Is Amicus Therapeutics Stock Still a Strong Buy?

9/11/17

By George Budwell, MotleyFool

What happened

According to data from S&P Global Market Intelligence, shares of rare-disease drugmaker Amicus Therapeutics (NASDAQ:FOLD) rose by 6.6% last month. Although the company did provide a bevy of clinical and business updates during its second-quarter earnings call early in the month, and even though it announced the approval of its Fabry disease treatment, Galafold(migalastat), in Australia toward the latter part of August, the real catalyst behind this move higher appears to be the industrywide surge in biotech valuations that's continued unabated since President Trump's inauguration. Amicus's shares, after all, closely tracked the iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) march higher in August:

FOLD Chart

FOLD DATA BY YCHARTS

So what

Amicus's shares are now up by a whopping 178% so far this year, thanks to the successful commercial launch of Galafold in multiple ex-U.S. territories where the drug is beginning to cut into the market share of rival therapies from both Sanofi and Shire plc.

Tiny rocket taking off from a person's hand.

IMAGE SOURCE: GETTY IMAGES.

Now what

Amicus's fortunes going forward, however, are likely to depend on the regulatory fate of Galafold in the United States. After initially requesting another late-stage study designed to address questions about the drug's impact on the gastrointestinal system of patients, the U.S. Food and Drug Administration (FDA) decided to nix this requirement last July, thereby clearing the decks for Amicus to submit a New Drug Application for Galagold in the fourth quarter of this year. Presuming the FDA grants an accelerated regulatory review -- which is fairly standard for medicines that address orphan indications such as Fabry disease, the drug could be on the market in the U.S. by perhaps the third quarter of 2018.

Before buying shares of this high-flying biotech, though, investors may want to keep in mind that Amicus's valuation is anything but cheap following its impressive rally this year. Amicus's stock, for instance, is currently trading at a jaw-dropping price-to-sales ratio of 139. So despite the company's host of positive catalysts that have spurred this move higher, further appreciation could very well hinge on how the overall biotech industry performs. And there's no guarantee that the biotech ETF can maintain its red-hot momentum after gaining a hefty 25.9% eight months into 2017.

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