Could Amarin Return From The Dead? Print E-mail
By Brian Wilson - Lead Contributor   
Wednesday, 02 July 2014 04:11

After Amarin (AMRN) failed to gain FDA approval for a sNDA that would’ve allowed its triglyceride-lowering omega-3 drug Vascepa to be marketed to patients with “high” TG levels (200-500 mg/dL), the market pretty much left the stock for dead after it dropped to 52-week lows of $1.28 per share.

This was not surprising after an advisory committee voted 9 to 2 against approval for Vascepa in the ANCHOR indication back in October 2013 – after all, this was the event that sent AMRN from the $5-6 range to $2 per share.

 

But despite its failure to obtain the coveted ANCHOR indication, Vascepa has been doing okay in the MARINE indication (hypertriglyceridemia with patients >500 mg/dL). Sales are nearly 500% higher in Q1 2014 vs Q1 2013 – which is decent growth for a drug only 1 year after launch.

While this isn’t meeting Wall Street’s original expectations for the drug, it is not bad in proportion to Amarin’s current $294 M enterprise valuation. Vascepa is an FDA approved asset, and does still have the potential to become a cardiovascular risk drug after additional testing. This would open the door to tens of millions of new patients that should be relatively easy to find. Vascepa could also improve its profile in terms of reimbursement, which seems to be interfering heavily with the drug’s progress.

We also think that Amarin could also be an attractive merger or acquisition target at its current price. Not only is Vascepa cheap and still superior to Lovaza, but the company’s residency in Ireland could also add extrinsic value for American companies who are looking to reduce corporate income taxes by parking their revenues abroad.

But despite its potential undervaluation, It’s hard to recommend Amarin to investors now given the company’s weak financials. Vascepa, which we expect to generate ~$60 M in income for Amarin this year, will not be able to pull the combined weight of Amarin’s $40-50 M annual R&D budget and $60-70 M SG&A budget. The company is still losing money quite rapidly (even a year after launch), and we expect the company to dilute the stock to fund operations throughout the next 2 years if needed. Note that Amarin is authorized to dilute shares infinitely, and will not hesitate to save itself from financial collapse.

Having said this, it does seem that stock is starting to wake up a bit as progress continues in the REDUCE-IT trial, and we think a return to $3 per share is plausible this year based on renewed speculation. The REDUCE-IT trial, which will gauge Vascepa’s ability to become a drug for cardiovascular risk, really is central to the long-term success or failure of Amarin. And with the recent launch of a generic version of Lovaza, Amarin will be pressured to further reduce prices on its only product.

Lastly, note that investors will have a long wait to see the final results of REDUCE-IT, as it is scheduled to be completed as late as November 2016.




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