Amicus Therapeutics, Inc. (FOLD) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. I'm Andrew Geller, one of the biotech analysts here at Morgan Stanley, and I'm pleased to be joined by Brad Campbell, President and CEO of Amicus Therapeutics. Brad, thanks for joining us today.

Yes. Thanks, Andrew. Thanks to Morgan Stanley for hosting us today. And a great...

Just before we start, I have to read some disclosure statements.

Please go ahead.

So for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales rep. All right. Brad, do you want to kick us off some general remarks about Amicus?

Sure. Yes. Thanks, Andrew. I hope everybody is doing well. Nice to see people in person for the first time in a while. So as a reminder, Amicus, we're focused on developing transformative medicines for patients living with rare genetic diseases. We have a core business, Galafold, which is our small molecule precision medicine for Fabry disease. We are on track this year to deliver our operational growth target of 15% to 20%, which translates to a $350 million to $365 million annual sales at constant exchange rates. So very excited about the continued progress there. For AT-GAA, I know all eyes are on our Pompe program. As a reminder, that's our next-generation enzyme replacement therapy combined with a small molecule stabilizer. We are in front of both the European and the FDA regulators and look forward to giving an update here today. We think that is a highly differentiated medicine, and we're very confident in the approvals in both of those markets and very eager to get moving with that program as I know many of you are as well and look forward to giving you an update there. And then finally, I think we've continued to hone in in our financial discipline and our performance targets. We've been, I think, judicious in our use of cash, keeping control on our operating expenses. And at the end of last quarter, we ended with $385 million in cash on hand. And with that, combined with the revenues that we expect from our 2 lead programs, our goal is to get to non-GAAP profitability next year in 2023. So lots of excitement around the company, around the programs and eager to dive into the questions.

Yes, absolutely. So let's start off with ATGA. Like you said it, the top investor interest going into this PDUFA date. So this morning, you did have a regulatory update. And the first component of that where you made significant progress in label discussions with FDA. Can you maybe give some more color about what's completed and what still remains?

Yes. So obviously, ATGA sitting in front of the FDA, we have a PDUFA date of October 29 that we're very eager for. Part of that is the ongoing progress we've made even since the last quarter call on our label negotiations. And what we provided this morning was the update that we now believe our negotiations are substantially complete with the FDA. The important piece there is that we believe that the draft label now includes all of the key parameters we think are necessary for a successful launch. And of course, the FDA can introduce anything into the review process when they want. But in our eyes, this means that really the only substantive issue remaining is, of course, the inspection of the Wuxi facility in China.

Yes, absolutely. And so you did provide an update that the inspection is not yet scheduled, but you're ready to accommodate any sort of inspection that they desire. So let's talk about that for a second. So the COVID situation in Wuxi is improving, but we're still not out of lockdown yet. So do you think that we can get to that point to have U.S. FDA officials go over for the PDUFA?

Yes. So it's a great question. And what we've said is we're working collaboratively with the agency. We're prepared to support any manner of inspection that would satisfy the regulatory requirement from the FDA. The options that we know of are a direct inspection from the FDA employees in Maryland, a inspection from FDA employees on the ground in China or remote interactive inspection, which would be a paper-based inspection. Any one of those things we are prepared to support, Wuxi is prepared to support, we're inspection-ready. As you said, we do know -- we hear at least the situation on the ground is improving in terms of travel restrictions within China. We know that multiple regulatory agencies over the last 12 months have been able to inspect both at the Wuxi facility and other manufacturing facilities. So we know that things are incrementally getting better, which is great. That being said, we did want to caution folks that there is some risk to the PDUFA date, given the fact that we don't have an inspection scheduled. But again, I think, for us, the important thing here is the October 29 date is not a binary event for us. This is a when, not if story. Based on the progress we've made on the label negotiations, we are highly confident this drug is going to be approved. We are eager to get it over the finish line. We are launch-ready. We have a great team who is ready to go, and it's just a matter of satisfying that inspection.

