August 22, 2014
Amicus Therapeutics (NASDAQ: FOLD) reported this week positive data from study 012 of its chaperone small molecule migalastat (Amigal) in patients with Fabry disease. Fabry is a rare disease that affects about 1 person in 117,000 people or about 5,000 patients evenly distributed between Europe and the United States. The hallmark of the disease is the accumulation of the substrate globotriaosylceramide (Gb3) in the kidneys. For more information on Fabry, visit this link.
After a significant run in the last few months, the stock popped about 20% on the news with 17x the average volume traded. One would have expected a warmer welcome from the market on this news as Amigal has the potential to become the first line option in those patients with amenable mutations –Amicus says it’s 30-50% of Fabry patients so I conservatively assumed 30% for this report. Other options for Fabry patients are Genzyme/Sanofi’s Fabrazyme in the EU and US and Shire’s Replagal only marketed in the EU. They are biological drugs that bear a high price tag of about $200,000 in the EU and $234,000 in the US (ref). Both drugs cost approximately the same. Amigal is a small molecule that will enjoy bigger margins and with same efficacy, better safety and improved administration (oral vs. injectable) will potentially become the standard of care in approximately 30% of Fabry patients.
For those with a fundamental approach to investing, I ran a DCF valuation to better assess what Amicus’ shares fair value would be. As always, I made some assumptions about sales, year of approval, price CAGR, etc.
I estimated that Amigal will be approved for marketing in the EU in 2015 and calculated the NPV for that year. I expect launch in the US in 2016 after a longer review process as indicated by Amicus’ management on their last conference call. Peak sales of about $400M with a maximum of 750 patients treated in each continent which is 30% of 2,500 patients. With regard to the discount rate, I used a WACC of 11,53% which already reflects the regulatory risk since the drug is not approved yet although I expect approval in the indicated years.
I arrive at a fair value of $10,80/share on a market cap of $821M and 78.7M shares outstanding.
Recall, this is just a model and is my valuation according to my assumptions. Different analysts with different valuation techniques, risk perception and estimations on sales, margins and other relevant parameters will arrive at different values.
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As a matter of disclosure, I currently own no stock in Amicus Therapeutics or any company mentioned in this article. If you have any questions, feel free to leave a comment below or email me.