Biotech Stock Mailbag: Amarin Pharma

Biotech columnist Adam Feuerstein answers readers' questions and concerns about healthcare and drug-related stocks.
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) --Contrary to popular opinion, I am capable of saying something nice about biotech stocks. I'm not


doom and gloom. Don't believe me? Check this out:

"Adam, I recently bought some shares of


(AMRN) - Get Report

," emails Santander S. "The stock is pretty cheap and it has two phase III studies for a fish oil drug that can address a big market. You seem not to like a lot of small biotech stocks, including ones that I do like, but maybe Amarin is a stock we can agree on. What do you think?"

I think we agree on Amarin. I like this stock. The company's lead drug is AMR 101, an ultra-purified form of the omega-3 fatty acid known as Ethyl EPA. Think of AMR 101 as medicinal-grade fish oil, which can be prescribed by doctors to treat patients with high levels of triglycerides.

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I was skeptical when I first looked into the Amarin story because my knee-jerk reaction was to scoff at any company developing prescription-grade fish oil. What's the point? Why can't people interested in lowering their triglyceride levels and improving heart health simply buy cheap fish oil capsules at their local health food store?

Not all fish oils are the same, I learned. The stuff you can buy retail doesn't contain pure omega-3s. By comparison, the manufacturing process Amarin uses for AMR 101 produces a drug that is almost pure ethyl EPA, which makes it more potent. And clinical studies have already demonstrated that higher levels of Omega-3s produce larger, more clinically significant reductions in triglyceride levels.

More comforting is the fact that


(GSK) - Get Report

paid $1.6 billion in 2007 to purchase privately held

Reliant Pharmaceuticals

, makers of the first prescription fish-oil drug. That drug, Lovaza, generates more than $1 billion in worldwide annual sales for Glaxo, including more than $700 million annually in the U.S.

Who knew that fish oil could be such a big deal?

Amarin is conducting two placebo-controlled, double-blinded phase III studies of AMR 101, both operating under Special Protocol Assessments from the U.S. Food and Drug Administration. The MARINE study is enrolling 240 patients with very high triglyceride levels (>500 mg/dl). The second study, ANCHOR, is enrolling 650 patients with mixed lipid levels (triglycerides >200 mg/dl) who are also taking a statin to lower cholesterol.

Positive results from the MARINE study would put AMR 101 on the same commercial playing field as Glaxo's Lovaza. The ANCHOR study is the potential game changer because it addresses a broader patient base and potentially a much larger commercial opportunity.

(Unlike AMR 101, which is almost pure Ethyl EPA, Lovaza contains Ethyl EPA and Ethyl DHA, another omega-3 fatty acid that is also known to raise LDL cholesterol levels. For that reason, Lovaza's label is restricted to patients with very high (>500 mg/dl) levels of triglyceride.)

Amarin is a relatively unnoticed stock considering the company has a drug in two phase III studies that address a blockbuster commercial market. Part of the blame goes to Amarin itself, which wasted years and tons of money testing AMR 101 in various neurologic diseases, including Huntington's, without any success. That lousy track record lingers, even though the company underwent an almost total management swap and recapitalization over the last couple of years. Amarin is a new company today, but the market is only just starting to catch on.

Risks? Yes, of course. The ability of ethyl EPA to lower triglycerides is well established clinically, but that doesn't guarantee success in the MARINE or ANCHOR studies. While AMR 101 is not being studied head-to-head against Lovaza, I suspect investors will be disappointed if AMR 101's efficacy doesn't at least match that of Lovaza. The absence of DHA from AMR 101 should make it a more potent lipid-lowering drug, but that's unproven until the study results come back.

Amarin closed Wednesday at $2.49, which makes it look like a very cheap stock. But with almost 150 million shares outstanding fully diluted, Amarin sports a $373 million market cap -- not as cheap as the stock price suggests. Still, when you look at what Lovaza does in sales, Amarin's valuation has ample room to grow.

Amarin shares traded for a buck and change in March, so the stock has already come a long way in a short period of time. I hear that hedge funds are starting to take notice, so fast money isn't always long-term money.

In terms of catalysts, the ANCHOR and MARINE studies are still enrolling, so data is not expected until next year. Amarin wants to partner AMR 101, so any deal done on lucrative terms could push the stock higher -- fast.

So there, I like something. We now return to your regularly scheduled Biotech Stock Mailbag...

Jalil T. emails, "First of all I must say, thank you very much for sharing your thoughts and research on your column... I am a physician and as such I'm naturally attracted to the biotech sector of the market. I am interested to hear your thoughts on

Aeterna Zentaris

(AEZS) - Get Report


Keryx Pharmaceuticals

(KERX) - Get Report

. Where do you see these companies going and why such a price disparity between the two?"

Aeterna and Keryx are linked by the experimental cancer drug perifosine. Aeterna licensed perifosine's North American rights to Keryx, which is conducting phase III studies in multiple myeloma and colon cancer. If perifosine is ultimately approved, Keryx will pay Aeterna royalties ranging from the high single digits to low double digits, depending on perifosine sales. Aeterna retains European rights to perifosine.

Keryx is valued at $336 million, based on Wednesday's $4.87 price and about 69 million fully diluted shares outstanding. Aeterna, by comparison, sports a $158 million market value, based on 89 million fully diluted shares outstanding and a recent price of $1.78.

Hard to say whether this disparity is justified. I've received a lot of email in recent weeks echoing Jalil's comments suggesting Aeterna is under-valued relative to Keryx. If perifisone is a real drug and the phase III studies turn out positive, then the Aeterna bulls are right. In my mind, the jury is still out on perifosine. I've written about the positive data from

perifosine controlled phase II studies

(a good thing) and my


about the

ongoing phase III perifosine studies

(a risk) already.

