Amarin's Problems Just Went From Bad To Worse

| About: Amarin Corporation (AMRN)

In my previous article on Amarin (NASDAQ:AMRN) entitled Amarin Is Dead With Or Without Anchor, I pointed out that the FDA-approved prescription-grade fish oil maker that has a treatment for "severe" levels of fat (triglycerides) in the blood isn't doing too well selling its drug. Amarin is attempting to get FDA approval to expand its marketing to the wider population, albeit less sick. My logic was that if Amarin is struggling to make sales to those most in need, what realistic hope does it have in marketing their drug to those less in need? The Amarin faithful are often quick to point out the steady percentage rise in prescriptions, as expected with any new drug, but large percentage gains from pitiful numbers is easy and unimpressive. Amarin continues to rack up massive, net losses on tiny sales.

Amarin's number one competitor is and has been GlaxoSmithKline (NYSE:GSK), the maker of the only other prescription fish oil drug, Lovaza. On Thursday, September 12, an appeals court gave the green light to Teva Pharmaceuticals (NYSE:TEVA) and Par Pharmaceutical (NYSE:PRX) to go ahead and make a generic copy of Lovaza. As with virtually any generic drug that hits the market, the price comes down significantly making it extremely difficult for its close competitors to compete on both volumes sold and price. GlaxoSmithKline, through its partner Pronova BioPharma ASA (OTCPK:PVNAY), has sold billions of dollars worth of Lovaza. That likely means a lot of cheap prescription generic fish oil is about to flood the market.

Amarin warned about this possibility in its most recent 10K, and the possible coming results aren't pretty:

Competitive factors, including generic competition, could force us to lower prices or could result in reduced sales

Now with a cheaper generic out that's similar to Amarin's fish oil product (active ingredient in both being EPA), could insurance companies or others steer patients toward the new generic? Again, from the 10K:

The continuing efforts of the U.S. and foreign governments, insurance companies, managed care organizations and other payors of health care services to contain or reduce health care costs may adversely affect our ability to set prices for our products which we believe are fair, and our ability to generate revenues and achieve and maintain profitability.

With Teva and Par success with their legal efforts, who even knows if Amarin could be next to be challenged with a generic copy? Once again, from Amarin's most recent 10K:

In addition, other drug companies, known as generic drug companies, may challenge the validity, enforceability or both of our patents and seek to design products around our issued patent claims and, after a period of FDA-granted regulatory exclusivity gain marketing approval for generic versions of Vascepa or gain marketing approval for branded competitive products based on new clinical studies.

We plan to vigorously defend our rights under issued patents. Other drug companies may challenge the validity, enforceability or both of the our patents and seek to design its products around our issued patent claims and gain marketing approval for generic versions of Vascepa or branded competitive products based on new clinical studies. The pharmaceutical industry is highly competitive and many of our competitors have greater experience and resources than we have. Any such competition could undermine sales, marketing and collaboration efforts for Vascepa, and thus reduce, perhaps materially, the revenue potential for Vascepa.

I would certainly classify Teva, with a market capitalization of over $30 billion, as now a competitor who certainly has greater experience and resources. It's certainly theoretically possible that new studies will come out proving Amarin's fish oil product is far better than anything out there and an enormous premium paid for it is absolutely necessary and worth it, causing a complete turnaround for a company. I wouldn't bet on it, however.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in AMRN over 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.