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

Good afternoon, everyone. Thank you so much for joining us. Really pleased to have Brad Campbell, President and CEO of Amicus.

Brad, to start here, can you give a snapshot of your business today and your strategy on commercial execution in the second half of the year?

Sure, yes. Thanks, Salveen, thanks to Goldman Sachs for having us here. It's a great conference, great schedule. So I appreciate that. Yes. So as a reminder, Amicus, we are a global biopharmaceutical company focused on delivering therapies for people with rare diseases. We have 2 core products, both commercial, first, of course, is Galafold. Galafold is a small molecule chaperone for patients living with Fabry disease who have amenable mutations. That's a business that continues to grow quite well. We saw a great first quarter. In fact, we raised our guidance from 11% to 16% growth year-on-year to 13% to 17% growth. And that's a product now that's in its 7th or 8th year of commercialization. So great to see that continued growth trajectory. I'm sure we'll talk more about drivers there. That really, I think, sort of represents the core value of Amicus today. The exciting piece, of course, now is the addition of Pombiliti + Opfolda. We sometimes shorten that to PomOp. So it's a little bit easier to say. PomOp for us this year. We've given guidance for the first time. It will do $62 million to $67 million in global sales and that contributes overall to Amicus of 25% to 30% top line growth. So we think really a core business in Galafold, you're now adding a great new launch product in Pombiliti + Opfolda. Both of those products, we think, have $1 billion of peak sales opportunity. And again, I'm sure we'll talk about kind of drivers and confidence in that launch. And then all of that is kind of underpinned by a strong financial profile. We will deliver non-GAAP profitability for a full year for the first time this year. And so as you said, really, this year is all about commercial execution, continuing to strengthen the financial profile and delivering value for shareholders.

You've guided to achieving a full year of non-GAAP profitability in 2024. Can you describe what is baked into that guidance and your expectations on the operating expense side over the course of the year?

Sure. Yes. So again, fundamental, of course, is top line growth. And as I mentioned, 25% to 30% year-on-year growth from the combined portfolio. So last year, we did just shy of $400 million, $399 million, and so that translates to a $500 million to $520 million in top line revenue for the year-end with the 2 combined products. You combine that with our expense guidance, which is about $345 million to $365 million in global non-GAAP expense. And about 30% of that, to give you a flavor, is R&D OpEx. We're still investing in registry commitments for both products. We're still investing in pediatric studies for Pompe, which we think could lead to label expansion over time. We're still investing in bringing the second WuXi facility online. And so all of that kind of contributes to investments that we think in the long term will create value again for shareholders and for the programs. But when you combine those 2, you can see full year non-GAAP OpEx. Another way to think of that is that we've kind of now gotten to scale with the Galafold business alone, about $400 million which will do well more than that this year is where the whole global business turns profitable, and now you're adding the Pombiliti + Opfolda piece taking out cost of goods, of course. And that's where you can really see leverage on the overall P&L.

You've really been at this point, a commercial stage company with limited pipeline. Maybe speak to us about how you'll bring in a future growth lever via R&D?

Sure, yes. So I would say there's 2 sort of phases of that. The first is where we are right now, which is we will continue to execute on Galafold and grow that business. We will continue to execute on the launch of Pombiliti + Opfolda. We have lots of new products -- or sorry, countries to bring on board there. And so if we simply execute on those, I think we're well undervalued today, and I think there's lots of opportunity to drive shareholder value. I do think though that we've built a very capable global commercial infrastructure and a very capable late-stage development infrastructure. And I do think those -- we still have some leverage we could get out of those. And so one of the things we've talked about is if we can find the right thing at the right price in the next kind of 12 to 18 months, you could see doing something that would accelerate the revenue growth and continue that profitability track. And so I don't think we have to do that. But if there's an opportunity to leverage what we've built in the next couple of years, I think we could do that. You've seen examples of that being productive ways to create shareholder value. In the next kind of 3 to 5 years, though, when we start to generate our own free cash flow and have our own resources, then I think we can also build into a pipeline. We do have some early-stage programs still that I think have some traction that could be very interesting. And then, of course, you could always look at bringing in an earlier-stage asset, but that would be when we can kind of fund that development through our own operating profits and cash flow.

