Amarin: Too Many Positives to Ignore

Feb.24.11 | About: Amarin Corporation (AMRN)

By Patrick Crutcher

With the markets pulling back, we think this could create some solid entry points for investors in shares of Amarin (NASDAQ:AMRN). Their lead product, AMR-101, has already posted successful results in their MARINE study, and we believe that they have a high likelihood of showing the same in the ANCHOR study. Amarin expects to announce the ANCHOR results sometime in Q2. Based on the completed randomization in December, 12-week endpoints, additional administrative work and data analysis, we suspect the results could be available sometime in April.

Remember, Amarin is developing AMR101 (ethyl icosapentate), which is an ultra-pure (>96% ethyl-EPA), prescription-grade omega-3 fatty acid compound for the treatment of patients with very high triglyceride levels (MARINE, 500 ≤ TGL ≤ 2000 mg/dL) and the other for the treatment of patients with high triglycerides with mixed dyslipidemia (ANCHOR , 200 ≤ TGL ≤ 500 mg/dL). The MARINE indication covers more than 3.5-4.0 million patients, while the ANCHOR indication covers well over 30-35 million patients in the U.S. Both Phase 3 trials are being conducted under Special Protocol Assessment agreements with the FDA. Back in November, Amarin demonstrated very positive results in the MARINE study, demonstrating a 33% (4g, high dose) and 20% (2g, low dose) reduction in TG levels, without an effect on cholesterol (something Lovaza actually increases).

As we told our subscribers first on Monday, We think that there is significant rationale to believe that the ANCHOR results will yield positive results.

A recent 191-patient study for mixed dyslipidemia patients (Nomura et al, 2009) demonstrated that "EPA (1.8g) alone or combined therapy significantly (p<0.05) lowered TG levels compared with those observed with pitavastatin alone." Here EPA was Epadel, a currently approved ethyl-EPA prescription product in Japan. These are significant results for several reasons. First, it reaffirms our belief that AMR-101 at 2g and 4g has very high chances of showing positive results in this patient population. Now if you look at the MARINE study, they saw that those on background statin therapy had much greater median reductions in TG levels (statistically significant), than those not on statin therapy. Part of the inclusion criteria for the ANCHOR study was a stable dose of statins. This synergistic effect could play in important role in the ANCHOR results and later potential studies for the additional indication as a combination therapy with statins.

Recently, Canaccord Genuity reiterated a "Buy" on Amarin, with an $11 price target. Canaccord had this to say,"Reiterating rating and PT on high chances of ANCHOR success, AMR 101 market potential. AMR101 is AMRN’s purified EPA omega-3 drug for high triglycerides. We expect positive top-line ANCHOR and full MARINE pivotal data in April. We think AMRN may submit the AMR101 NDA for high triglycerides H1/11 with approval in H1/12. Our $11 target is based on a pNPV analysis."

Investors should realize that the $11 price target is risk adjusted for the possibility of tepid ANCHOR results. Consider that positive results in the ANCHOR indication alone are potentially worth several (>$2) billion dollars, more than twice their marketcap. They are even talking about additional indications in inflammation, prevention of cardiovascular events and combo therapy with statins.

We believe Amarin is currently being run by stellar management. In the past several months, Amarin has essentially reunited the key players from Reliant Pharmaceuticals, makers of Lovaza who were purchased by GSK for $1.65 billion. Current CEO Joe Zakrzewski, was at the time CEO of Reliant. Additionally, they just hired Paul E. Huff, as Chief Commerical Officer. Paul Huff played a pivotal role in the launch and successful commercialization of Lovaza and Niaspan, two very successful lipid products. Their executive team has serious credentials in the cardiovascular space, but more importantly, they have demonstrated the ability to execute on their product’s potential.

With the addition of more experienced management and very strong MARINE results, Wall Street funds have taken notice. In just the 3 month period from 9/30-12/31, Amarin saw a 115% increase in institutional holdings (+36M in 3 months, approximately 66M in total). I can only imagine these holdings have increased in 2011, especially when you consider the tight range shares have traded in.

Amarin is widely seen as a likely acquisition target in 2011, especially with positive ANCHOR study results. Back in January at the JP Morgan Healthcare Conference, CEO Joe Zakrzewski, said "I have more companies interested in this asset (AMR-101) than employees." The company employs 17 people. Be sure to check out the webcast from this conference; Zakrzewski gives a very compelling presentation. We will continue to following Amarin closely as we get closer to ANCHOR results.

In addition to everything else, we see a very interesting technical pattern developing on the AMRN chart (see below) which leads us to believe that the stock is coiled up and may be getting ready to continue it's recent uptrend. As you can see, there is a symmetrical triangle- which is often seen or thought of as a continuation pattern developed in markets that are, for the most part, aimless in direction. According to Investopedia, and others, "during this period of indecision, the highs and the lows seem to come together in the point of the triangle with virtually no significant volume. When the investors do figure out which way to take the issue, it heads north or south with big volume in comparison to that of the indecisive days and or weeks leading up to the breakout. Nine times out of 10, the breakout will occur in the direction of the existing trend. But, if you are looking for an entry point following a symmetrical triangle, jump into the fray at the breakout point.

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These patterns, both the symmetrical triangles on the bullish as well as the bearish side are known to experience early breakouts that give investors a "head fake." Hold off for a day or two after the breakout and determine whether or not the breakout is for real. Experts tend to look for a one-day closing price above the trendline in a bullish pattern and below the trendline in bearish chart pattern. Remember, look for volume at the breakout and confirm your entry signal with a closing price outside the trendline.

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Disclosure: Long AMRN