Amicus Therapeutics: ~$7 Biotech Stock Still Has Upside

| About: Amicus Therapeutics, (FOLD)
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Summary

Today we revisit the investment case for a small biotech concern called Amicus Therapeutics.

After collapsing in November on an adverse FDA ruling, the shares have rallied some 25% in recent months and a beneficial owner significantly upped their stake during the decline.

Further upside appears likely and we take a deeper look below.

"But who wants to be foretold the weather? It is bad enough when it comes, without our having the misery of knowing about it beforehand." ― Jerome K. Jerome

Jerome K. Jerome

Today we revisit Amicus Therapeutics (NASDAQ:FOLD). The stock suffered a steep fall when it did not receive accelerated FDA approval for its lead drug candidate galafold to treat Fabry Disease in the middle of the fourth quarter of last year. This was after the compound was approved for that indication in Europe during the second quarter of 2016.

The stock went into the Insiders Forum portfolio in early January of this year as the stock's decline seemed an overreaction given that European approval gave galafold access to ~70% of the global population of Fabry's patients. Approval in the United States should happen in 2019 or 2020 after further trial data is garnered and presented.

What triggered the decision to Buy for the Insiders Forum early in the year was that Perceptive Advisors, noted healthcare investors and a beneficial owner of Amicus, added more than $2 million to their stake late in December on the pull back in the stock. The stock has gained some 25% since going into the Insiders Forum portfolio but still looks like it has upside. It now trades just over $7.00 a share and has $1 billion market capitalization.

2 Other "Shots On Goal":

In addition to Galafold, the company has two other late stage drug candidates.

ATB 200/AT 2221 for Pompe Disease. Pompe is a rare inherited neuromuscular disorder that causes progressive muscle weakness and respiratory disorders. Like Fabry, Pompe is a lysosomal storage disorder. In this instance, the enzyme that is deficient is alpha-glucosidase {GAA}, which results in the buildup of glycogen that damages muscles and nerve cells. It is a dreadful disease. The life expectancy from the infantile onset form of Pompe is only 8.7 months with the babies dying from cardiorespiratory failure.

Amicus estimates that there are approximately 5,000 to 10,000 cases worldwide.

There are currently two treatments (Myozyme and Lumizyme) approved for Pompe, both made by Genzyme. Both are ERTs. Although proven to be efficacious, both ERTs have greater than 50% infusion-associated reactions (IARs). Each ERT is approximately $300,000 per patient per annum. Amicus views the global marketplace for Pompe to be approximately $800 million.

Amicus has developed an enzyme replacement therapy of its own (ATB 200) that is administered with pharmacological chaperone (AT 2221). Although the number of patients in the Phase 1/2 trial is relatively small, early results are promising. Of the 9 patients taking either ATB 200 or ATB 200/AT 2221, none have experienced any IARs comprising over 100 injections. In terms of efficacy, of the four patients taking ATB 200/AT 2221, two patients showed signs of improvement (based on biomarker data) and two remained stable after 14 weeks. All four were previously on other ERT regiments. The trial will have three cohorts including ambulatory ERT-switched patients, non-ambulatory ERT-switched patients, and ERT-naïve patients. Encouraging early data was released in Mid-February and further results will be disclosed in the second and third quarter of this year.

SD-101 for Epidermolysis Bullosa {EB}. EB is a group of inherited connective tissue diseases that cause blisters in the skin and mucosal membranes. There are four types of EB: EB simplex {EBS}; Junctional EB {JEB}; Dystrophic EB {DEB}; and Kindler Syndrome. With EB, the two skin layers (epidermis and dermis) lack protein anchors allowing independent movement of each layer, resulting in fluid-filled blisters on the skin, deformity or loss of fingernails and toenails, skin thickening on the palms and the soles of the feet, and difficulty swallowing amongst other symptoms - all of which are extremely painful.

The company estimates that there are 30,000 to 40,000 patients diagnosed with EB worldwide.

Although bone marrow transplants have shown promise as a cure, the immunosuppression involved with bone marrow transplants significantly increases the risk of infection which has led to several patient deaths. As a result, there are currently no therapies for EB.

Amicus has developed a topical solution (SD-101) that has the potential to be first-to-market therapy for EB. It is currently in a Phase 3 study (ESSENCE) encompassing 28 sites in the U.S., Europe, and Australia. SD-101 was granted FDA Breakthrough Therapy designation (and rolling NDA) in 2013 based on results from a Phase 2a study for the treatment of lesions in patients with EB. In that trial, 8 patients between the ages of six months and nine years were enrolled with 7 patients experiencing complete closure of targeted wounds within one month, showing proof of concept across all EB types. Also, the treatment was well tolerated. Enrollment into a Phase 3 trial was completed in early April and top line data should be out in the third quarter of this year.

With no competition, the company estimates that SD-101 has $1 billion + commercial potential.

Initial Galafold Sales & Analyst Commentary:

On March 1st, the company reported quarterly results that showed galafold sales in Germany were above the consensus estimates. The company launched galafold in Italy a week later and will continue to expand the rollout of this compound in the months and quarters ahead.

The company raised $225 million via a secondary offering in Mid-February and ended 2016 with some $330 million in cash on hand. The company estimates it will spend $175 million to $200 million in 2017 to support the rollout of galafold as well as development costs for its other two late stage assets.

The median analyst price target on FOLD is currently $11.00 a share, about 50% higher than current trading levels. Cowen & Co. was the last analyst firm to comment. Its four-star ranked analyst (TipRanks) reiterated his Buy rating and $12 price target the day fourth quarter results came out.

Outlook:

The stock has recovered nicely from its 'hiccup' in November but still is significantly below 52-week highs. Amicus has two other late stage compounds that could be heading to approval in foreseeable horizon aimed at lucrative markets. The company is also well-funded at the moment and has upcoming catalysts. Further upside seems likely from current trading levels.

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The Biotech Forum

"From where we stand the rain seems random. If we could stand somewhere else, we would see the order in it." ― Tony Hillerman

Thank You and Happy Hunting

Bret Jensen

Founder, The Biotech Forum

Disclosure: I am/we are long FOLD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.