Amarin (AMRN +0.87%) has faced its fair share of troubles commercializing its triglycerides-lowering drug Vascepa, but Amarin remains hopeful that Vascepa will be able to make good on its previously high expectations. Here are three things that investors need to know about Amarin before deciding to buy shares.
No. 1: This is still a big market opportunity
An estimated 5 million Americans suffer from heart failure annually, and sadly, someone in the U.S. dies from a heart-disease related event every 60 seconds. Those are sobering statistics, especially when we remember that these figures come decades after cholesterol-busting statins, which lower cardiovascular risk, hit the market.
Clearly, there's a significant need for new treatment options. That has Amarin's management sticking to their bullish view that Vascepa's revenue will continue growing, particularly if the company can prove that Vascepa improves cardiovascular outcomes. Because Americans spend more than $300 billion annually treating cardiovascular disease, and the statin market was worth more than $40 billion per year at its height, there would seem to be plenty of evidence backing up management's bullishness.
No. 2: Data readout is coming in 2017
Despite management's optimism, the FDA has balked at approving Vascepa's use in all but the most extreme cases of high triglycerides. As a result, Vascepa's revenue is far short of pre-launch forecasts. Unless Amarin can deliver proof that Vascepa reduces the risk of cardiovascular events, there's little chance of the FDA backing away from its stance.
For that reason, the peak sales potential of Vascepa relies heavily on the ongoing Reduce-It trial that is evaluating Vascepa's ability to improve cardiovascular outcomes. If the Reduce-It trial succeeds, then the FDA could expand Vascepa's label to include millions more patients. However, the Reduce-It study isn't expected to conclude until 2017, and the results of it aren't expected until 2018.
Granted, an interim look at the outcomes data will occur in 2016, and that could lead to an early stop of the trial; but investors shouldn't bank on that given how uncommon it is for trials to be stopped early.
3: Revenue continues to grow
Although the future potential for Vascepa rests with the Reduce-It trial, investors might not want to ignore the fact that Vascepa's revenue does continue to grow. Last year, net sales of Vascepa eclipsed $50 million, up from $26.4 milllion in 2013. In the first quarter, Vascepa's sales totaled $15.6 million, up from $11 million the year before.
In order to continue that positive sales momentum, the company is working with payers to get Vascepa covered on more favorable reimbursement tiers. Amarin has also launched programs to drive prescriptions higher, including a $9 co-pay card, and it's inking collaborations to get in front of more doctors. Last summer, it began a co-promotion arrangement with Kowa Pharmaceuticals America, adding an additional 250 sales reps, and earlier this year, it licensed Chinese rights to Vascepa to Eddingpharm in exchange for $15 million upfront, potential milestones of up to $154 million, and double-digit royalties.
Long road ahead
Although management is working hard to maximize the value of Vascepa, there are still a lot of challenges that should keep investors cautious. In addition to the uncertainty of the Reduce-It trial results, and the fact that we could still be years away from any potential FDA label expansion, the company's costs continue to outstrip its sales.
Given its ongoing hurdles and its disappointing P&L, it's tough for me to label Amarin as anything more than a highly speculative investment. For that reason, I'm still on the sidelines.
