Amarin (NASDAQ: AMRN ) closed up 25% on Friday after the company announced that the Food and Drug Administration wasn't going to make an on-time decision about Amarin's request to expand the indication for its lipid-lowering drug Vascepa to include patients with moderately high triglyceride levels. The drug is currently only approved for a small population of patients with extremely high triglyceride levels.
No news is good news when the decision you were expecting was almost guaranteed to be negative.
After the FDA rescinded Amarin's special protocol assessment, claiming that other clinical trials showed that lowering triglycerides doesn't necessarily improve clinical outcomes, there was essentially no chance that the agency was going to approve the expanded indication.
Amarin appealed, but the FDA refused to hear the appeal, telling the biotech that it had to wait until the rejection came before it could appeal. The agency argued that the two items -- the rescinded SPA and the impending rejection -- were one and the same.
Apparently someone higher up at the FDA thought the agency's tough stance was a little harsh, and the latter has agreed to hear the appeal and make a decision by January 15.
The good news for Amarin's investors is that the chance of approval is no longer zero. The bad news is the likelihood is still pretty low. Even after the increase today, Amarin's shares are down 78% from their 52-week high.
An approval is such a long shot because the biotech has to appeal to the FDA to overturn the decision -- the same FDA that made the initial ruling. You can safely assume that it wasn't one guy in a cubicle who made a decision this big; the higher-ups were presumably consulted.
Even if the FDA official who makes the final ruling on the appeal feels the SPA should be kept in place, there's little incentive to approve the drug after the committee of outside experts recommended 9-2 that the agency not approve the expanded indication until Amarin completes an ongoing outcomes trial. A vast majority of the doctors on the committee thought that, if AbbVie's (NYSE: ABBV ) Tricor and Merck's (NYSE: MRK ) Cordaptive lowered triglycerides but failed to lower heart attacks and strokes, there's a good chance the same would hold for Vascepa.
If the FDA goes against the advisory committee by approving the expanded indication and the ongoing trial shows the drug doesn't lower the risk of heart attacks and strokes, the agency will look like idiots.
Conversely, if the agency doesn't approve the drug and the trial turns out positively, the agency can just blame the doctors on the advisory committee and the precedence set by AbbVie and Merck.
Given the potential to look like an idiot or pass the blame, which option do you think the FDA will go with?
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