Amicus Therapeutics (NASDAQ:FOLD) will be able to submit its Fabry disease drug Galafold to the FDA for consideration, a reversal of fortune that sent shares skyrocketing earlier this week. While news of the FDA's change of heart was unexpected, management's decision after the bell yesterday to issue more shares wasn't. As I wrote previously, the company's cash at the end of March had only been expected to last until the middle of 2018, and that was before factoring in any spending increases associated with a now possible U.S. launch.
It's very common for young biotech companies to issue shares to raise money to fund their research and commercialization programs, and tapping equity investors for financing via stock offerings is less costly than hitting up lenders and racking up debt.
So, Amicus Therapeutics shouldn't be faulted for taking advantage of the recent run-up in its share price to bolster its balance sheet. The company plans to sell 18.4 million shares at $12.25 per share, and investors can purchase an additional 2.7 million shares if necessary to meet investor demand.
If the company's underwriters place all of the stock, then it should provide Amicus Therapeutics with about $259 million, before fees. If everything goes off without a hitch, this offering will substantially increase the company's cash position, which stood at $279 million in March.
Prepping for success
This money will go a long way toward helping Amicus Therapeutics launch Galafold in the U.S., if the FDA approves it. It will also finance Galafold's potential commercialization in Japan and its ongoing commercialization in Europe, where Galafold won approval in 2016.
Although Fabry disease is rare, it's a life-threatening disease, and that makes it a billion-dollar market. Because they can't break down a fatty substance called GL-3 that builds up in their vital organs, Fabry disease patients can suffer life-shortening kidney failure, stroke, and heart attack.
In the U.S., Fabry disease patients are treated with Sanofi's enzyme replacement therapy (ERT) Fabrazyme, which replaces a missing or under-produced enzyme necessary for breaking down GL-3. The U.S. market is home to about one quarter of the global Fabry disease population, and U.S. sales of Fabrazyme totaled 93 million euros in the first quarter, or a bit more than $100 million at current exchange rates.
Galafold is only effective in between 35% to 50% of Fabry disease patients, so its commercial opportunity is smaller, but if it's priced similarly to Fabrazyme, which costs about $200,000 per year, it could still bring in nine figures annually for the company.
Outside of the U.S., the sales opportunity for Galafold is similarly significant. The company filed for approval in Japan last month, and an approval there would open up 13% of the global Fabry disease market.
In Europe, the company is already competing for market share against Fabrazyme and another ERT, Shire's Replagal. The company is negotiating reimbursement prices with individual EU member countries, and launches in key population centers, including Germany, have management forecasting that 300 patients will be on Galafold by the end of this year, up from 101 patients in the first quarter. If so, then Galafold sales should climb significantly in 2017. In the first quarter, its sales were $4.2 million, up 50% from the fourth quarter, and only a bit below its full-year 2016 sales of $5 million.
Investors should probably focus less on the dilution associated with this stock offering and more on the commercial opportunity ahead of Amicus Therapeutics. If Galafold gets a go-ahead in Japan and the U.S., it will participate in a market valued at $1.2 billion.
The company's future isn't limited Galafold's success, either. It's also conducting a phase 3 study for SD-101, a treatment for epidermolysis bullosa, a rare tissue disorder. If successful, SD-101 could become a first-in-class treatment in what it estimates is a $1 billion market. Results from that trial are expected in the third quarter. Management also expects to report additional data from a phase 1/2 Pompe disease study this year. The global market for ERTs used in Pompe disease eclipses $800 million.
Overall, Amicus Therapeutics has a few different shots on goal that make it an intriguing rare disease drug company. It's still losing money, but with new cash in hand, it should have enough money to make the most of Galafold and its pipeline, and eventually, that should get it into the black.