Sure, there was a little intrigue along the way. But the outcome that pretty much everyone expected arrived: Amarin (NASDAQ:AMRN) won FDA approval of a key label expansion for Vascepa. The drug, first approved in 2012 for lowering triglyceride levels, is now also approved to reduce cardiovascular risk.
But don't think that Amarin is totally out of the woods. The biotech still faces three key risks after its huge FDA win for Vascepa.
1. Missing expectations
The biggest risk for Amarin, by far, is that the company could fail to meet the lofty expectations for Vascepa. Amarin thinks that the drug will generate up to $700 million in sales next year. But that's just the beginning.
Some analysts project that Vascepa could bring in around $2 billion annually at its peak. Others are way more optimistic, estimating peak sales could be as much as $10 billion. There are also plenty of analysts with sales projections somewhere in between those levels.
Some are speculating that the company could claim a market cap in the ballpark of $20 billion in the not-too-distant future. That kind of valuation implies expectations that Vascepa will rake in at least $4 billion annually. I don't think that's an unrealistic prospect. However, there are quite a few scenarios that could unfold where Amarin misses those expectations.
2. Potential rivals on the way
Many of the highest sales projections for Vascepa assume that the drug will have the market all to itself. That could prove to be an invalid assumption.
Acasti Pharma expects to announce results from its late-stage Trilogy 1 clinical study evaluating triglyceride-lowering drug CaPre this month. Results from a second late-stage study, Trilogy 2, should be announced in late January 2020. The company hopes to file for FDA approval of CaPre by the middle of next year.
Matinas BioPharma could present a bigger threat. The biotech plans to report results from a head-to-head pivotal study comparing its drug MAT9001 against Vascepa in the fourth quarter of next year.
But while Acasti and Matinas are initially focusing on besting Vascepa at lowering triglycerides, AstraZeneca seeks to win the big prize -- reducing cardiovascular risk. The drugmaker should wrap up its cardiovascular outcomes study for Epanova in August 2020. Epanova was approved by the FDA in 2014 for lowering triglyceride levels.
3. Patent challenges
Most of the key patents for Vascepa don't expire until 2030 or later. So is Amarin safe for at least the next decade? Not necessarily.
The company faces patent challenges for Vascepa from Hikma Pharmaceuticals and Dr. Reddy's Laboratories. Such patent challenges are often settled. Amarin and Teva Pharmaceuticals struck a deal where Teva will be able to sell a generic version of Vascepa in the U.S. beginning on Aug. 9, 2029. However, there's no guarantee that either Hikma or Dr. Reddy's will go for a similar settlement agreement. There's also no guarantee that Amarin will win in its litigation over the challenges to its patents for Vascepa.
All three of these are valid risks for Amarin and shouldn't be ignored. However, they should be viewed in perspective. Most biotech stocks face similar risks. I don't think that Amarin is more vulnerable than the average biotech would be.
I remain quite bullish about Amarin's prospects. My view is that Vascepa should generate peak sales in the $4 billion ballpark and perhaps even higher. I also still think that Amarin is a great acquisition target. The potential rewards for the stock outweigh the risks, in my opinion.