3 Lessons From Amarin's Failures in 2013

It's been a brutal year for Amarin (NASDAQ: AMRN  ) , which has lost more than 76% of its market value since the beginning of 2013. The maker of fish oil drug Vascepa, a treatment for severe hypertriglyceridemia (triglyceride levels equal to or higher than 500 mg/DL), was struck down by four main factors:

  • Competition from GlaxoSmithKline (NYSE: GSK  ) and Pronova's (now part of BASF) similar drug, Lovaza.

  • Upcoming generic versions of Lovaza from Teva Pharmaceutical (NYSE: TEVA  ) and Par Pharmaceutical.

  • AstraZeneca's (NYSE: AZN  ) introduction of Epanova, another fish oil drug that competes against Vascepa and Lovaza for the treatment of severe hypertriglyceridemia. The FDA could approve Epanova in May 2014.

  • A FDA panel recommendation against the expansion of Vascepa's indication to treat patients with elevated levels (equal to or higher than 200 mg/DL, but lower than 500 mg/DL) of triglycerides -- which would have helped the drug reach 20% of the U.S. population, allowing it to dominate a new market without any major competing treatments.

Combine all those factors and the overall outlook for Vascepa, Amarin's only marketed drug, looks pretty bleak.

AMRN Chart

Source: YCharts.

Let's take a look at three Foolish investing lessons we can learn from Amarin's decline.

Lesson No. 1: Drug timing is everything
Amarin bulls believed Vascepa was superior to Lovaza for one primary reason -- it didn't raise LDL ("bad") cholesterol levels as it reduced triglyceride levels, while Lovaza did. During clinical trials, Vascepa was found to lower LDL levels by 2% while Lovaza raised levels by 45%.

Although Vascepa appeared to be the superior choice in fish oil treatments, it arrived too late, launching in January 2013 -- that was nine years after Lovaza was released in the U.S. by Reliant Pharmaceuticals, which GSK acquired in 2007.

By the time Vascepa launched, there was evidence that demand for Lovaza had peaked, as seen in this comparison of the two drugs' sales over the past year.

 

Vascepa sales

Lovaza sales

Q3 2013

$8.4 million

$221 million

Q2 2013

$5.5 milion

$264 million

Q1 2013

$2.3 million (launched)

$243 million

Q4 2012

--

$243 million

Sources: Company quarterly reports.

The other problem is that Amarin, with only $226 million in cash last quarter, lacked a major pharmaceutical partner with the marketing muscle to go toe-to-toe against GSK, which finished last quarter with a cash hoard of $5.3 billion.

Things might have turned out differently if AstraZeneca or Teva, two rumored suitors for Amarin, had either bought or partnered up with the company. Instead, AstraZeneca purchased Amarin rival Omthera earlier this year for $443 million, giving it access to Epanova, and Teva decided to pursue production of generic Lovaza instead.

Lesson No. 2: What hurts your biggest competitor can hurt you more
Since Amarin arrived so late to the market with Vascepa, it barely had a chance to make an impact before a U.S. court ruling in September cleared the way for Teva and Par's generic Lovaza to arrive in the near future.

This ruling didn't matter much for GSK, since sales of Lovaza had apparently peaked, only accounting for 2% of the company's top line last quarter. GlaxoSmithKline investors were likely more concerned with the fate of Advair, the blockbuster asthma and COPD (chronic obstructive pulmonary disease) drug that accounts for nearly a fifth of its top line. The U.S. patent for Advair's medication expired in 2010, while the patent will expire in Europe later this year.

Yet for Amarin, Vascepa represents everything -- 100% of its revenue and 100% of its pipeline. Declining Lovaza sales and generic competition will only further fragment the market for severe triglyceridemia, eventually marginalizing its tiny sliver of the segment.

Therefore, even though Teva and Par weren't gearing up to produce generic Vascepa, the market interpreted generic Lovaza as the same thing, punishing Amarin much more harshly than GSK.

Lesson No. 3: Having more eggs in a basket is better than painting one egg three colors
Last but not least, Amarin's fall highlights the dangers of having a single egg in the basket, which characterizes plenty of other small biotech companies as well.

If Amarin had a few other experimental drugs in its pipeline, investors could at least look forward to better results from other clinical trials. Amarin's pipeline, however, consists only of Vascepa for three indications -- severe hypertriglyceridemia (approved in the U.S.), high triglycerides in patients with mixed dyslipidemia (phase 3 trials completed), and the reduction of cardiovascular events (early phase 3).

Amarin's pipeline. Source: Company website.

