3 Reasons to Buy Amicus Therapeutics

The potential to commercialize new drugs targeting rare disease soon makes Amicus Therapeutics intriguing.

Todd Campbell
Todd Campbell
Oct 2, 2015 at 8:05AM
Health Care

Source: Amicus Therapeutics.

Amicus Therapeutics' (NASDAQ:FOLD) focus on rare diseases has put it in investor crosshairs in the wake of mounting pressure to curb sky-high drug prices. But Amicus Therapeutics investors may want to ride out the storm given that there are a number of positive catalysts that could make this company worth more than its current $1.5 billion valuation.

No. 1: Commercialization fast approaches
Amicus Therapeutics' lead product is a treatment for Fabry disease that works in an entirely new way. Currently, Fabry disease patients receive enzyme replacement therapy (ERT) to manage their disease; however, Amicus Therapeutics' Galafold doesn't replace the missing enzyme, instead it helps enzymes that are still produced by patients work better.

Amicus Therapeutics estimates that up to half of all Fabry disease patients could benefit from Galafold therapy. But what makes Galafold especially intriguing to me is that its different mechanism of action could end up making it a treatment-agnostic therapy used alongside both of the top-selling ERTs: Shire's Replagal and Sanofi's Fabrazyme.

Both Replagal and Fabrazyme are priced at roughly $200,000 per year and although no pricing forecasts have been made public by Amicus Therapeutics, Galafold could still be a nine-figure drug even if it's priced at half that level. Last quarter, sales of Replagal totaled $113 million and sales of Fabrazyme totaled roughly 146 million euros.

No. 2: Another potential product coming
Last month, Amicus Therapeutics finalized its acquisition of Scioderm, landing the company's phase 3 stage drug, Zorblisa.

Zorblisa is a topical cream that is being evaluated as a treatment for a rare genetic connective tissue disease known as epidermolysis bulluso (EB). EB causes skin to easily be damaged leading to long-lasting lesions that are susceptible to infection. EB patients are often diagnosed when they are very young, and currently there are no FDA-approved treatments for EB beyond palliative care.

Because this drug is in late-stage trials with data expected early next year and it addresses a high unmet need, the FDA could approve it more quickly than usual. In 2013, the FDA awarded Zorblisa breakthrough status and Amicus Therapeutics plans to begin its rolling FDA filing for approval soon.

If Zorblisa's phase 3 data confirms the phase 2 data showing that it effectively helps wounds close quicker, then Amicus Therapeutics believes an approval would allow it to target a market valued at $1 billion annually. Overall, there are as many as 30,000 EB patients in the U.S. and up to 400,000 people with the condition globally and palliative measures can cost as much as $15,000 per month.

No. 3: Potential for a quick return on its R&D
Although concerns over drug pricing have grown in the past year, I believe the focus will ultimately center more on price increases associated with long-used therapies than on breakthrough medicines for rare disease.

If so, then worries over delays to how quickly Amicus Therapeutics can make back the money it has already spent may prove to be short term. If not, then investors should still consider that even at lower prices, Galaforld and Zorblisa could still have the potential to generate $100 million or more per year in revenue. Additionally, because Zorblisa targets a rare childhood disease, Amicus Therapeutics may be able to secure a transferable priority review voucher. Those vouchers are awarded to companies that the FDA categorizes as having developed a drug for a rare pediatric disease, and recently one of these vouchers sold for $350 million on the open market. If those prices hold up, then proceeds from selling it (of which the littlest of 50% or $100 million will go to Scioderm) could strengthen Amicus' already solid balance sheet.

Tying it together
Roughly 90% of drugs entering human trials end up in laboratory dustbins rather than on pharmacy shelves. As a result, clinical stage biotech stocks like Amicus Therapeutics are risky.

But given that Amicus Therapeutics' products are late stage and could begin reaching the market as early as next year, and its shares have retreated by 27% in the past month and its debt-free balance sheet includes over $200 million in cash, this company could be worth buying.