Amicus Therapeutics: Rare Disease Drug Developer Expected To Reveal Phase III Results In 3Q12

| About: Amicus Therapeutics, (FOLD)

Amicus Therapeutics (NASDAQ:FOLD) is focused on the development of new treatments for rare metabolic disorders, including lead product candidate AMIGAL (migalastat), which is summarized below. Pivotal Phase 3 results are expected this quarter as part of a recently expanded collaboration with GlaxoSmithKline (NYSE:GSK).

AMIGAL (migalastat) is being developed as the company's lead product candidate for the treatment of a rare genetic metabolic disorder known as Fabry Disease, including Phase 2 and 3 Clinical Trials (Study 011, 012 and 013). Last week, Amicus announced an expanded development and commercialization agreement with Glaxo that included an $18.6 million equity investment at $6.30/share by Glaxo for a 19.9% ownership stake.

An ongoing pivotal Phase 3 trial (Study 011 w/ ID NCT00925301) for Fabry disease has results expected during this quarter to support a planned New Drug Application (NDA) filing. In addition, the compound is being evaluated in a Phase 2 drug interaction trial (Study 013) ( ID NCT01196871) with results expected this quarter, and a Phase 3 trial (Study 012) ( ID NCT01218659), in combination with enzyme replacement therapy (NASDAQ:ERT), with expected completion of patient enrollment by year-end 2012. The results of that trial are expected during the second half of 2014.

Amicus is also developing Duvoglustat (AT2220) for the treatment of Pompe Disease. The compound is currently being evaluated in a Phase 2 Clinical Trial (Study 010). Last month, the Company reported preliminary results from an ongoing Phase 2 trial ( ID NCT01380743) evaluating four ascending doses co-administered with ERT (Myozyme or Lumizyme) for the metabolic disorder Pompe disease. It expects to present full results during 4Q12, along with initial results expected this quarter for ongoing lab-based drug interaction studies with ERT.

Glaxo and Amicus recently announced an expanded collaboration for Fabry disease from their original agreement in October 2010 that included $30 million in cash upfront, a 19.9% equity ownership stake (6.9 million shares purchased at $4.56/share) and up to $170 million in potential future milestone payments, plus tiered double-digit royalties. Announced last week, the expanded deal included the purchase of 2.9 million shares of Amicus common stock at $6.30/share by Glaxo, bringing their ownership stake back to 19.9% (9.8 million shares) following a stock offering from Amicus in March for the sale of 11.5 million shares at $5.70/share and net proceeds of $62 million.

Below is a summary of the expanded collaboration from the press release last week:

  • Amicus will commercialize all formulations of migalastat in the U.S., while Glaxo will commercialize in the rest of the world.
  • Amicus and Glaxo will continue to share research and development costs for all formulations of migalastat, with Amicus funding 25% and Glaxo funding 75% of these costs for mono-therapy and co-administration during the remainder of 2012. Amicus and Glaxo will be responsible for 40% and 60% of these costs, respectively, for co-formulation immediately and for all formulations in 2013 and beyond.
  • Glaxo will make an $18.6 million equity investment in Amicus, bringing Glaxo's total ownership stake in Amicus to 19.9%. Glaxo will purchase 2,949,581 shares of common stock at $6.30 per share, a 7% premium over the 15-day average closing sale price ($5.86/share) of Amicus's common stock.
  • Amicus will receive a $3.5 million cash payment from Glaxo this quarter to reflect the achievement of a clinical development milestone during 2Q12.
  • Glaxo will be eligible to receive U.S. regulatory approval and product launch milestones totaling $20 million for migalastat mono-therapy and chaperone-ERT co-administration.
  • Glaxo will be eligible to receive additional regulatory and time-based milestone payments totaling up to $35 million within 7 years following the launch of a co-formulated chaperone-ERT product. Amicus will also be responsible for certain additional pass-through milestone payments and single-digit royalties on the net U.S. sales of the co-formulated chaperone-ERT product that Glaxo must pay to a Third Party.