What do you think with regard to the full story is underappreciated by the Street? And what are you most excited about over the next year?

Yes. I think there are a few things. So first of all, I think Galafold alone should be a $12-ish valuation from a share price perspective. I think, in some ways, people have really focused on the launch, which I get and makes sense, but I think it distracts a little bit from what is just the value of our core business. So there's not a lot of downside, which I think for many biotechs, you've got binary events which can challenge that thesis. The other thing I think that clearly has weighed on the stock and I'm sure we'll talk more about it is biosecure and now we've gotten much more clarity around the transition period that congress is allowing for hopefully, that takes that away and allows us to kind of clearly perform past that. And for sure, there is an element around the launch and what's going on there. And I think the most important question that investors need to ask themselves is, "Is there an issue with the product?" The answer is no. We've got great data. We're having great experience with physicians, putting patients on Pombiliti + Opfolda. Is there an issue with Amicus in our capabilities. I think we've demonstrated with Galafold. We have very strong commercial capabilities, and we're doing that here. And so then you say, well, then what is it? I think it's really just a matter of timing and we'll talk a lot more about why that is. What I'm most excited about, frankly, from an Amicus perspective is, if you look at the feedback we're getting from physicians, if you look at the data we've generated, if you look at the feedback we're getting from patients, we're seeing over and over again this really positive response to switching on to Pombiliti + Opfolda. And Again, it's the only product that's demonstrated an ability to improve the outcomes of patients after switching from standard of care. And I have very high conviction that this is a 50-plus percent market share product at peak and this market is growing to more than $2 billion. And so to me, it's just a really underappreciated opportunity to grow on top of what is already, I think, a really healthy growing business in Galafold.

Let's start on the PomOp launch. How is the launch that's currently underway in the U.S. and U.K. and Germany progressing? I think you've mentioned, as you just did about $1 billion in peak sales opportunity. Could you speak to the assumptions baked into this guidance and when you expect to get to the peak sales number?

Sure, yes. So part of it is if you just take a step back and look at the overall market, it's a $1.3 billion market today. We're a small contributor to that, but we will be a bigger one over time. And I think most physicians, analysts, et cetera, would think that, that's probably a $2 billion-ish market by the end of this decade. That, by the way, is assuming a conservative rate of growth. It's growing at a faster clip like day in the last few years. But if you just kind of assume it's going to slow down a little bit, you get to $2 billion by the end of the decade. And that's, I think, driven by 2 things. It's driven number one by just increasing diagnostics. Part of it, we've talked about this, and this is really a big deal in Fabry as well. Low-cost genetic screening just helps facilitate faster diagnosis of patients. The other thing is you see this over and over and over again when you have another player and tour into a space or another therapy offer, you oftentimes see an increased growth in the market. So I think those 2 things -- and then if you just look at the ERT markets broadly, Gaucher, Fabry, MPSs, et cetera, you just see this long-term healthy growth until something gets displaced and then we don't see anything on the horizon that's going to displace that. So I think the market is just robust and growing, which is really good. And then you look at our therapy and how it can play within that. We can talk about specific kind of regional dynamics, but fundamentally, what we point to is the U.K. as a great comparable to look at sort of where this product can go in the short term and maybe medium term. It was made available through the EAMS program, which is the Early Access Medicine Scheme, a little over 2.5 years ago, almost 3 years ago. And that was effectively the physicians could prescribe it freely just as if it was a launch product. So in our mind, that's kind of really the start of the launch. And in 2 years, in the presence of both Nexviazyme, which was available through the same program and of course, Lumizyme, the legacy product. We've now passed a little over 1/3 market share in that market. So our ambition is within every market we launch in, we can get to 30% to 35% within 3 years. I think from there, you can easily see your way to continuing to become standard of care, and we can talk about how that happens and get your way to 50-plus percent market share. But we know within 3 years, we're already at 30 -- we're 1/3 actually in the U.K. If you look at the other launches so far, Germany, U.S. and now Spain, which is pretty recent, we're on track right now to exit this year between 10% and 15%, which puts in each of those markets, which puts you on that 30% to 35% sort of pathway. So I feel like all the things that we want to see in the early months of launch are on track and we see great line of sight to getting to that 50%, which would translate to $1 billion.

Are there any other dynamics that are playing out with regard to use of the competitor drug and how recently they may have gotten on that drug with regard to understanding that the time before you would switch over?

Yes. And I think -- and I've talked about this, I feel like that piece is that's how you have conviction of this is going to be the 30% and it caps out there versus this is going to be standard of care, i.e., more than 50% of prescriptions. And by that, I mean, what we're hearing from physicians and what we anticipated and I think is playing out now is physicians are saying they need about 12 to 18 months of experience with a product before they're willing to switch. I think you've shared in some of your reports, we've heard from a number of sites and other sources that physicians sort of want to see what happens over that period of time before they switch. And therefore, in the United States, where Nexviazyme has been approved for like 2.5 years, you have just a big chunk of patients that are in that middle segment. So they've been on drug on Nexviazyme for less than 18 months. What you're clearly seeing, and we've seen this with great data now, we're clearly seeing the decliners who've been on for potentially 18 months or more, switching over to Pombiliti + Opfolda. And I think that's the segment that we're getting very demonstrably in the U.S. and in other markets. The way we win is through continued improvement when patients switch from either product to our product. And then you can challenge a patient to say, and by the way, that's we're the only product in our label that says that improvement is possible. Literally, that's the FDA-approved promotional material say improvement is possible because that's what our Phase III data demonstrated. So when you can convince a physician that actually you shouldn't wait 12 to 18 months because that patient may end up having a declining event in how they can walk or how they breathe that you may never recover from. So why not improve them now and change the trajectory of their disease. That to me is the difference between, like, yes, we'll get the decliners outside the U.S., we've got 90 patients, et cetera, et cetera. But that and actually truly being the winning therapy. And that takes time. And that's kind of the course we're on, and we're seeing things that give us confidence that we're going to be able to do that.

And how do you think about the U.S. versus ex U.S. split?

So from a -- there are -- so the other side of the coin, I'll start with kind of the market share dynamics. So right now in the U.S., Nexviazyme has the majority of market share because they launched a lot sooner. And so we're getting a higher percentage, much higher. We're getting like 70-plus percent of our switch patients are coming from Nexviazyme and the balance from Lumizyme. I think that will continue to play out just because that's the way the market evolves. Outside of the U.S., it's the flip. So the majority of market share is still Lumizyme. And so we're getting a majority of switch patients from the Lumizyme pool. And again, I think that will continue. We are also getting a healthy uptake in the naive patient population as well outside the U.S. So that's really exciting. And so I think we'll continue to pull from kind of all 3 segments. If you look at revenue distribution, because we came into the year with more European patients in clinical trial and expanded access and because we launched a little bit sooner in those markets, we'll get a higher revenue this year from Europe. That being said, because of the price differential because of the market size if you look at kind of steady state, if you look at Sanofi's numbers, 40-plus percent of their revenue is coming from the U.S. So I think we will evolve to that in our portfolio as well. And I think this year, even we'll have more new commercial patients coming from the U.S. because it's a bigger country. but the revenue will catch up as we go.

How is the frontline market playing out in terms of the various players right now?

And you mean frontline, meaning?

Meaning if a patient were naive and being put on drug for the first time. What proportion are coming on to your drug versus the others?

So in the United States, as a reminder, our lable is for experienced patients. And so we cannot promote to first-line therapy nor will we do that? Eventually, every patient can be a switch patient, right. And in the U.S., there's probably 400 or 500 treated patients. There's probably 40 or 50 new patients that come on every year. So the vast majority of the revenue opportunity globally is switching patients. And again, even in the U.S., if they start on another product, eventually they can be [ eligible to ] switch. And our job is to encourage that switch sooner. Outside the United States, interestingly, we're hearing for the first time that actually in some of our earlier launch markets that we're the dominant treatment of choice in naive patients. And I'm not surprised. If you look at the data, we don't have the label in the U.S., when you look at the data, we've shown very impressive impact on naive patients and the Europeans included that in the label. So right now, I think you're seeing strong uptake in the markets where we have an ability to market against those patients. In the long term, as you continue to demonstrate the value of the product, I think that should only increase the preference but again, even if they were to start on another therapy because of our switch data is so strong, and it's -- again, we're the only manufacturer that's shown in a controlled study that we can improve patients switching from standard of care. I think that you have a preferential share of switch patients over time as well.

Could you speak to the path to get naive patients included in the U.S. label?

I think there's 2 obvious choices. One would be to do kind of a head-to-head study against naive, you could do all 3 products, you could just do next size them in our product. That's an expensive study. It takes a long time. We've seen 6-minute walk has variable outcomes. So I'd say that's a highly unlikely choice, although you might, over time, have enough conviction in the data that it's worse. I mean that would be a home run outcome. But the other piece that I think is probably a more likely outcome is what Sanofi demonstrated in the Fabry case is they use registry data to expand -- to move from accelerated approval for the original Fabrazyme approval to full approval. And they were able to use registry data to do that. So I think there is a precedent in the LSD world with regulators to use registry data. We -- as I said, there will be naive patients in it because outside the U.S., we have them on label, and we have a growing pool of those patients. So in 3-ish years, I think you could think about using that data to support a label expansion.

Can you speak to the reimbursement dynamic in the U.S. I think you've spoken to a lag that was playing out with regard to referral forms to time to infusion. How long does it take for that to be shortened?

And I will say that was the biggest disconnect for us between expectations and guidance. And we had said, look, we need enough time to understand how those trends play out. And so we needed data and time to be able to confidently give guidance. And it's unfortunate, but we understand it much better now and now we've worked through that process. That was probably about $15 million of the difference between expectations in our eventual guidance. The rest is probably pricing mix. And so -- and the real issue as we look back on it was less TRF or prescription to infusion or reimbursement, and that's really a U.S. phenomenon outside the U.S. It's immediate. It was really getting the clinical trial -- physicians to write the prescription to start the process. It seems kind of, I guess, obvious that they would want to do that and get moving on that process. But if you think about it from a physician's perspective, number one, they already have access to the drug. So the urgency to like I really want to switch my patient. Well, they're already on PomOps, so they don't need to switch. The second piece is for the end of the study, that you have to come back in. They actually have to do 2 infusions in the clinic. So it's a pain in the butt for the dock. It's pain in the butt for the patient. Again, there's no urgency because already on the drug they want to be on. So it just took a lot longer for us to get those first prescriptions written. Now we've worked through that whole process, and that's behind us. If you look to the question you have, which is now the metric, the relevant metric for new patients is from a prescription to infusion, we started off with a target of about 90 days, some a little bit longer, some a little bit shorter. As of our Q1 call, which was in April, that's down to 70 days. We also shared that a couple of our patients -- the more recent patients actually gone through in about 40 days. And that's our target is from a steady state perspective, it's 30 to 45 days. So we have data that says we're moving in that direction. Our goal is kind of by the end of the year to be in that range. We saw that with Galafold and we're in that same range with Galafold. So it's -- we clearly can demonstrate that. And I think that's something that we'll track as we go through the year is kind of making sure we continue to narrow that process. The good news is what you really don't want to see is formulary rejections, patients being denied, and we're not seeing that at all. It's just a matter of sort of getting through the system.

Can you speak to the Myozyme switch dynamics? Have they almostly gone to Nexviazyme? Or are you seeing some switch over to your drug?

Yes. So we are still seeing Myozyme switchers to us, and it's proportional based on the market. So in the U.S. it's the minority, 70-plus percent of our switch patients have come from Nexviazyme, the balance from Myozyme in Europe, where it's kind of flipped from a market share perspective, it's the opposite. The majority coming from Myozyme and a smaller minority coming from Nexviazyme. But that matters a lot to us because you want to make sure you can take share from both products. I think from a physician perspective, really all they care about is like how are they doing. So they don't ask themselves what drug are they on? I think they ask themselves how are they doing? And have I had enough time to evaluate that performance. So to me, yes, you want to make sure you can take market share from both. And now that we've, I think, clearly demonstrated that. I think really what we want to focus on, as I said before, is that let's shorten the time to come to the decision that they need to switch to PomOp.

You touched on the biosecure build. Maybe help us understand the plan here if you look to opening another second WuXi plant about the move elsewhere with regard to manufacturing?

Yes. So if you look at our current plan, there's a couple of things that we've done mitigate against risk. First is moving to WuXi, Dundalk. So still WuXi facility. And by the way, they invested in that facility and they've been very high quality, great partners. And again, they invested in a second site of manufacturer, which is great. That's online and that product should come into the supply chain sometime next year or early '26. And that's what we had planned for. So that's all on track, which is great. We've also taken a near-term supply strategy of always having 18 to 24 months of inventory throughout the supply chain. So everything from drug product to drug substance to finished goods. But what we did, and this was really a lesson from COVID is we started moving product out of China. So 65% of our product is in finish goods outside of China, either in distribution side in Europe or in markets of the U.S., U.K., et cetera. So we have a significant portion of our supply that's finished goods that's sitting in our distribution centers, which is great. So we own that product. In the medium term, and this is where the biosecure Act was so confusing for people. When the first bill was proposed and I get it. We were very confident this wouldn't be the case. But when the bill was first proposed, one interpretation is that you would sort of stop cold turkey and any patient who was on -- any government patient, I should say, who was on a product manufactured by a named company in China, would no longer have access to that medicine. Now we were confident at the time that in the end, congress would wake up and say, "Oh, gosh, this is like millions of voters who would be taken off of like life-saving medicines," they're not going to do that. But clearly, we need time for some of us manufacturers and bio as well. We give a shout out to the CEO of Bio, who you guys all know well, John Crowley, who is really instrumental in making sure that Congress did understand the importance of that new language. And now what you see is this transition period of out to 2032, so 8 years to transition away from WuXi to another supplier. And so we've already talked about our second-generation manufacturing process, which is our attempt to bring down cost of goods. And effectively, we will now look to put that in the hands of another supplier and the good news is we've already identified 3 who not only have the capabilities, but also have the capacity and the physical plants to be able to do that. WuXi, I think, will always be a partner of ours and a manufacturing partner of ours. Obviously, with the biosecure Act, we wouldn't use their supply to go into the United States. But you've got Asia Pacific, Rest of World, Europe, et cetera, where I think they could be a long-term partner. And again, they've been super high quality and really great part of the development of the product. So I think they'll be a long part of the story. But we have plenty of diversification away from them in the context of biosecure.

Under biosecurity, you could be a U.S. domiciled company and still partner for the ex U.S. supply?

Yes, exactly. The technicalities of that contract are -- or that contract, the bill are that no government contract can occur for a product that's manufactured in -- by a named company in China so effectively Medicare, Medicaid, NIH, anything government, the defense department, VA, et cetera, would be restricted. I think the practical reality is that probably most American companies are going to have a supply source for all of their patients in the United States, but technically, it's limited to government contracts.

Got it.

I will say the knock on. I think the knock-on effect of biosecure is actually a positive one, which is kind of reframing the narrative of the American biotech and pharma manufacturing industry broadly and focusing on what should be a competitive advantage for the United States, which is not just developing but also manufacturing medicines for the world. And we used to do that, I think, and we used to be leaders in that and you've seen an erosion of that capability over time. If you could see like a chips act kind of thing for biotech, it would be great for our whole industry and great for the United States as well. So I'm hopeful that, that's kind of the second shoe of this initiative. But in the meantime, we're very comfortable with the strategy, and I think investors will now sort of realize this isn't kind of a black swan effect. In fact, there's clear ways to have the transition period. You have our strategy. So hopefully, investors now can kind of put this aside and focus on the business.

Maybe turning over to Galafold. Help us understand what's baked into the assumptions around your guidance there?

