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Omega-3 class of medications are known as antilipemic or lipid-regulating agents. Omega-3-acid-ethyl esters, free fatty acids and icosapent ethyl work by decreasing the amount of triglycerides and other fats made in the liver. Their utility may soon be expanded to manage a broader cholesterol spectrum when combined with statins, and ultimately help reduce serious cardiovascular events.

The occasional news stories that pop up about Omega-3 fish oils not offering cardiovascular benefit are the minority in the overall scientific body of work conducted on fish oil. These stories cause shock reaction when they are published and that is what they are intended to do. I can tell you that all syndicated sales data information in the OTC and Rx Omega-3 space indicate success and growth. It's important to note that the negative studies out there were not conducted with Rx grade therapies, were not well designed or controlled, had no consistent outcome points and were simply not conclusive. In contrast, credible, well-designed studies like Amarin's (NASDAQ:AMRN) Marine and Anchor Phase III clinical trials conclude positive benefit. For a well vetted and peer reviewed article response on the general fish oil topic (including OTC), you can reference the November 28, 2012 Science Daily article featuring quotes and data from top lipid management researchers and institutions. I don't know about you, but I'm going to trust these doctors and respected medical institutions over media outlets like the street.com any day. To close the point about the importance that lead scientific researchers, medical professionals and pharmaceutical companies view toward Omega-3 Rx therapies, I'd point out the 2007 GlaxoSmithKline (NYSE:GSK) acquisition of Reliant (for Lovaza) at $1.65 billion; the 2013 announcement by AstraZenaca (NYSE:AZN) to pay $443 million for development stage Omthera (NASDAQ:OMTH) for their Epanova drug in development, and favorable public comments by Elan's (NYSE:ELN) CEO and board members about AMRN's Vascepa during Elan's most recent shareholder meeting. So, let's examine who the players are, what's going on in the space now, and what happens next...

Current Omega-3 Class Rx Space:

AstraZenaca's Epanova -- AZN recently announced their intent to purchase Omthera, a development stage company. Their drug candidate is called Epanova, basically a free fatty acid form of GSK's Lovaza. OMTH just went public a few weeks ago after failing to receive further capitalization from other investors to move their drug program forward. Some have suggested that AZN's price was not enough. In fact, OMTH shareholders have sought legal counsel to investigate whether management had their best interest in sight. AMRN bulls and Wall Street analysts also questioned the valuation of OMTH being low. Well, I also question it, for being too high. While I agree that the free fatty acid "FFA" form of Omega 3s have a superior bioavailability and oxidation profile than ethyl esters 'EE' and even triglyceride 'TEE' forms, it is more meaningful if judging an OTC EE vs. OTC FFA. The actual human clinical trials for Rx indications have not proven this. I'll repeat, Epanova is not best in class for people with very high triglycerides and shows no dose dependent benefit (forget Anchor indication).

Ethyl esters require chemistry. This makes the molecules more volatile which is what allows the fatty acid ester to be separated and concentrated from other fats. It is this concentration that enables the science and "magic" to happen. In the Rx space Lovaza and Epanova use EPA and DHA with other fatty acids, while Vascepa primarily utilizes EPA. Ethyl Esters are not easy to make. While more expensive, they come with automatic barriers to entry due to this engineering process. Free fatty acids do not have this volatility and therefore don't oxidize as much, true. But, they have limits, serious ones when applying to the Rx space. What good is more bioavailability if:

  1. Absorption uptake is not proven through outcomes studies or clinical trials
  2. If the compound that is more bioavailable is not more effective than other compounds [DHA+EPA vs. EPA alone]
  3. The compound cannot be engineered to be consistent to drug standards and/or as safe as other existing therapies
  4. Increased side effects outweigh the value of more bioavailability
  5. Ease of entry limits advanced intellectual property and barriers to entry.

I'd argue that more bioavailability is important when marketing products in the OTC space, where Rx claims are not allowed. FFA forms have higher value and better differentiation than EE commodity fish oil engineered to be price attainable by everyone. Not the case with Rx EEs, engineered to be best of breed.

Over the past year, AZN's CEO has been broadcasting the fact that his intent was to make small, bolt-on acquisitions to counter challenging times. This should have tipped everyone off that $1B+ buyouts were not in the cards for AZN. So was $443 million worth it for Epanova? This researcher argues that AZN is spending a lot of money for next to nothing. Epanova is not FDA approved yet and the earliest an NDA may get the thumbs up is mid-year 2014. While it's unlikely FDA will reject the NDA, Epanova certainly has the most risk of FDA denial because Free Fatty Acids have not been used before in Rx and present safety issues absent of outcomes studies. I remind everyone FDA considers safety first when approving drugs. Epanova obviously does not have NCE now and that can be another gray area (like AMRN) in 2013. IP is the weakest of the bunch, mainly focused around the gelatin coating and capsule, and with FFA forms so easy to produce and less costly, where do you think generics will want to attack first? The Phase III clinical trials disappointed against Vascepa, as they were slightly better than Lovaza, but came with the same, if not increased side effects of raising LDL-C (raise bad cholesterol levels). Despite Epanova's marketing claims, it's widely known that the FFA form of Omega-3s cause significantly more eructation (belching). Most concerning is the failure of Epanova to deliver increased benefits at higher doses. What does this mean? No expanded indications anytime soon. It's clear management knew what they were up against and what challenges their drug faced for the future, given the sale of the company just a few weeks after IPO. I believe Epanova will make next to no headway against Lovaza or Vascepa, and that the drug will fail if they attempt an Anchor indication -- leaving AZN with a development stage drug to use with their Crestor statin. If successfully developed for the combo statin indication, the $443MM will be well worth it, but there will be competition.