Absolutely. So do you have a sense of what the lead time would need to be for each kind of inspection? I would imagine...

Yes. So it's a great question. I'm sure every inspection is different to some extent. I think if folks are coming locally from somewhere within China, Beijing, as an example, we believe there's that FDA team there is only a few hours away. So that's an indication that could come relatively quickly. I'm sure if they're coming from the United States, that could take a little bit longer. A paper-based inspection or remote interactive inspection literally can be telephonically with e-mails going back and forth. So that presumably could be done relatively quickly. So where we sit today, I think there is still time, but can't speak on behalf of the agency. And again, we're just ready to do whatever we can to support what they need to do to get it done.

Absolutely. So there has been talk about China supply chain issues for other drugs, but this is a single source API and manufacturing facility, correct?

Yes, that's right. Yes. The good news is, from a raw materials perspective, from a supply chain perspective, we've been investing in production of ATB200, which is the biologic component here of ATGA for a long time now. We have prudently moved product outside of China into our regional depots in the U.S. and in Europe. So we have launched material ready to go in those geographies. We haven't seen any supply disruptions from the manufacturer of ATGA. And so from that perspective, I think Wuxi has done a phenomenal job in maintaining supply chain as is our team and moving pieces around as we need to avoid any risk around COVID disruption.

Absolutely. And then just before we move on to other ATGA questions, is there anything else you want to flag that you've been hearing from investors about the manufacturing or ongoing regulatory process?

No, I think -- I mean, investors are all focused on the questions that you ask in terms of when is the inspection going to happen. I think we're -- we sort of walk through that. The only other thing maybe I would point out is that there are 2 separate filings here. There's the small molecule and then there's the large molecule, the biologic. We did have 2 separate PDUFA dates. The small molecule was August 29. The biologic is October 29. And what we had indicated to investors and to the Street is that that the FDA indicated to us they would approve them together. And so I would say we take some comfort in the fact that the NDA date passed and that the FDA took no action. So for us, it means we're on track for them to review them together, to approve them together, and we're just eagerly anticipating that time frame.

Perfect. And then -- so management has previously given ATGA peak guidance sales of about $1 billion. Can you walk me through what the anatomy of that looks like and where you might see upside or downside?

Yes, sure. So today, the global market for the current standard-of-care is a little over $1.2 billion. I think everybody recognizes that this is a significantly underdiagnosed disease, perhaps not as much as Fabry disease, which I think we'll get into, but Pompe is underdiagnosed. And so there continues to be new patients coming onboard. And I think most folks expect this market is a $2 billion-plus market by the end of the decade. So you clearly have a healthy and growing market. Now up until last year, that market was only served by the original manufacturer. So one initial therapy, Myozyme and then Lumizyme and that was really on the market for 15 years. And unfortunately, this is well reported. What we've seen is that patients who had some initial benefit on that product eventually hit a plateau and then started to decline on most major measures of the disease. And so clearly, there's an unmet need for new treatments to come out. Of course, you have the same manufacturer who just launched a second-generation product. But it's important to note that that's a differentiated product. It's not the same as ATGA. We have our next-generation and the replacement therapy, which was a naturally selected cell line with very high producing mannose 6-phosphate, which is critical for targeting an uptake. And then we also combine it with the enzyme stabilizer, which allows more active enzyme to be present in the circulation. We designed -- carefully designed a study that looked at predominantly ERT-experienced patients. And that's really important because if you project forward to our assumed approval, that switch data is highly differentiated. We will be the only products that has switch data in its label from a controlled -- a well-controlled Phase III study. And I think those data are the key to really penetrating into that what is really a switch market today. The other thing I think that gives us great comfort is our long-term Phase I/II data. We hope to show additional data from that Phase I/II study here later this year and then eventually, I think, published on the extension data from the Phase III studies as well. So from our perspective, we see a very strong and compelling data set. We see a market that has only been served by one manufacturer for a long time, and I think is very ready for another alternative in the space. And we really believe that we have the opportunity to take a significant share in that market.

