FOLD - Amicus Therapeutics: Well Positioned To Grow Faster Globally

2023-03-08 13:57:48 ET

Summary

• Amicus ended FY’22 with a growing topline and reassuring outlook from the management.
• The company seems well-prepared for pre-approval inspection and also seems optimistic about regulatory approval of their AT-GAA this year.
• The success of Galafold in expanding its global footprint continues, and it is rapidly growing in the US.
• FOLD is currently trading near support levels and has strong fundamentals, making it an attractive buy candidate.

Amicus Therapeutics, Inc. ( FOLD ) is a biotechnology company specializing in rare genetic disease treatments, offering an oral monotherapy for Fabry disease and a biologic for Pompe disease. Its primary product is Galafold, which is an oral precision medicine for patients with treatable genetic variants of Fabry disease. The company's flagship biologics program is AT-GAA, a prospective top-of-the-line treatment for Pompe disease, with an FDA pre-approval inspection scheduled and regulatory approval expected in Q3 2023, which should contribute to the company's top-line growth. Additionally, FOLD is expected to become profitable at least on a Non-GAAP basis in FY'23, making it a potentially attractive investment opportunity.

Company Overview

Despite fear from the delay of FDA approval of its AT-GAA treatment due to Covid restrictions imposed in China, Amicus Therapeutics stock has shown significant progress this year, as quoted below.

We are thrilled today to announce the U.S. FDA has scheduled the required pre-approval inspection of the WuXi Biologics manufacturing site in China during the second quarter of this year. Pending completion of a successful inspection, we anticipate the regulatory approval and launch of AT-GAA in the United States will be during the third quarter of 2023.

[…]

And as a reminder, the EMA has indicated that it does not require an inspection of the WuXi manufacturing site as a condition of their approval. In the U.K., the regulatory submission process for AT-GAA was initiated in December and is on track for an expected approval in the third quarter of this year. Source: Q4 2022 Earnings Call Transcript

In fact, the management recently announced that they are seeing positive results from their Phase 3 Open-label extension study , such as an improvement in walking ability. These findings suggest that AT-GAA may be a promising treatment option for patients with Late-Onset Pompe Disease ("LOPD").

This makes FOLD attractive, and it is no wonder why we are seeing an increasing number of people who are interested globally, hinting at outstanding growth potential in the future.

… As we've observed throughout 2022, we continue to see significant interest in participation in our expanded access mechanisms for AT-GAA globally; programs are now in place in the U.S., United Kingdom, France, Germany and Japan, with a growing number of patients participating in each. Source: Q4 2022 Earnings Call Transcript

With Galafold's success, FOLD reported an outstanding growth in its top-line amounting to $329.2 million, up from its $305.5 million and $260.9 million recorded in FY'21 and FY'20, respectively.

It is worth noting that revenue derived from the US is growing faster, accounting for 35.2% of total revenue this year, up from 31.2% and 30.7% recorded in FY'21 and FY'20, respectively. According to the management, they are experiencing growth globally.

We are pleased to see continued patient growth in countries like the U.S., Japan, Germany, Italy and the U.K., just to name a few of our key markets. Source: Q4 2022 Earnings Call Transcript

According to the management, this growth in its key markets resulted in a growth rate of 16% over the same period in FY'21 at constant exchange rates. This growth makes FOLD an attractive investment option, especially considering its pending FDA approvals and the prospect of returning to a more normal operating environment.

In fact, management provided a clearer outlook, making the company extra attractive as of this writing.

Galafold, and that it has potential to surpass $500 million in annual revenue over the next few years. We anticipate sustained growth through 2023 to be driven by several key growth drivers; first continuing to penetrate into existing market. Second, further uptake into the diagnosed and treated population. And third, is expanding into new geographies and label expansion. Source: Q4 2022 Earnings Call Transcript

Approaching Support Levels

FOLD is approaching the support trend line of the ascending channel, as shown in the chart above. Today, the stock is being supported by the 200-day simple moving average ("SMA"). However, the current bearish macro environment may cause FOLD to break down this level. If that happens, the next support levels seem to be around $11.5 and $10.5. Another bullish indicator to monitor is the potential 50- and 200-day bullish crossover in the coming weeks. However, the MACD currently warns investors and traders with its recent bearish crossover under its Signal line. If the bearish pressure persists, FOLD might retest its prior key levels, providing potential investors with a better risk/reward ratio than today.

FOLD Looks Cheap

Overall profitability is also improving as mentioned earlier, adding to the company's bright top-line prospects as shown in the image above. This is especially true considering the reassuring outlook from the management as quoted below.

… our current operating plan and continued careful management of expenses we remain on track to achieve non-GAAP profitability, which we continue to expect in the second half of 2023. Source: Q4 2022 Earnings Call Transcript

Assuming a conservative gross margin of 87.5% next year, which is slightly below its 3-year average of 88.4% and this FY'22's 88.3%, we can arrive at a forward EV/Gross Profit of just 10.20x, which is undervalued compared to its 5-year average of 18.62x.

Furthermore, this undervaluation sentiment is compounded when we look at the forward EV/Sales of 9.07x, compared to its 5-year average of 18.20x. In summary, it appears FOLD is an attractive buy today, particularly on further pullbacks.

Conclusive Thoughts

With its improving profitability catalysts, Amicus is well-positioned for long-term growth. Additionally, FOLD seems to be already well-prepared for the positive outcome of inspection, as quoted below.

... So we were able to conduct a very successful mock inspection. Last year, actually, we had a consultant who was on the ground, who was from China, and then supported by our team here in the United States. So we feel really good about the status of WuXi in manufacturing. Source: Q4 2022 Earnings Call Transcript

If there are problems regarding the regulatory approval of its AT-GAA, the next challenge that FOLD will face is its liquidity. It has a declining balance of cash and cash equivalents, amounting to $293.6 million. This is mainly due to the continued use of cash from operations, amounting to $166.6 million. Additionally, its growing total debt of $452.1 million could affect its profitability through an increased interest burden. Nonetheless, the positive catalysts mentioned earlier outweigh this risk in my view, making Amicus an attractive buy candidate.

Thank you for reading and good luck everyone. Cheers!

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