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An article released by Bloomberg on October 11th about FDA briefing documents related to Amarin's (NASDAQ:AMRN) upcoming October 16th Vascepa advisory panel seemed to help an options trader with significant put options taken out the day before. The timing is curious and SEC should be concerned as AMRN's stock was taken down on October 11th not by the material contained within the briefing documents, but, by the misleading headline and one-sided language of the Bloomberg article. A more balanced media assessment came from Reuters and Seeking Alpha commentary after the market closed on October 11th.

The FDA briefing documents were around 115 pages long and this research summary will help explain where investors stand going into the advisory panel next week.

Make no mistake, the FDA reviewer, Dr. Mary Dunne Roberts, was very thorough in spelling out the current treatment landscape and explicit about the desire of AMRN to expand their triglyceride lowering Vascepa (scientifically known as AMR-101) into a substantially larger patient population. While I would argue the background information material was slightly less balanced and relevant to pure EPA than I would like to see presented for the committee's use, there were truly only two surprises:

Surprise #1 was the suggestion that AMRN's placebo of mineral oil may not be as inert as previously known. This suggests results could potentially be clouded. While provocative, the researcher ultimately downplays the theory in practice with two assertions: 1) Lovaza saw similar signals in their trial which did not include mineral oil, as noted on page 15/155 from the FDA briefing document 2) mentioned that the mineral oil theory is just theory and not known to be true from existing science. Several times Dr. Roberts pointed out that no conclusive studies exist suggesting mineral oil would have this type of effect. The fact that Lovaza presented similar anomalies with baseline TG levels in the absence of mineral oil placebo completely negates the Vascepa mineral oil theory.

Surprise #2, and pay close attention. The FDA review documents and associated line of questioning for the Advisory panel is related more to Reduce-It indication labeling language than intended Anchor indication labeling. This begs the question, is the FDA already considering Anchor safe and effective and essentially approved, and is more focused around considering wider combo statin claims now, way ahead of any Reduce-It data? The sNDA approved by the FDA for Anchor seeks approval for the marketing and sale of Vascepa (icosapent ethyl) capsules for use as an adjunct to diet in the treatment of adult patients with high triglycerides (TG ≥200 mg/dL and <500 mg/dL) with mixed dyslipidemia. There is no mention for specific combo statin labeling in the sNDA, although Anchor supports the potential expansion of the Vascepa patient population to include adult patients on statin therapy with triglyceride levels ranging from 200 to 499 mg/dL and mixed dyslipidemia. With all the focus on outcomes in the briefing documents it seems FDA is clear about approving Anchor for the base population while considering wider labeling allowance. At the end of the day, the population size is similar, so it maybe moot and just semantics of label language.

The FDA briefing document cited recent large scale non-Vascepa outcomes studies failing to show CV benefit. However, these study inclusions are quite irrelevant because they include both non-Omega 3 class drugs and Omega-3s with DHA and other fatty acids and at levels far below the 4 gram Vascepa dose. It is Vascepa's pure EPA and dose dependent impact that differentiates it from other Omega-3 drugs. For this very reason, it cannot be assumed the failed CV trials relate to how Vascepa will impact CV events. As demonstrated by AMRN's trials and the Japanese open label JELIS study, pure EPA has been clinically proven to provide neutrality if not advantage for other lipid markers, vs. mixed EPA/DHA.

From page 12/115 of the FDA briefing document, "the agency has historically considered granting approval for lipid-altering drugs based on favorable changes in the lipid profile, with the assumption that these changes would translate into a benefit on clinical outcomes." This precedent is typically the line of reasoning the upcoming panel will follow unless serious safety concerns are raised. In AMRN's case, there is no risk of serious side effects.

In addition to precedent, AMRN has an agreed Special Protocol Assessment with the FDA. Details about the SPA from 2011 can be found here. Essentially, the SPA enables AMRN to ask for marketing approval for Anchor once certain trial criteria for Reduce-It have been met. These criteria are currently met. While FDA can do whatever they want (think one year delay on NCE status), it is highly unusual to ignore an SPA agreement and break protocol and precedent. Millions of dollars and patients are at stake from the FDA agreed design, and legal consequences may be stiff.

At the end of the day, one must understand what the FDA review documents are for. As per the FDA, they are not a determination and do not convey the agency's opinion toward a drug. It is compiled research from the reviewer to prepare the committee to discuss and debate the topic at hand. FDA explicitly states it is the work and related conclusions of the individual reviewer or reviewers, not the agency. However, if you take the conclusion of the author of the brief at face value:

Data from the ANCHOR trial have demonstrated that VASCEPA (AMR101), either 2 g or 4g dose, was effective in reducing TG when compared with placebo (mineral oil) in adult patients at high risk for CVD with high fasting TG level (≥ 200 mg/dL and < 500 mg/dL) despite stable/optimal statin therapy at background. In fact, a median % increase in TG from baseline after 12 weeks of treatment was observed in the placebo group (+5.9%). For the other efficacy variables such as LDL-C, non-HDL-C, VLDL-C, Lp-PLA2, Apo B, and TC, both doses of VASCEPA also consistently exhibited better median % changes from baseline to Week 12 endpoint favoring VASCEPA when compared with placebo.

Downsides: Should the panel give an outright thumbs down, the stock may experience another $1 of downside pressure and trade in a $5-6 range until FDA decides the ultimate fate of Anchor at the PDFUA December 20, 2013. If Anchor is declined until Reduce-It results, AMRN becomes a long-term investment and would require a marketing partner for Marine or additional funding in the future. Interim value would mainly be focused around sales for the Marine indication, a $1-2 billion market.

Upsides: Should the panel be split, a trading range of $6-8 is likely until PDFUA, assuming FDA will favor the approval.

If the panel votes favorably, the stock easily doubles if not triples heading into the PDFUA date. Label language may also be an area of flexibility. I maintain a $28-32 level on the stock, if approved.

Keep in mind, the FDA typically follows panel guidance, but is not required to rule per the panel vote. Also interesting to note is the controversial and very dramatic play-out of the recent weight loss drug approvals. For Arena's (NASDAQ:ARNA) case, the FDA briefing documents for their panel contained many scary surprises that temporarily imploded the stock, yet the panel and the FDA concluded that from a scientific standpoint, the conclusions of the reviewer were weak and approved the drug. Interesting to note obesity affects at least 1/3 of our population, same as high triglycerides for Anchor!

Disclosure: I am long AMRN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: Analysis of Vascepa's FDA Briefing Documents