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Big Money Has Been Buying Amicus (FOLD)

We bought a few shares of this one, we think decent shot it moves over $4 today

 

One investing strategy in the biotech field is to follow what successful biotech funds are doing.  We detailed some companies last year that the Baker Brothers bought and most of those investments were profitable.  This year, we want to highlight another successful fund, Perceptive Advisors.

 

Investor Joseph Edelman leads Perceptive Advisors and since 1999 the fund has returned an annualized 30.2%.  Last year the fund returned about 48%.  Edelman works with six biotech analysts to find companies that can be huge winners.  The fund’s strategy focuses on finding the right products.  Edelman states:

 

“The critical thing we are doing is evaluating the science and the data to decide whether a drug will work and whether it will be approved.  If we think there is a higher probability that a drug will work than the Street does, we may have a long on that position."

 

Perceptive’s most recent buy is Amicus Therapeutics (FOLD)The fund bought 8,339,444 shares on May 29, 2014 and then again added another 4 million shares on June 30.  The 4 million additional shares were added on the day that Amicus announced trial updates and analysis plan for its Phase III Fabry Monotherapy Study 012.  Additionally, the company’s CEO John Crowley added shares a few weeks before Perceptive.

Amicus has been on a rough road for the last couple of years.  Many smart biotech analysts (including us) were expecting the company to present positive Phase III data in late 2012.  However, the company surprisingly disappointed investors and announced the study did not meet primary endpoints.  Later, partner GlaxoSmithKline (GSK) gave up co-commercialization and co-development rights on the drug.

 

Perceptive Advisors claims its unique skill is identifying successful products.  So if the drug failed studies before, why is Perceptive buying stock?

 

  • The Turn Around

 

The trial failure in 2012 surprised many people and several analysts speculated that the failure was due to trial design and not lack of efficacy.  We think this may actually be the case.

 

In the original study, about half of the patients enrolled had a mild case of Fabry’s Disease, while the other half had a severe case.  The study was constructed for patients that had a severe case of the disease.  Thus, when Amicus announced Phase III trial results, the patients with a mild case of the disease “diluted” the trial results.

 

The study was not setup to have both types of patients and, in a sense, missed primary endpoints by formality.  Patients with a mild case of the disease were treated with the drug or placebo. Of the patients treated with the drug, 32% were responders.  Conversely, of the patients treated with placebo, 44% were responders.  The mild case of Fabry’s is difficult to measure and this is what most likely caused the trial to miss primary endpoints.

 

However, the patients with a severe case demonstrated different results.  Patients who received the drug were 64% responders, while patients who received placebo were 14% responders.  The standard in the industry for testing Fabry’s patients is to use the severe cases.  So, these results are most meaningful because they would have been statistically significant by industry standards.

Clearly, if the study had been designed correctly, the company would have announced positive data.  Over 2013, the company redesigned the trial and worked with the FDA to correct the errors.

 

On April 29, 2014 the company announced positive 12 and 24-month data from the Phase III 011 study.  On June 30, 2014 the company announced several positive updates from the Phase III 002 study.  These updates included the following highlights:

 

  • Following randomization, 34 of 36 patients who switched to migalastat and 18 of 24 patients who continued with ERT completed the primary 18-month treatment period.
  • Among patients completing the 18-month primary treatment period, 32 out of 34 in the migalastat group and 16 out of 18 in the ERT group had GLP HEK amenable mutations.
  • 97% of patients with GLP HEK amenable mutations in the migalastat group (31 out of 32) elected to continue to receive migalastat in the 12-month treatment extension.
  • 94% of patients with GLP HEK amenable mutations in the ERT group (15 out of 16) elected to switch from ERT to migalastat for the 12-month treatment extension.

 

The company also announced that it is doing the final analysis on the completed trial and results should be out in the 3Q.  The day of this announcement is when Perceptive added another 4M shares.  Perceptive obviously liked these announcements and are bullish on the upcoming trial results.  Perceptive prides themselves on finding products that The Street has discounted and it seems they may have found something with Amicus.

 

  • Perceptive Advisor’s History

 

Looking back into Perceptive’s history, we can see they have found several companies before they caught investor attention.  Many of these companies were huge winners.

 

Perceptive had a position in InterMune (ITMN) before data announcement.

 

Perceptive had a position in Saratepa (SRPT) below $10 a share.

 

Perceptive’s largest position is in AcelRx (ACRX).

 

Perceptive had a position in Idenix (IDIX) before buyout.

We think that as long as the $IBB does not tank further, Amicus should get back over the $4.50 range soon, so that is our first target sell price for the trade.

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