Yes. Absolutely. And so you touched on the importance of your ERT-experience data. Do you think that some payers might seize on that and try to push a step at it through the currently available products from Genzyme?

Yes, it's a good question. Of course, what we've said is we've characterized our label negotiations, as I said, largely complete. And all the key elements we think we need are in the label or at least the draft label as it sits today. And so one of the scenarios that we've talked a lot about is if you're indicated for an experienced patient population. I would say from our perspective, some people describe that as a limited label or restricted label. The reality is that's the majority of the market opportunity today, right? So for us, that 3,200 patients that makes up the treated market today, that's where we're going to focus for the foreseeable future. As we understand, there's about 200, 300 patients -- new patients that come on treatment every year. So the vast majority opportunity is in the experienced patient set. And so that's why we're focused so much on making sure those data end up in the label. From a U.S. payer perspective, the feedback we've gotten is that as long as we're priced no more than existing therapies, they have so few patients within their provider -- within their payer set that their member-set -- excuse me, that they don't really manage this category actively. So I don't think it's going to be a matter of payers restricting access. It's really going to be up to the physicians to decide how they want to use the product. Of course, we'll only ever promote to the label. But I think in the long-term, as patients and physicians get experience with ATGA in the switch population as we look for opportunities to potentially expand the label, I think you'll end up seeing this used in the broad Pompe population.

Absolutely. And so then we bifurcate the market into infantile onset Pompe and then late onset Pompe. So what do you really think is a clinical unmet need for each population? And how does ATGA address this?

Yes. So as a reminder, the initial strategy from a regulatory perspective is to pursue approval in LOPD first. And so that's -- the vast majority of the market is 80% to 85% of the market is -- from a revenue perspective is LOPD patients. Of course, they weigh a lot more. There are more of them, and so it's a disproportionate amount of the opportunity. So we're focused there first. We do want to move into the IOPD population as well as the adolescent population with LOPD. As they've done more and more newborn screening, many patients are being identified young even if they have a late onset mutation. And so that's an important segment as well. And we're doing those studies and we'd look to expand into that population. To your point about where is the unmet need? Clearly, in the late onset population is what I've described before, which is you have, unfortunately, this initial impact from standard-of-care that looks like after a period of time it plateaus and then starts to decline. So these patients are still declining in their forced vital capacity, in their 6-minute walk and that's been published kind of over and over again. So for us, if you look at our Phase I/II data, if you look at the experience segment of our Phase III data, what we showed is we were able to take patients on standard-of-care, switch them and show a significant improvement in both 6-minute walk and forced vital capacity. So we think that's a very clear differentiating data set. For the infants, there's a lot -- it was a little bit more complicated in the sense that you have an immunogenicity sort of profile cutting through that. And so how you deal with that, you've seen a whole host of regimens on how to deal with the immune response. But if you look at that population, I think clearly having an alternative will be very powerful. We -- although we haven't started our infantile onset studies yet, we do have a number of patients who have been granted access through expanded access. And while it's anecdotal, so these aren't -- this isn't a controlled study yet, we've shared over time some of the anecdotal data from those handful of patients, and we think it looks very promising as well. So our belief is that you'll see similarly promising data in the infantile onset population with ATGA once we conduct those studies.

Great. Absolutely. Do you want to put me to Galafold now?

No, excellent.

So like ATGA, you've given peak sales guidance of $1 billion. So I guess what's the anatomy of how we get there from here? Is it a mix of price, volume and geographic footprint expansion?

