Amarin (AMRN) remains at an absolutely crucial point in its growth. Amarin's stock price is almost directly predicated on its successful launch of Vascepa, the company's recently approved fish-oil pill.
From its website, "Amarin Corporation is a biopharmaceutical company focused on the commercialization and development of therapeutics to improve cardiovascular health. Amarin's product development program leverages its extensive experience in lipid science and the potential therapeutic benefits of polyunsaturated fatty acids. Vascepa® (icosapent ethyl) is Amarin's first FDA approved product and is available in the United States by prescription."
After the drug's approval, the company decided to forego any massive pharmaceutical partnerships, bring on their own sales staff, and have a go at launching their one product on their own.
I've written twice about Amarin, once to cover the war going on between Alex Heisenberg and Adam Feuerstein, and once to let investors know that their conference call rubbed me the wrong way.
In my first article, I laid out my bullish and bearish case:
The Bullish Case:
The bullish case on Amarin is really simple -- they've got what looks to be the most effective prescription based Fish Oil product on the market in Vascepa.
1. In its trials, Vascepa significantly lowered triglyceride levels in patients with extremely high baseline levels.
2. Feuerstein thinks the poor launch and DIY sales strategy is already priced into Amarin's share price, as it's off 60% already from its highs.
3. If executed correctly, Vascepa could be looking at sales of $1-$2 billion annually.
4. There is still a chance of a buyout at this stage.
The Bearish Case:
1. The launch of Vascepa is going to be tough. Without a major pharmaceutical partner, Amarin is going to have a small budget to try and compete with GSK's Lovaza. They're going to have a small sales force and not have the advertising and branding power that a company like GSK has.
2. Heisenberg feels like there's going to be competition from over the counter fish oils, despite the radical EPA content difference.
3. Feuerstein admits :
Amarin may have trouble turning the drug into a blockbuster. On this point, I agree with Heisenberg.
4. Heisenberg points out substantial insider selling and lack of buying since the FDA approval.
In my second article, I pointed out how their recent earnings call gave me serious pause going forward. There were precisely zero bullish sounding sentiments from management, and it almost reminded me of Celsion's conference call where they had to release their massive Phase III failure results. Amarin's CEO, Joe Zakrzewski, constantly alluded to the fact that they were simply being conservative and that it was too early to get excited, but to me, the tone sounded watered down and humbled.
There were a number of cautious, bearish sounding indicators I gathered from the conference call. Here's just some, with my emphasis in bold:
1. There was absolutely zero Vascepa information offered in regards to 2013. No metrics, no prescription numbers, no guidance. This is the big piece of the puzzle for Amarin, and the biggest reason I still remain bearish here. It's going to be put up or shutup time soon for Vascepa data - until the market gets that, expect the stock price to continue to fall.
Amarin has not provided specific guidance regarding Vascepa sales targets and it is too early to make accurate assessments on the sales [front] of the product. -Joseph S. Zakrzewski - CEO
First, we do not believe that we can provide a reasonably accurate forecast of Vascepa revenues at this time and accordingly just consistent with the disclosures of most companies launching their first product we provide no quantifying guidance at this time with respect to anticipated 2013 revenue levels for Vascepa. -Frederick Ahlholm - VP, Finance and Administration
2. Stocking, sampling, incentives and discounts are costing the company a lot of money and are going to hurt margins in 2013.
The result of these factors is that as we move to 2013, we anticipate supply volume to increase, even if the actual dollar spent on a quarterly basis remain somewhat consistent. In addition, in order to help ensure the wholesalers and select pharmacies were adequately stocked with Vascepa, prior to our commercial launch, we offer these wholesalers and select pharmacies special stocking discounts. And as discussed earlier, we're offering cards to patients that reduce their co-pay amounts to $25 per retail during 2013, as we were to move fair coverage from Tier-3 to Tier-2.
