FOLD - Amicus Therapeutics: Finally The FDA Inspection Is Done Time To Be Positive

2023-05-22 16:25:38 ET

Summary

• The FDA inspected the WuXi facility this month, and Amicus Therapeutics, Inc. expects approval in the third quarter.
• Galafold revenue is growing, although the ANDA challenge needs to be resolved.
• I expect the next 3-4 months to be very exciting.

I have been in Amicus Therapeutics, Inc. ( FOLD ) for two years now, and boy, it has been a tough ride. This month, we seem to be close to resolving “the issue.” The issue was originally so simple it was silly, and there was always the tantalizing prospect that it would be resolved, and the stock would move up. I think it's time to make a decision.

In two years, FOLD stock has been so stagnant I have only been up 35% at peak, and down 37% at trough. I am up 20% now, which is some consolation if I decide to quit today.

When I last covered FOLD in January, Amicus was still waiting for the FDA to go and inspect its China facility, which had been delayed due to covid. Amicus was also waiting for AT-GAA (ATB200/Pombiliti/cipaglucosidase alfa) approval in Europe, which has now happened, in March.

There are two tantalizing positives about FOLD that have made me hold on for 2 years. One is its Fabry Disease drug Galafold or migalastat (not to be confused with miglustat or Zavesca, approved for Gaucher Disease). This drug has been approved for a few years now, and brings in over a quarter of a billion dollars in revenue every year, with hopes of reaching $500mn in the next few years. The drug is patent-protected :

We own issued U.S. patents that cover the use of migalastat, the active pharmaceutical ingredients in Galafold® , in the treatment of Fabry disease, which expire between 2027 and 2039 and are listed in the FDA Orange Book. Foreign counterparts of the U.S. patents are pending or issued in Europe, Japan, and certain other jurisdictions. Further, we have pending U.S. patent applications covering various aspects of Galafold® , including composition-of-matter methods of treating a patient diagnosed with Fabry disease with migalastat and their foreign counterparts. Any patents issuing from these applications will expire between 2036 and 2043. We anticipate listing these patents in the FDA Orange Book if issued.

My limited knowledge in IP law does not help me understand what is a “composition-of-matter methods” patent, and how a composition-of-matter patent can be issued after a use patent. I will, therefore, take 2027 as the year when galafold’s patent troubles may start.

That I may not be too wrong is demonstrated by the three Paragraph IV Certification Notice Letters the company received from Teva Pharmaceuticals USA, Inc.("Teva"), Aurobindo Pharma Limited ("Aurobindo"), and Lupin Limited ("Lupin") in 4Q 2022 regarding ANDAs for galafold. The company filed its own defense lawsuit in November, and it will be very important for the future of the company that they prevail. If the ANDAs are accepted, this stock should drop.

The second tantalizing positive is the logic behind AT-GAA’s potential approval. I said it quite clearly earlier:

PROPEL and COMET are two trials for AT-GAA and nexviazyme, respectively. PROPEL’s primary endpoint is 6MWT, and secondary endpoint is FVC. COMET’s is just the other way around; FVC is the primary endpoint, 6MWT the secondary endpoint. Nexviazyme failed its primary endpoint of FVC, but passed its secondary endpoint of 6MWT, and was approved on that basis. PROPEL failed its primary endpoint of 6MWT, but passed its secondary endpoint of FVC. Now, FVC is the more important endpoint because a problem with FVC causes more fatalities. That’s the core reason why AT-GAA’s approval seems likely.

Thus, the investment thesis of Amicus now rests on two things - how well they defend galafold, and when the FDA inspects their Chinese manufacturing facility. There are additional aspects - uptake in Europe, improvement in galafold’s revenue given an ANDA win, FDA’s eventual approval of AT-GAA after China inspection, uptake of Sanofi’s nexviazyme, and emerging competition. But these are minor issues - Europe is a small market, galafold’s revenue will surely improve if the ANDAs do not hold, FDA will probably approve AT-GAA, clinically speaking, nexviazyme is a poor competitor, and there’s not a lot of emerging late stage competition. So, we are back to those two issues.

During their May earnings call, the company announced the following:

The U.S. Food and Drug Administration ((FDA)) has very recently completed the required pre-approval inspection of the WuXi Biologics manufacturing site in China. The Company believes the comments and observations received at the close of the FDA inspection are all addressable and continues to expect regulatory approval of AT-GAA in the U.S. in the third quarter of 2023.

Great news! So the inspection has finally been done, and the FDA comments are positive. If so, approval in the third quarter does not seem unlikely. That is a major positive for Amicus.

I had a bit of doubt about how the company can be so confident about the short approval timeline. Fortunately, just that question was asked at the earnings call , and their response was this:

You’re right - in terms of what happens from here, we are in a little bit of an unusual situation, but typically what happens is as the FDA finalizes the inspection, which has now happened, then they finalize the inspection report - that takes a period of time, and once the inspection report is finalized and provided to the review division, that’s where you get that kind of 30 to 60-day timeline to approval, and so that gives us a lot of comfort that we’re on track there based on the fact that we received the deferred action letter, and again I’d remind folks at least per the regulations, it says that those can only be given when no other issues remain and the application otherwise satisfies the requirements for approval. That gives us great confidence that effectively it’s really just getting through the final inspection report and then final memos within the Agency, and then we’re onto approval and launch.

Thus, there’s a specific review and reporting timeline, and the FDA deferred action letter is also a pretty conclusive argument that there is no major concern from the FDA about manufacturing.

Also in May, they mentioned the following about galafold:

Galafold U.S. intellectual property estate strengthened following the issuance of multiple new patents in 2023. Galafold is protected by orphan drug regulatory exclusivities and a broad U.S. intellectual property portfolio of 49 orange book-listed patents, including 8 composition of matter patents, 33 of which provide protection through at least 2038.

This is also interesting news, although I am waiting to get more clarity on the ANDA lawsuit. The docket is here. There seems to be nothing new since January.

Financials

FOLD has a market cap of $3.39bn and a cash balance of $267mn. Total revenue in the first quarter 2023 was $86.3 million, a year-over-year increase of 10%. Total non-GAAP operating expenses of $80.6 million for the first quarter 2023. Full-year 2023 non-GAAP operating expense guidance for 2023 is of $340 million to $360 million. Based on that, the company expects to achieve non-GAAP profitability in the second half of 2023.

Bottom Line

I think, given the de-risking event (the FDA inspection), Amicus Therapeutics, Inc. is still at a decent enough price for a buy, in expectation of a quick surge around approval, in about 3-4 months, if we are to believe the company’s estimates. I will not buy now, however, unless there is a very large price drop for no real reason. I will hold my shares until approval, and then get out of Amicus Therapeutics, Inc.

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