Acquisition Of Amryt Pharma: How To Profit From Orphan Drugs Developers (NASDAQ:AMYT)

In the Rare Disease Healthcare Sub-Sector, Amryt Pharma plc (NASDAQ:AMYT) Received an Offer for the Acquisition of all Its Shares

Owning shares in biopharma companies with a portfolio of marketing-stage and development-stage treatments with significant growth potential can provide an incredible fortune for shareholders.

When the asset is in the crosshairs of a potential buyer who is willing to pay a purchase price that is a multiple of what the market is offering, a staggering return can derive.

This is what happened to shareholders of Amryt Pharma last Sunday, Jan 8 when they were offered to sell their American Depositary Shares [ADS] in exchange for a price of $14.50 per ADS, plus an additional $2.50 per ADS if certain development milestones are achieved.

The potential buyer is Chiesi Farmaceutici S.p.A., a Parma, Italy-based private international biopharma developer and marketer of novel treatments in respiratory health, rare diseases and specialty care.

Based on the approvals of Chiesi’s and Amryt’s executives and the voting agreements between Amryt’s major shareholders, Chiesi intends to acquire all of Amryt’s outstanding shares.

Voting agreements with major shareholders are typically used to ensure that as many shareholders as possible vote in favor of the proposed purchase and the transaction goes through.

The total transaction, valued at ~$1.25 billion, to be paid through an upfront payment, plus an additional ~$225 million upon achievement of certain pipeline development milestones, is expected to close before the second half of the current year.

The purchase price of $14.50 per ADS represents an increase of 107.14% over the adjusted closing price of $7 per ADS at the end of regular hours on Friday, January 6th.

Amryt Pharma plc shares are now trading around $14.6 apiece and would likely not rise much higher than current levels due to voting agreements held by leading shareholders. This carries a significant risk of ending up with a loss, as transaction costs also need to be considered. It would, therefore, be wise not to buy shares now, but to hold the position until the sale to Chiesi.

Amryt Pharma ADSs were down 30% in the past year through January 6, 2023. One ADS represents 5 common shares.

Well-known headwinds from increased inflation, strengthening of the U.S. dollar against other currencies, and higher interest rates have impacted Amryt Pharma’s share price.

Buying Amryt shares near oversold levels and waiting for the right moment has proven to be a successful investment strategy.

That was to be expected. Steady sales growth has resulted in Amryt Pharma plc’s portfolio attracting another company that collects as many rare disease treatments as possible.

Rare diseases are less common in the population and treatments covered by health systems in most developed economies can be very expensive. The competition in this market exists and is very challenging, but a large product portfolio that grows and is renewed over time, also in terms of intellectual property protection, is the key to a very profitable business.

If rare disease treatments make a timely transition from clinical to commercialization, and sales growth is supported by strong underlying demand and a growing number of prescribers, the company will sooner or later become the target of a potential buyer.

Amryt Pharma plc in the Healthcare Sector

Headquartered in Ireland, Amryt Pharma plc is a commercial-stage biopharmaceutical company active in the healthcare sector with a portfolio of acquisitions, development and commercialization of several medical treatments.

These treatments aim to improve the lives of patients suffering from certain diseases, known as rare diseases due to their extremely low incidence in the population.

Amryt Pharma plc provides the following products:

• Metreleptin is given as replacement therapy in patients with leptin deficiency in addition to a diet to treat the complications of generalized lipodystrophy, which can be either congenital or acquired.
• Orally administered octreotide in patients with acromegaly requiring long-term maintenance therapy. The name of the product is Mycapssa.
• Lomitapide is taken by adults with homozygous familial hypercholesterolemia in addition to the prescribed low-fat diet and other medicines to lower blood fat levels.

These products are sold in America, Europe and the Middle East.

Amryt Pharma is also developing two additional treatment candidates. The first is called Oleogel-S10 and is aimed at treating certain skin manifestations of Junctional and Dystrophic Epidermolysis Bullosa disease.

The second treatment candidate is called AP103 and is expected to become a gene-based therapy for patients with dystrophic epidermolysis bullosa.

The Diseases Targeted by Amryt Pharma

Leptin deficiency is a complication of generalized lipodystrophy.

In generalized lipodystrophy, also called congenital Berardinelli-Seip lipodystrophy, the patient’s body has little fatty tissue, making his (or her) appearance very muscular.

Congenital generalized lipodystrophy is caused by a specific mutation in the gene and is often recognized by pediatricians very early, even when the child is only one year old. The body’s inability to grow fat tissue makes the child appear muscular and the veins are more visible than normal.

Generalized lipodystrophy can also be acquired because of other pathologies or behaviors that are not in the best of health, or because of certain lifestyles. For example, research suggests that taking older medications could trigger a form of irreversible lipodystrophy.

