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I think this AIM stock’s price could surge…but I am being patient

The big pharmaceutical companies typically avoid developing drugs for rare diseases as the markets are small, and sales do not typically cover the costs. If a rare disease is not having treatments developed for it, then it is described as being an ‘orphan’.

Governments offer incentives beyond what is typically available such as tax credits, extended rights, and fast-tracking of applications to stop this happening, and smaller drug makers have stepped in.

Strength in numbers

After acquiring Aegerion, formerly a subsidiary of NASDAQ-listed Novelion Therapeutics, Amryt Pharma (LSE: AMYT) will be a significant player in the rare and orphan disease market. The coming together has united the lomitapide brands Lojuxta and Juxtapid, which treat an inherited cholesterol disorder, and brought Myalept and Myalepta, which treat leptin deficiency, into the fold.

Sales of Lojuxta in Europe, the Middle East, and North Africa grew by 23% in 2018, and Amryt hopes to use its expertise to drive Juxatapid sales just as hard in North and Latin America, with patent protection in place until 2028 in the EU, and 2027 in the US.

Applications for paediatric applications and other indications are also in process. Myalept/Myalepta is already licensed for the treatment of generalised lipodystrophy in the EU and US, and partial lipodystrophy in the EU with an application in process for the US.

Amryt has made a loss every year since listing. Normally I would run a mile but the revenues and cost synergies from the combined commercial portfolio could make a real improvement here, and support Amryt’s existing pipeline in getting to market.

Potential in the pipeline

Amryt’s lead development asset promotes wound healing when applied with dressings in patients with epidermolysis bullosa (EB), better than the dressing alone. Approval for partial-thickness wound treatment in Europe has been gained, and more applications could follow. The general wound market is much larger than anything Amryt has targetted before.

Also being developed for EB sufferers is a non-viral gene therapy platform that works to restore collagen production of skin cells in pre-clinical models with topical application. Now, this has been in-licensed from University College Dublin, but think of in-licensing as an acquisition where you only get the bits of a company that you want.

The underlying gene delivery technology, which is a special polymer that binds the gene and delivers it into cells, could have application in other disorders and could be a real game-changer.

Seeking approval

I’m just looking at this stage. At the moment we have 2018 numbers in dollars for Aegerion, reported numbers for Amryt in euros, and the deal itself is complicated (in part because Aegerion had filed for bankruptcy on the back of regulatory action). In addition, there is a partial US listing planned for this year.

What I want to see is the first quarterly report as a combined company. This should come in early 2020 and deliver updated numbers reported in a single currency, and give me the opportunity to see if the chances of getting the pipeline assets to market have indeed increased from a financial standpoint. There will also be a little more time to see if there are any skeletons in the closet that Amryt has bought.

You can be patient when making investment decisions.

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James J. McCombie has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.