Amicus Therapeutics: Strong Catalyst Trade With GlaxoSmithKline And Heavy Insider Buying
(Thomson Reuters ONE) -
By Scott Matusow, Contributor
I like to invest in and trade companies with strong corporate structures that
are also equipped with upcoming short term catalysts.
One company that has been receiving some interest in the investment community
demonstrates both. As an added bonus, we see heavy insider and institutional
support recently. This may help bring some added stability and a good chance for
another upswing in stock price as a new group of longs discovers the stock.
Today, I write about the firm's technology, with an investment in the company
from a huge winner in the industry, and the goals of Amicus Therapeutics, Inc.
(NASDAQ:FOLD).
Amicus Therapeutics focuses on the discovery, development, and commercialization
of orally-administered, small molecule drugs for the treatment of various human
genetic diseases.
Overview of technology:
Certain human diseases result from mutations in specific genes that, in many
cases, lead to the production of proteins with reduced stability. Proteins with
these mutations may not achieve their correct three-dimensional shape and are
generally referred to as mis-folded proteins. Mis-folded proteins are often
recognized by cells as having defects and, as a result, are eliminated prior to
reaching their intended location in the cell. The reduced or completely absent
biological activity of these proteins leads to impaired cellular function and
ultimately to disease.
Amicus' approach to the treatment of human genetic diseases consists of using a
new type of drug, which they refer to as a pharmacological chaperone, which
selectively binds to the target protein. This increases the stability of the
protein and helps it fold into the correct three-dimensional shape. This
restores appropriate trafficking of the protein, thereby increasing protein
activity, improving cellular function, and reducing stress on cells.
Lysosomal storage disorders, such as Fabry disease, Gaucher disease, and Pompe
disease, are just a few examples of diseases in which a protein folding defect
is the primary cause of the pathology.
Large pharmas have recently shown a strong interest in entering into the
Lysosomal storage disorders segment, as demonstrated by Pfizer's (NYSE:PFE)
collaboration In April of 2011 with Zacharon Pharma to develop drugs for orphan
diseases including lysosomal storage disorders. The potential value of the
collaboration to Zacharon is approximately $210 million. The firms did not
divulge how much will be given up front and how much is attributed to funding
and milestones.
Amicus' unique pharmacological chaperone technology represents a next-generation
approach to the treatment of genetic diseases and offers the potential to
improve treatment options for patients.
Amicus is focused on three key strategic priorities. One is the phase III
development of their AT1001 for the treatment of Fabry disease. This is where
the catalyst exists since the results of this are supposed to be announced in
the third quarter of this year.
Fabry Disease is a rare X-linked (inherited) lysosomal storage disease, which
can cause a wide range of systemic symptoms. It is a form of sphingolipidosis,
as it involves dysfunctional metabolism of sphingolipids. The disease is named
after one of its discoverers, Johannes Fabry.
Biotech writers like Adam Feuerstein seem to like Amicus, as he wrote in early
July that he plans to give the company more positive coverage--which should also
attract more buying as Adam, like him or not, Adam does have a lot of influence
as a top writer in the Biotech industry.
On July 30th, Canaccord Genuity reiterated a 'Buy' on Amicus Therapeutics with a
price target of $11.00. Analyst Ritu Baral remarked:
"I Reiterate rating and price target on potential positive migalastat pivotal
Fabry monoTx data Q3/12, chaperone/ERT comboTx for Fabry, Pompe. We think Q3
pivotal migalastat Fabry monoTx '011 trial data will be a strong positive
catalyst and that the trial has a high chance of success. We also expect
positive full Ph2 AT2220/ERT Pompe combo data in Q3/12...We see excellent
risk/reward: $5+ upside on success, but only $2-3 downside given floor valuation
from comboTx program."
GlaxoSmithKline (NYSE:GSK) has made a big impact to help out Amicus in the
development of this technology as well as financially. GSK recently bought close
to 3,000,000 additional shares to bring their ownership stake up to 19.9% of
Amicus . Additionally, they paid a 7% premium on fifteen day average price which
amounted to $6.30/share. I like the confidence this shows in the technology and
leadership that Amicus displays. Obviously, people have to do their own due
diligence but this can help provide some assurance when you see a very
successful company buying up a portion of a company at a premium.
Marc Dunoyer, Global Head of GSK Rare Diseases remarked:
"We have strengthened our relationship with Amicus through the expanded Fabry
collaboration and additional equity investment in the Company."
Some additional notes from this updated arrangement:
Amicus will commercialize all formulations of migalastat HCl in the US,while GSK
will commercialize in the rest of the world.
