I wrote an article touching on Amarin (AMRN) that wasn't too heavy on facts. After being chastised by a slew of blistering comments from the great Seeking Alpha audience, I did more thorough research on the company. Here is what I have. This article will discuss the bare facts about the company first, then highlight what I now see as some of the pros and cons of investing in AMRN. There is a lot of history here which might seem irrelevant to some, but I would never invest in a company without knowing all I can about its history.
The Facts: A Look At AMRN's Long History Of Rediscovery
Gist: Amarin was a small British drug delivery company that rediscovered itself in four phases to position itself as one of the most promising cardiovascular drug development companies in the United States today.
In the First phase, according to the latest Annual Report of AMRN for 2011 (available here), the company was originally incorporated in England and Wales as a private limited company in1989. At that time, it was merely a small drug delivery company known as Ethical Holdings. It became a public limited company in I993. In 1999, after another Irish pharma, Elan, acquired a stake in Ethical Holdings, it changed its name to Amarin. Until 2004, Amarin was engaged in sales and marketing in the US of PERMAX, a drug for Parkinson's disease that was later shown to have severe side effects on the lungs and the heart. PERMAX was licensed by an affiliate of Elan from Eli Lilly (LLY).
Amarin apparently lost faith in PERMAX after various fibriotic side effects and the risk of cardiac valvulopathy were discovered in the drug. Although AMRN was not directly manufacturing PERMAX, it probably - and rightly, as it turned out - thought that it could be implicated in subsequent lawsuits against the drug. On February 25, 2004, Amarin sold its U.S. subsidiary, Amarin Pharmaceuticals, Inc., including the rights to Permax, to Valeant Pharmaceuticals International (VRX). This completed the phase 1 of Amarin. (In 2008 and 2009, various lawsuits were filed on PERMAX issues against Elli Lilly, Elan, Valeant and Amarin. However, Amarin was never served in many of these suits, and in at least two cases, the lawsuits against only Amarin was dismissed; a lucky escape, and a smart move by the fledgling company!)
In Phase 2, Amarin shifted focus to the central nervous system (CNS), by acquiring Laxdale in 2004, a neuroscience company. The goal of this acquisition was R&D in Huntington's disease, a debilitating genetic disorder of brain cells. It had previously licenced Miraxion TM (formerly referred to as LAX-101) for Huntington's disease in November 2000 from Laxdale. However, after a great deal of speculation regarding the new drug in development, phase 3 clinical trials of its lead candidate failed in 2007. This completed phase 2 for AMRN.
In Phase 3, it "purchased Ester Neurosciences Limited, an Israeli pharmaceutical company, and its lead product candidate, ENl0l, an AChE-R mRNA inhibitor for the treatment of myasthenia gravis, or MG, a debilitating neuromuscular disease." (from the 2008 Annual report). However, by 2009, AMRN had given up on this drug candidate in favor of focusing on development of improved treatments for cardiovascular disease. Although there were some legal actions taken by Yissum, the originators of EN101, against Amarin for failure to proceed with it to completion, nothing serious resulted from it and Amarin was able to focus exclusively on its next venture. Thus began its phase 4; the most important phase in the development of the company.
Phase 4: Developing Vascepa
Phase 4 apparently began with Amarin's recruiting of Declan Doogan as head of R&D. Doogan, an MD doctor and scientist, was previously senior VP and head of worldwide development at Pfizer Global Research & Development. In 2008, AMRN decided to shift its research headquarters to Mystic, CT, and scale down its operations in the UK. In 2009, the company elected Doogan as interim CEO, replacing longtime CEO Thomas Lynch, who continued as Chairman. Later on, the company recruited Joe Zakrzewski as its new CEO.
