Amarin dips on news of AdComm & sNDA delay

Price Target Relevant Events
$35
  • Quarterly revenue beat (Nov. ’19)
  • EVAPORATE data (4Q ’19)
  • AdComm (Nov. 14)
  • Label expansion (Dec. ’19-Jan. ’20)
  • Removal of litigation overhang (1H 2020)
  • Europe & Canada approval (2H ’19/1H ’20)

Recently, Amarin (AMRN) revealed the FDA will require an Advisory Committee prior to evaluating Vascepa for sNDA. Vascepa’s sNDA had been slated for September review. With the AdComm scheduled to take place on November 14, sNDA is likely to be pushed back one or two months.

This news dropped Amarin’s valuation by nearly a fifth. Shares have since bounced back a bit:

While the AdComm & sNDA delay do merit a decrease in valuation due to increased risk and time to marketization, the drop we’ve witnessed seems hardly appropriate. Given the broad population Amarin is seeking, this just seems to be an attempt from the FDA to do their due diligence. There are reasons to believe this event will be a positive one.

  • The “mineral oil issue” has already been discussed in the previous AdComm for Vascepa

Source: FDA

  • The REDUCE-IT data is far too significant to be totally dismissed due to “exaggeration” concerns.
  • The FDA agreed the use of mineral oil for placebo was appropriate, per SPA.
  • The REDUCE-IT data was monitored by the DMC each quarter for signals that suggest the placebo wasn’t inert. After each review, the DMC decided to resume the study as planned.

It is also important to keep in mind that Vascepa could be the first drug approved for risk reduction that, primarily, lowers triglycerides. There is no clear precedent for triglyceride-lowering leading to risk reduction. It, therefore, merits further discussion. There was a trial conducted in Japan with a lower dose of EPA that also supported risk reduction in a statistically significant manner, but there are some major limitations to the study (e.g. population, open label study).

Vascepa recommendations keep pouring in

  • A recent independent review by ICER concluded a positive risk/benefit profile of Amarin.
  • The National Lipid Association recommends, “icosapent ethyl for atherosclerotic cardiovascular disease (ASCVD) risk reduction in high and very-high-risk patients, 45 years of age or older with clinical ASCVD, or 50 years of age or older with type 2 diabetes requiring medication and with ≥ 1 additional risk factor, and fasting triglycerides of 135-499 mg/dL on maximally tolerated statin, with or without ezetimibe. The NLA recommendation was issued as a Class I, Level B-R (STRONG) recommendation, its highest designation, for icosapent ethyl.”
  • The European Society of Cardiology and the European Atherosclerosis Society also recommends Vascepa (icosapent ethyl) in patients with uncontrolled triglyceride levels at risk for cardiovascular events despite statin use.

Capital structure

Source: The Formula

If approved for cardiovascular risk reduction, I believe Vascepa will likely procure a few billion dollars a year in peak annual revenue. Amarin’s enterprise value, however, only trades at $6B. I project the likelihood of FDA approval to be “very high” based on the strength of REDUCE-IT data.

Summary

Amarin appears to be a very favorable trade leading into AdComm. I do expect a positive outcome that may inspire shares to 52-week highs. Risks include dilution, poor AdComm outcome, regulatory setbacks (e.g. CRL, RTF, etc.), global economic struggles. etc. A full extent of risks in an Amarin investment can be read within their latest annual filing.

Disclaimer: The intention of this article is to provide insight, not investment advice. While the information provided in this article is intended to be factual, there is no guarantee and prospect investors are encouraged to do their own fact-checking and research before investing in a company. One must also consider one’s own financial standings, risk tolerance, portfolio diversification, etc. before making a decision to buy shares in a company. Many of my articles detail biotechnology companies with little or no revenue. These stocks are, therefore, speculative and volatile. Even when prospects seem promising, there is no predicting the future. Losses incurred may be significant.

I present and update my best ideas & biotech research only to subscribers of my exclusive marketplace, The Formula. I also maintain a model portfolio of my top biotech ideas.

Try a free, no-risk 2-week trial today by clicking the flask below! 

Disclosure: I am/we are long AMRN. 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.

Source link

2019-09-20