How Amarin Bulls Made The Right Choice

| About: Amarin Corporation (AMRN)
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Amarin (AMRN) is well-known for its fish-oil-based drug, Vascepa, which is used to treat patients suffering from high triglycerides, or TG, a kind of fat found in blood. Excess or high TG may raise the chances of heart attack and metabolic syndrome. To evaluate the safety and efficacy of Vascepa, Amarin ran two phase III trials, MARINE and ANCHOR. In 2012, based on the results of the MARINE trial, Amarin received approval from the FDA for Vascepa, and it also received patent protection from the European Patent Office in May 2013. Vascepa is the company's first FDA approved product and is available in the U.S. by prescription. This drug generated revenue of $7.8 million in the first half of 2013, and we believe improved results from other trial studies will boost its revenue further.

Few important dates

July 2012- FDA approved Vascepa for treating TG

October 16, 2013 - Meeting regarding Amarin's sNDA Review

November 4, 2013 - Third-quarter Earnings

December 20, 2013 - ANCHOR indication decision

Study Update

The company is now at the next level of regulatory approval for Vascepa. The ANCHOR phase III trial evaluates the safety and efficacy of treating patients with high TG ranging from 200 milligram per deciliter, or mg/dl, to 499 mg/dl with mixed dyslipidemia. It is estimated that one out of five, or around 40 million, U.S. adults have triglycerides in this range. The FDA agreed to review its Supplemental New Drug Application, or sNDA, for ANCHOR indication, to approve it as an adjunct to diet for treating adult patients with high TG.

The FDA will review this with the Endocrinologic and Metabolic Drugs Advisory Committee, or EMDAC, on October 16, 2013. In addition to this, the FDA has assigned a Prescription Drug User Fee Act, or PDUFA, action date of December 20, 2013. PDUFA action date is the target date for the FDA to complete its review of the sNDA. We believe the approval of its ANCHOR trial and its sNDA will transform Vascepa into a fortune drug for the company.

In July 2013, to deepen its study on reducing cardiovascular events and to launch Vascepa as a New Chemical Entity, or NCE, Amarin raised around $121 million through issuance of 21.7 million shares. In 2011, it commenced the cardiovascular study, REDUCE-IT, to evaluate the safety and efficacy of Vascepa as an adjunct therapy in reducing cardiovascular events. It has continued this study to make this drug more efficient in reducing the risk of cardiovascular events. As of September 25, 2013, more than 6,000 patients were enrolled in the REDUCE-IT study of Vascepa, which operates at 400 clinical sites in 11 countries. This study will complete in six years and is expected to enroll more than 8,000 patients by 2017. Along with the MARINE and ANCHOR trials, REDUCE-IT is also conducted under the Special Protocol Assessment, or SPA, agreement with the FDA. An SPA is a declaration from the FDA that an uncompleted phase III trial's design, clinical endpoints and statistical analysis can be acceptable for FDA approval. This will allow Amarin to enhance its safety profile, enrolling the set target of patients before 2017 and treat them with its full efficacy.

Clinical Studies

In clinical trials, Vascepa's reduced TG levels by 27% compared to the placebo, which increased TG levels by 10%. Vascepa also reduced very low density lipoprotein, or VLDL, a type of bad cholesterol, by 20%, whereas the placebo increased it by 14%. Vascepa showed superior results compared to the placebo in the clinical study and higher efficiency than GlaxoSmithKline's (GSK) Lovaza in reducing the bad cholesterol level, or LDL. This demonstrates Vascepa's higher safety and efficacy profile in reducing cardiovascular risk.

Further, it is expected to treat a patient population of around 70 million adults in the U.S. alone. The positive REDUCE-IT result will provide Amarin an opportunity to serve patients efficiently and reduce cardiovascular events, driving Vascepa's future sales. This will help Amarin build superior creditability in the market, and we are bullish on Vascepa's future prospects.

On competition side

Lovaza is a prescription drug that received FDA approval to lower high TG levels. Pronova owns the patent of this and GlaxoSmithKline markets it in the U.S. and Puerto Rico. On September 13, 2013, the U.S. Appeals Court reversed its 2012 decision regarding the patent protection of Lovaza, and ruled in favor of Teva Pharmaceuticals (TEVA). This will allow Teva to develop a generic equivalent of Lovaza and will begin selling it in the market soon. The favorable ruling added another drug to Teva's generic portfolio, enabling it to enhance its footprint in the TG market.

Additionally, in September 2013, Teva received FDA approval to develop a generic version of AbbVie's (ABBV) Niaspan, cholesterol controlling drug, and the exclusive marketing rights for 180 days for this drug. We expect the generic version of Niaspan, coupled with Lovaza, will boost the company's generic business revenue, which has declined by 8% year-over-year to $970 million in second quarter of 2013. Teva has experience developing the generic equivalent of Niaspan, which is capable of controlling LDL and helps build good cholesterol, or HDL. Its experience in manufacturing cholesterol drugs will help in developing the generic version of Lovaza more efficient in reducing LDL than Lovaza than the original drug currently available.

On the other hand, GlaxoSmithKline's first Lovaza patent expired in March 2013 and the second patent will expire in April 2017. It is expected that after the ruling against GlaxoSmithKline, the generic version of Lovaza will be available in the market soon. This will hamper GlaxoSmithKline's sales as the generic equivalent will be available at a lower price. Lovaza generated revenue of more than $1 billion in 2012 and around $532 million in first half of 2013. In August 2013, GlaxoSmithKline won the FDA approval for its HIV drug, Tivicay, which has demonstrated positive results in suppressing HIV in 88% of the patients after the regular intake of it for 48 weeks. Tivicay is expected to have the potential to be the next blockbuster for the company, which expects it to generate revenue of more than $900 million by 2017. This will offset the loss of revenue from Lovaza's patent expiration and allow GlaxoSmithKline to maintain the same profitability profile.

Vascepa included in tier II category

Health insurance companies categorized the prescribed drugs under tiers, depending on their cost and availability on their generic version. Tier II category drugs are brand-name medications that the health insurance company prefers the insured person to use for treatment. These drugs have lower co-pay amounts than tier III drugs. In its first quarter, Amarin's Vascepa secured formulary access in tier II category drugs of insurance companies. There are around 190 million people covered under the tier II category and more than 72 million people have access to Vascepa under the tier II drug, twice its first quarter numbers.

Additionally, in the second quarter of 2013, there were around 9,000 physicians prescribing Vascepa to patients. The normal prescription rate increased to 47,334 in second quarter from 10,484 in the first quarter. Due to these two factors, the company has witnessed quarter-over-quarter revenue growth of around 139% to $5.5 million.

With the acceptance of Vascepa as a tier II drug and physician's faith in it, we expect these factors will continue to drive its revenue higher, and the positive decision regarding its sNDA by the FDA will further boost its revenue performance.

Stock performance in last one year

AMRN Chart

AMRN data by YCharts

In the last year, Amarin's stock has fallen from the high of $12.96 to $5.66, mainly due to delay in acceptance of Vascepa as a NCE and some regulatory aspects. An NCE is a molecule in the early drug's discovery stage, and after undergoing few clinical trials, it can be translated into a drug that can treat some disease. Amarin continues to focus on receiving the acceptance of Vascepa as a NCE. We believe a positive response in the October 16, 2013, review meet will result in significant upside in the stock's price.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Fusion Research is a team of equity analysts. This article was written by Satya Prakash, one of our research analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.