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With $229M Deal, Amicus Gets a New Drug And Perhaps a Voucher

Xconomy New York — 

Just how far has Amicus Therapeutics come in two years? In 2013, the Cranbury, NJ-based company was reeling from a trial failure and restructuring to conserve cash. Now, it’s eyeing its first drug approval and buying a startup in a nine-figure deal.

Amicus (NASDAQ: FOLD) this morning is announcing the acquisition of Durham, NC-based Scioderm. The deal could be worth close to $1 billion in total payments if the privately held Scioderm’s drug, SD-005, a cream for a rare, debilitating skin disease called epidermolysis bullosa, hits a variety of regulatory and sales milestones.

Amicus will pay Scioderm $229 million up front for the company: $125 million in cash, and $104 million via 7 million Amicus shares. Scioderm’s shareholders, who include venture investors such as Morganthaler Partners and Technology Partners, could get another $618 million in cash or Amicus stock if Scioderm’s drug hits certain clinical, regulatory, and sales milestones. Amicus will choose whether those payouts are in cash or stock, according to CEO John Crowley.

SD-005 is currently in Phase 3 testing, and results are expected in the first half of 2016. Crowley (pictured above) says Amicus will soon begin a “rolling submission” of an application to approve the drug—basically, a tool that allows companies to submit completed portions of their FDA applications to the agency, rather than wait until they finish the whole document.

There’s a third part to this deal as well, what’s known as a priority review voucher. The FDA awards the vouchers to companies that bring treatments to market for neglected tropical diseases and rare pediatric ailments, and they enable a swifter review from the FDA once a company files for approval of a drug. That can cut months out of a review process, and what’s more, vouchers can be used for any drug in a company’s pipeline or flipped just like any other asset.

Four vouchers, in fact, have been sold over the past year, each time at a higher price. Most recently, AbbVie paid United Therapeutics $350 million for a voucher.

Scioderm will get a voucher if SD-005 is approved for epidermolysis bullosa; that voucher would now go to Amicus. CEO Crowley confirms that Amicus expects to sell it off.

“I would expect that we would monetize it,” he says. “It would be much more valuable to one of the larger drug companies.”

If Amicus sells the voucher, it’ll split equally the proceeds with Scioderm’s shareholders up to a purchase price of $200 million. If the price exceeds $200 million, all the excess cash would flow to Amicus—meaning, in theory, if the voucher went for $400 million, Amicus would get $300 million, and Scioderm’s backers would get $100 million.

Epidermolysis bullosa, or EB, is a crippling disease. It’s actually a group of genetically triggered connective tissue disorders that result in a lack of collagen, a structural protein that attaches the skin’s various layers. Without collagen, patients with EB can easily suffer severe blisters or wounds; patients are sometimes called “butterfly children” because their skin is so delicate. “You meet these kids and it just takes your breath away,” Crowley says.  “Some of them are wrapped in bandages from head to toe, and their hands are fused, it’s just awful.”

The disease affects 30,000 in the U.S., and 500,000 worldwide, according to the Dystrophic Epidermolysis Bullosa Research Association of America. Amicus calls EB a potentially $1 billion global market.

There are no approved treatments for EB. Those in development have yet to begin clinical testing, says Crowley. Shire (NASDAQ: SHPG), for instance, bought Cambridge, MA-based Lotus Tissue Repair back in 2013. Founded by Third Rock Ventures in 2011, Lotus was developing a genetically engineered form of collagen as a protein replacement therapy. Shire’s website shows that the effort is still in preclinical testing, however, just as it was when Shire bought Lotus two years ago.

SD-005, which would be marketed as Zorblisa, is a topical cream containing allantoin, a natural substance found in some plants and mammals that is already used in a variety of over-the-counter items like toothpaste and certain skin care products. Allantoin, however, has a short half-life. Scioderm’s cream, as Frank Vinluan explained in this piece last year, keeps allantoin more stable and delivers it in a higher concentration for a longer time. It softens keratin, and in Scioderm’s mid-stage trials it helped reduce and even close some patients’ chronic wounds in a small study. SD-005 would be used daily, and chronically, to deal with these wounds for patients with all forms of EB, Crowley says.

Crowley knows the drug well. He’s been on Scioderm’s board of directors for two years—his only non-Amicus board seat—and developed a “strong relationship” with the startup’s co-founder and CEO Robert Ryan. He approached Scioderm about a buyout several months ago and began exclusive talks. “This deal was never shopped,” he says.

For Amicus, the deal represents the latest step in what’s been a long and winding road. Last year, I profiled Amicus’s quest of more than a decade to create “pharmacological chaperones,” or small-molecule drugs designed to grab misfolded enzymes, force them into the correct shape, and shepherd them to the proper cell. Amicus has seen its share of failures trying to prove the worth of this approach, but it appears to finally be on the verge of a payoff. Its Fabry disease drug, migalastat (Galafold), is currently under review in Europe, and Amicus has been raising cash to prep for the drug’s launch, which could come next year. Amicus hopes to file papers for approval in the U.S. later this year as well, Crowley says.

Shares were worth around $2 apiece when things looked bleak in late 2013. Now they’re worth close to $15, and Amicus is acting as if its worst days are in the rear-view mirror—it’s now a buyer. Though no one should expect another Scioderm-sized deal in the near-term, Crowley says the company is scouting around for other opportunities.

“It’s been a great journey, that’s for sure,” he says.