Vascepa cogs oiled until REDUCE-IT reports
Amarin PLC (NASDAQ:AMRN) has responded to a challenging year by focusing on cost control measures and driving the sales launch of Vascepa with copromotion partner Kowa, despite the headwind of generic entrants in the >$1bn US Lovaza market. Initial sales data are encouraging; investors will look for Amarin to manage costs and increase Vascepa market share until the interim readout from the REDUCE-IT Phase III trial, potentially in 2016.
Copromotion deal with Kowa to boost Vascepa sales
Since Q214, Kowa's 250-strong sales team has supplemented Amarin's 150-strong salesforce in return for a percentage of Vascepa’s gross margin (from high single digit to low 20s). Prescriptions grew 22% in Q314 vs Q214 (IMS) and sales were $37.7m Q1-Q314 (vs $16.2m in 2013) despite the launch of Lovaza generics in Q214. The all-important managed care coverage is also improving, with >119m people now insured by managed care plans that cover Vascepa on tier 2.
Aggressive cost reduction measures implemented
The October 2013 FDA decision to rescind the SPA for the ANCHOR trial made it unlikely that the sNDA for Vascepa would be approved soon. Amarin cut operating expenses by 37% Q1-Q314 vs the same period in 2013 and FY14 cash burn is forecast at $72m, down from $190m in 2013. However, REDUCE-IT will have ongoing R&D costs of c $30-40m per year, so Vascepa revenues will be critical.
REDUCE-IT interim readout possible in 2016
Vascepa is approved as an adjunct to diet to reduce hypertriglyceridaemia (TGs>500mg/dL, 4m people in the US). The FDA now requires prospective data supporting the link, seen in subgroups of other studies such as JELIS, between lowering TGs and CV outcomes from the ongoing REDUCE-IT trial (~8,000 patients with 150-500mg/dL TGs on statins, potentially 70 million people in US). An event-driven interim look at the data is expected in 2016, with trial completion in 2017 and full data in 2018. The interim data, if positive, could bring approval of Vascepa’s stalled sNDA closer and enable differentiating label expansion.
Valuation: EV discounts upside from REDUCE-IT
Amarin's EV of $235m, assuming net debt of $30m, appears to assign little value beyond Vascepa's approved indication. Continued sales growth in 2015 should provide Amarin with cash to weather the next 24 months until REDUCE-IT reports.
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