially told Amicus Therapeutics it would have to conduct another trial to prove Galafold's efficacy before it would consider an approval. However, the FDA changed its mind this past summer, telling management it could submit Galafold for approval without doing the additional study.

The FDA's change of heart could signal that an OK is in the offering for Galafold. If so, it could give Amicus Therapeutics' financials a big boost. Replagal and Fabrazyme generate over $1 billion per year in combined sales, while Galafold's sales were only $7.2 million in Q2. Amicus Therapeutics expects to complete its application for FDA approval in Q4.

A Galafold green light would be great news, but there's another reason Amicus Therapeutics stock could continue to climb. Recently, management reported that its clinical-stage Pompe disease drug improved walking distance at the 6-month and 9-month marks. It also increased muscle strength and boosted pulmonary function. The data conceivably could be good enough to warrant accelerated approval, but if not, a phase 3 trial is slated to begin next year. 

Amicus Therapeutics' opportunity in Pompe disease could be similar to its opportunity in Fabry disease. Sales of Sanofi's Myozyme and Lumizyme, two commonly used Pompe disease enzyme replacement therapies, totaled 393 million euros in the first six months of 2017. 

With the potential to generate 9-figure sales in both Fabry disease and Pompe disease, Amicus Therapeutics could be worth more than its current $2.5 billion market cap.  

Risky stocks to buy

Sarepta Therapeutics and Amicus Therapeutics spend more money than they bring in, and there's no guarantee their trials will lead to FDA OKs. A lot of success is already priced into their shares, so a stumble could cause shares to tumble, and that makes owning these companies too risky for most investors. Nevertheless, I think the peak sales opportunity for these companies is going to get bigger, and if I'm right, then risk-tolerant investors could still end up being rewarded, despite shares trading near 52-week highs.

Todd Campbell owns shares of Amicus Therapeutics. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.