Amarin Stagnates Despite New Attention from the Market Print E-mail
By Brian Wilson, Lead Contributor   
Tuesday, 12 February 2013 08:11

It seems that the market’s attention is once again turning to Amarin Corporation (NASDAQ: AMRN), which has recently launched the much anticipated prescription omega-3 hypertriglyceridemia drug Vascepa into the United States.

Sales revenue is expected to become grow impressively over time because of the improved safety profile that Vascepa offers when compared to the current leader of the market, Lovaza – marketed by GlaxoSmithKline (NYSE: GSK). Lovaza is an extremely successful drug, which boasts annual revenues of over $1 billion in the US alone (and over $400 million abroad). Given its current valuation of ~$1.3 B, the market is generally saying that Amarin won’t even be able to match Lovaza’s sales.


Despite the big potential of the drug, it seems that the market still can’t get over the fact that Amarin has not been acquired. Recall that in 2012, the AMRN investment community was utterly obsessed with the notion that there were buyers lined up to partner with, or buy the company outright. There were very big rumors about Teva Pharmaceuticals (NYSE: TEVA) and AstraZeneca (NYSE: AZN) in particular, which were rumored to be some of Amarin’s most interested potential acquirers.

It was due to this intense M&A speculation that I decided to purchase some AMRN for myself, with the intent to reap options premiums from the call options buyers who were expecting a buyout of AMRN north of $20/share in the near future. This was driving call options premiums through the room, and it ended up being a gold mine for those who expected AMRN to be acquired at a later date (like myself).

Unfortunately, all good things come to an end. This was the case for the M&A speculation over Amarin, especially after the company’s press release on December 6th 2012, which unveiled the company’s plans to raise $100 million to basically prepare for the launch of Vascepa. Amarin also finalized their plans to hire a few hundred people for their Vascepa sales force for the marketing of Vascepa under the MARINE indication.

What exactly does that mean? Well, let’s just put these indications for Vascepa in an easy-to-understand format:

MARINE Indication: Treatment of hypertriglyceridemia (high triglyceride levels) for patients over 500 mg/dL

ANCHOR Indication: Treatment of hypertriglyceridemia for patients over 200 mg/dL

REDUCE-IT Indication: Treatment for “cardiovascular risk”

In 2012, Vascepa was FDA approved for the MARINE indication, which means that it can be prescribed for adult patients with excessively high triglyceride levels. Excluding off-label usage, this means that doctors use it only for patients with extremely high triglycerides. Only a small fraction, about 10% of the 40 million hypertriglyceridemia patients or so, reach that particular threshold. This also means that MARINE indication matches the indication that was given to GlaxoSmithKline’s Lovaza.

Things get more exciting for Amarin in the future because of the potential approval for the ANCHOR indication, which is scheduled to have its sNDA submission before the end of this month. This means that AMRN investors will have a PDUFA action date look forward to in December 2013 or early 2014 that could expand Vascepa’s target market to about 40 million adult patients (far exceeding the reach of Lovaza). If Amarin receives this FDA approval, I think AMRN could move substantially higher(although it will certainly be less than 900% upside – I’d say 200% at best).

Down the road, we also have the REDUCE-IT trial which can expand Vascepa’s potential into the overall “reduction of cardiovascular risk” area. This means that many of the patients that are on statin therapy for cholesterol (hyperlipidemia) might be taking Vascepa as well as a preventative medicine.

Overall, while AMRN investors wait for the establishment of the PDUFA date for the FDA’s decision on the ANCHOR indication there are other factors which could move the stock significantly this year.

AMRN seems to have dropped 30% permanently following the equity-financing press release mentioned earlier, which is ultimately a result of the mentioned “fizzling out” of M&A speculation over AMRN and the big skepticism that the market is placing on Amarin over its ability to launch a drug into a huge and competitive market by itself. I think that Vascepa sales could help mitigate some of this skepticism given that they have a fast enough growth rate.

I also want to mention that the lack of an NCE decision over Vascepa is another lingering topic from 2012 that has yet to be addressed. An NCE means the difference between 3 and 5 years of exclusivity for Amarin’s Vascepa, although it’s also worth mentioning that the extensive patent protection that Amarin has layered over Vascepa could make the NCE decision a moot point (these patents last until 2030).

I would encourage anyone looking for a long-term holding in the pharmaceutical industry to at least consider Amarin, although it’s important to be aware of the risks surrounding this stock as well. As we’ve seen with Vivus’ (NASDAQ: VVUS) launch of Qsymia last year, healthcare reimbursement issues can be crippling to a drug’s sales figures. It’s also true that large pharmaceutical companies are simply more efficient at drug launches, which puts Amarin at a disadvantage in many ways.

Nonetheless, I think AMRN has significant downside protection due to the fact that M&A speculation for the stock is somewhat dead, and investors are pricing Vascepa to be worth only a fraction of what Lovaza is. I don’t think that Amarin has become a less attractive acquisition target either (in fact, I’d say the opposite), and I think that an NCE decision could definitely result in an unexpected, sudden acquisition from a larger pharmaceutical company sometime this year. We’ll have to see.

Disclaimer: I am long AMRN, and continue to sell covered calls against the position. I’d also encourage investors who are looking to perform heavy due diligence on Amarin to consider points brought up against Vascepa by competitors. See an interview with Omthera Pharmaceuticals’ CEO, Jerry Wisler on November 14th here.

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