GlaksoSmithKline's Lovaza -- This drug was developed by some of the people currently running AMRN. It is classified as a mixture of Omega-3 ethyl esters and has been on the market for years, generating billions of dollars for GSK. The compound was awarded NCE and has less than one handful of patents that so far, have been effective in warding off generics. So, why have they not gone after wider indications, similar to AMRN's anchor? Do you believe they have not explored that idea? The answer is actually simple; it won't be efficacious, cost effective or safe in doing so. While Lovaza decreases triglycerides, similar to Epanova, it raises bad cholesterol, a side effect. LDL-C was increased by more than 49%. While doctors may prescribe it off-label, insurance won't cover it. In fact, GSK was slapped with a fine and warning for off label use and the product's label has a warning for "recurrent atrial fibrillation or flutter". This therapy is also the most expensive for patients to use.

Amarin's Vascepa -- my vote for best-in-class goes to Vascepa, an EPA solution, modeled after success on other health indications in Japan. Summarizing the upcoming sNDA for their ANCHOR trial: A multi-center, placebo-controlled, randomized, double-blind, 12-week pivotal Phase III study in patients with high triglycerides (≥200 mg/dL and <500 mg/dL) who were also on statin therapy. 702 patients were enrolled in this trial. The primary endpoint in the trial was the percentage change in triglyceride level from baseline of Vascepa-treated subjects compared to placebo after 12 weeks of treatment. In April 2011, Amarin reported top-line results from the ANCHOR trial. The ANCHOR trial met its primary and secondary endpoints. One of the ANCHOR trial's key secondary endpoints was to demonstrate a lack of elevation in LDL-C in order to avoid offset to the target of cholesterol lowering therapy. The trial's non-inferiority criterion for LDL-C was met at both Vascepa doses. For the 4 grams per day Vascepa group, LDL-C decreased significantly (-6.2%, P=0.0067) from baseline versus placebo, demonstrating superiority over placebo. Other secondary efficacy endpoints included the median placebo-adjusted percent change in non-high-density lipoprotein cholesterol (non-HDL-C), apolipoprotein B (apo B), and lipoprotein-associated phospholipase A2 (Lp-PLA2) and very-low-density lipoprotein cholesterol (VLDL-C). In this trial, the safety profile of Vascepa was comparable to placebo and there were no treatment-related serious adverse events. No other Omega-3 Rx therapy demonstrated an absence of increased LDL-C, as well as non-HDL-C and apo B levels. Recently additional data indicating around Lp-PLA2 further differentiated Vascepa from the crowd. All this adds up to most favorable side effect profile, or lack thereof.

AMRN is also the best-in-class in terms of supply barriers to entry (the only company with locked up supply), IP (more than 19 issued or pending patents) and trade secrets (the most challenging compound to reproduce).

The most excitement around AMRN's Vascepa, and a huge upcoming catalyst for the company and the cardiovascular treatment community will be the ability to market to a new patient population - one that Lovaza and Epanova cannot touch. The "Anchor" population is 8-10X larger (36 million patients and growing rapidly) than other indications currently approved for Omega-3 therapies. FDA approved AMRN's sNDA under Special Protocol Assessment and will not require outcomes for full approval in December 2013. Vascepa would address a $30-40 billion market opportunity (retail).

Vascepa is also going after an indication combined with statins (similar to Epanova) and an indication for the reduction of cardiovascular events, known as Reduce-It. While a few years down the road and with more uncertainty, Japan's JELIS study and other bodies of science evaluating 96% or greater levels of EPA, suggest AMRN could be the only Omega-3 to conclusively and individually reduce heart attacks.

Neptune's (NASDAQ:NEPT) Krill -- The krill story is a great one, for U.S. retail OTC. Mega Red has been a marketers dream and it is the #1 brand of Omega-3 in the U.S., without actually having the most Omega-3 in it (go figure that out). But, Krill for Rx is a long way away, if we ever get there. Like OMTH, NEPT romances us with dreams of higher bioavailability through phospholipids vs. free fatty acids. Great on paper, promising in the test tubes, not proven in the body as the real test comes during Phase III, which has not been conducted yet. Here are the problems: it's too expensive; it doesn't contain enough Omega-3 concentrations; it's highly volatile and spoils easily; it cannot be standardized consistently to Rx grade requirements; and there is no upper limit safety data. Oh yeah, no outcomes exist on this material either, so FDA will have a very tough time approving a new therapy not proven to be safe. I do hope NEPT fully recovers from their unfortunate plant explosion, so they can advance Krill to be a contender in the future, even if it is distant.

As Omega-3 Rx therapies create a new lipid management paradigm, they will attempt do so in three main areas: triglyceride management; combination use with statins; and reduction/prevention of cardiologic diseases. While there is plenty of market for many players, all eyes should focus on AMRN as a best-in-class therapy able to expand into all applicable indications. Potential pharma suitors seem to be on borrowed time with steep patent cliffs and limited ways to fill their pipelines and revenue streams fast. It is a time where an acquisition misstep can cost the future, and a $4-6 billion investment in Amarin, just shortly down the line, will look as low as the $443 million AZN just wasted on OMTH.

Source: The Future Of Omega-3 Based Lipid Management: All Eyes On Amarin