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On October 29, the FDA dashed Amarin's (AMRN) hopes for its fish-oil-based drug, Vascepa, for treating patients suffering with high triglyceride, or TG, levels (<200mg/dL to >=499 mg/dL). TG is a kind of fat found in blood lipid that helps transfer blood glucose from the liver to other body parts. Amarin received the written notification in which the FDA rescinded the ANCHOR study Special Protocol Assessment, or SPA, agreement. The FDA noticed that Amarin's TG-lowering drug fails to reduce the risk for cardiovascular events among statin-treated patients with mixed dyslipidemia and residually high serum TG levels.

To resolve this issue, Amarin is working on scheduling a Type A meeting with the FDA to discuss the SPA withdrawal, as per the FDA guidance. Any positive discussion in the meeting is expected to benefit Amarin, and it might receive a Complete Response Letter from the FDA for Vascepa's Supplemented New Drug Application, or sNDA, in mixed dyslipidemia. This will enable the company to develop a more efficient version of Vascepa for treating high TG patients. Additionally, it is in continuous discussions with the FDA and vigorously pursuing approval for Vascepa's ANCHOR indication. The FDA has granted the Prescription Drug User Fee Act, or PDUFA, target date of December 20, 2013.

Amarin, with its study REDUCE-IT, is evaluating Vascepa's safety and efficacy in reducing cardiovascular events, or CVEs, among high level TG patients who are taking statins. As per the suggestion by nine of the eleven FDA committee members, Amarin should complete this study and demonstrate Vascepa's efficiencies among the cardiac patients with high level TG. However, REDUCE-IT, which was initiated by the company in 2011, isn't expected to produce the desired results until its completion. This study is expected to complete by December 2017 and is currently under the SPA agreement with the FDA. To capitalize on the benefits of the SPA agreement, the company has to produce superior efficacy in this trial study to receive the FDA approval before 2017. After attaining the safety and efficacy profile in reducing CVEs, the company should be able to receive the approval for treating the patients with high TG levels.

To date, more than 6,000 patients are enrolled in REDUCE-IT, and it is expected to complete the enrollment of 8,000 patients by 2015. It is operating at 450 clinical sites in 11 countries, and to continue this study, Amarin must raise its funding sources. It would require $100 million to complete this study. Vascepa, which is currently approved for treating adult patients with severe (≥500 mg/dL) hypertriglyceridemia, contributed only $8.4 million in revenue in the third quarter of 2013. As Vascepa is limited to treat a small population size of just 4 million, I expect it won't be able to generate such a huge amount for the company in the coming quarters. So, to continue with its REDUCE-IT study, Amarin has identified other ways to fund the study.

After the decision by the FDA panel, and to continue the funding for its REDUCE-IT study, Amarin reduced its worldwide workforce by 50%, including reduction of 150 U.S. sales team members. Amarin expects this won't affect commercialization of Vascepa for its current indication despite reducing the head count. Further, Amarin's selling, general, and administration expenses were around $101.5 million year-to-date, and after reducing head counts, I think the company may generate sufficient savings to fund its REDUCE-IT study.

My take

In the JELIS study, which was conducted on 18,645 Japanese patients, Vascepa showed a significant reduction in cardiovascular events in mixed dyslipidemia. So, I am optimistic about Vascepa's efficacy; despite using a relatively lower dose of 1gm per day compared to 4gm dose, REDUCE-IT was able to produce positive on outcomes in the JELIS study. The patients who were enrolled in the JELIS study have a higher baseline level of omega-3 fatty acids than the patients in REDUCE-IT. I believe that with the Vascepa 4gm per day dose, the company may receive positive results upon the completion of the REDUCE-IT study as well. However, currently, the risk-reward propositions are a bit low, since the REDUCE-IT results aren't expected until 2017.

On a positive note, if Vascepa is approved for the high TG patients, then Amarin has a chance to enhance Vascepa's coverage by tenfold, as it is estimated around 40 million U.S. adults suffer with high TG. Further, according to the average of five analysts' expectations for Vascepa at Bloomberg Businessweek, they anticipate Vascepa sales may reach to $1.2 billion by 2017, and Amarin could generate revenue $36 million this year.

Big players in the TG drug market

AstraZeneca (AZN), with the acquisition of Omthera pharmaceuticals, gained control of Epanova, a once-daily TG drug. AstraZeneca claimed that Epanova is superior in reducing severe TG levels compared to Vascepa and GlaxoSmithKline's (GSK) Lovaza. Looking at the efficacy of Epanova, in July 2013 AstraZeneca filed the New Drug Application, or NDA, for Epanova with the FDA, and in September 2013, the FDA accepted it for review. It is expected that if Epanova is able to secure its label in the treating the TG patients, then it will be in better position to tap the considerable market share of both these drugs. Further, AstraZeneca is also expected to file the application for the combinational therapy of Epanova and Crestor, its blockbuster cholesterol drug. This therapy will be used to treat patients with high TG levels and would extend the Crestor franchise beyond 2016.

On the other hand, GlaxoSmithKline has the marketing rights for Lovaza in the U.S. and Puerto Rico. It is a FDA approved prescription drug to treat patients diagnosed with high TG levels. Lovaza contributed around $1 billion in revenue for the company in 2012 and more than $700 million for the nine months ended in September 2013. Its first patent expired in March 2013, and the second patent is expected to expire in April 2017. The U.S. Appeals Court ruled against GlaxoSmithKline's Lovaza patent, and it is allowing Teva Pharmaceutical (TEVA) to develop the generic equivalent of Lovaza. It is expected that Teva will launch the generic version of Lovaza in the market soon. The favorable ruling for Teva will impact GlaxoSmithKline's sales and generate competition for other patent TG drug manufacturers. This has enabled Teva to add another drug to its generic drug portfolio, which is expected to enhance its footprint in the TG drug market and add significant revenue to its topline.

Conclusion

Amarin is stuck between a rock and a hard place; the FDA withdrawing the ANCHOR study SPA agreements and the U.S. Appeals Court allowing Teva to develop the generic version of Lovaza are both blows to the company. Further, AstraZeneca plans to develop the combinational therapy that is expected to generate even more competition for Amarin's Vascepa. These factors created a panic situation for Amarin, but on the positive side, the company is in continuous communication with the FDA related to its ANCHOR study and is focusing on the PDUFA target date.

Another positive factor is Amarin's CEO Zakrzewski purchased 50,777 shares of Amarin for his personal account at an average price of $1.54 and increased his stake to 226,047 shares. This may be an optimistic sign for Amarin's investors, and they can expect some positive developments in the company in the upcoming quarters. I feel investors should continue to hold Amarin stock until the target date set by the FDA.

Source: Any Hopes Left For Amarin Bulls?