In the same year, the company also acquired investments from many sources, including Sofinnova Ventures, Orbimed Advisors, Longitude Capital, Abingworth, APG Asset Management, Great Point Partners, Tavistock Life Sciences Company, and RA Capital. Dr. James Healy of Sofinnova Ventures, Dr. Carl Gordon of OrbiMed Advisors LLC, Dr. Joseph Anderson of Abingworth LLP and Dr. Manus Rogan of Fountain Healthcare Partners were appointed as new directors. This set the stage for AMRN's development of AMR101, a prescription grade Omega-3 comprising not less than 96% icosapent ethyl, or ethyl-L-IPA, for the treatment of hypertriglyceridemia, a cardiovascular disease.
The research was conducted in three stages, or what are known as the Marine indication, the Anchor indication and Reduce-it, each more broad in its scope than the previous one.
- Marine indication refers to patients with very high triglyceride levels @500 mgtdL.
- Anchor indication is for patients with high triglyceride levels (220 and<500mgrtdL) who are also on statin therapy for elevated low-density lipoprotein cholesterol, or LDL-C, levels (which AMRN refer to as mixed dyslipidemia in their 2011 Annual Report).
- Reduce-it (Reduction of Cardiovascular Events with EPA - Intervention Trial) refers to the study to "evaluate the efﬁcacy of AMRIOI in reducing major cardiovascular events in an at-risk patient population on statin therapy."
In plain language, there's a progression in the three studies, or stages. Marine is for patients with very high TGL, over 500 mgtdL. Anchor is for patients with high TGL, between 220 and 500 mgtdL. Reduce-it is for at-risk patients, that is, patients who are yet to develop high TGL, but are at risk of doing so.
The three studies together cover the whole gamut of TGL treatment. As can be understood, progressively larger number of people have Marine, Anchor and Reduce-it indications. The financial potential for the results of the studies are enormous, and progresses from one indication to the next. As has been observed by AMRN in the aforementioned annual report, they "believe the results of this study (Reduce-it) could lead to a broadening of the market potential for AMRl0l beyond the MARINE and ANCHOR indications."
Three New Drug Applications, or NDAs, were filed by AMRN with the US. Food and Drug Administration, or FDA, for the first of these three stages. Phase 3 clinical trials began, and in November 2010, AMRN announced favorable results for the MARINE trial. In April 2012, similar favorable announcements followed for the ANCHOR trial. These results were submitted to the FDA; in predictive language, the AMRN annual report 2011 says that they "believe that we must first obtain approval of AMRl01 in the MARINE indication and be substantially underway with a cardiovascular outcomes study at the time of the submission of an NDA to the FDA for the ANCHOR indication."
As is now common knowledge, the FDA gave approval to the drug candidate (now renamed Vascepa) on July 27th for Marine indication. Early next year, its use for Anchor indication is slated to be approved. If the Reduce-it study is also approved, AMRN will have a drug that is potentially the most major discovery in the cardiovascular niche in years.
The 5th Phase, if it happens, will be the marketing and selling phase for Vascepa. This could happen through M&As; however, given its history of rediscovery, we might just find AMRN changing into a drug marketing company in its next phase, switching from the R&D phase. As has been nicely put by Suzanne Elvidge in her article "Amarin's "How To" Guide To Change," "Amarin has been through some major changes, moving to a new therapy area, new leadership, and even a new continent" so another shift in the company's focus can't be unexpected.
The Peer Market:
Since the FDA approval of Benicar in 2002 in the cardiovascular space, there have been over 30 FDA approved drugs in this arena. At least two of these, Lovaza from GlaxoSmithKline (GSK) and Triplix from Abbott Laboratories (ABT) have found wide usage in the market for the specific niche where Vascepa will operate, Hypertriglyceridemia. Lovaza raised over $1 billion in revenue for GSK last year, and Abbott, which sells the fenobarbitate under the trade name of Tricor and Triplix, also generated an equal amount of revenue from the drugs.
