Amarin Corp. (NASDAQ:AMRN) can't seem to catch a break these days. Almost immediately after inking a co-promotional deal for the company's lone commercial product, Vascepa, with Kowa Pharmaceuticals America, Teva Pharmaceuticals (NYSE:TEVA) announced yesterday they are launching a generic version of Lovaza. Lovaza is Vascepa's chief rival in the severe triglyceride market, and is manufactured by GlaxoSmithKline (NYSE:GSK). This generic launch is presumably bad news for Amarin because it could hurt Vascepa's sales as well.
Amarin's recent 10-K reported that Lovaza saw sales of $1.4 billion in 2013, whereas Vascepa generated $26.4 million in revenue for the year, most of which came in the fourth quarter, suggesting the drug was beginning to gain traction. Amarin bulls have long pointed to Lovaza's blockbuster status as evidence that Vascepa could be a commercial success as well, even after the drug failed to gain approval from the Food and Drug Administration for a label expansion as a treatment for moderately high triglycerides last year through the ANCHOR indication . As Amarin shares moved lower on the back of this news yesterday, I think it's important to consider how generic Lovaza could impact Vascepa going forward.
Will generic Lovaza halt Vascepa's recent sales momentum?
To be up front, I don't think this question can be answered definitively right now. How generic Lovaza will impact this market is clouded, in my opinion, by two overhanging issues that are worth exploring in their own right.
First off, although it seems straightforward that another player in the market with a cheaper price should translate into lower sales for higher-priced brand names, this is not always the case. For instance, Abbot Laboratories successfully fended off generic rivals to its cholesterol-lowering drug, Tricor, in patients at risk of cardiovascular disease for over a decade using a complex reformulation strategy. And Mylan has only recently started to cut into Tricor's sales with its generic version of the drug, showing the effectiveness of Abbot's strategy in warding off generic competitors. GlaxoSmithKline and/or Amarin could thus choose to follow in Abbot's footsteps in the wake of Teva's planned entry into the market with its generic. While I don't know what exactly they will do -- this is just one possible route -- I don't expect either company to remain complacent while Teva gobbles up market share.
Secondly, we don't know how Kowa plans to market Vascepa. As Vascepa reportedly has a better efficacy profile in terms of lowering triglycerides than Lovaza, Kowa will probably use this information to its advantage. The goal will obviously be to differentiate Lovaza and Vascepa in the eyes of doctors, thus increasing the barrier for generic competition. Overall, there will probably be some impact from generic Lovaza on Vascepa, but there are too many moving parts to this story to panic just yet.
Amarin's management has been open about the potential impact of a generic launch of Lovaza for some time, and that day has finally arrived. Even so, I would caution investors from overreacting to this development. Kowa is a highly experienced marketing partner in the cholesterol drug market and there are potential avenues worth exploring that could create a lucrative niche for Vascepa even now. While I am not exactly bullish on Amarin shares, I don't see generic Lovaza as a "straw that broke the camel's back" type event, either. In short, we need data on sales going forward to truly assess the impact of generic Lovaza, which won't come for a few months.
Looking ahead, the more pressing issue is Amarin's ability to fund its pivotal REDUCE-IT study. Unless sales of Vascepa improve markedly over the next few quarters, the company will be forced to either raise funds or discontinue the study altogether. In short, Amarin does have bigger problems to worry about than generic Lovaza, some of which, like the financing of REDUCE-IT, are critical to the company's future prospects.