Yes. So some of those things, the one place in -- from a price perspective, except for the U.S. where we have a pricing promise where we'll never raise price above CPI. Around the world, generally, there's either flat pricing or even erosion over time through various mechanisms. So price really doesn't drive market growth. But your other point, geographic expansion, for sure, penetrating into diagnosed, untreated patients for sure, but even continuing to switch patients. So the market today is $1.9 billion last year in 2021. We think it will pass $2 billion this year, clearly on its way to $3 billion, and that's reflected because Fabry is a massively underdiagnosed disease. And so really, what you're seeing there, some market growth from Amicus moving into the diagnosed untreated market, but also just finding more patients. So that dynamic will continue to happen. But from a switch patient population, we have -- remember, we're eligible to 1/3 to 1/2 of patients that have those amenable mutations. We have a market share at the end of last year of just under 50% treated amenable. So that means we still have another 50% of patients to switch and that was on a run rate of about $300 million last year. So that right there is another $300 million in opportunity. And you ask yourself, well, how far can you go? Like how much can you penetrate into those markets? And what we see in the markets where we've been approved the longest, so Germany, U.K., et cetera, we're seeing 70%, 80%, 90% market share. So we know we can penetrate into the vast majority of that segment. The other point on geographic expansion is a good one. We're approved in about 40 countries around the world, and that represents about 80% of the global commercial footprint. So there's still about a 20% additional opportunity just to launch into those markets. Turkey is probably the biggest single country ahead of us, and that's -- we just got approval this year, and so we're pursuing pricing and reimbursement. There are some other big ones. And then again, that sort of combination of newly diagnosed patients and diagnose and treated. So I think if you put all that together and combine it with our IP estate, we should continue to build upon, we now have 28 Orange Book-listed patents that go to 2038, including 3 composition of matter patents. So we think we have a really nice runway to continue to build the Galafold franchise.

Absolutely. I find interesting, you mentioned Turkey is a single biggest market and how do you -- I think typically, when you think about rare disease, people think of China as the largest opportunity. Is it just Fabry disease and China are poorly understood?

No, it's a great point. So I guess we're a little bit cautious on talking about China as the largest market. Obviously, from a prevalence perspective, it should be and it will be. The question to me is how quickly for the rare disease markets, can you access those patients with a reimbursed product. The good news is what we've seen in the last couple of years is Fabry is now recognized on their official rare disease list. Galafold is actually recognized on their urgent medicine list. So there's clearly traction there, I think, to be able to pursue commercialization. And then I think most importantly, we've seen even Replagal, as an example, by Takeda, which now is reimbursed through their central process. So I think what you're hearing is perhaps a little bit of maybe cautious optimism. So it's definitely on the list. We're looking for opportunities and how best to pursue it. But because I think you've had a harder time getting traction towards reimbursement. From a dollar volume perspective, it still isn't on the largest country list. I hope that in 5 or 7 years, that actually changes. And so we're looking for ways to access there as well.

Yes, absolutely. So that $1 billion peak sales number is kind of almost a conservative estimate and based on what you have near-term visibility into?

Use that at me.

Great. And you touched on this as well, Fabry disease is massively underdiagnosed.

Yes.

So what are you doing from a patient identification perspective to try to increase this diagnosis rate?

Yes. So historically, what you've seen is a lot of focus on kidney disease because originally it was classified as a sort of disease affecting males and primarily the kidneys. So back in the day Genzyme, now Sanofi has done a lot of work in dialysis centers, as an example, other places that follow kidney disease, finding patients there, and that's been, I think, very productive. You saw some movement towards looking at hypertrophic cardiomyopathy, some interesting work in idiopathic stroke, and that uncovered some undiagnosed Fabry patients. And we're doing some of those things as well. We typically do that work through sponsoring investigator-initiated studies. One of the places that's been really fascinating actually is in multiple sclerosis. We had a German investigator who did a pilot study 2 years ago that showed 5% of a pretty large cohort, hundreds of patients with MS actually had misdiagnosed MS and actually were actually Fabry disease patients. And as we look back in the records, we found that the very first male patients who we treated with Galafold, his mother was misdiagnosed with MS and it was actually treated for a long time with MS medications. And of course, she would have had Fabry given the fact that he did. So that's an area where we've continued to look more closely. We're also doing a lot of really interesting work looking at AI. Now that you have closed health care network systems, you can really do some interesting things looking using AI to detect Fabry. We actually published an initial study last year at World. We have a publication coming up, I believe, this year. So we'll do some more work there. And then there's always newborn screening, and there are some countries around the world that already use newborn screening. In the U.S., it's a state-by-state issue, as you know. The biggest factor in Fabry disease is whether you identify a classic male or you identify a later onset mutation. And there are so many patients being discovered when we do these newborn screening studies like in Missouri and Illinois. There hasn't been a wholesale acceptance yet of doing newborn screening in the same way that Pompe as example has made more traction. So we're looking very carefully at are there ways to either mine existing data sets to understand how many patients were found through that process or work with states to do some interesting work there. So more to come on that, but I think continuing to help the community and diagnose patients more readily.

