Amarin's Tough Road Ahead

Feb.13.13 | About: Amarin Corporation (AMRN)

It is finally official now. One-trick pony Amarin Corporation (NASDAQ:AMRN) finally has its Vascepa "drug" available for prescription and sale and is 100% depending on its sales reps to push it (as opposed to a partner or sale of the company). I say "drug" in quotes because even though it's only available by prescription, Vascepa is simply an omega-3 fatty acid supplement. Omega-3 fatty acids are also marketed by other companies as non-prescription dietary supplements. As a result, Vascepa would be subject to non-prescription competition and consumer substitution. What supposedly distinguishes Vascepa from other fish oil pills is that it is "not less than 96%" ethyl eicosapentaenoic acid (EPA) while other fish oil pills contain a significant amount of docosahexaenoic acid (DHA) which is said to raise "bad" cholesterol as a side effect with traditional fish oil pills.

Less side effects is great, but in the end the active ingredient, EPA, is simply something that is already available in a wide variety of OTC fish oil pills and is very cheap. Worse, recent studies and research into 68,000 users of fish oil that were published in The Journal of the American Medical Association have concluded "Overall, omega-3 PUFA supplementation was not associated with a lower risk of all-cause mortality, cardiac death, sudden death, myocardial infarction, or stroke based on relative and absolute measures of association." While it's true that the FDA did approve Vascepa, the approval was based on the Phase III trial called the MARINE trial. In the trial, Vascepa (referred to as AMR101 in the trial) was compared to a placebo rather than other fish oil products available over the counter. There is no concrete clinical evidence that proves it's any better than other OTC fish oil supplements at achieving its primary endpoint in the trial which was merely to measure if after 12 weeks AMR101 lowered triglyceride levels versus placebo. With the same active ingredient as other cheap fish oil pills, there's no evidence nor reason to believe that Vascepa helps "lower risk of all-cause mortality, cardiac death, sudden death, myocardial infarction, or stroke" just as regular fish oil pills do. As such, is there any reason to pay top dollar for this "drug," have health plans cover it, and worst of all have doctors even prescribe it in the first place?

It's little wonder AMRN failed to find a partner and raised money instead at high interest rates to "go at it alone." They need to hire a huge sales force it seems to push their fish oil. Other studies have shown similar negative conclusions regarding fish oil's benefits. For example, researchers at McMaster University conducted a study with 12,536 patients concluded fish oil was no better than placebo. A number of other recent studies have been coming to the same or similar conclusions.

The only other FDA approved prescription fish oil pill is GlaxoSmithKline's (NYSE:GSK) called Lovaza. Lovaza has been seeing a decline in prescriptions in recent months. It seems that doctors are wising up. With healthcare costs already out of control, do patients really need an expensive prescription for another fish oil pill with the exact same active ingredients as the cheaper OTC versions? Here's an example of one doctor swearing he'll never write another prescription for Lovaza again due to the unethical costs to the healthcare system of a prescription-based fish oil pill.

I believe there will continue to be a steady shift away from fish oil in general, especially prescription-based, and AMRN has a tough road ahead at best. Add to the fact that there are a flood of new competitors possibly coming as warned in their 10K filing, and the environment for AMRN will only get tougher. I believe AMRN is a strong sell here. The warnings in their own 10K are very revealing as seen in just a sample of them below. Analysts don't seem to have much faith either. 10 out of 10 of them expect AMRN to continue to post losses this year and have even increased their loss estimates recently.

I believe Vascepa is little more than an expensive version of the same fish oil available very cheap elsewhere, and AMRN will fail as an investment. The only way to make money with AMRN; the stock is either to trade its occasional and very brief rallies or just short the stock. There is little indication of anything exciting coming any time soon, and insiders continue to sell ever since FDA approval with not a single insider actually buying instead. Why buy their shares? The best strategy is to sell with insiders rather than bet against them.

On the bull side of the coin, Vascepa may not have much commercial value for the current indication, but there's two other far more meaningful and far more potentially commercially successful trials in Phase III which could be game changers, called the ANCHOR trial and the REDUCE-IT trial. My bearish article focuses on the here and now of what AMRN has or does not have already. Speculators could be right that Vascepa goes on to prove itself in much bigger ways. The ANCHOR trial is for patients with high triglyceride levels but lower than the patients in the MARINE trial. The primary endpoint though is similar, and if doctors fail to prescribe or insurance companies fail to approve Vascepa for the higher triglycerides group, it's not likely the lower tier will be much more successful either. However, the REDUCE-IT trial's aim was to show it "reducing the first major cardiovascular event" using statin therapy + Vascepa versus statin therapy alone. While I admit this is a far more meaningful and potentially lucrative indication for AMRN, the trial began barely over a year ago and is expected to last 6 years. At this rate, AMRN could be broke and bankrupt by then, so investing now for a trial alone 5 years away from completion is probably not a sound investing strategy. For more information on sound investing strategies and cardinal rules to investing that everybody should consider, I recommend a great recent article by Quoth the Raven that you can click here for 17 Cardinal Rules For Investing Success (Editor's Pick!) that I believe is a must-read and a must-study for any novice or even experienced investor.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within 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.