Aeterna's drug development track record is fairly abysmal, so perifosine's success would run against the grain for this company. Aeterna's shark cartilage drug for lung cancer bombed out of a phase III study program; so did two different drugs for men with enlarged prostate glands. Both of these men's health drugs had positive phase II data and were partnered, one to

Spectrum Pharmaceuticals

(SPPI) - Get Report

, the other to


(SNY) - Get Report

. None of that mattered. The drugs still blew up.

How much confidence should I have in perifosine turning out differently? Keryx's drug-development capabilities haven't proven yet to be any better than those of Aeterna, so I take little comfort from Keryx shepherding the drug through phase II and phase III studies. It looks like a toss-up to me. But then you know me, Mr. Negativity.

Check that, I'm trying hard to be nice, so I will mention that Aeterna has an interesting drug in its preclinical pipeline that targets P13K inhibition -- a molecular pathway in cancer that is drawing a lot of interest these days.

Simon B. thinks I'm a "rotten hack" for writing about the "rotten review" of

Vanda Pharmaceuticals'

(VNDA) - Get Report

schizophrenia drug Fanapt

in the psychiatrists' drug manual this week.

Andy A. is peeved for the same reason. "You are not an objective person and you write this article for one reason alone. I think we both know what the reason is."

I'm guessing Andy and Simon are Vanda message board buddies. Neither can get their heads around the possibility that Fanapt might be a commercial bust. They both reason that nearly all of the competing schizophrenia drugs have sold well; even the poorest selling drug in the class,


(PFE) - Get Report

Geodon, is a billion-dollar drug. Therefore, Fanapt's success is automatic, it's just a matter of time, they say.

If that's your thesis for owning Vanda, go for it. I think otherwise and have laid out the

bear case

already, going back to before

Fanapt was approved

. (That FDA decision still boggles my mind.)

To respond to the ridiculous and false charge that I'm working for short sellers, I'll quote the American financier and stock market speculator Bernard Baruch:

"Bulls have always been more popular than bears in this country because optimism is so strong a part of our heritage. Still, over-optimism is capable of doing more damage than pessimism since caution tends to be thrown aside. To enjoy the advantages of a free market, one must have both buyers and sellers, both bulls and bears. A market without bears would be like a nation without a free press. There would be no one to criticize and restrain the false optimism that always leads to disaster."

Bobby T. asks about

Cell Therapeutics

(CTIC) - Get Report

. "Adam, do you feel that pixantrone will ever get to market?"

No. Certainly not while the drug is owned by Cell Therapeutics.

The company continues to be a serial dissembler of pixantrone's true benefits and risks. This week, Cell Therapeutics issued a press release touting the cardiac toxicity-sparing benefits of pixantrone in a phase II study that substituted pixantrone for the commonly used anthracycline doxorubicin in the standard "CHOP-Rituxan" regimen used to treat non-Hodgkin's lymphoma patients.

What Cell Therapeutics failed to mention was that this PIX203 study of pixantrone enrolled just 124 of a planned 280 patients and that much of the data from this study has already been disclosed and presented going back as far as 2007. This study is long over, yet Cell Therapeutics still hasn't disclosed results of a survival analysis comparing pixantrone and doxorubicin. We know from an earlier interim analysis that there were three patient deaths in the pixantrone arm compared to none in the doxorubicin arm. The response rate in the study also favors doxorubicin.

Meantime, Cell Therapeutics disclosed Thursday night that it swapped out just over $1 million in debt in exchange for 2.4 million shares of the company's common stock. That works to a debt exchange price equivalent to 44 cents a share, or an 11% discount to the volume-weighted average price.

Cell Therapeutics closed Thursday at 44 cents a share.

Recall that Cell Therapeutics said earlier this week that the company planned to rid itself of $30 million in debt through the exchange of 60 million share of common stock. Well, that debt exchange window is still open but with just $1 million in debt off the books, it doesn't appear as if note holders are lining up eagerly to accept the company's offer.

Rambabu D. writes, "I am looking for some insights on


(AGEN) - Get Report

. It is in Phase 2 trial for glioma and Phase 3 for renal cell carcinoma. The company is learning the lessons from the previous denial of renal cell carcinoma in Europe just like



and trying to make amends for possible approval. It has other vaccines under testing by GlaxosmithKline. Sounds like a very good investment as the stock is cheap relative to the potential. Please send your insights."

I know everyone is excited about the approval of Dendreon's prostate cancer "vaccine" Provenge and that this gives investors like Rambabu hope that other companies may find similar success with drugs that harness a patient's immune system to kill tumors.

I have my doubts about Antigenics turning into one of those lucky companies. I'm not saying anything new here, I'm a long-time Antigenics bear because the Oncophage data produced to date from failed phase III studies in kidney cancer and melanoma don't justify any optimism. (Leaving aside the problems that Antigenics has in manufacturing viable doses of Oncophage.)

Thursday, Antigenics produced more "encouraging" data on Oncophage, this time from phase II study in glioma, or brain tumor, patients. Antigenics says glioma patients treated with Oncophage are living longer than expected, but the study is single arm, no comparator, which renders any survival analysis difficult, if not meaningless.

A few people I respect have suggested to me that I'm unduly harsh on Antigenics. They say I shouldn't fault the company for continuing to pursue Oncophage despite the drug's setbacks.

I accept this criticism in the spirit of this "Adam plays nice" Mailbag, but I'd still remind folks like Rambabu and others looking for the next Dendreon that there may not be another Dendreon for a long time, if ever. At this point, Provenge is a rare winner amidst many more cancer vaccine losers. Oncophage is 0-2 in pivotal studies. It's going to take some very convincing data to dig out of that hole.

Other than that, I have nothing but positive things to say about Antigenics.

-- Reported by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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