Vascepa’s Upward Grind Should Reward Amarin Investors With Stability Ahead of ANCHOR

2:32:38 AM EDT, Monday, April 29, 2013 · by Brian L. Wilson / Bio-Wire

I’ve got to hand it to Amarin Corporation (NASDAQ: AMRN) for its progress on the launch of EPA capsule Vascepa, which was able to make appreciable gains in market share for 14 consecutive weeks. Although the stock is down about 20% following the official launch of the drug, the consistency of Vascepa’s growth may start to deter short-sellers from adding onto their positions.

In fact, this is exactly what we’ve seen in April 2013. Short interest was flat for the first two weeks, and might decline on the next NASDAQ reporting for the last two, given how far the stock has fallen. From here on out, short covering may also extend the potency of any positive catalysts.

For instance, note the trading action from Friday, April 26th. The initial upside momentum was the likely result of news that Amarin CEO Joseph Zakrewski would exercise warrants to buy 10,000 shares of AMRN common at a price of $1.35 each. The small size of this insider purchase wasn’t a big deal, although gains were extended significantly after we saw a giant buy order at 11:06 AM EST that wasn’t fully absorbed by sellers.

It’s true that Vascepa’s sales revenues are simply not high enough to justify Amarin’s valuation of ~$1 B, although the surprisingly steady growth is something bears should certainly pay attention to.

amrn

As you can see, Vascepa is on track to become a viable threat to the short sellers – even without the ANCHOR indication for hypertriglyceridemia at the 200-500 mg/dL level (see details in this older note).

MARINE Indication: Treatment of hypertriglyceridemia (high triglyceride levels) for patients over 500 mg/dL

ANCHOR Indication: Treatment of hypertriglyceridemia for patients over 200 mg/dL

REDUCE-IT Indication: Treatment for cardiovascular risk

Note that MARINE targets ~4 million patients in the United States, ANCHOR ~40 million, REDUCE-IT ~34 million

Since the risk for shorting Amarin has gotten a lot higher, and since more of the meat has been taken off of the bone, I expect the bears to start a slow migration into small pharma companies that have had much weaker launches.

We are about one month away from Amarin’s Q1 2013 earnings release, in which we should be seeing more financial details about Vascepa and the effects on Amarin’s financial health. Expect the company to operate at a total loss of $220 million for fiscal year 2013, and again for FY 2014. The size of the loss will depend heavily on the speed at which Vascepa can grow in the MARINE indication, and even more on the ability for Amarin to find a partner before 2014.

Note that analysts expect Vascepa to generate about $80 million for FY 2013, which remains a very appropriate guess if we see some deceleration in the drug’s sales throughout the rest of the year. This won’t be enough money to prepare for a “good” launch into the ANCHOR indication, which may be why certain short sellers are anticipating an AMRN stock offering in 2014 given that the company can’t find a partnership. Bears may also be expecting an unfavorable NCE decision on Vascepa by the FDA, although discussion over this particular catalyst has died out due to the sheer boredom of waiting for every Orange Book update. Even Amarin has implied that it’d prefer a negative NCE decision instead of the non-decision that AMRN traders have been watching for almost a year.

Although the ANCHOR indication may change everything from this company and the market’s interpretation of it, we have roughly seven months until the December 20th, 2013 PDUFA goal date for the sNDA for ANCHOR (see the press release here). Other than an NCE decision, there shouldn’t be any fundamental movers of this stock other than Vascepa sales. Since these have been in-line with most of our expectations, I’d be surprised if the stock made any serious movement during this waiting period.

 

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