Amicus IPO: A Very Risky Prospect (AMTX)

Amicus Therapeutics filed an S-1 with the SEC yesterday for a Nasdaq IPO. Highlights from the filing:

Quick Stats

Proposed offering size: $86.25 million

Proposed ticker: AMTX

Underwriters: Morgan Stanley, Goldman Sachs, Pacific Growth Equities

One-line Description (from S-1): We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel small molecule, orally-administered drugs, known as pharmacological chaperones, for the treatment of a range of human genetic diseases.

P&L: Zero revenue company; Total operating loss of $45.5 million since inception (2002), $7.8 million of which was in Q1 2006.

Cash: $19.55 million in the bank at the end of March.

Funds Raised:

$88.5 million in three rounds of financing. Last round ($55 million) took place in 2005/2006. Lots of VCs in the deal including Quaker BioVentues, Canaan Partners, CHL Medical Partners, Frazier Healthcare Ventures, New Enterprise Associates, Prospect Venture Partners and Radius Ventures.

Board of Directors: Eight members (2 from management)

Management: John F. Crowley, CEO since January 2005. CEO of Orexigen Therapeutics (under 2 years); CEO of Novazyme Pharmaceuticals for 1.5 years (until acquisition by Genzyme). Holds 1% of the company pre-IPO.

Business Summary (From S-1):

Since our founding in 2002, we have generated three product development programs: Amigal for Fabry disease, AT2101 for Gaucher disease and AT2220 for Pompe disease. Fabry, Gaucher and Pompe are relatively rare disorders but represent substantial commercial markets due to the severity of the symptoms and the chronic nature of the diseases. The reported worldwide net product sales for the four approved therapeutics to treat Fabry and Gaucher disease were more than $1.3 billion in 2005.

We are currently conducting Phase II clinical trials of Amigal and have observed encouraging results in the first four patients after 12 weeks of treatment. These results suggest that treatment with Amigal causes an increase in the activity of the enzyme deficient in Fabry disease. We expect to complete enrollment in our current Phase II trials for Amigal by the end of 2006 and, assuming positive results, we intend to initiate a Phase III trial in 2007. We plan to initiate Phase I trials for AT2101 in the second half of 2006, and plan to file an investigational new drug application, or IND, for AT2220 by the end of 2006.

Human genetic diseases result from mutations in specific genes that, in many cases, lead to the production of proteins with reduced stability. Proteins with these mutations may not achieve their correct three-dimensional shape and are generally referred to as misfolded proteins. The cell ensures that proteins are folded into their correct shape before they can move from where they are made, the endoplasmic reticulum, or ER, to the appropriate destination in the cell, a process referred to as protein trafficking. Proteins that do not achieve their correct shape are often eliminated by the cell, resulting in reduced biological activity that can lead to impaired cellular function and ultimately to disease. In certain instances, misfolded proteins can accumulate in the ER instead of being eliminated. This accumulation of misfolded proteins may lead to various types of stress on cells, which may also contribute significantly to cellular dysfunction and disease.

Our novel approach to the treatment of human genetic diseases consists of using a pharmacological chaperone that selectively binds to the target protein, which increases the stability of the protein and helps it fold into its correct three-dimensional shape. This restores appropriate trafficking of the protein, thereby increasing protein activity, improving cellular function and reducing stress on cells.

The Opportunity
Amicus, like recent biopharma IPOs including Omrix (OMRI), has developed a platform technology. If it works, it translates into a home run (note the final sentence of the paragraph below)

The current standard of treatment for Fabry, Gaucher and Pompe is enzyme replacement therapy. This therapy compensates for the reduced level of activity of specialized proteins called enzymes through regular infusions. Instead of adding enzyme from an external source by intravenous infusion, our approach uses small molecule, orally-administered pharmacological chaperones to restore the function of the enzyme that is already made by the patient’s own body. We believe our product candidates may have advantages relative to enzyme replacement therapy relating to biodistribution, treatment effect and ease of use, potentially improving treatment of these diseases. In addition, we believe our technology may be broadly applicable to other diseases that have been linked to misfolded proteins, including certain types of neurological disease, metabolic disease, cardiovascular disease and cancer.

The Risk
Oodles of risk as typical of a zero-revenue high cash burn biopharmaceutical startup. The following sentence from the S-1 filing highlights the risk of drug development for esoteric disorders (bold is mine):

We are currently conducting multiple open-label Phase II clinical trials in up to 48 adult male and female patients with Fabry disease. The initial data from the first four Fabry disease patients enrolled in one of our Phase II trials showed that after six weeks of treatment the activity of alpha-galactosidase A, or a-GAL, the enzyme deficient in Fabry disease, was on average more than five-fold higher in white blood cells than before treatment. The four patients had three different genetic mutations and we observed an increase in the level of a-GAL enzyme activity in all of these patients.

Competition:
Main competition comes from enzyme replacement therapy in which Genzyme (GENZ) is the 500 pound gorilla. Note the competitors' table from the S-1 below [click to enlarge]:

The S-1 goes into considerable detail on each of the three target disorders. Anyone with an interest in orphan drug development should take a look.

There were three biosciense platform IPOs in the last couple of months; Omrix (OMRI), Vanda Pharmaceuticals (VNDA) and Targacept (TRGT). Omrix was covered by Bill Simpson last week. Here's a graph of their post-IPO performance: