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Biotech Stock Mailbag: Amicus, Celldex

BOSTON ( TheStreet) -- Welcome back to the Biotech Stock Mailbag.

@StuckinStock writes, "Do you care to share your thoughts on FOLD, Adam?"

I'm bullish on Amicus Therapeutics (FOLD), meaning I believe the phase III study of Amigal in Fabry disease patients will be a success. Amicus and partner GlaxoSmithKline (GSK - Get Report) are expected to announce top-line results from the Amigal study in December.

Given the dynamics of the current biotech market, the announcement of a win from the Amigal study should be fuel for a nice bump in Amicus' stock price. (Look at Acadia Pharmaceuticals (ACAD) this week as a comp.) Whether Amicus can hold the higher bid is a tougher call.

A positive outcome from the Amigal study should wipe away many of the questions about Amicus' "pharmacological chaperone" technology platform that cropped up after the 2009 failure of the company's Gaucher disease drug Plicera.

On the other hand, it's difficult to gauge the commercial opportunity for Amigal in Fabry disease, which affects about 10,000 people worldwide. The current therapy for the disease is Fabrazyme, which generates approximately $500 million annually for the Genzyme unit of Sanofi (Sny). Amigal won't work in all Fabry patients, but how many will benefit is a bit of guess. Amicus says half to three-quarters of Fabry patients have genetic mutations amenable to Amigal therapy. Other independent estimates predict 50% or fewer patients will be eligible for Amigal. Fabrazyme isn't going away, so Amigal will have to compete for Fabry patients. (Amicus does believe Amigal and Fabrazyme can be used in combination, too. More on that later.)

Amicus' market cap is approaching $300 million as the Amigal data release nears, so the size of the drug's commercial opportunity isn't a trivial matter.

Let's dig into the details.

Fabry is an inherited disease in which a genetic mutation stops an enzyme from breaking down a fatty substance known as globotriaosylceramide, or GL3. The buildup of GL3 in blood vessels throughout the body causes severe damage to kidneys, heart, brain, and other organ systems.

Currently, Fabry patients are treated with replacement enzyme. Fabrazyme takes the place of a patient's misshapen or missing native enzyme and clears GL3 from the body. As a replacement for the non-working native enzyme, Fabrazyme is effective in various degrees for all Fabry patients, although patients must sit through a time-consuming infusion every two weeks. The Fabrazyme infusion can also cause serious allergic reactions in some patients.

Amicus takes a different approach to treating Fabry disease. Amigal is a "chaperone." As the term implies, Amigal accompanies, or fixes, a patient's native enzyme. Without the Amigal chaperone, the native enzyme in a Fabry patient doesn't work well and can't get to the place in a cell where it's needed to break down GL3. But with Amigal as a helper, the native enzyme is stabilized and has increased cellular activity so it can break down GL3.

Remember when I said Amigal works only in some Fabry patients? That's because a chaperone can't do its job unless enough native enzyme is present. Patients with too little native enzyme or mutated enzyme that Amigal can't chaperone don't benefit from this approach. Don't expect Amigal to work as well or as broadly as Fabrazyme, but Amigal is a more convenient pill and the safety profile looks superior.

Amicus and Glaxo are running two phase III studies of Amigal in Fabry. The first, Study 011, enrolled 67 Fabry patients with severe disease, meaning they have high levels of GL3 built up in their kidneys. All patients were also screened to make sure they had enzyme mutations amenable to Amigal treatment. The patients were randomized in a blinded fashion to treatment with Amigal or a placebo for six months. After six months, the placebo patients were switched to Amigal while the original Amigal patients remained on therapy. The study's primary endpoint compares response to Amigal versus placebo at six months, with response defined as a 50% reduction in GL3 levels measured via a kidney biopsy. Response at 12 months is a secondary endpoint.

From a statistical standpoint, Amicus and Glaxo set up Study 011 to be a success with a nine-patient difference in response between Amigal and placebo. [37 patients were treated with Amigal; 30 on placebo.] The likelihood that a meaningful number of placebo-treated patients achieve a 50% reduction in GL3 levels at six months is very small, which means the success of the trial hinges on Amigal's ability to produce a response.
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