Below is a summary of the financial statistics for Amicus.

  • As of 3/31/12, Amicus reported $108.2 million in cash/equivalents, which does not reflect additional cash proceeds of $18.6 million for the Glaxo stock purchase as part of the expanded collaboration, and a $3.5 million milestone payment due from Glaxo that is due this quarter.
  • As of 4/26/12, Amicus reported 46.4 million shares of common stock outstanding, with $1.7 million in total debt (secured loan).
  • Updated cash and equivalents for Amicus are approximately $130 million, with 49.3 million shares of common stock outstanding with a low float due to a high level of institutional, insider and Glaxo ownership stakes.
  • Amicus has provided guidance for full-year cash burn rate in 2012 of $37-43 million.

While the pivotal Phase 3 results expected this quarter are the key upcoming catalyst, Amicus also has an early-mid stage clinical development pipeline that goes beyond the Glaxo collaboration. The pipeline is also focused on the treatment of rare diseases/metabolic disorders, which can be a very successful and profitable business model with few if any competitors and high profit margins as illustrated by the success and stock price gains for development and commercial-stage companies such as Alexion (NASDAQ:ALXN), BioMarin (NASDAQ:BMRN) and Synageva (NASDAQ:GEVA).

The expanded collaboration with Glaxo is a positive development that further strengthens Amicus' balance sheet with $130 million in cash, and a a projected cash burn rate of $37-43 million for 2012. I estimate the probability of success in the pivotal Phase 3 study this quarter as higher than average (i.e. 70/30 chance of success), as AMIGAL has demonstrated the ability to stabilize the enzyme (α-galactosidase A or α-GAL) that is deficient in patients with Fabry disease in previously conducted Phase 2 trials. Additionally, placebo effect is not an issue as it would be in trials for behavioral or subjective endpoints, such as pain or depression trials.

In this case, enzyme levels can be measured in the blood, and if restored to normal, will prevent the accumulation of a toxic compound known as GL-3, which causes organ damage (e.g., kidney failure). The primary outcome in the pivotal study is kidney GL-3 levels assessed by kidney biopsy, with secondary outcomes that include urine GL-3 levels, kidney function tests, and safety/tolerability.

Since there is no exact date scheduled for the company to report results of the pivotal study this quarter, traders should be comfortable holding through results if maintaining a position overnight. Also, the pivotal study will serve as a key catalyst for Amicus to support a planned NDA filing, and validate the Company's other clinical development programs for Fabry disease related to AMIGAL.

The Company provided an update on the pivotal Phase 3 (Study 011) in its most recent corporate presentation from last month. Several positive factors include a low dropout rate in the study, a high conversion rate (38 of 40 patients) to the open-label extension phase of the study, and previously reported Phase 2 results that are comprised of 150 patient-years of data, including positive results on GL-3 clearance.

The high conversion rate to the open-label extension phase of the trial suggests no major safety concerns and clinical benefit for patients. Otherwise, there would be no reason to continue in extension phase of trial, where it is known that all patients are receiving AMIGAL. The main risk factor for the Phase 3 trial is whether statistically significant results are achieved to support the planned NDA filing vs. just a clinical benefit that is useful to patients, but does not achieve statistical significance.

My estimates for upside potential on positive results are high single digits (i.e. $6-8) with negative results likely to plunge shares to around cash levels of $2-3 per share, since this would cast doubt on the remaining pipeline and would not support the planned NDA filing. While estimating a higher than average probability for success based on a proven mode of action in earlier stage trials, and also validated by Glaxo's continued support of the program as a major shareholder and development partner, Phase 3 trials still maintain the risk for major downside if statistically significant results are not achieved. So potential investors and traders in Amicus should consider this before buying the stock, as once again, results of the pivotal study are expected sometime this quarter.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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