Yes. So there are two, I think this is a $1 billion product opportunity at peak. There are a few big assumptions there. The first is that this is a $2.1 billion market today. We think it grows to a $3 billion market again by the end of the decade. How does that happen? Well, in the Fabry case, what's been, I think, remarkable, it's even a larger disease than Pompe disease, and you've seen, therefore, even a faster diagnosis rate there. As an example, when we launched 8 years ago, there were 10,000 diagnosed patients, 5,000 treated, 5,000 diagnosed untreated at that time, it was about a $1 billion market. Within 7 or 8 years, it's doubled to a little over a $2 billion market. We've fueled some of that growth because Galafold's an oral product, I think that has some positives. So now there are 11,000 treated patients, but there's another 6,000 diagnosed untreated patients. So if -- even if you don't find a single other patient, you just penetrate into that population that gets you well past $3 billion. From a Galafold -- then you ask yourself, well, what are the dynamics are on Galafold. First is we're eligible for a 1/3 to half of those patients, those are the amenable patients based on our estimates. So right now, we're sitting at a little over 60% share of treated amenable patients. So there's still a significant chunk of just switching patients that we have to go. But we're also getting a ton of growth from the diagnosed untreated or newly diagnosed patients. And that's where I think the market will grow and our product will grow with that because we're now standard of care in the switch market. We're getting to 80% or 90% market share of Germany and U.K. and other more mature markets. So for me, the market already exists today to get to that $1 billion as long as we just continue to execute the way we have, I think there's a clear path there. And I think that's -- people say, well, how long does it take? And I think that's still a relatively kind of steady growth process. We're growing at high teens rates today. Again, if you kind of assume that continues roughly in the low teens over time, you could sort of see how you would get to that $1 billion.

How are you thinking about emerging competitors that are taking different. Using different modalities such as the substrate reduction therapies or gene therapy?

Yes. So I think there are 3 main classes of technologies that are out there today. First is substrate reduction therapy is -- well, maybe for ERT. So we have seen the new launch of the Chiesi, Protalix ERT. And what we had seen in Fabry, what we had seen previously. So there is a -- so JCR has a product in Japan, that's an ERT. There's a Korean company that sells biosimilar ERT in Asia as well. And effectively, those products kind of compete with other [indiscernible] some of the best growth, kind of 6 to 9 months for Galafold, launching their products. So I think the ERTs for us will [indiscernible] each other for patients to have choice. And so we wish them [indiscernible] business. The second one is the substrate reduction therapies. And you've had 2 developers of those over time. One of them has failed to meet its primary endpoint and is sort of a trying to sort of see if there's an outcome there that could be positive. Another one has taken a lot longer than it was anticipated. And so I have high skepticism that an SRT is ever going to work in the Fabry space. The other piece of that is even if it does, if you -- the reality is even though it says substrate reduction, as you know, you're turning off the production of substrate, you're not actually reducing existing substrate. So if you're talking to a patient with an amenable mutation, whereas Galafold does turn over existing substrate. If you're talking to a patient with a amenable mutation, they're already in a safe, effective drug -- a new mechanism unknown that -- so I just think there's limited likelihood and limited impact from the launch of that product. I do -- I really like the idea of a gene therapy or gene editing or a nonviral delivered genetic payload for the nonamenable patients in Fabry. We have our own program that we're keeping warm. We're investing like less than $5 million in it. As I mentioned earlier, like once we get enough of our own resources, I'd love to be able to kind of bring that program forward in 2 years or so. But there are a lot of issues with gene therapy today that still need to be solved. I know you guys have covered this, too. We still don't know the best way to deliver them. And we've tried a whole host of different ways to do that, and none of them seem to work as well as we want. In particular, they don't seem to lead to long-term expression and durable outcomes. Dosing is a challenge. We've seen a lot of safety issues. And again, I think that's because of the protein that we're expressing is an optimized for a gene therapy mechanism. I think we've done some interesting things in protein engineering that might solve that. Manufacturing leads to much higher prices than I think the current system is willing to sort of deal with. I think you have to get $1 million or less price point, and I'd love to be able to redose these things so that fits better kind of the current payment landscape. So I think all those things are kind of putting a challenge on it. But I love the idea if we could solve some of those things, find a better way to deliver it. [indiscernible] therapeutic option for nonamenable patients, that would be [indiscernible].

Thank you so much. Really appreciate the discussion.

Thank you very much.

Thank you.