After a crushing decision by a U.S. Food and Drug Administration advisory committee, you might think that Amarin (AMRN 0.62%) could now be a dead fish swimming. The market appears to be thinking along those lines, as the biopharmaceutical company's stock dropped more than 60% in early trading.
The FDA Endocrinologic and Metabolic Drugs Advisory Committee voted 9-2 against recommending Amarin's fish-oil drug Vascepa for approval in treating adult patients with high triglycerides in the range of 200-499 mg/dL. This indication represents a much larger market than the severely high triglyceride ranges for which the drug is currently approved.
Despite the negative decision, it's not over yet for Amarin. Here are the three most important next steps for the beleaguered company.
1. Wait for the FDA
It ain't over until the FDA sings. The agency is scheduled to announce its decision on Dec. 20. No one, including the Amarin management team, expects any holiday glee. While the FDA doesn't have to follow the advisory committee recommendation, odds are that it will do so.
Fellow Fool contributor Brian Orelli recently pointed out a good example of why the probability that the FDA will approve Vascepa is low. Merck (MRK 0.29%) obtained regulatory approval in Europe for cholesterol drug Cordaptive without an outcomes study. The FDA demanded that the study be conducted. Its decision was proven wise when Merck later was forced to yank the drug from the market.
The FDA won't catch too much flak from requiring Amarin to complete its cardiovascular outcomes study . The original special protocol assessment allowed the company to submit for approval before the study was completed. However, the FDA always can change its mind -- which it did in this case after recent trials didn't show improved cardiovascular benefits from use of fish oils.
2. Reassess the cash situation
Amarin says it has enough cash to last for quite a while. The company ended the second quarter with cash and investments totaling roughly $149 million. It also recently completed a secondary offering that netted slightly more than $121 million.
I expect that Amarin's path won't be too different from that of Orexigen Therapeutics (NASDAQ: OREX)when it received bad news from the FDA in 2011. Orexigen promptly announced a corporate restructuring after the FDA turned down approval of obesity drug Contrave. The company followed that later in the year with another stock offering to raise cash.
Amarin's management is already hinting about a possible reorganization of its sales force in light of the FDA panel's decision. The company won't need to sell more stock any time soon, but that option is very likely to raise its head again down the road.
3. Continue with the outcomes study
The big driver behind the need for cash is the REDUCE-IT outcomes study that is already under way. Amarin said the cost of this clinical safety and efficacy study for Vascepa will come in between $30 million and $40 million this year. Tack on at least another $20 million (and probably more) for next year.
An even bigger issue than cash, though, is time. Probably the earliest date that an interim analysis would be ready for the study is late 2015. Final results won't be available until the fourth quarter of 2017.
Amarin CEO Joseph Zakrzewski even said that the company wouldn't rule out discontinuing the REDUCE-IT study. I don't see that happening. Vascepa still has potential.
Looking ahead
Things look bleak for Amarin, but the end isn't yet at hand. The company does have a good cash position for now. Assuming it plows forward with the outcomes study and that the results are positive, we could be talking about a rise-from-the ashes story in a few years.
In the meantime, though, the stock is left tattered and broken. I wouldn't recommend gambling on the results of a study that won't wrap up for several years. Amarin isn't necessarily a dead fish swimming, but there are plenty of other fish in the sea that look much more attractive for investors.
