Amarin: Dead Stock Walking With Negative Vascepa Panel Vote

BEDMINSTER, NJ ( TheStreet) -- Adam, Congrats on your bearish Amarin (AMRN) call.

Thanks. It's nice to be right.

With the FDA advisory panel voting last night 9-2 to recommend against expanding Vascepa's approval to include the treatment of patients with mixed dyslipidemia, what will the FDA ultimately decide?

FDA advisory panels are just that -- advisory. Votes are not binding. But in this case, it's almost impossible to conjure a scenario under which FDA approves Vascepa for mixed dyslipidemia patients -- the so-called "ANCHOR" indication we discussed on Tuesday.

FDA is expected to announce the Vascepa decision on Dec. 20.

I believed FDA went into Wednesday's advisory panel not wanting to approve Vascepa without cardiovascular outcomes data. The agency convened the advisory panel in order to get agreement from outside experts, which is what happened.

If FDA follows the negative recommendation of Wednesday's advisory panel, will Amarin be forced to stop selling Vascepa?

No! Absolutely not. Vascepa is approved to treat patients with very high levels of triglycerides in their blood. Nothing about this approved indication changes as a result of Wednesday's negative vote, or when FDA ultimately follows through on Dec. 20.

Of course, without an expanded approval for mixed dyslipidemia patients, Vascepa's sales potential is much lower. That's not good for Amarin.

What does Amarin do now?

The panel experts made it clear they want to see data demonstrating Vascepa can provide cardiovascular benefit -- fewer heart attacks, strokes, heart-related hospitalizations and deaths -- in mixed dyslipidemia patients. FDA concurs.

Amarin is conducting the "Reduce-IT" study right now, specifically designed to answer this question.

When will Amarin complete the "Reduce-IT" study?

Amarin has about 6,000 of 8,000 patients enrolled in the study, with enrollment expected to be completed in early 2015. An interim analysis is planned that could be conducted in late 2015. If the interim analysis comes back inconclusive, the final results will be ready in late 2017.

2017? That's a long wait!

It is, yet Amarin has no choice but to bite the bullet and complete the Reduce-It study. Getting a definitive answer to the question of whether or not prescription fish oil provides real cardiovascular benefit to patients is incredibly important. Amarin is in the best position to provide that answer. If Reduce-It is positive, Amarin will reap the rewards because Vascepa will be a much more valuable drug.

On a conference call Wednesday night, Amarin's CEO left open the possibility that the Reduce-IT study would be shut down.

I know. I heard the call. Shuttering Reduce-It would be a huge strategic mistake for Amarin and a terrible loss for the medical community, not to mention an ethical travesty because it would abandon all the patients already enrolled.

At this point, Amarin has no other options but to roll the dice and bet the company's survival on a positive outcome from Reduce-It. The study end is a long way off but the company just has to see it through.

What happens if Reduce-It fails?

Amarin probably goes belly up. Like I said, Reduce-It is a win-or-go-home scenario.

Does Amarin have enough cash to stay solvent until the results of the Reduce-It study are ready?

Doubtful. With the last financing in July, Amarin has about $270 million in cash on hand. The company admitted Wednesday night that costs reductions and/or layoffs are a possibility to stretch out the cash. Management wouldn't say definitively if another financing would be necessary before Reduce-It is completed.

Right now, Amarin's operating expenses are annualized at about $200 million a year, with a big chunk of that derived from running the Reduce-It study. Do the math yourself.

Can Amarin count on Vascepa sales under the currently approved indication to generate more cash?

Not entirely. Vascepa's launch has been a disappointment. Prescriptions are growing but slowly, so you're only looking at Vascepa peak sales in the $100-200 million range. Don't forget, Vascepa is also vulnerable to potential generic competition. All this explains why Amarin's share price has under-performed so badly this year. Amarin will report third-quarter results on Nov. 7.

Amarin -- dead stock walking?

Pretty much. I'm lousy at predicting where stocks settle out after big setbacks but it's safe to say Amarin shares will take a big hit Thursday. The stock was halted all day Wednesday at $5.17.

Looking forward, it's hard to get excited about Amarin again until we get closer to Reduce-It data, or if we see a sharp uptick in Vascepa sales. I don't expect the latter to happen any time soon.

I read on some of the message boards and StockTwits that Big Pharma might be more interested in buying Amarin now that the company is on the rocks. Do you see a takeout of the company likely?

Only read message boards for entertainment and laughs. Never say never, but an acquisition of Amarin today makes little sense. For starters, why would Big Pharma pay a premium -- even a small premium -- for Amarin with the all-or-nothing nature of the Reduce-It study looming ahead? If Amarin trades down to $3 per share, which equals a market cap north of $500 million, you're still talking about a fairly hefty price tag for a company that may not be worth anything in three years. Lots of risk.

And why would Amarin even accept a bargain basement takeout offer today when it has the chance to be worth so much more if the Reduce-It study succeeds?

Do you believe the odds favor a positive result from Reduce-It?

Ha! I was waiting for you to ask me that question. No, I don't. If I were a gambler, I'd bet against Reduce-It, not because Vascepa is a lousy prescription fish oil, but because I just don't believe triglyceride reductions in these mixed dyslipidemia patients will result in significant reductions in cardiovascular events. The science and clinical trial precedents seems spotty.

With that said, I can't rule out the possibility of a Vascepa win in the Reduce-It study. A successful outcome is a definite possibility.

Is there any chance Amarin sues FDA on the grounds that the agency reneged on the Vascepa Special Protocol Assessment (SPA) agreement?

You've been reading the message boards again, haven't you?

Um...yes.

After I told you not to believe anything you read on message boards?

I know. I'm sorry, I feel shame.

You should! The FDA did not renege on the Vascepa SPA. We've talked Tuesday in our preview of the advisory panel how SPA agreements are fungible. These agreements can change -- or can be ignored entirely -- when facts or the science underlying them change. That is exactly what happened with Vascepa.

Okay, but Amarin, on its conference call Wednesday night, said it was reviewing its legal options regarding the Vascepa SPA.

Amarin's management team is in desperation mode. They'll say or do anything to keep their jobs. Taking legal action against the FDA is a dead-end move. Amarin has no case.

-- Reported by Adam Feuerstein in Boston.

Follow Adam Feuerstein on Twitter.
Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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