Make It Or Break It Day Could Be At Hand For Amarin

Oct.11.13 | About: Amarin Corporation (AMRN)

Today could be a big day for Amarin (NASDAQ:AMRN) shareholders. Rumors are spreading that the FDA's briefing documents for Vascepa's crucial Anchor Indication could be posted today on the agency's website in spite of the government shutdown.

For folks new to this story, Amarin's highly refined fish oil pill, known commercially as Vascepa, is set to be reviewed for an expanded indication by the FDA with a target PDUFA date of December 20th. The Anchor indication targets adult patients with moderately high triglycerides (TG ≥200 mg/dL & < 500 mg/dL). To date, Vascepa has only been approved for use in patients with severely high (≥ 500 mg/dL) triglyceride levels, which has so far been commercially unsatisfying ($1.8 M monthly average since launch) to put it mildly.

By comparison, GlaxoSmithKline's (NYSE:GSK) fish oil pill, Lovaza, had sales topping $1B last year, even though the drug is also only approved in the U.S. as an indication for severe hypertriglyceridemia. Even so, a number of analysts suspect that these impressive sales figures for Lovaza are due to the drug being prescribed off-label for moderate triglyceride levels. If Vascepa can become the first FDA omega-3 therapy for moderate triglyceride levels, it's thus safe to say that shares of Amarin will easily revisit their previous highs in the $12's, nearly double their current levels.

Nonetheless, this is not a trade without major risks and bears have taken out massive positions betting the stock is going to falter. The downside risk for shares of AMRN is clear. The stock is already trading close to 7 times its cash position, and sales of Vascepa for severe triglyceride levels haven't taken off yet despite the company hiring 257 sales reps to aggressively market the drug.

With strong clinical data backing the ANCHOR indication, however, this supplemental New Drug Application should be a slam dunk, right? Not so fast. The bear's main bet, in my opinion, is that the FDA is going to shelve the ANCHOR indication until the company completes the cardiovascular outcomes trial known as REDUCE-IT. And that's where investors should focus their attention today while reading over the briefing documents.

Key issues to pay attention to in the Briefing Documents:

1. Is the FDA clearly telegraphing that they want a complete dataset from the REDUCE-IT trials prior to approving the ANCHOR indication? If so, AMRN shares are going to go down hard because the REDUCE-IT trial shouldn't be completed until at least 2016, leaving Amarin only able to market Vascepa for severe triglyceride levels.

2. Is there any "unexpected" adverse event data that the company has failed to disclose? Unfortunately, biopharmas all-too-often paint a bucolic picture of their pivotal clinical trials prior to an Advisory Committee meeting, and subsequently let investors discover the truth in the briefing documents.

The biggest problem is that retail investor probably won't have time to react to an overtly negative (or positive) briefing document. They will likely find out either way based on how the stock reacts (dives or pops), as they scramble to read through a dense, technical document to find out what in the world just happened.

I have no special insight into what the FDA is going to do here. Nonetheless, I am of the belief that if the ANCHOR indication is approved, there will be a decent amount of upside to catch in the coming days. With big bear positions already laid out, I think there is simply too much risk going long prior to the release of the briefing documents. That said, I sincerely wish Amarin longs the best of luck.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long 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.