The story of Amarin (NASDAQ:AMRN) is both punny and deadly serious.
The puns are because its drug candidate Vascepa is derived from fish oil. The U.S. Food and Drug Administration’s approval of Vascepa Dec. 13 for patient with high triglycerides may be seen as fishy by some.
Amarin — which is run out of New Jersey but calls Ireland its home for tax reasons — has fought for years to have Vascepa seen as a drug, with all the attendant protections, and not just a supplement. It contains only the chemical in fish oil that reduces triglycerides, and not those that raise “bad” LDL cholesterol.
Vascepa is Amarin’s only FDA-approved product. It was previously approved for patients with severe hypertriglyceridemia — a condition marked by elevated levels of certain fats in the blood. Now it can be prescribed, along with cholesterol-lowering drugs, for anyone with elevated triglycerides. The FDA requires that patients also either already have established cardiovascular disease, diabetes or at least two risk factors for cardiovascular disease.
The Good News
The approval is based on a trial called REDUCE-IT, published in January. It showed a 25% reduction in heart events, and a 20% reduction in deaths, for 8,000 patients who had higher risk of heart attack despite taking statins, like Lipitor, which are now generic. A rival drug from GlaxoSmithKline (NYSE:GSK), called Lovaza, failed to show such benefits in a similar trial, called ASCEND.
A follow-on study, dubbed EVAPORATE, suggested that Vascepa works by slowing the accumulation of plaque in blood vessels. EVAPORATE was done independently of Amarin.
EVAPORATE, however, missed its primary endpoint, a change in volume of low-attenuation plaques. Four of the study’s other goals, however, were met. Some analysts saw this as a negative result, and told investors to sell Amarin last month. After all, they figured, the stock had run from $12 to $22 per share during 2019, so why take the risk that Vascepa was another Lovaza or (worse) just fish oil?
Vascepa had sales of $287 million for the first three quarters of the company’s fiscal year, but Amarin now thinks it could make $700 million for the full year, as it doubles its sales force to 800.
Analysts think the drug could do $2 billion of sales per year.
Who Will Buy It?
News of the FDA approval sent Amarin up 5% in trade on Dec. 13. It gained another 7% over the weekend, opening December 16 at $25.51. That gives it a market capitalization of $8.4 billion, high for a company with $770 million in sales. But if it’s really a $2 billion blockbuster, its market cap is a little low.
Now that the FDA has sided with Amarin, all bets on how high the stock might rise are off. FiercePharma, which covers the industry, thinks Amarin could fetch $20 billion. Pfizer (NYSE:PFE), Amgen (NASDAQ:AMGN) and Gilead Sciences (NASDAQ:GILD) are all seen as potential suitors.
One analyst has a $35 per share price target on Amarin for just this week. Expect a lot of action on Amarin among punters who don’t know a statin from a hole in the ground.
The Bottom Line on Amarin Stock
Drug companies are desperate for new blockbusters that can replace those drugs whose patents are expiring. Amarin can go into their product lines immediately.
Amarin also brings patents back into play for heart drugs. How many patients with only elevated triglycerides, who have not had a heart attack, will be able to afford the price a bidder must place on the drug after buying Amarin? Will insurers pay? Will Vascepa’s new price find many buyers in markets where price and access are controlled?
Amarin’s path to riches retains some risk. The hope is it will be a risk born by whoever buys it.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.