Amicus and GSK will continue to share research and development costs for all
formulations of migalastat HCl, with Amicus funding 25% and GSK funding 75% of
these costs for monotherapy and co-administration during the remainder of 2012.
Amicus and GSK will be responsible for 40% and 60% of these costs, respectively,
for co-formulation immediately and for all formulations in 2013 and beyond.
Amicus will receive a $3.5 million cash payment from GSK this quarter to reflect
Amicus' achievement of a clinical development milestone during the second
quarter 2012.
Amicus is also working on a pharmacological chaperone Duvoglustat, (AT2220) for
the treatment of Pompe Disease, another lysosomal storage disease. The drug is
being used in combination with enzyme replacement therapies (ERT).
Duvoglustat is currently being evaluated in a Phase II Clinical Trial (Study
010). Last month, the Company reported preliminary results from an ongoing Phase
2 trial (ClinicalTrials.gov 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.
Lysosomal storage diseases are a group of approximately 50 rare inherited
metabolic disorders that result from defects in lysosomal function. Lysosomal
storage diseases result when the lysosome - a specific organelle in the body's
cells - malfunctions.
As a group, the incidence of these diseases is about 1:5,000 - 1:10,000. The
lysosome is commonly referred to as the cell's recycling center because it
processes unwanted material into substances that the cell can utilize. Lysosomes
break down this unwanted matter via enzymes, highly specialized proteins
essential for survival. Lysosomal disorders are triggered when a particular
enzyme exists in too small an amount or is missing altogether. When this
happens, substances accumulate in the cell. In other words, when the lysosome
doesn't function normally, excess products destined for breakdown and recycling
are stored in the cell.
Like other genetic diseases, individuals inherit lysosomal storage diseases from
their parents. Although each disorder results from different gene mutations that
translate into a deficiency in enzyme activity, they all share a common
biochemical characteristic - all lysosomal disorders originate from an abnormal
accumulation of substances inside the lysosome.
Lysosomal storage diseases affect mostly children and they often die at a young
and unpredictable age, many within a few months or years of birth. Many other
children die of this disease following years of suffering from various symptoms
of their particular disorder. Hearing things like this really makes people hope
for treatments for these types of diseases. Amicus has a big opportunity if they
can do something about these indications especially if they have a company like
GlaxoSmithKline in their corner to provide financial support as well as
knowledge from their Rare Diseases Division. Shire PLC (NASDAQ:SHPG) and
BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) are two companies Amicus/GSK will be
competing with as they also develop drugs for these types of diseases. Of
course, with a large group of complex diseases such as this, there is room for
several companies to make significant contributions.
As well, Amicus is focused on the advancement of its lead pre-clinical programs
that utilize its pharmacological chaperone technology for the treatment of
diseases of neurodegeneration.
Neurodegeneration is the umbrella term for the progressive loss of structure or
function of neurons, including death of neurons. Many neurodegenerative diseases
including Parkinson's, Alzheimer's, and Huntington's occur as a result of
neurodegenerative processes. As research progresses, many similarities appear
which relate these diseases to one another on a sub-cellular level. Discovering
these similarities offers hope for therapeutic advances that could ameliorate
many diseases simultaneously. There are many parallels between different
neurodegenerative disorders including atypical protein assemblies as well as
induced cell death. Neurodegeneration can be found in many different levels of
neuronal circuitry ranging from molecular to systemic.
Stock highlights:
The net institutional purchases in the current quarter are at 11.7M shares,
about 48.11% of the company's float of 24.32M shares. Over the last six months,
insiders were net buyers of 1,140,000 shares, representing about 4.69% of the
company's 24.32M share float. Especially in the institutional area, this
represents a huge increase in buying and once again, a more solid core of new
investors that should hold for awhile and create stability.
Recent Insider Transactions Report
Date Insider Shares Type Transaction Value*
GLAXOSMITHKLINE PLC Purchase at
Jul 16, 2012 Beneficial Owner 2,949,581 Indirect $6.30 per 18,582,360
(10% or more) share.
CROWLEY JOHN F Option Exercise
Mar 29, 2012 Officer 49,931 Direct at $0.64 per 31,955
share.
NEW ENTERPRISE Purchase at
Mar 6, 2012 ASSOCIATES 11 LP 925,154 Direct $5.70 per 5,273,377
Beneficial Owner share.
(10% or more)
NEWHALL CHARLES W Purchase at
Mar 6, 2012 III Beneficial 1,140,000 Indirect $5.70 per 6,498,000
Owner (10% or more) share.