Since the second indication, also known as ANCHOR, is nearly guaranteed to be rejected by the FDA after the October advisory meeting, the only hope left for Amarin is the third indication, known as REDUCE-IT. Unfortunately, the REDUCE-IT trial isn't expected to be completed until late 2017 -- a very long time for investors to wait for possibly positive results.

Compare Amarin to Achillion Pharmaceuticals (NASDAQ: ACHN  ) , which also plunged in October after the FDA retained a hold over its lead hepatitis C drug candidate, sovaprevir, due to abnormal liver results. Achillion investors were disappointed, but they could at least look forward to better results from the company's three other experimental hepatitis C treatments -- giving them a faint glimmer of hope that Amarin investors now desperately need.

The Foolish takeaway
In closing, Amarin should teach us three things -- that a superior treatment can flop if it launches too late, generic competition for a competing treatment can oversaturate the market, and putting a few more eggs in a basket can keep hope alive in case a leading drug fails.

For now, Amarin's best hope is to boost sales of Vascepa for its approved indication -- which could be extremely tough considering that the company laid off 50% of its global staff after the negative FDA panel reaction in October.

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Read/Post Comments (6) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 06, 2013, at 12:00 PM, marzans wrote:

    Everyone should watch AMRN ADCOM afternoon session:

    http://1.usa.gov/1amS2mj

    see the panel discussion that FDA is ok with AMRN going off label. But how that be possible legally? Looks like at the least FDA is leaning to let Amarin have Anchor trial data included in the Marine indication. Watch the clinical reviewer Mary Roberts saying that the FDA has put a lot of thoughts into 'conditional approval' or 'changing the voting question' or 'expanding the Marine label' etc. So FDA clearly has a positive plan for Amarin.

    So dear MF, how could you conclude Amarin as one of the 2013 flops? I know how, because you are afterall a MF.

  • Report this Comment On December 06, 2013, at 2:21 PM, marzans wrote:

    Cramer's Street says AMRN is going to breakout!

    http://www.stockpickr.com/4-biotech-stocks-under-10-watch.ht...

    I wonder why the media is not showing this article?? You can't hide air bubble under water for too long.

  • Report this Comment On December 09, 2013, at 1:05 PM, marzans wrote:

    Time to load the truck!

    Read the Supplemental approval Marine Indication Letter from FDA:

    http://www.accessdata.fda.gov/drugsatfda_docs/appletter/2013...

    "We have completed our review of this supplemental application. It is approved, effective on the date of this letters for use as recommended in the enclosed, agreed-upon labeling text."

    As soon as possible, but no later than 14 days from the date of this letter, submit the content of labeling [21 CFR 314.50(1)] in the structured product labeling (SLP) format......bla bla

    Signed by Eric Coleman and call Kati Johnson for questions...

    Looks like Anchor trial data will be included in the Marine indication at the least!

  • Report this Comment On December 10, 2013, at 11:45 AM, marzans wrote:

    will AMRN get NCE or NPE this week??

  • Report this Comment On December 10, 2013, at 4:00 PM, jimswarthout wrote:

    Lovaza and generic Lovaza are not real competitors. Vascepa has a placebo-like safety profile. It only reduces Trigs and LDL. Anecdoteally, it appears to reduce inflammation and improve circulation.

    This is a very important drug for people with the American diet. The stock has been beat down, but the drug will succeed on its merits. Investing success here requires averaging down and having patience.

  • Report this Comment On March 09, 2014, at 1:01 PM, porgy wrote:

    Why doesn't Amarin think about off label treatment for mental health issues? Several studies have shown that pure EPA-ethyl esters have had success in treating mental health issues. Several excellent reviews with meta-analysis have been conducted. See the tables that list the dietary supplement EPA-ethyl ester that was used.

    J Clin Psychiatry. 2011 Dec;72(12):1577-84. doi: 10.4088/JCP.10m06634. Epub 2011 Sep 6. Meta-analysis of the effects of eicosapentaenoic acid (EPA) in clinical trials in depression.

    Mol Psychiatry. 2012 Dec;17(12):1272-82. doi: 10.1038/mp.2011.100. Epub 2011 Sep 20. Omega-3 fatty acids for the treatment of depression: systematic review and meta-analysis.

    There are products selling from nutraceutical companies that have the same identical dose as Vascepa but they have not applied for any FDA approval. See http://www.renewlife.com/norwegian-gold-epa-1000-omega.html.

    Seems like an untapped source of potential prescriptions to the mental health care providers.

    Porgy

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