This Biotech Stock Is a Gift at $10

In the world of mid-cap biopharma investments, few opportunities present the kind of compelling trade that Amicus Therapeutics (FOLD) currently does. Known for its focus on rare diseases, Amicus has seen its stock primarily oscillate within a trading range of approximately $10 to $15 since the start of 2021. Today, as the stock hovers near the $10 mark once again, investors may find it an opportune time to consider this equity.

A Steady Player in Rare Disease Treatment

Amicus Therapeutics thrives in the niche of rare diseases, with its flagship product being Galafold. This oral monotherapy is specifically approved to treat Fabry Disease, a condition that can lead to severe health complications. Despite being on the market for several years, Galafold continues to gain market share and achieved impressive sales growth in the high teen percentages recently.

In October, Amicus settled a significant patent litigation matter with Teva Pharmaceuticals, a giant in the generic drug sector. This resolution eliminated an important overhang over the company’s future prospects, allowing investors to focus on the fundamental strengths of the business.

Recent Developments and Growth Prospects

Amicus has added another feather to its cap with the introduction of Pombiliti + Opfolda, a combination therapy recently approved by the FDA for adults suffering from late-onset Pompe disease. While this product caters to a smaller market segment, it has seen robust initial adoption. The company is projecting approximately $70 million in revenues from this therapy in 2024.

When combined, Amicus’s two products indicate strong revenue growth potential. Analysts forecast a revenue increase of about 30% for the current year, with anticipated sales growth remaining above 20% through 2025. This growth trajectory is pivotal, especially as the company edges closer towards profitability, with expected earnings of 15 to 20 cents per share in 2024. Analyst projections suggest profits could more than double by 2025.

Market Response and Analyst Outlook

Despite a recent stock decline of approximately 15% following the third-quarter earnings report, where Amicus exceeded top and bottom-line expectations, the long-term outlook remains robust. The company’s management team also raised their full-year guidance, reflecting confidence in their operational and financial trajectory.

Following the announcement of third-quarter results, eight prominent analyst firms, including Morgan Stanley, Bank of America, and UBS, reaffirmed their “Buy” ratings on the stock, with price targets ranging from $15 to $21 per share. This positive analyst sentiment provides a solid foundation for potential investment.

Acquisition Speculation and Future Directions

Amicus has been mentioned in the context of potential acquisitions, which could make strategic sense for larger players in the rare disease space. However, it appears more likely that Amicus will maintain its identity as a standalone company, with opportunities for gradual stock price appreciation moving forward.

Investment Strategy: Utilizing Covered Calls

For those interested in engaging with this stock, employing a covered call strategy can offer an attractive approach. A covered call involves purchasing shares while simultaneously selling just out of the money call options against the position. For example, using the July $10 call strikes can initiate this strategy, with an effective buy-in ranging between $8.60–$8.70 per share (net stock price minus option premium). This method can provide downside protection of approximately 13% with an upside potential return of just over 15%, even if Amicus remains flat through mid-July.

Conclusion

With Amicus Therapeutics positioned firmly within the $10 range, the current investment thesis is compelling. The continued growth prospects of Galafold, coupled with the promising introduction of new therapies, suggests a favorable long-term outlook. For both active traders and long-term investors, now may be the perfect time to take a closer look at Amicus Therapeutics.