After 'Yuge' Rally, What Now For Amicus Therapeutics?

Summary

• Amicus Therapeutics continued its recent rally and shot up 25% last week on an unexpected decision reversal from the FDA.
• The FDA will now accept a NDA on the company's compound galafold without a costly trial, knocking two years off the projected rollout in the U.S.
• Given how far the shares have come so far in 2017, what is next for this rare disease concern?  We take a look at that below.

“Never confuse movement with action.” - Ernest Hemmingway

It was a big week for Amicus Therapeutics (FOLD) and its shareholders. The company was one of the first beneficiaries of a more industry friendly FDA. The governmental agency reversed its ruling last November that tanked the stock. It will no longer require a costly trial for the company to submit a New Drug Application {NDA} for its compound galafold to treat Fabry Disease, a rare affliction. The drug was approved for this indication by European authorities in May of last year and its initial rollout has been gaining momentum recently. The company also just filed a NDA for Japan, where approximately 700 people are afflicted.

Even a secondary offering to raise funding to support the rollout of galafold as well as potentially two other late stage compounds for other rare diseases could do no more than temporarily dampen the enthusiasm for the shares. The stock was up some 25% on the week.

I noted in the November 30th Biotech Forum Daily Digest, where I kept the faith in Amicus, "Hopefully, the FDA is one of many government agencies that get more effective and efficient under the new administration." It is nice to be the recipient of some government efficiency improvements for a change, which can as rare as unicorn sightings.

The stock has soared since that November debacle and had already recovered all of that plunge before this week's good news. For those who initiated or added to their positions back after the original FDA action tanked the stock, congratulations! You are seeing some "yuge" gains.

I have had quite a few questions on what to do with Amicus after this huge rally. First of all, always remember to cull profits using the Jensen Rules or something similar. This means I have 70% of my original position but still think the shares could have upside if management continues to execute.

Galafold's NDA should be submitted in the fourth quarter and under the FDA's accelerated approval guidelines should be approved and on the market by mid-2018, two years ahead of schedule. The United States contains 30% of the globe's Fabry patients. Given the drug likely will be priced slightly higher than Europe (which usually is the case), that should add 35% to 40% to potential peak sales. Given the small population of patients, almost all of which have been identified, rollout should be quick and population will be able to be served by a small sales force as well.

In addition, the company is not a 'one trick' pony. It just reported encouraging mid-stage results in mid-May for its compound to treat Pompe Disease, another rare affliction. The company also just received Rare Pediatric Disease designation for its topical med SD-101 to treat another rare disease called epidermolysis bullosa. This is potentially a valuable asset. If SD-101 is approved, Amicus will receive a priority review voucher that it can used for accelerated review of a future product or it can be sold or transferred to another party. Sarepta Pharmaceuticals (SRPT) sold one of these vouchers to Gilead Sciences (GILD) for $125 million in February and other vouchers have sold for higher amounts in the past.

Analysts definitely like the FDA's decision to reverse its earlier stance on galafold. Last week, Robert W Baird reissued its Buy rating ($15 price target) as did Cowen & Co. ($16 price target). I would other analysts to do same as they start to price in U.S. galafold sales two years earlier than expected.

Top line results for a Phase 3 study for SD-101 are due to be released sometime in the third quarter, and that is another potential catalyst for the stock. Obviously, Amicus has some upcoming catalysts to watch and that could trigger the next leg up in the stock.

In addition, this small rare disease concern could be a logical acquisition target for a larger player if the 'animal spirits' come back to a dormant M&A market across the industry. Its compounds could easily be folded into a larger product portfolio. These are the reasons I continue to hold the majority of my Amicus stake even while culling some profits.

“Do what is right, not what is easy nor what is popular.” - Roy T. Bennett

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Thank You and Happy Hunting

Bret Jensen

Founder, Biotech Forum

Analyst’s Disclosure: I am/we are long FOLD, GILD. 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.