Amicus Therapeutics (FOLD) stock tumbled by 21% on Tuesday after it had announced a major setback. The problem is that the company hoped that it could seek marketing approval for its Fabry disease drug Galafold in the coming months.

Now, FOLD will have to wait many years before it is able to file an NDA with the FDA to receive marketing approval. This was a shock to investors and a large reason why the stock tanked so much during the trading day. The stock closed lower with heavy volume of 11.3 million shares traded.

That is a lot of shares, especially since the average volume for the stock is typically around 2.1 million shares daily. The good thing about Galafold is that it is already approved in Europe. The bad news is that FOLD will have to wait for a study to complete in a few yearsbefore it can seek FDA approval again for its drug.

FOLD Delay

This delay will be hard pressed for many years to come, and it will cost the company a lot of money to complete. In the meantime, the three year delay will cost the company millions of dollars it could have received. The three year delay stems from two issues. The first being that management of FOLD stated that they will initiate the new trial in 2017.

This is so that the trial can test gastrointestinal symptoms in Fabry Disease patients taking Galafold. With the trial starting in 2017, results of the study won’t be out until at least 2019. That brings up the second issue, which is that an NDA filing to the FDA will take another year after the trial has completed.

That brings potential approval of the drug by 2020. That is why investors were highly disappointed. It seems as if investors weren’t too distraught as the FOLD stock only fell by 21%. This is rare in the biotech space, which typically punishes a delay like this a lot more harshly.

Most biotechs that post delays such as this can typically fall by 50% or more. The good news is that FOLD is generating revenue from its sales of Galafold in Europe. The bad news is that it is not helping its current burn rate. Even With European sales, the company is not expected to post a profit this year at all. In fact, management expects that it will burn through $135 million in cash expenses this year.

European Approval

With FOLD having to push back its U.S. approval, it has to be frugal with its cash. It is generating sales from Galafold in Europe, but it still has an uphill battle to face.

That is because in the third quarter report, the company stated that it had made $2.3million in sales. This is an okay start, but if it expects to ever reach profitability it has to improve upon this number.

The FDA approval of Galafold would have definitely helped push this sales number up slightly. It could have also been a big help in reducing the burn rate, which is very strenuous for a small cap biotechnology company.

Looking Forward

The plus side is that Fabry disease is a rare indication, and there are not that many competitors in the market. That means that despite the three year setback, FOLD should still be able to generate millions of dollars selling Galafold in Europe. This is because at least 75% of the patients with Fabry disease are in Europe.

Still, FDA approval in the U.S. market is still a large chunk of the market. That is why FOLD has chosen to continue to take this regulatory path despite having to run another trial. Considering the FDA delay and the fact that the company carries a close to $1B in market cap there may not be much upside left. In the short-term the stock should continue to be pressured lower because of this negative news of a delay.

There may be an opportunity to trade this later if all technicals line up. Although, as a long-term play it will be many years before a possible FDA approval catalyst will come into play.