It’s All About the Marketing for Amarin

Amarin (NASDAQ:AMRN) stock is rising on news that their only product, Vascepa, was approved to have an expanded label. This will expand the potential user base for Vascepa.

The new FDA approval will allow Amarin to market Vascepa as a drug that can lower the risk of cardiovascular events (such as heart attacks or stroke), in patients with high triglyceride levels. High triglyceride levels are a known link to heart problems.

There are a few caveats. Patients must already be taking statins (considered the standard of care in heart disease). Second patients must have a diagnosis of heart disease or diabetes. Finally, they must have at least two other risk factors for cardiovascular disease.

“Vascepa has the potential to change the treatment paradigm of cardiovascular care,” Amarin president and CEO John Thero in a conference call with investors.

Amarin was hoping for a less restrictive label

But while the expanded label broadens the potential user base, the FDA’s ruling gave the drug a far more limited scope than what the company was hoping for.  In the first place, the qualification that patients must have a high triglyceride level reduces the projected number of patients to somewhere between five million and eight million users. That estimate comes from Oppenheimer’s Leland Gershell.

On the other hand, analysts from Maxim Group believe a label that had stated it could be prescribed for people with mild-to-moderate triglyceride levels would open up the patient group to as high as 40 million patients.

Vascepa is also being limited by the requirement for a diagnosis of diabetes plus at least two other risk factors. Ami Fadia, an analyst for SVP Leerink cited FDA concerns about Vascepa becoming a cardio candy “which we believe prompted the FDA to require the … risk factors for primary prevention language.”

What investors need to know about Vascepa?

Vascepa is derived from fish oil. This does not mean it’s the same thing as taking a fish oil supplement. However, perception is reality. And there are a number of patients who are skeptical that there is a difference.

Here’s a case in point. Just doing a cursory search on the Internet, I was able to find a list of six benefits that include both of the benefits that will be on Vascepa’s label. That means that consumers could perceive that a fish oil supplement (albeit unregulated) will allegedly provide four additional benefits.

That may sound silly. But remember, perception is reality.

This makes it incumbent on Vascepa to ensure that they are very clear that customers know why one 4,000 milligram Vascepa will provide additional benefits that a patient taking four 1,000 milligram OTC supplements can receive.  And, at a price that is 70% less than Vascepa.

One model Vascepa can look to is the one being used by CBD products. However, cannabis companies can point to a burgeoning black market as an alternative to avoid. Amarin is combating supplements which are not illegal in any state.

What’s next for Amarin stock?

And this is really the question for investors? Amarin’s stock closed within 10% of its 52-week high on December 13. How much run is left in the stock? My suspicion is that there are two factors that will keep the stock trading in a tight range for the time being.

First, Amarin has been rumored to be a takeover target by Amgen (NASDAQ:AMGN), Pfizer (NYSE:PFE) and Novartis (NYSE:NVS). However, that was possibly due to the expectation of a larger addressable market that would be very difficult for Amarin to keep up with. However, the stricter, more restrictive label shrinks their addressable market which may very well cool interest from any company.

Second, stocks like Amarin are commonly traded on the news. In the case of Amarin many analysts are suggesting that the stock is already pricing in the FDA’s announcement. For the stock to go higher, investors will need to see evidence that the company is being able to successfully convince investors, or a company looking to acquire it, that Vascepa can deliver on its promise instead of being just a fish story.