In my previous article, I wrote about the risks and returns associated with investing in Amarin Corp. (NASDAQ:AMRN), and concluded that the company should have enough cash to fund its operations and the research and development expenses associated with the Anchor label expansion, if AMRN achieves a weekly total prescription count of 19,500.
You may also refer to another article by Elephant Analytics, which suggests a prescriptions figure of 24,400 TRx a week is required by 2016 to fund REDUCE-IT without additional funding. In order to achieve this target, 9,100 NRx per week on average is required between 2014 and 2016.
I argued that sales of Vascepa under the current Marine indication would come under severe pressure from competitors producing generic Lovaza in 2015. This leaves the Anchor indication crucial to the company's long-term survival and thereafter success. In this assumption, I had dropped hopes for obtaining New Chemical Entity, or NCE, status for this drug, which would have given a longer lead time for Amarin to build its sales channel and widen its competitive moat.
19,500 weekly scripts would have helped ease cash flow concerns and allowed Amarin to generate operating cash flows to fund its research and development initiatives. In an attempt to manage costs, management decided to shed 50% of its sales team. In typically predictable fashion, management justified this decision in the Q4 earnings management discussion stating that Vascepa scripts grew to 91,000 during the quarter compared to 74,500 scripts reported in Q3, and the number of prescribing physicians grew from 13,000 to 16,000.
This script growth deserves further scrutiny, and upon dissecting this information clearer, it is obvious that sales is stagnating and reaching a stable weekly figure that is far below what I estimate Amarin needs to sustain its operations.
Management reported quarter-on-quarter scripts of 47,500 in Q2 to 74,500 in Q3 and then 91,000 in Q4. The growth has tapered from 58% to 22%, and now on a weekly average basis, this growth is only 3%.
Without NCE, the defensive moat (which is down to a 3-year exclusivity period), weakens further, and together with the threat from generic competitors, the risk-reward profile of AMRN as a one product company really is not compelling to investors.
Management has now acknowledged in their Q4 management discussion that they face an "uphill battle" to secure Anchor indication, and the REDUCE-IT trial would be completed in 2017. This leads me to question again, is there enough sales momentum to sustain AMRN till then?
Amarin announced that the company had entered into a Co-Promotion Agreement with Kowa Pharmaceuticals on March 31, 2014, and Kowa Pharmaceuticals' sales force started promotional efforts in May. I had initially expected a lot from Amarin's initiative and felt this was a good attempt at driving sales.
However, as of June 6, the TRx for the week was 7,000 and NRx was 2,900. A week ago, the figures were 7,600 TRx and 3,500 NRx. Both weeks' figures are still falling short of the growth needed to spur the company on.
Shareholders of Amarin should consider if the growth story can still be validated, but I would be partially divesting my position after being a hopeful long for over a year.
Disclosure: The author is long AMRN. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.