BARRIS PETER J Purchase at
Mar 6, 2012 Beneficial Owner 1,140,000 Indirect $5.70 per 6,498,000
(10% or more) share.
PERRY MARK W Purchase at
Mar 6, 2012 Beneficial Owner 1,140,000 Indirect $5.70 per 6,498,000
(10% or more) share.
BARRETT M JAMES Purchase at
Mar 6, 2012 Director 925,154 Indirect $5.70 per 5,273,377
share.
KRAMLICH C RICHARD Purchase at
Mar 6, 2012 Beneficial Owner 1,140,000 Indirect $5.70 per 6,498,000
(10% or more) share.
GSK and other are certainly buying up a lot of shares lately. Obviously, there
is always a risk that the phase III data could turn out bad, but I would think
that these massive insider buys--especially those of GSK show a heck of a lot of
confidence that the results will be very good. Because GSK has a large position
in Amicus stock, an eventual GSK buy-out of the company is certainly a strong
possibility.
I expect to see the release of the phase III data sometime in late August/early
September, so their might be a good opportunity for a catalyst run-up here.
After the expansion with GSK, ThinkEquity wrote in the linked report above that
it believes this expansion validates the Amicus' technology. Additionally, it
allows several significant concessions, including full United States rights in
Fabry, plus $18.6 million in cash. The analyst restates its price target of $9,
and its Buy rating.
Additional share stats:
Share Statistics
Avg Vol (3 month): 233,894
Avg Vol (10 day): 570,225
Shares Outstanding: 46.38M
Float: 21.37M
% Held by Insiders: 30.85%
% Held by Institutions: 63.60%
Shares Short (as of Jul 13, 2012): 1.75M
Short Ratio (as of Jul 13, 2012): 6.40
Short % of Float (as of Jul 13, 2012): 9.40%
Shares Short (prior month): 1.86M
One thing I notice is the short shares as a percentage of float is close to
2,000,000 shares. This could provide a nice boost to the price if any good news
'squeezes' the shorts to cover. If the phase III results are positive for
Amicus, I like FOLD as a longer term trade/investment, with a price pop likely
to be closing in on $8 a share.
Balance Sheet
Total Cash (mrq): 108.20M
Total Cash Per Share (mrq): 2.33
Total Debt (mrq): 1.73M
Total Debt/Equity (mrq): 2.14
Current Ratio (mrq): 6.49
Book Value Per Share (mrq): 1.74
Amicus has an abundance of cash, so dilution does not seem to be on the table
here.
Price Target opinions: $8 a share on a positive Phase III report, $12 a share on
eventual FDA approval. A negative Phase III report would likely send the stock
down to near $4 a share.
Other smaller cap BioPharmas with strong insider buying to keep an eye on are:
EnteroMedics, Inc. (ETRM): Focuses on the design and development of devices that
use neuroblocking technology to treat obesity and associated co-morbidities, and
other gastrointestinal disorders. Performance over the last quarter at 31.58%--
over the last six months, insiders were net buyers of 2,164,479 shares, which
represent about 14.83% of the company's 14.60M share float.
Synta Pharmaceuticals Corp. (SNTA): Focuses on the discovery, development, and
commercialization of small molecule drug candidates for treating severe medical
conditions, including cancer and chronic inflammatory diseases--performance over
the last quarter at 60.84%. Over the last six months, insiders were net buyers
of 1,243,920 shares, which represent about 3.37% of the company's 36.91M share
float.
Repros Therapeutics Inc. (RPRX): Performance over the last quarter at 103.45%.
Over the last six months, insiders were net buyers of 562,500 shares, which
represent about 5.88% of the company's 9.57M share float.
Wright Medical Group Inc. (WMGI): Engages in the design, manufacture, and
marketing of devices and biologic products for the extremity, hip, and knee
repair and reconstruction. Over the last six months, insiders were net buyers of
1,649,234 shares, which represent about 5.59% of the company's 29.49M share
float.
Disclosure: I have no positions in any stocks mentioned, and no plans to
initiate any positions within the next 72 hours.
Additional disclosure: Family Member holds a position in FOLD.
The full report on FOLD is available at:
http://www.biomedreports.com/20120802101086/amicus-therapeutics-strong-catalyst-
trade-with-glaxosmithkline-and-heavy-insider-buying.html
Healthcare investors and Biotech traders interested in accessing BioMedReports'
new complete database of clinical trials and upcoming FDA and world-wide
regulatory decisions which can be used to make more profitable trades and see
upcoming catalysts can go to: http://biomedreports.com/fdacal.html
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Datum: 02.08.2012 - 14:06 Uhr
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