Amryt Pharma Holdings Ltd (LON: AMYT) – Encouraged by an accelerated and disciplined growth

Founded in 2015, Amryt Pharma Holdings Ltd (LON: AMYT) is a FTSE AIM All-Share listed commercial-stage biopharmaceutical company, which is dedicated to develop and commercializing novel therapeutics for patients with rare life-threatening diseases. The company includes a profitable and growing commercial business with a substantial development pipeline. The group’s commercial business is differentiated into four product portfolios: Juxtapid®/ Lojuxta® (lomitapide), Myalept®/ Myalepta® (metreleptin), AP101 (Oleogel-S10), and AP103 (Gene Therapy). The global headquarter is located in Dublin, Ireland, while the US headquarter is in Boston, Massachusetts. It employs over 170 employees worldwide. In 2020, it has completed the integration of Aegerion Pharmaceuticals, which was acquired in 2019 and added two global commercial assets. On 8 July 2020, the company also got listed on the Nasdaq Global Select Market.

(Source: Company Presentation)

Growth Prospects and Risk Assessment

AMYT has the existing, scalable global medical and commercial infrastructure, which can support any future development, including FILSUVEZ®. The company has the substantial financial flexibility to acquire additional assets and develop or launch pipeline programs. In pipeline, it has two global rare disease products, lomitapide and metreleptin, with patent protection in the US and EU. It is also conducting late-stage clinical program in severe Epidermolysis Bullosa (FILSUVEZ®) with positive Phase 3 results. Moreover, it completed the integration of Aegerion, which shall drive revenues and deliver operational synergies. In June 2020, it has also signed a distribution agreement with Swixx BioPharma AG for Myalepta® across 17 jurisdictions in Central and Eastern Europe, which is likely to strengthen the revenue stream further.

 (Source: Kalkine Research, Refinitiv)

However, there are certain risk and uncertainties to business growth. There is a liquidity risk as the company has been incurring losses since its inception. It is dependent on two products, lomitapide and metreleptin, to generate sales. The growth trajectory is dependent upon the pipeline of product candidates which might not be marketable. Also, the adverse US federal income tax regimes and fluctuating exchange rates can affect the financial condition further. Moreover, there is an emerging risk to preclinical studies and clinical trials with the outbreak of Covid-19.

Industry Outlook Dynamics

The Global healthcare expenditure is projected to reach USD1.5 trillion by 2023, which was valued at USD 1.2 trillion in 2018. This upward trend is primarily driven by the incremental rate of ageing population and life expectancy. By 2050, there will be around 2 billion people above 60 years of age, while life expectancy is forecasted to increase by 4 years by 2040. While the Specialty drugs (especially oncology and rare diseases) is expected to represent two-thirds of all product launches over the next 5 years.

The above-mentioned global trends are occurring at a time when the cost of developing a drug is rising, and the market (comprising both biotech and pharmaceutical firms) is moving towards specialty therapies. Moreover, there is a shift in product mix from conventional primary care drugs to orphan drugs, which are more expensive and complicated. Furthermore, as per the report from Research and Markets, the clinical trial supplies market is projected to grow at a CAGR of ~7% (from 2019 to 2027) and reach US$3,298.91 million by 2027, which was valued at US$1,867.44 million in 2019.

Key Fundamental Statistics

Key Shareholders Statistics

Business Segments

(Source: Company Website)

Financial and Operational Highlights (for the six-month ended 30 June 2020 (H1 FY20), as on 17 August 2020)

(Source: Company Website)

• In H1 FY20, the Company has shown a strong revenue performance, with an increase in unaudited Q2 FY20 revenue growth of 22% y-o-y.
• In Q2 FY20, EBITDA stood at US$6.9 million, representing an increase of 50% quarter-on-quarter.
• During H1 FY20, the Company witnessed a strong cash generation, with US$9.7 million of cash generated from operating activities.
• It has also shown a robust financial position, with US$67 million of unrestricted cash at 30 June 2020 (31 December 2019: US$65.2 million (audited).
• The positive momentum experienced in FY19 and in Q1 FY20 has continued into the second quarter of 2020.
• The development pipeline of new therapeutic drug candidates for diseases where there is a high unmet medical need continues to progress in line with the anticipations.
• The Company is well-placed to implement the strategy of becoming a global leader in orphan and rare diseases and to deliver therapies to patients with high unmet needs.
• In June 2020, the Company has signed a distribution agreement with Swixx BioPharma AG. This agreement is for Myalepta® (metreleptin) across 17 jurisdictions in CEE (Central and Eastern Europe).

Share Price Performance Analysis

 (Source: Kalkine Research, Refinitiv)

On 24 September 2020, at the time of writing (before the market close, at 11:13 AM GMT+1), Amryt Pharma Holdings Ltd shares were trading at GBX 190.20, down by 2.46% against the previous day closing price. Stock 52-week High was GBX 250.00 and Low of GBX 80.00, respectively.

Bullish Technical Indicators

 (Source: Kalkine Research, Refinitiv)

From the technical standpoint, shares were trading above the support level of 20-day (GBX 189.13), 50-day (GBX 183.47), and 100-day (GBX 163.50) simple moving average prices, which reflects an uptrend in the stock and carrying the potential to move up further. Also, 14-day RSI is currently supporting an upside move (around 49.99 level), which means the stock price could increase in the short term.

The Company’s stock has delivered a positive return of around 28.52% in the last three months. Also, it has delivered a positive return in the last six and nine months of around 89.37% and 61.98%, respectively.

In the last one year, Amryt Pharma Holdings Ltd share price has delivered 47.37% return as compared to 7.71% return of FTSE AIM All-Share index, which shows that the stock has outperformed the index during the last one year.

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Peers used in the valuation methodology (NTM EV/Sales)

Business Outlook Scenario

In FY20, the company expects to report revenues in the range of US$170 - US$175 million, while projection has considered the forward-ordering patterns already identified in Q2 FY20, seasonality, and the impact of variable orders in H1 FY20. Over the past four years, it has demonstrated a flexible and adaptable business model to become a global player in rare and orphan diseases.

The company has bright prospects for lomitapide and metreleptin commercial businesses. The Metreleptin revenue continues to increase each year, while Lomitapide performed well both in the US and EMEA region. It also intends to capitalise on additional opportunities for both commercial products in 2020. Furthermore, the top-line data of EASE study is due in late Q3 FY20 or early Q4 FY20, which would be a significant milestone for Amryt. The company is also encouraged by the opportunities lying with FILSUVEZ® for high unmet medical needs.

In a nutshell, AMYT has revenue-generating commercial portfolio, financial flexibility to pursue anticipated development plans, a pipeline of new therapies to serve high unmet needs and global commercial infrastructure to support the long-term growth.

Considering the strong revenue performance, high level of cash generation capabilities, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Amryt Pharma Holdings Ltd at the current price of GBX 190.20 (as on 24 September 2020, before the market close at 11:13 AM GMT+1), with lower-double digit upside potential based on 3.26x EV/NTM Sales (approx.) on FY20E Sales (approx.).

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

*Dividend Yield may vary as per the stock price movement.

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