No Buy-Out, No Support for AMRN Suggests Investors Will Dump

Coincident with securing $100M in non-equity financing, Amarin Corp. (AMRN) announced after the close on Thursday that it will begin hiring a sales force to launch Vascepa, its approved treatment for high triglycerides. The announcement comes as a major disappointment to investors, as many had been holding out for either a buy-out or  a major drug company partnership. In kind, AMRN is down ~18% in pre-market trading, and given that most investors will not want to stick around to see the company launch the drug itself, the shares could continue to fall once the market opens Friday morning. In PropThink’s prior coverage, we estimated downside in AMRN could be as low as the $7-$8 range if investors lost faith in a potential acquisition of the company. Over the past several years, most biotech drug launches have flopped, primarily because small companies did not commit sufficient resources to support a given new drug roll out and/or health insurance companies blocked access to new expensive therapies by putting in place high patient co-insurance payments. Vascepa has potential to fall prey to these same issues, and we believe investors may end up selling their stock in front of the launch and getting back in at better levels and once Vascepa's launch ramp becomes more clear. The “go it alone” announcement comes just a week before the FDA releases its latest edition of the Orange Book, which may finally determine Vascepa’s New Chemical Exclusivity status (read more here). Unfortunately, the news that the company has chosen to launch Vascepa alone signals little confidence from Amarin management that they will receive an NCE designation for the drug. Without the designation, which would grant the product five years of unchallenged market exclusivity, potential acquirers or partners have been, and could remain, hesitant to take a stake in Vascepa.

Amarin shares likely to remain under pressure unless NCE status is granted or the company demonstrates Vascepa’s commercial success.
Amarin is embarking down an expensive and resource-consuming road by launching Vascepa on its own, hence the $100M financing announced last night. Investors are well aware of the possibility that the drug could fall short of expectations, at least initially, and resources could be consumed even faster than analysts are forecasting. The company plans to hire 250-300 specialty sales professionals who already have three- to five-year existing relationships with the physician groups that Amarin will be pursuing with Vascepa. Thursday’s announced “hybrid debt-like instrument” may not even be sufficient to commercialize Vascepa properly, given that cardiovascular drugs addressing large markets can require marketing and sales budgets in the hundreds of millions of dollars for a full-scale launch. The company did note in its press release that the possibility for another avenue still exists: “Amarin's hiring of a sales force is part of a continuing strategy to evaluate three potential paths to Vascepa commercialization: an acquisition of Amarin, a strategic collaboration, and self-commercialization, the latter of which could include third-party support.”

No deal, no support for the stock. Again, we see Thursday’s announcement as a signal that the partnership and acquisition search has not gone well, in part due to no NCE status. The company preparing for Vascepa’s commercialization on its own is the worst-case scenario, and many investors are likely to head for the hills Friday given that this is not what they had hoped for. There still is a chance that the company could gain NCE status next week, which could get the shares trading better again as investors would remain hopeful for a major pharmaceutical company buy out or partnership. Should the FDA’s decision on NCE status not go the company’s way, shares of AMRN have potential to dip down to the mid-single digits. We reiterate that a core position hedged with options, or a pure options strategy, are the best ways to remain involved in AMRN.