For these reasons we anticipate that our gross margin for Vascepa sales will be significantly lower in 2013 than in subsequent years assuming that sales volumes increased. - Frederick Ahlholm - VP, Finance and Administration
I think as we get through the second quarter, into the second quarter at the end of the first quarter I think we'll get a real better handle there. The lessons there is plenty, for competitive reasons I can't comment on those, because there are others out there both following us and ahead of us and I want to make sure we're protecting that. And then in terms of sampling, we've done a lot, there's a lot of sampling out there. - Joseph S. Zakrzewski - CEO
3. Management sounded incredible unsure of themselves. The entire tone to the call sounded dull and grim, there was nary a spark of excitement from anyone that spoke. They used the word "pretty," as in "pretty good" a few times - that struck me as odd to hear:
But for the most part again, early indications anecdotal feel pretty good, but it's going to be a while before we know.
Again I think it's too early to really characterize and compare them beyond that, but we are pretty encouraged. Again we've been out for several weeks.
You can sort of go beyond the first quarter I think and even say well what's your script rate and you're sort of sitting here with your auditors making sure that you're not. The key here is to be conservative, not to be overly aggressive, right?
Again I want to remind everybody the first quarter will be those first two months. I think we'll have a better picture, even then I think you're going to need to actually continue to see where this sales trajectory goes. - Joseph S. Zakrzewski - CEO
My bullish ideas from my first article have been laughed out of the arena. Poor execution was clearly not priced in, as the stock continues to trade at lows in the midst of perceived poor execution. A buyout hasn't happened and doesn't show any signs of taking place, and a full scale execution of roll-out remains to be seen.
What's New & Why I'm Still Bearish
The tone of the conference call by the questions that were asked and the hints that the executives gave suggested that everyone is on the same page here : Vascepa's rise or fall is ultimately going to determine the outcome of Amarin's future.
Yesterday, Adam Feuerstein reported on Vascepa's prescription information after two months. Some of the key points that he noted:
Early verdicts are not final verdicts, so no one is saying Amarin is doomed just two months into the launch of its prescription-grade fish oil pill. But right now, weekly Vascepa prescription growth is decelerating at a time when it should be doing the opposite. The number of patients going back for Vascepa refills is also lower than expected.
He goes on to say:
Total Vascepa prescriptions were 1,240, up 14% from the week of March 8. Numerically, Vascepa scripts are growing but the rate of growth has dropped for four weeks straight. Week-over-week script growth was 33% for the week ended Feb. 22, down to 14% for the week of March 15.
There is no "right" rate of growth for a new drug launch but this early, investors definitely want to see accelerating script growth. Deceleration at this stage of the launch is an uneasy sign. Amarin is offering incentives to doctors and patients in the form of free Vascepa samples and discounts, which is likely affecting script numbers. How much can't be quantified.
On this news, there doesn't seem to be much positive looking data for Amarin at this point. Today, the stock continues to paint new lows, touching the low $7 region.
In light of this new prescription information, the case for a long position in Amarin right now is off the table. Unless the company can start to show acceleration in growth of its prescriptions again, this becomes an extremely risky place to invest.
A $1 billion market cap at this point is completely insane. Yes, the approval has been over and done with and the drug is ready to go, but Amarin has way more to prove before commanding a market cap that large. At this point, this company's future growth is extremely speculative, and $1 billion market caps are for companies that command it; companies with serious proven growth or proven growth potential.
This Is Not the Time to Get Greedy
If you're at a profit in Amarin, meaning you've bought and held since 2010-2011, it's in my opinion that it's time to take some money off the table. If you're long already and don't want to sell, why not pick up some cheap $6 puts that expire in '14 or '15 to hedge your position. If things pick up, you can write calls against your position and pocket the premiums and the difference between today's price and the strike price.
Can't bring yourself to run from the potential upside, even in the face of this news? Play an options spread, but leverage yourself 2:1 on puts to sweeten the pot should things continue down this grim looking road for the company.
This company is on thin ice without a major partner or the right type of marketing. This has been a concern for many longs from the get-go: how is this company going to market and roll-out an entire drug, effectively, on its own? If the prescription metrics continue to slow and people do not continue to refill, Amarin could be headed for serious trouble. I'd steer clear or go short here, and best of luck to all investors.