By Jake King
News that Amarin Corp. (AMRN) is preparing for an FDA advisory panel regarding Vascepa in the Anchor indication caught investors off guard last Thursday, introducing another element of risk to the Amarin story. But the revelation creates a compelling trade as AMRN's voracious following piles in ahead of a decisive meeting that could materialize later this year. With that in mind, AMRN near its 52-week lows (two-year lows in fact) is an attractive buy in anticipation of a retail-driven run-up in the second half of this year.
Amarin President John Thero said in an investor presentation at the Jefferies Healthcare conference on Thursday, June 6, "We are anticipating that there will be an advisory committee for this drug. We have not yet been informed by FDA of that or the timing of that, but because it is the first drug in the class for this indication, we are anticipating that we will have an advisory committee for that indication." This is the first hint from the company that Vascepa might see an advisory committee ahead of its December 20th PDUFA action date.
For some background, Vascepa's current label includes patients with very high triglycerides (severe hypertriglyceridemia, ≥ 500mg/dL), dubbed the Marine indication based on Amarin's Phase III Marine study, which read out in November of 2010. The FDA approved Vascepa for the Marine population in July of 2012.
The Anchor indication, meanwhile, includes patients with high triglycerides (≥200 and <500mg/dL) with mixed dyslipidemia, a lower-risk population that makes up a much larger market. Amarin released positive results from the Anchor trial in April of 2011, and the FDA accepted Amarin's supplemental New Drug Application for the expansive indication on April 23rd of this year. The sNDA, if approved, will broaden Vascepa's label into a market roughly ten times the size of the Marine indication; its clear, then, why investors focus so much attention on the broader label.
Recall that these studies evaluated Vascepa's ability to lower triglyceride levels, not its ability to reduce the risk of cardiovascular events. In December of 2011, Amarin dosed the first patient in the Reduce-It trial, a cardiovascular outcomes study designed to measure the clinical benefit of Vascapa. The 8,000-patient study won't have results until 2016, but the FDA, through a Special Protocol Assessment, allowed Amarin to file the Anchor sNDA so long as the Reduce-It study was "substantially under way."
This is the first time Amarin has mentioned an FDA advisory panel publicly, and it's brought a new element of risk to the Amarin story. Most had assumed that since the Anchor and Reduce-It studies were/are carried out under Special Protocol Assessment agreements, the FDA wouldn't require an advisory committee's vote. Confirmation that FDA wants Vascepa in front of an advisory panel before approving the Anchor sNDA creates another binary event for the controversial name and suggests that the SPA is less definitive than thought. To be clear, Amarin has not said that there will be an advisory meeting for the Anchor sNDA, only that they're preparing. Whether Amarin is simply readying for the worst or the FDA has hinted at a panel in its communication with the company remains unclear, but we expect an announcement by the end of July if a committee meeting is required.
Profiting From an Unexpected Event
The sNDA's approval chances aside, a run-up into a panel meeting is a high probability phenomenon given Amarin's passionate retail following and its history of catalyst-driven run-ups, particularly as investors take note of AMRN's 52-week high of $15.96 compared to its current lows around $7.00.
Notice that, like clockwork, AMRN rallies in anticipation of a NCE decision on a monthly basis. In part, it's this continued interest in a catalyst that has largely left the spotlight (given up for lost by some) that suggests to us a run-up into an advisory panel -- the bigger the catalyst, the bigger the run-up. Vascepa's status as a New Chemical Entity has been widely lauded as the gating factor for a large pharma takeover, thus investors have hinged significant value on the designation. When/if the FDA makes a decision, it will be published in the FDA's Orange Book, which is updated during the second full week of each month and contains the FDA's latest drug approvals as well as their exclusivity status. In anticipation of this event, beginning during the last week of each month AMRN has consistently rallied $0.50 to $1.00 into the Orange Book publication. And every month, AMRN recedes as the FDA fails to deliver. It's important to note that even as the NCE debate has largely faded into the background of the AMRN bull/bear fiasco in 2013, this phenomenon persists.
In addition, AMRN in the last eight months has experienced the same sell-off that preceded a run-up into the July 26 PDUFA for the Marine indication, a run-up that began just weeks after the FDA's acceptance of the Marine NDA. The similarities on the chart are hard to miss.
The FDA set a PDUFA action date for the Anchor sNDA of December 20, 2013. The FDA generally requires 2-3 months between an advisory panel and PDUFA date, which would put a Vascepa panel meeting before mid-October at the latest. Although there has been speculation that the Cardiovascular and Renal Drugs Advisory Committee, which meets between August 5 and 7, will handle the subject, it's more likely in our view that the Endocrinologic and Metabolic Drugs Advisory Committee tackles Vascepa. The EMDAC currently has nothing scheduled for this Fall, but adding a meeting for the committee would not be out of the ordinary. Thus, to allow the sponsor (Amarin) enough time to prepare and the FDA enough time to evaluate after a meeting, we speculate that a panel, if announced, will fall in September. Failing to materialize, Amarin's December 20 PDUFA will serve as an equally important event.
Barring a surprise Vascepa update in the Orange Book this week, we expect AMRN to sell off in the second half of the month, as usual. Although we suspect a dip in AMRN's share price if a panel is announced, getting in around AMRN's two-year lows and previous long-term support ($6.00) is an attractive bet. In addition, settling on an options strategy before implied volatility increases makes sense. A FDA advisory committee, if it materializes, is likely less than 4 months away, just in range of the run-up sweet spot.
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