Amarin - Catch And Release

Dec.10.12 | About: Amarin Corporation (AMRN)

In fishing, when you catch and release you can catch the fish again. Sell Amarin (NASDAQ:AMRN), and you'll be able to acquire shares of the company at a more reasonable price. Amarin sold off on Friday, Dec. 7, 2012, on news that it will go it alone in marketing Vascepa.

In my previous Seeking Alpha article, before FDA approval of Vascepa, I noted several reasons why I thought Amarin shares were overvalued then. Are they still overvalued? Vascepa was approved and is indicated and will likely benefit patients with high triglyceride levels (over 500 mg/dl). My previous article noted that there is little evidence that reducing triglycerides with Fenofibrate (from ABT), in the larger group of patients with moderately high triglycerides, changes cardiovascular risk (ACCORD trial). This will be tested by the REDUCE-IT trial, but that trial is ongoing. Vascepa will also face stiff competition from Lovaza (from GSK) and generic fish oil. There is information suggesting Vascepa could be superior, based on surrogate markers, but it is controversial whether Fenofibrate, Lovaza, Vascepa, or fish oil will change clinically significant outcomes (MIs, deaths, etc.). I would be remiss, however, if I did not point out that Lovaza sales, being marketed by a sophisticated marketing team, are surprisingly robust (around a billion dollars) considering it competes with fish oil.

What has changed since the pre-approval days of AMR101 (Vascepa)? The stock price, for one.

Chart forAmarin Corporation plc (<a href=

Also, Vascepa was indeed approved and is not being sold yet. Most importantly, Amarin is preparing to market Vascepa without partnering, which will be expensive and lack the synergy of being marketed by people experienced in and simultaneously marketing cardiovascular drugs. Also, there is still little evidence that a buyout of Amarin will emerge. On the other hand, the much anticipated NCE status should be resolved soon (three-year vs. five-year protection).

Vascepa is clearly labeled for treatment of high triglyceride levels only. From the prescribing labeling information: "VASCEPA is an ethyl ester of eicosapentaenoic acid (EPA) indicated as an adjunct to diet to reduce triglyceride (NYSE:TG) levels in adult patients with severe (≥ 500 mg/dL) hypertriglyceridemia," and, most importantly, "The effect of VASCEPA on cardiovascular mortality and morbidity in patients with severe hypertriglyceridemia has not been determined."

On the research front (ANCHOR study), recent news (from July 23, 2012) is more positive for expanding the FDA approved indications. Indeed, in patients with triglyceride levels between 200 and 500 mg/dl, Vescapa was both well-tolerated and effective at lowering triglyceride levels -- and notably LDL cholesterol levels. The study population was statin-taking patients with residually high triglyceride levels. The study did not address clinical outcomes like MI or death.

The market has done some of the math already. The average cost of fielding a pharmaceutical sales representative is $175,000. Times 300, that is more than $50 million. It will take time to build a sales force, let alone an effective sales force, and pipelines need to be filled. Sales will likely not see a robust start. Annual losses for Amarin, which translate mostly to operating expenses, have ranged from $70 million to $200 million. Keep in mind that even being very optimistic, the gross sales of Vascepa would probably only approach $500 million in the face of competition from Lovaza. In this market place, Lovaza is entrenched and Epanova by Omthera Pharmaceuticals, Inc. is in trials. Fish oil is cheap and there are even cholesterol-free versions. It does seem very unlikely that Amarin will be profitable in the foreseeable future, hence what I said above: "Sell Amarin."

Even sales of a just-approved obesity drug, Qsymia, by Vivus Pharmaceuticals (NASDAQ:VVUS), which does not face stiff competition yet, are not off to a robust start and Vivus shares are off about 50% since approval. Qsymia's main competitor, Belviq by Arena Pharmaceuticals (NASDAQ:ARNA), still awaits DEA scheduling before it can be sold.

To Amarin's credit, the ongoing REDUCE-IT trial using "Composite endpoint of CV death, MI, stroke, coronary revascularization, and hospitalization for unstable angina" is testing Vescapa. If that trial, REDUCE-IT, provides evidence of benefit in clinically important outcomes (reduced MIs, death, etc.) for a much larger patient population, I will change my opinion both on Vascepa and Amarin's stock prospects. For now, I think Amarin stock can be acquired at lower prices before we know the results of the REDUCE-IT trial.

Disclosure: I am long VVUS, ARNA. I will not to buy or sell short AMRN in the next 72 hours. 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.