Amarin's Dilemma: Sell Vascepa Or Sell Itself?

| About: Amarin Corporation (AMRN)

Amarin's stock price (NASDAQ:AMRN) has gone through a roller coaster ride since the company's first product Vascepa received FDA approval on July 27, 2012. The wide swing of its stock price between the July high of $15.30 and the recent low of $10.26 is centered on several issues: the New Chemical Entity (NCE) exclusivity status of Vascepa, patent issuances, the company's commercialization and partnership strategy, and the possibility of a sale of the company. In its recent Q3 earnings conference call, Amarin's CEO, Joseph Zakrzewski, hinted that the company would make a decision on whether to hire a sales force to market Vescepa sometime before the end of November. We believe that this timeframe is related to the NCE status decision by the FDA, which is expected to be announced by the second week of November.

Here we consider how this particular event will drive the company's strategy to sell either Vescepa or itself.

First, we'll list the upcoming catalyst events for AMRN:

1. An anticipated FDA announcement of Vascepa's NCE status by mid-November.

2. An announcement by AMRN management's regarding whether it will hire a sales force before the end of November.

3. The commercial launch of Vascepa early in the first quarter of 2013.

4. Vascepa's NDA submission for the high triglyceride indications studied in the ANCHOR trial by February 2013

Amarin is actively considering three potential paths to the commercial success for Vascepa: An acquisition of the company, a strategic collaboration, or self-commercialization (which could include third-party support).

There is no doubt in our mind that Amarin's management is making acquisition its top priority. This would explain why Amarin did not immediately recruit a sales force after the FDA's approval in July. Additionally, management has been actively engaged in acquisition and partnership talks with pharmaceutical companies since the approval. A key part of the negotiations likely center on the valuation of Amarin's assets, which include its patents, intellectual properties, and whether the company will be granted either 3 years or 5 years of exclusivity. Essentially, management and potential partners are awaiting the determination of NCE status to better value the company. According to management, "Regarding opportunities with large Pharma companies, the uncertainty around our pending regulatory exclusivity request has presented a challenge in our discussions. Whether we receive 5 years or 3 years of exclusivity, a decision in and of itself would provide some degree of clarification for many of the parties involved." (Amarin Management Discusses Q3 2012 Results - Earnings Call Transcript).

There are three possible outcomes of the anticipated FDA decision on NCE status. The best outcome for the company is that the FDA assigns an NCE status for Vascepa in November, which would grant 5 years of marketing exclusivity for the drug. We believe that this event would significantly raise AMRN's value for potential acquirers and partners, and would likely soon result in an acquisition or a strategic partnership announcement.

If the FDA determines that Vascepa should not be granted NCE status, AMRN will still have 3 years of marketing exclusivity. This would lower AMRN's valuation and any acquisition negotiations would put the company in a less advantageous position.

The third possible outcome is that FDA remains indecisive over the NCE status and further delays a decision. In this case, the company would likely proceed to launch the product by hiring its own sales force or collaborating with strategic partners.

Regardless of the FDA's decision, the company is committed to the commercial launch of Vascepa by early 2013. To further expand the market for Vascepa, the company has drafted a sNDA for the use of Vascepa to treat patients on statin therapy with multiple lipid disorders, including triglyceride levels greater than 200 mg/dL. The submission of this sNDA to the FDA is pending only on the final REDUCE-IT cardiovascular study being deemed substantially underway. The company indicated that patient enrollment in the REDUCE-IT study was progressing well and it anticipates submitting this sNDA submission no later than the end of February 2013, with a PDUFA date in the fourth quarter of 2013.

Therefore, the next few weeks will be crucial for Amarin, as management makes a decision on whether to pursue an acquisition of the company, pursue partnerships, or self-launch Vascepa.

Disclosure: I am long AMRN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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