However, there are major problems for both the drugs. Lovaza and Triplix both raise Low-density lipoprotein (LDL). According to WebMD, LDL is the "bad cholesterol" that is known as causing cardiovascular problems including the blockages of atherosclerosis, or blood clots that cause heart attacks. While not yet understood to be directly related, Lovaza is also a known cause of Atrial Fibrillation, and the FDA on Sept 4, 2012 asked GSK to label Lovaza as causing it.
On the other hand, Vascepa is not known to raise LDL, and is in fact understood to actually lower it.
The other major problem for GSK (and Abbott) is that they are about to face stiff competition from generic versions of their drugs. Abbott has already settled a lawsuit against India's Ranbaxy Laboratories, allowing them to produce generic versions of Triplex. Lovaza's NCE status expired on September 16 this year, and almost certainly it is sure to face stiff generic competition. While Vascepa's NCE status is still unresolved (see a detailed discussion here), it has patent protection until 2030.
Manufacturing and Marketing:
AMRN is yet to come up with a concrete marketing plan for Vascepa. As early as last year, its annual report said:
We are currently considering three potential paths for the marketing and sale of AMRl0l: strategic collaboration,acquisition, and self-commercialisation, the latter of which could include a third-party collaboration. From time to time we have held discussions with larger pharmaceutical companies on potential collaborations and other strategic opportunities, and we may have discussions regarding such opportunities in the future. These strategic opportunities may include licensing or similar transactions, joint ventures, partnerships. strategic alliances, business associations, or a sale of the company. However, no assurance can be given as to when or whether we will enter into any such strategic transaction. Until such time that we enter into such a strategic transaction, if ever. We plan to continue to execute on our plans to launch. market and sell AMRIOI on our own.
This above statement from its 2011 report is considerably different from its statement in the 2008 report: "We intend to ultimately partner AMR101 for hypertriglyceridemia with a larger pharmaceutical company for commercialisation worldwide."
In a recent conference call, CEO Joe Zakrzewski said that partnerships are messy, and that sort of tells us the current thinking of AMRN. However, all the major pharmas, including Pfizer (PFE), AstraZeneca (AZN), Merck (MRK), and even GSK might be looking at AMRN for a potential merger, acquisition or strategic partnership. However, AMRN is in no hurry; with plenty of cash in hand, it can afford to plan its next steps cautiously.
For a company that has waited so many years to produce a real blockbuster potential drug, I believe it can wait another year to get its Anchor stage approved before it goes for an M&A situation. That will solidify its bargaining power; given the fact that so many years and so many millions of dollars are required to bring out a solid drug candidate, I think a cautious overlook of current research will tell the company the exact time when it should consider such a merger. Until then, it can consider going it alone with marketing Vascepa's partial approval.
- AMRN's Vascepa can potentially end the market for Lovaza.
- If its three indication stage studies are all approved, Vascepa could become a bestseller drug.
- Any indication of approval of NCE status or partnership or M&A could raise the stock price considerably.
- AMRN is a survivor; it has rediscovered itself over the years and has the potential to make Vascepa a major rainmaker.
- AMRN has had some experience in marketing drugs like PERMAX before, although on a smaller scale; this experience may come in handy in marketing its blockbuster candidate Vascepa.
Right after the FDA approval on July 26, the stock fell from $15.31 on volumes of 6 million to $13.51 on 22.5 million the next day, ending the downward spiral at $11.18 on volume of 9 million on August 6. Looking at insider trade history, we notice that almost $100 million worth of insider sales occurred during or about this period, mainly from the Directors of investment companies like Orbimed who had invested in AMRN. This tells me nothing but the simple fact that these companies and insiders were trying to make a quick profit on the good news. The huge volume of fresh shares in the market downgraded the price, but it quickly rallied back to above $14 levels in September.
At present, it is trading at $12.52 on volumes of roughly 4 million. The market seems to me to be poised to move on expected news of the NCE status, or news about M&A. The stock is moderately speculative right now, but for the risk-taker, this can become a mid-to-long term gainer of very large scale.