Amarin Stock Needs Everything to Break The Right Way

I know that most companies could say they need a good break or two, but in the case of Amarin (NASDAQ:AMRN) it has a particular meaning. The company just reported second-quarter 2020 earnings and it was a mixed bag. The company had an easy beat in earnings per share, but it missed on revenue.

But, Amarin has been seeing steady year-over-year revenue growth for Vascepa. So it’s fair to ask if the second-quarter dip is just a bump in the road or is there something more. And, even if it revenue does correct, is the stock already priced to reflect that revenue?

Obviously, Amarin was going to see a reduction in revenues as doctor’s offices were not functioning at peak efficiency at the height of the lockdown measures.

But there is an educational component that Vascepa acknowledged in its presentation to investors. Amarin launched its flagship drug, Vascepa, in 2013 as an adjunct therapy to help reduce triglycerides.  In late 2019, Amarin received an expanded label approval that includes a cardiovascular risk indication for Vascepa.

However, as I wrote back in December, the FDA gave Vascepa a much more limited scope than Amarin wanted. And the company acknowledged that more education is needed for doctors to have comfort prescribing Vascepa for the expanded label.

Amarin continues to make news

At the end of 2019, Amarin received a key FDA decision that allowed it to expand the label for its Vascepa drug. The expansion allows Amarin to make the following claim:

“VASCEPA is now approved, along with certain medicines (statins), to reduce the risk of heart attack, stroke and certain types of heart issues requiring hospitalization in adults with heart (cardiovascular) disease, or diabetes and 2 or more additional risk factors for heart disease.”

The argument for Vascepa is easy enough to understand. Cardiovascular disease is a major health issue. And one to alleviate the risk of a cardiovascular event (e.g. heart attack, stroke) is to control bad cholesterol. That’s where statins come in. However, according to Amarin’s own information, for 65%-75% of patients who have had a cardiac incident, statins alone are not sufficient in reducing their risk of future events.

Enter Vascepa, which has proven itself in a landmark study as demonstrating the highest relative risk reduction of any therapy when used in conjunction with statins.

Generic competition is a lose-lose proposition

Amarin is currently engaged in litigation to blunt the emergence of generic competition. In March, the United States District Court for the District of Nevada ruled in favor of two generic companies (Hikma Pharmaceuticals and Dr. Reddy’s Laboratories) who are looking to market generic formulations of Vascepa.

The company is appealing the ruling, but it looks like a "lose a little" or "lose a little more" proposition for Amarin. If they are unsuccessful, the addressable market in the United States would be smaller. By how much it’s tough to tell, but it would be reduced. Vascepa claims it would still be able to generate a significant share of the market even with generic competition. But historically, generic competition is not good news for pharmaceutical companies.

But there’s another problem. Amarin already has agreements with Teva Pharmaceuticals and Apotex that forbid them from marketing generic versions of Vascepa until August 2029. But, if Amarin is unsuccessful in their appeal, then those prior agreements would be deemed unenforceable.

And if the appeal succeeds, Amarin will likely have to reach similar agreements with Hikma and Dr. Reddy’s Laboratories which will be a cost to the company on top of the litigation costs the company has already absorbed.

Don’t have FOMO about Amarin

My fundamental problem with Amarin has never been with the science behind Vascepa. I don’t look at the company as a “snake oil” or in this case a “fish oil” salesman. I’ve l bee pollen at different times and received benefits. But my doctor might disagree. And that’s at the heart of my feeling about Amarin.

At its core, Vascepa is prescription-grade fish oil. That’s not to dismiss its effectiveness. Fish oil has been proven to have some effect at lowering triglyceride levels. And the argument goes if a little is good, a lot is better, particularly if taken in the concentrated, precise form that is available with Vascepa.

But Amarin stock did not get much of a bump after receiving the expanded label designation. And that’s because the case that Amarin has to make is that taking one 4,000 milligram Vascepa produces additional benefits not available in four 1,000 milligram OTC fish oil supplements (at a price that’s 70% less).