Can Amarin Stock Overcome COVID-19 and Legal Headwinds?
Last week, Dublin-based Amarin Corp. PLC (NASDAQ: AMRN) released preliminary first-quarter sales figures for its synthetic fish-oil product. Amarin’s Vascepa generated $150 million in revenues. That topped a consensus estimate for sales totaling $120 million and more than doubled the $73.3 billion the company reported in the same period a year ago. The announcement did not do much to boost Amarin’s share price, however.
A Nevada federal district court ruling in March upended the seeming safety of the company’s Vascepa patent. The court declared that even though generic versions of Vascepa would infringe on claims in Amarin’s patent, those claims were “obvious” and invalid. Amarin holds six patents on Vascepa, a synthetic formulation of fish oil, but the ruling opens the door immediately to generic competitors.
Last December, the U.S. Food and Drug Administration (FDA) approved Vascepa to reduce cardiovascular events in people with elevated triglyceride levels and either established cardiovascular disease or diabetes with other persistent cardiovascular risk factors. Vascepa has been shown to be effective in reducing cardiovascular risks for heart attacks and stroke.
Because FDA approval had been expected, the company’s stock had been trading higher, so there was no spike in the share price. The Nevada ruling, however, was unexpected and, by the end of March, Amarin’s stock price was down almost 70%.
How Amarin Plans to Fight Back
On April 13, when Amarin reported its preliminary sales figures for Vascepa, the company also shared key elements of its strategy and future, given both the COVID-19 pandemic and the unexpected court decision.
During a conference call on the same day, CEO John Thero said, “We have come too far to stop fighting now.” Thero also noted that Amarin had doubled its sales force to 800. Moreover, given the December FDA ruling, the company had forecast full-year revenue in a range of $650 million to $700 million. Based on the strong showing in the first quarter, the company had even contemplated increasing its guidance for the year.
Regarding an appeal of the federal court’s decision, Thero said it would “focus on arguments of a more legal nature and important factual errors” than on the history of the development of Vascepa. “The aim of the appeal,” Thero said, “is to persuade through a legal argument, a panel of 3 specialized federal court judges, that the [Nevada] decision should be overturned or reconsidered when the law is applied properly and factual errors are corrected.”
The company’s regulatory application to the European Union’s European Medicines Agency (EMA) has been submitted and approval is expected by the end of this year. Thero noted that Amarin has been informed that Vascepa should qualify for 10 to 11 years of regulatory exclusivity in Europe. Also that the net price of the product in Europe “should be at least as high” as it is in the United States.
How Amarin Expects Competitors to React
The plaintiffs in the Nevada case were generic drugmakers Dr. Reddy’s Laboratories Inc. (NYSE: RDY) and Hikma Pharmaceuticals. What are they likely to do now that the federal district court has upheld their claims?
Amarin does not expect to see generic launches any time soon for three main reasons. First, generic drugmakers are not pathbreakers. In order for a generic product to pay back its investment, the drugmaker cannot spend large amounts of cash promoting and educating patients and doctors about the product. The patent holder does the heavy lifting and spending.
Financial terms aside, Thero notes that once generics enter the market, education generally ends. In the case of Vascepa, “this could lead to unnecessary heart attacks, strokes and other high-cost cardiovascular events for lack of education about the drug’s benefits.”
A second major obstacle is the difficulty in manufacturing and maintaining the purity of icosapent ethyl, the active ingredient in Vascepa. Thero estimated that creating a facility that could manufacture a generic version of Vascepa at commercial scale (large enough to generate $100 million in annual sales) is expensive and could take years to achieve.
Third, Thero said Amarin does not expect the generic drugmakers to begin immediately producing their own versions of Vascepa because if the generics lose on appeal they are open to serious monetary damage claims:
Damage awards, if they elect to launch [generic versions of Vascepa] and we prevail on the appeal, could be very significant. If we are in a position of seeking damages from generics, we, of course, will seek all we can, including, at very least, the full amount of lost profits available to us. Our intention is to fight vigorously on the appeal. And assuming we win, we’ll fight vigorously for compensation for damages if the generic launch occurs by one or more generic companies.
Overcoming COVID-19 Headwinds
Amarin would be in a league all its own if it were not affected by the COVID-19 pandemic. As it is, however, social distancing procedures have hampered the company’s sales teams and the addition of new patients for Vascepa has begun to slow. Thero said the company continues to interact with managed-care organizations and pharmacy benefits management (PBM) companies. He noted especially the April 1 effective date for Vascepa to receive preferred brand status in 14 states (for a total of 17) for Anthem-managed BlueCross-BlueShield plans.
The company is also investigating the use of Vascepa in acute or chronic settings as a mitigating factor for heightened cardiovascular risks associated with COVID-19.