Edited by Kate Boehme
Amarin Corporation (AMRN) develops and commercializes therapeutics to improve cardiovascular health. On July 27, 2012, Amarin got approval for Vascepa, a drug designed to lower blood fat levels, thus decreasing the chances of heart disease and stroke. Since the approval came through, Amarin has focused all of its energies on getting the patents and NCE status for Vascepa. In my previous article, I presented an estimated takeover price as well as the drug's market potential, but there were still a number of unanswered questions regarding the NCE (New Chemical Entity) status and the 899 patent. Given recent developments, now is an ideal time to discuss these issues.
According to the FDA code, "New chemical entity means a drug that contains no active moiety that has been approved by FDA in any other application submitted under section 505(b) of the act." In this definition, approved refers to the active ingredient either "alone or in combination" with other elements. If granted NCE, Amarin will get exclusive marketing rights for Vascepa over the next five years. An important factor in deciding whether Vascepa should receive NCE status is how it compares to the drug Lovaza. According to the FDA's drug database, the active ingredient for Lovaza is "Omega-3-Acid Ethyl Esters." A one-gram capsule of Lovaza contains at least 900mg of the active ingredient, which is delivered through fish oils. Meanwhile, Vascepa contains a "a prescription-grade omega-3 fatty acid, containing ultra pure EPA (icosapent ethyl)." If Amarin can be listed with "Ethyl-EPA" as the active ingredient instead of "Ethyl Omega-3 Acids," the chances of getting an NCE for Vascepa will increase. However the outcome turns out, the market reaction to the news seems positive.
899 Patent Status
Although there are still doubts regarding the NCE status, the patent protection process is moving along well. Amarin has already received a "Reasons for Allowance" notice from the U.S. Patent and Trademark Office for its 899 patent. If the company is successful in acquiring this patent, it will have protection over its intellectual property through 2030. PTO normally gives a "Reasons for Allowance" notice when the inspectors are content with the patent applicant's claim. A recent announcement from Amarin indicates that they feel confident of their ability to secure most of the necessary patents for Vascepa. The company is happy with the current drug label, and is solely focused on protecting the drug's commercial potential.
Amarin expects to launch Vascepa in the first quarter of 2013, with three potential avenues through which they could market and sell the drug. Notable among these options is the method by which Amarin is acquired by one of the leading pharmaceutical companies. Amarin's choices also include either strategic collaboration with another company or self-commercialization of the drug. Lastly, Amarin could design a marketing strategy that would incorporate support from a third-party.
Over the coming months, Amarin plans to take steps to build market awareness and prepare in advance of the commercial launch. This process includes conclusion of the process by which Vascepa is introduced to managed-care plans, the solidification of inventory levels, and coordination of other pre-launch marketing activities.
Vascepa has the potential to become one of the most significant triglyceride-lowering drugs, surpassing GlaxoSmithKline PLC's (GSK) Lovaza and Abbott Laboratories Inc.'s (ABT) drugs, Tricor and Trilipix. Expected annual U.S. sales of Vascepa could rise to $2.6 billion by 2020. Sales projections for the drug depend on the particulars of its marketing approval as well as its price. The price for Vascepa would be higher than that assigned to Lovaza, due to its better safety rating and efficacy profile. Meanwhile, Lovaza raked in sales of about $1 billion last year, in spite of physicians' hesitancy to proscribe the drug, due to its associated side effects. Therefore, the safer and more effective Vascepa should attract greater physician confidence, encouraging them to prescribe the drug more readily. This, in turn, will lead to higher overall revenues than those brought in by Lovaza.
Although a strong patent would for Vascepa provide significant protection in the long-run, it is believed that any potential acquirers of Amarin would prefer the drug receive a NCE. A NCE would allow the acquiring company extra time to obtain long-term patents without any intrusion from generic filers. Once the drug's status is known, potential acquirers will be able to firmly establish the value of Vascepa, given the three or five-year regulatory protection that accompanies a NCE. However, even if Vascepa does not get NCE, it will remain an attractive target because it has the potential to inject significant revenues into deteriorating portfolios. As I indicated in my previous article, a lot of manufacturers are at the end of their drug patents. These larger companies will soon be forced to replace those declining revenues and Vascepa provides the perfect means.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.