Seeking Alpha
Special situations, micro-cap, biotech, healthcare
Profile| Send Message|
( followers)

After a lengthy period of market speculation over the potential acquisition of Amarin Corporation (NASDAQ: AMRN), which drove shares as high as $15.96, the market sold the stock quite heavily following FDA approval for its flagship product AMR101 (now known as Vascepa) for the treatment of high triglycerides. Vascepa is coming into the market as the only prescription fish oil pill since GlaxoSmithKline's (NYSE: GSK) Lovaza, which brings GSK over $1 billion a year in sales revenue.

Amarin's drug is derived from fish oil extract, which is widely available as a supplement. Fish oil has fully saturated the over-the-counter market, although the introduction of highly-refined products in the prescription market came with Lovaza after GlaxoSmithKline bought its parent company Reliant Pharmaceuticals back in 2007. The biggest problem with Lovaza is that it has been known to increase LDL-cholesterol (the bad type).

Vascepa brings a far superior product that not only has the potential to dethrone Lovaza completely, but to go further into the triglyceride-lowering drug market by being available for the patients in the 200-500 mg/dL range which represent the bulk of this market. This has gotten many value investors in the pharmaceutical space interested in AMRN, which trades at a steep discount considering to the expected potential of the hypertriglyceridemia drug market.

As of now, both Lovaza and Vascepa are available for the treatment of high-triglyceride patients with readings greater than 500 mg/dL. We expect that Vascepa will be able to have an NDA acceptance for the 200-500 mg/dL patients in the near future, since results from the ANCHOR phase III clinical trials demonstrated placebo-like tolerance for the pills and statistically significant lowering of triglyceride levels within 12 weeks.

Amarin has received the patents it needs to keep Vascepa from being stolen by competitors, but will receive a decision on its NCE (New Chemical Entity) by August 17th which will determine whether the drug stays exclusive for 3 or 5 years. This was pointed out in the BioMedReports' FDA calendar at the end of July. This catalyst should affect AMRN shares, since the length of exclusivity determines the worth of the drug.

We may see new investors in AMRN once we are absolutely sure that it can be sold to the entire hypertriglyceridemia population, because the market cap of the company is only $1.65 billion. If Vascepa outperforms Lovaza (which will most certainly be the case once it is officially brought to market for high-triglyceride patients under 500 mg/dL), Amarin is worth at least triple its current value. For investors who are willing to hold this stock until Vascepa is developed into a true blockbuster drug, it wouldn't hurt to take a look now since the stock has pulled back quite significantly from its 52-week highs thanks to impatient investors and bearish reports whose logic have been called into question by many.

As pointed out by analyst Ritu Baral of Canaccord Genuity in a recent note, "with Vascepa approved; all eyes are on upcoming NCE decision, BD activities, launch prep & ANCHOR submission in Q4/12. NME/NCE discussions with FDA are active and ongoing; we expect the decision in mid-August. Post-approval, we also now expect BD discussions to intensify, particularly headed into Q4 when AMRN would need to ramp up investment in a self-launch scenario. We also expect ANCHOR sNDA to be filed in Q4, with approval in mid-2013."

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.