The FDA previously told Amicus Therapeutics' (NASDAQ:FOLD) it would need to conduct another study of its Fabry disease drug, Galafold, before regulators would consider approving it. Now, however, the agency has opened the door for an approval without that study, and that change of heart could clear the way to Galafold's commercialization in 2018. Will a U.S. approval move the needle for Amicus Therapeutics? And, if so, by how much?

First, some background

Fabry disease is a genetic disease that causes a fatty substance called GL-3 to build up in vital organs, including the kidneys. Patients with Fabry disease face life-threatening kidney failure, stroke, and heart attack.

Gold and silver pills spill out on top of a pile of money.

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The disease is often diagnosed when someone is in their 20s or 30s, and life expectancy for Fabry disease patients is shorter than the general population. The average life expectancy of males with Fabry disease at 58 years and for women it is 75 years. The most common cause of death in Fabry disease patients is cardiovascular disease.

Currently, GL-3 levels are kept in check with the use of enzyme replacement therapies (ERT) that replace an enzyme, alpha-gal A, that is missing or damaged in patients with Fabry disease. Shire's (NASDAQ: SHPG) ERT, Replagal, is available in Europe, and Sanofi's (NASDAQ:SNY) ERT, Fabrazyme, is available in Europe and the United States.

In Europe, Amicus Therapeutics' Galafold also became available last year. Unlike ERTs, Galafold acts as a chaperone drug that stabilizes alpha-gal A in patients who still produce some of it. An estimated 35% to 50% of Fabry disease patients are amendable to this approach, rather than ERT.

What's the commercial opportunity?

Globally, there are an estimated 10,000 people with Fabry disease. However, only half of patients are treated for their disease, and less than half are addressable by Galafold.

Although the addressable market is small, the market for Fabry disease drugs eclipses $1 billion annually. Replagal and Fabrazyme cost roughly $200,000 per year, and both of those drugs generate hundreds of millions of dollars in revenue. In 2016, Replagal and Fabrazyme's sales were $452 million and 606 million euros, respectively.

Europe accounts for about 34% of the global Fabry disease patient population, so Galafold's approval there opened up a big long-term opportunity for Amicus Therapeutics. The company has been negotiating with individual EU member countries on pricing, and as deals have been reached, the number of people on Galafold therapy has been steadily increasing.

As of April, 101 patients are on Galafold, but by the end of 2017, the company estimates 300 patients will be taking it due to launches in key markets like the United Kingdom, where there are currently about 450 patients being treated with ERTs. If so, then Amicus Therapeutics revenue should exit 2017 much higher than it exited 2016. Galafold sales last year were just $5 million, but sales in the first quarter totaled $4.2 million, up 50% quarter over quarter.

Management plans to file for FDA approval of Galafold in the U.S. in the fourth quarter, and it anticipates a speedy review that could make it available to U.S. patients in the first half of 2018.

The U.S. accounts for 25% of the global Fabry disease patient population, and, historically, drugs sold in the U.S. command higher prices, and patients get access to them more quickly. Therefore, if Galafold wins FDA approval, its opportunity in the U.S. could be bigger than it is in the EU. How big is anyone's guess, but Sanofi reports Fabrazyme's U.S. sales were 93 million euros in the first quarter of 2017, up 13% year over year. So, if we assume pricing parity between Galafold and Fabrazyme, and full penetration of the 35% to 50% of patients who are amenable to Galafold, then the peak sales opportunity for this medicine in the U.S. could be between $37 million to $53 million per quarter, at current exchange rates.

What's next

More launches in EU countries should help drive sales higher into the end of 2017. In 2018, sales growth will depend heavily on whether or not the FDA approves Galafold. Regulators willingness to consider Amicus Therapeutics' application is a good sign, but it doesn't guarantee a green light for Galafold. Investors will also want to watch Japan. Amicus Therapeutics recently filed for Galafold's approval there, and if approved, that will open up another 13% of the addressable market to the company. 

Overall, Galafold's sales could increase meaningfully in the coming years, but investors should keep in mind that the company's still spending more than it's taking in, and that's likely to continue for a while. In Q1, management said their cash stockpile will get them into the middle of 2018, but that's not too far off. For this reason, I wouldn't be surprised if a rapid run-up in Amicus Therapeutics' shares leads to a dilutive share offering to bolster its balance sheet. 

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