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Just Another Amarin Theory...

|Includes:Amarin Corporation PLC (AMRN), GSK

As an Amarin shareholder, I'm thoroughly exhausted of dreaming for a large buyout bid to come in and save all of us underwater longs. Therefore, I've begun to change my viewpoint to that of BP, and think about how purchasing Amarin could be very beneficial to these companies (besides just the obvious V script sales). This is big business, and we all know how selfish BP can be, so the only realistic way they will want Amarin, is if it is thoroughly beneficial for their balance sheet. This is when I began thinking more about GSK and their ~$1bil/year blockbuster Lovaza.

From my perspective, GSK has two large Lovaza "cliffs" so to speak in the next 1 to 2 years. First, if Lovaza really is highly prescribed off label (as rumored) in the high trig market, I would assume that Vascepa's hopeful Anchor approval would steal a majority of the off label scripts. Who wants to pay full price out of pocket, or which insurance company would promote, a non-approved drug when a similar, arguably superior, drug is now approved for the indication. I've heard anywhere from 50% to 70% of Lovaza being prescribed off label, so let's assume the conservative number and go with 50%. At a 75% conversion rate from Lovaza to Vascepa (no basis for this number, just throwing it out there), we would get:

50% x $1 billion = $500 million x 75% = $375 million

$1 billion - $375 million = $625 million

So within a relatively short time period, we could see Vascepa taking 30% to 50% of Lovaza's scripts in the first half of 2014, following Anchor approval. Let's assume by the beginning of April 2014.

We also know that generic Lovaza will be available 1Q 2015. With all of the recent senseless bashing and a drug class that many unintelligibly lump all OTC and prescriptions together as "fish oil", regardless of composition, purity, and potency ("fish oil" is about as specific as saying "pain killer"), I'm assuming that the switch from Lovaza to the generic version will be quite swift. Using Lipitor as an example, the first week that the generic version was on the market, Lipitor scripts were cut in half. (

Using this model, Lovaza sales could be well under $200 million by 2Q 2015. So let's sum up the revenue that GSK can squeeze out of Lovaza using this scenario...

July 2013 through December 2013 - ~$1 billion / 2 = $500 million

January 2014 through December 2014 - $625 million

January 2015 through December 2015 - ~$200 million

Total amount through 2015 - $1.325 billion with revenue on a downward slope

Now, what if GSK purchased Amarin (let's say by January 2014), and actually used 2014 to phase out Lovaza, essentially converting all Lovaza scripts to Vascepa. For this, I won't even assume any expanded sales from Vascepa's probable Anchor approval. When this purchase would really benefit GSK would be in 2015. With Lovaza essentially off the market, patients having switched to Vascepa, and reps having already educated doctors on the advantages of Vascepa over Lovaza, would there even be a market for generic Lovaza? Generics essentially leech off of name brand drugs' sales and marketing efforts, so I can't imagine that the generic companies would want to be out promoting/selling their drug, especially if GSK has already essentially educated doctors on Vascepa's advantages. Therefore, I'd think that Vascepa would essentially replace Lovaza and allow GSK to keep their $1 billion+ of revenue per year by making generic Lovaza obsolete. Now, we also know the Vascepa has the possibility of far surpassing the $1 billion per year mark. But even in this conservative case, GSK would come out ahead with minimal work, given the similarity to a drug they already sell. It's as "plug-and-play" as a drug can be.

July 2013 through December 2013 - $1 billion / 2 = $500 million

January 2014 through December 2014 - $1 billion

January 2015 through December 2015 - $1 billion

Total amount through 2015 - $2.5 billion with revenue on an upward slope

Obviously, the purchase price of Amarin would have to factor into the profits, but I can definitely see the payback being fairly quick, with the additional possibility of a mega blockbuster making it a no brainer. Another reason that the BO is being dragged out in this instance, is that GSK would essentially have nothing to gain from purchasing Amarin now, as opposed to late 2013 when Anchor approval is in the bag. Actually, they would have seemingly gained by waiting, since Amarin is at new lows and I would think they could get away with paying less than before, even if the inherent value of the company/product has not changed.

Lastly, I'm not sure if the whole phasing out a drug and replacing it with another is feasible in this industry or if this blatantly breaks numerous regulations or anything, so please play devil's advocate here as to why this thinking may be flawed. This was just a thought that crossed my mind recently.

Disclosure: I am long AMRN.

Stocks: AMRN, GSK