Amarin's Magic Pill

By Stephen D. Simpson, CFA | April 19, 2011 AAA

Sometimes good ideas are just there staring scientists in the face. A great deal of energy has been spent finding drugs that can lower cholesterol and triglycerides and counteract the coronary side-effects of the typical American lifestyle. All the while, part of the answer may have just been swimming around our oceans.

Data released by Amarin (Nasdaq:AMRN) on Monday morning indicates strong triglyceride-lowering potential for its purified EPA omega-3 pill, and a potential blockbuster for this small company.

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Strong Data Should Drive Approval
Amarin's results in a Phase 3 study of AMR101 were quite good. The study showed that a daily dose of four or two grams reduced triglyceride levels by 21.5% and 10.1%, respectively. Arguably even more important, though, was that the data showed no meaningful increase in LDL levels (the so-called "bad cholesterol"). (For more, see Measuring The Medicine Makers.)

Here's why that matters: GlaxoSmithKline (NYSE:GSK) has done quite well with its Lovaza pill, a mixture of DHA and EPA ethyl ester omega-3 that also lowers triglyceride levels. While Lovaza is quite efficacious in lowering triglycerides (and maybe better than AMR101), it does lead to higher LDL levels. That combination is worrisome for some patients, and could give AMR101 a real shot at blockbuster status. (For more, see Pharmaceutical Phenoms: America's Best-Selling Medicines.)

The Path from Here
Amarin's data on AMR101 should be more than enough to secure FDA approval, particularly as the side-effect and safety profile looks very clean. Investors should expect a filing later this year, with approval possible in the first half of 2012.

What remains to be seen, though, is whether the company will be marketing this drug themselves. There's not much question that the company could now raise the money it would need to market the drug itself, but that may not be the best use of resources - particularly since the company's pipeline is basically non-existent past AMR101.

Luckily for Amarin, just about every major pharmaceutical company will have an interest in this drug. Glaxo acquired Reliant Pharmaceuticals to get Lovaza (or rather, the U.S. marketing rights), and it seems reasonable that Pfizer (NYSE:PFE) could be interested in AMR101 as a way of offsetting some of the revenue it will lose as Lipitor goes off-patent. Likewise, AstraZeneca (NYSE:AZN), which does not need to worry about patent expiry for Crestor for a few more years, may see it as a valuable add-on product.

Not All Smooth Sailing
Of course, if biotech investors have learned anything in the past year, it is that they should not just assume FDA approval. Likewise, the market for AMR101 may not be quite as robust as bulls currently hope. Glaxo is facing some patent challenges on Lovaza by those wishing to sell generics, and a generic Lovaza may limit what Amarin (or whomever sells AMR101) can charge for the drug.

Likewise, there will be competition. Omthera is working on its own "super fish oil" pill, as is Trygg Pharma. Beyond that, there are other competitive offerings in cholesterol management like Isis Pharmaceuticals' (Nasdaq:ISIS) mipomersen (partnered with Genzyme, now part of Sanofi-Aventis (NYSE:SNY)). Now, Isis's drug is very different and the companies have a different target population in mind, but the point is that this is a very big therapeutic space and there are a lot of contenders for prescription and dollar market share.

The Bottom Line
Glaxo paid $1.65 billion for Reliant and its U.S. rights to Lovaza (as well as other drugs producing roughly $150 million in revenue at the time). With AMR101's better efficacy profile (that absence of LDL increase), that at least compensates for the absence of those other drugs that Reliant had. In other words, Amarin shareholders may want to expect a buyout with a price tag very similar to what Reliant got from Glaxo.

Of course, maybe Amarin goes the route of partnership. This would be a riskier strategy for investors, especially as they would face a long wait for other drug programs to advance into late stage trials or the prospect of Amarin's own acquisitions or in-licensing efforts. In either case, this was a binary investment opportunity that certainty came up "1" for shareholders. (For related reading, see Approval In Hand, Does Xenoport Have The Legs To Run?)

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