23Apr 2016

Amryt Pharma – Building a Specialty Pharma Business

amryt

Amryt Pharma was established as a platform to acquire, build, develop and commercialise a range of drugs targeted at niche, orphan diseases, thereby creating a Specialty Pharmaceutical business. The company has acquired two companies which have brought in two products, one with European regulatory approval, which it is looking to expand into more indications. The company is led by a strong management team with considerable pharmaceutical experience. Amryt has a market capitalisation of £50m which compares very favourably with peers developing similar orphan assets, suggesting there is solid upside potential.

Strategy: Management aims to acquire and develop more orphan drug assets that target significant commercial opportunities to create a Specialty Pharma company. The acquisitions of Birken and Som are the first steps in delivering this strategy and others are likely to follow as and when appropriate.

Products: On Admission, Amryt had two drug assets. Episalvan (from Birken) is a relatively de-risked asset targeted at a rare childhood disease that causes severe skin conditions, and a market opportunity of $1,370m. AP102 (from Som) is focused on acromegaly/Cushing’s disease, a $1.2bn market.

Valuation: Amryt has an EV of £39.1m compared to six quoted peers trading on a range of £48m (Phase 1 assets) to £1,608m (Phase III), suggesting that there is considerable upside potential in Amryt’s Phase II/III assets. This is also borne out by M&A activity for similar assets, in the range $97-842m.

Risks: As with all drug companies, the main risk is that a product fails in clinical trials. However, Amryt’s lead drug Episalvan already has EU regulatory approval which makes it largely de-risked. Rising cash burn on R&D investment will require further capital, some of which could come from licensing partners.

Investment summary: The traditional pharmaceutical model of developing and commercialising new drugs that target very large patient populations is being superseded by the model that targets orphan diseases – rare conditions in less than 200k patients. Amryt is in this latter category. Specialty pharma companies are interesting in their own right and are also attractive to bigger players. The EV leaves plenty of scope for upside compared to quoted peers.

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