Yes. You mentioned Missouri and Illinois. How many states right now actually do put it in the newborn screening panels?

So I believe it's less than 15 states today. There's a number that are sort of in process. And then whether or not it's recommended versus whether or not they actually implement it successfully is also a little bit state-by-state. So it's not a perfect system. Where you've seen better traction is in some countries, Taiwan, I think, is the best example where they use newborn screening and they went from something like a couple of hundred diagnosed Fabry patients to 1,000 -- over 1,000 diagnosed Fabry patients. So -- and there are a couple of other countries that have done that as well. So there, where you have a centralized health care system, it's easier to implement those kinds of health care policy initiatives. I think the United States will be a work-in-progress, but it's certainly something that we're focused on and want to take a leadership position.

Absolutely. And then you mentioned MS in -- a German investor study that identified hundreds of MS patients that actually had Fabry.

Sorry. So it was a cohort of hundreds of patients, 5% of them had that, right? Yes.

Absolutely. You mean 5% of MS patients need able putting them on immunosuppressive therapy is kind of foolish. I would ask you this, do you envision a scenario where it becomes part of the clinical workup if you're diagnosing like an MS patient or one of these other actions?

Yes. So I think if you look at probably hypertrophic cardiomyopathy, renal failure are 2 great examples of disease areas where now Fabry is much more readily on the differential diagnosis. And once you get to the 2%, 3%, 4% range, I think it makes sense for some of these specialists to be looking actively for a genetic disease. So the MS one as an example, that was a pilot study. We're working with that physician to replicate those results. If you were to keep that number in that kind of Q or 4% or 5% range, I think, for sure, you could get MS physicians to be focused on that as a potential treatment alternative because as you said, first of all, you don't want to treat with the wrong medication, but second of all, having a clear genetic cause with multiple therapies in the market could be a really attractive option for some of those patients.

Absolutely. And then just competitively, how do you think about the threat from GCS inhibitors?

Yes, it's a good question. So I think, first of all, important to remember, very different mechanisms, right? So chaperone, the fundamental technology there is that you take a small molecule, it binds to and stabilizes a patient's own misfolded protein, traffics it to the lysosome. If the mutation is amenable to the chaperone, then once in the lysosome, it's able to turn over substrate and that's where you see the benefits of the chaperone mechanism. With the GCS inhibitors, different approach. In that case, they're effectively turning off of a biological pathway that leads to the synthesis of the substrate. So they're preventing the accumulation of substrate. As far as I know, I haven't seen any evidence that they actually can reduce the substrate that already exists. So from our perspective, great to have another oral option. We see that really competing for the nonamenable mutations who don't have the choice to take Galafold. And so from our perspective, great for the whole Fabry population have an oral option if those -- if they get -- go on to get approval, but we don't see a lot of competition in our space because of that very differentiated mechanism.

Okay. That's helpful. And then just, I guess, one last question, and it's a source of confusion for a lot of people. Is the number of mutations that are amenable the U.S. label are very different from U.K. and EU? Is that just because U.S. has only identified mutations and U.K. more like theoretical mutations?