One of the complications of lipodystrophy is leptin deficiency, which is reflected in the patient’s risk of becoming obese due to overeating. Leptin is a plasma protein that regulates body weight by reducing food cravings and increasing the body’s energy loss. Lower levels of leptin inform the central nervous system of the affected individuals that the body’s lipid stores are being depleted.

The central nervous system reacts and sends out signals that cause the person to experience intense hunger pangs. This is because the brain thinks the organism is starving. The individual then overeats and tends to gain weight very rapidly until becoming obese.

Therefore, Amryt Pharma’s Metreleptin targets this type of complication in patients with lipodystrophy.

Patients affected by lipodystrophy may have had the condition since birth or may have developed it at some point in their lives.

In both cases, lipodystrophy is a serious, life-threatening chronic condition and possible metabolic complications such as leptin deficiency can lead to diabetes, abnormal levels of triglyceride or the development of fatty liver disease.

Acromegaly is a rare condition in which the pituitary gland (at the base of the human brain, just behind the bridge of the nose) produces a growth hormone in large excess and for a long period of time, which in turn causes both tissues and bones to grow too fast.

Acromegaly is most treated surgically, but drugs and radiation therapy are also used. The short and long-term memory of these patients may be impaired. Acromegalic patients have a reduced life expectancy, especially when the situation is complicated by diabetes and heart disease.

Based on the results of the previous 3 late-stage clinical trials, on December 5, 2022, the European Commission approved the drug Amryt Mycapssa as maintenance therapy for patients with acromegaly who have responded and shown to tolerate octreotide- or lanreotide-based treatment. After this approval, Amryt Mycapssa can be sold not only in all member states of the European Union but also in Iceland, Liechtenstein, and even Norway.

Homozygous Familial Hypercholesterolemia is a condition in which the patient’s body has difficulty clearing the blood of low-density lipoprotein [LDL] cholesterol, also known as “bad” cholesterol.

Homozygous means that the patient has two genes that predispose to the disease because he (or she) inherited them from both parents.

Patients affected by homozygous familial hypercholesterolemia are at higher risk of developing a heart attack, even at a young age, but treatments are helpful to reduce the risk.

Fierce Competition for Treating Rare Diseases: The Treatment’s Success Must Be Measured by How Well It Sells

The better a portfolio of rare disease treatments is selling, potentially with steadily increasing sales over quarterly and 12-month periods, the greater the likelihood that a potential buyer might be interested in the owner of those sales.

In the third quarter of 2022, Amryt Pharma reported revenue of $61.1 million, growing 8.1% year on year. Year over year, Metreleptin grew 4.5% to $38 million, Lomitapide fell 7.3% to $17.2 million, and Mycapssa grew a whopping 293% to $5.71 million.

Lomitapide sales were impacted by the appreciation of the US dollar against the Euro and other global currencies.

Mycapssa continues to benefit from: a steady increase in prescribing physicians, particularly among ambulatory physicians; continued positive engagement trends among endocrinologists; the potential to expand Mycapssa treatment to other diseases as a Phase 3 trial begins in some patients with neuroendocrine tumors.

Mycapssa’s renewed US patent protection through 2040 gives the company’s intellectual property portfolio a significant boost from an empowering perspective.

Metreleptin sales benefit from strong growth in the number of patients receiving therapy in the US and Europe, supported by favorable reimbursement regimes in Italy and The Netherlands and strong performance in the Turkish and Middle East markets.

As the USD weakens against the Euro and other currencies, Lomitapide should benefit from a robust number of EMEA patients receiving therapy, particularly in Germany, Greece and Spain.

Total revenues are steadily increasing through quarters:

Through 12-month periods:

And fiscal year after fiscal year:

Amryt Pharma forecasts revenue guidance of $260 million to $270 million for full year 2022, growing 17%-21% from 2021.

Additionally, Amryt Pharma shareholders could rake in an additional $2.5 per share sold as Filsuvez, which was launched in the German market in September for the treatment of the dystrophic disease Epidermolysis Bullosa [EB], continues to make strides.

Dystrophic EB is a rare condition that causes the skin to be so fragile that it blisters easily from even a minor injury or friction such as rubbing or scratching.

Filsuvez appears to be supported by strong demand in Germany and should soon be available to EB patients in other EU countries. Plus, Filsuvez has watchdog approval in the UK as a treatment for dystrophic and junctional EB in patients aged 6 months and older.

Conclusion

This $1.25 billion transaction, under which Amryt Pharma plc will be acquired by Chiesi Farmaceutici S.p.A, a privately held biopharmaceutical company that treats rare diseases, is a good example of how profitable investing in biopharma developers can be.