Shares of rare-disease specialist Amicus Therapeutics (NASDAQ:FOLD) have been tumbling for several months over competitive concerns for its lead drug candidate. While the first-mover advantage tends to be overblown in most investing discussions, that's typically not the case when it comes to launching new drug products, especially in rare diseases. Doctors and patients tend to stick with the first drug to claim market share unless a more effective, safer, or lower-cost option becomes available. 

Considering the lead drug candidate was expected to generate peak annual sales of $1 billion or more, the potential of losing first-mover status to a competitor isn't something to be brushed aside. That said, Amicus recently reported preliminary third-quarter 2019 operating results that demonstrated reasons for optimism for the next several years. Is this gene therapy stock a buy?

A businessman staring at a wall with question marks and a light bulb drawn on it.

Image source: Getty Images.

A deep pipeline and a promising drug product

Investors may find it easier to seriously consider adding Amicus Therapeutics to their portfolio because the company has a drug on the market today. Galafold, a treatment for the rare genetic disorder Fabry disease, is expected to generate $170 million to $180 million in full-year 2019 revenue. The company expects the drug to earn peak annual sales of over $1 billion. 

The company also has a deep pipeline, including one of the industry's largest gene therapy lineups. Amicus intends to develop 13 drug candidates across five different programs, but only three have advanced into clinical trials. The pipeline is led by AT-GAA, which is currently being investigated in a phase 3 trial as a treatment for the rare genetic disorder Pompe disease. 

Ramping up sales of Galafold and conducting the research and development required for a buzzing pipeline are expensive. Amicus reported an operating loss of over $157 million and cash outflow from operations of $137 million in the first half of 2019. 

Metric

First Half 2019

First Half 2018

Change 

Revenue

$78.2 million

$38.0 million

106%

Gross profit

$68.7 million

$32.2 million

113%

Operating expenses

$226.4 million

$135.4 million

67%

Operating income (loss)

($157.7 million)

($103.1 million)

N/A

Cash flow from operations

($137.0 million)

($106.5 million)

N/A

Data source: SEC filing. 

But management sounded optimistic when announcing preliminary third-quarter 2019 results in mid-October. The company expects to report Galafold revenue of $48 million when the numbers are finalized, which would mark a 133% increase from the year-ago period. That prompted management to increase the low end of full-year 2019 revenue guidance by $10 million, with the full range now expected at $170 million to $180 million.

Additionally, Amicus expects to end the year with $420 million in cash and thinks that'll be enough to fund operations into the first half of 2022. That's a significant runway. Considering management expects Galafold to generate over $500 million in annual revenue in 2023, it's possible that the business may only need to conduct opportunistic fundraising activities between now and then.

Such an opportunity may arise if Amicus Therapeutics reports positive results from the ongoing 52-week phase 3 trial of AT-GAA in Pompe disease. Investors aren't so sure, however, as they're beginning to question whether the drug candidate can compete with an experimental treatment from Sanofi called neoGAA. 

The obvious concern is that Sanofi is expected to wrap up its late-stage trial in Pompe disease ahead of Amicus. But there's added uncertainty due to the differing clinical outcomes being measured: The primary endpoint for neoGAA is lung function, whereas the primary endpoint for AT-GAA is a six-minute walking test. Will regulators or doctors view lung function as a better sign of efficacy? It depends on the results from both trials, but it's certainly something investors need to consider.

A risky biopharma stock for now

The successful ongoing commercialization of Galafold and the company's expectations for having a relatively long cash runway cannot be considered a slam dunk by investors, but each certainly de-risks Amicus Therapeutics stock.

The issue is that the uncertainty from the AT-GAA phase 3 trial and neoGAA competition is likely to hang over shares until investors have more information. That could come in the form of a data readout from neoGAA, or investors may wait until both drug candidates report results, but top-line numbers aren't expected until the second half of 2020.

Without any other notable catalysts on the horizon, investors may find it easier to watch Amicus Therapeutics from the sidelines.