Exactly. Yes. So it's -- and our Chief Development Officer is here, and he was one of the people that helped develop this whole process. But on the one hand, I think if you look at the EU, and it's a very exciting application of this notion of pharmacogenetic medicine, right? So once we prove the concept in the clinical study where we had patients with the mutations, we developed the pharmacogenetic lookup table that allowed us to determine who had amenable mutations. They really bought into that concept and said, okay, now that we understand the concept, we sort of made a construct of all theoretic mutations, and we were able to update the label with all every theoretical mutation that would lead to an amenable mutation for patients. So if a patient shows up who has one of those, then they can go run on therapy. The U.S., maybe not surprisingly took a little bit more of a pragmatic approach. Their approach was, okay, we get the concept in the clinical studies. But in order for us to update the label with a new amenable mutation, you have to show me a patient who actually has that mutation. The reality is, now that we've done the work in characterizing the mutations, it's a few weeks to work up with patients, own mutation, you put it up against the theoretical amenability list and then you work to update the label. So it's really more a matter of time. I don't think it leads to -- if you were to get the FDA up to 500 mutations -- I don't think it leads to a meaningful difference in the opportunity that already exists.

Absolutely. And then maybe we can just move to more high-level general questions.

Sure.

So you're targeting non-GAAP profitability in 2023. Can you just help us to understand kind of how you get there between revenue growth and then also OpEx cuts?

Yes. So the big change was -- and we may talk a little bit more about this, but the big shift, of course, was our pivot away from the investment we're doing in the early gene therapy program. Effectively, they were taking too long. There was too much risk, too many questions, frankly, in the gene therapy space that we were not able to address effectively. And so we moved a lot of that investment on all of it, a lot of that investment off the book. So that was one step, which is removing about $400 million in operating expense over the next, call it, 3 to 5 years off of our books. The second piece is, of course, growing Galafold, and it continues on track and then adding ATGA revenue. So those 2 are obviously on the top line. And over the next 5 years, that's $1 billion plus in top line revenue. And then the next piece, as you said, is really being judicious around OpEx. Now this year, we have a couple of onetime expenses that artificially elevate the OpEx line. One of them is the wind-down costs associated with gene therapy. The other piece is the continued buildup of manufacturing, which today still shows up on R&D expense line. For next year, the gene therapy costs largely go away. And then once we get to an approval, the expense around inventory moves over to the balance sheet and then it's cost of goods. So in that way, you're effectively winding down your Phase III development on Pompe because now you've moved to approval in those studies are ending and moving over to commercial patients, you're not recognizing the cost of the inventory as an expense any longer. You don't have a handful of big gene therapy, expensive gene therapy programs entering the clinic and that way you're able to really ratchet down the OpEx line. And what we've said is that we think we can bring it down to the levels sort of in the 2019/'20 range or even below that, and that was a $400 million to $410 million. So something near that or even below is our target.

Okay. Fair. And then we can talk about the gene therapy spinout or attempted packing, but market conditions that went back. Are you actively looking to out-license this or divest it to another company?

Yes. So as I said, we felt like the investment we are putting into those programs and the challenges that were -- existed in the gene therapy space didn't make it worth it. We decided we'd much rather invest in growing Galafold, growing ATGA and that would deliver more value for shareholders in the short term. We do still have our Fabry and Pompe gene therapy programs. And there, we will always look to be leaders in the Fabry and Pompe space. We think we have highly differentiated transgenes with our protein engineering technologies. But we think there are some fundamental questions that we need to answer before we push those into the clinic. So we're making very modest investments there to keep those programs going to try to answer some of those questions. And at the right time, I think you could see us move those forward if we think that a good chance for success there. We do have a CLN3 Batten program that's still ongoing. We have a clinical study that we're waiting to see the final data from the initial 4 patients there that will read out later this year. Our hope is that there's a way to move that forward somehow. Whether it's in our hands or somebody else's is to be determined. We'll see what the data look like and go from there. But again, I would expect very modest investment in all of that for the near term while we focus on what we think are the bigger value drivers, which is the top line products.

Great. Well, I see we're out of time. Brad, thanks so much for joining us today.

Thanks, Andrew. Appreciate it.

Yes.