Tiny Amarin Banking on Fish Oil Drug Success

Investors have to be wondering whether Amarin (Nasdaq: AMRN ) can reap the full
benefits of its potential blockbuster drug by going it alone. After all, the
Dublin, Ireland-based biopharmaceutical company has fewer than 20 employees, no
marketing department, no sales force, and no real manufacturing infrastructure.
The company does have about $100 million in cash, but it probably takes at least
three times that much to get a hit drug off the ground these days. Some industry
observers suggest that Amarin needs to sell itself to a member of Big Pharma if
its fish oil drug, AMR101, is to realize its full potential. The two names being
mentioned as perfect partners are cholesterol powerhouses Pfizer (NYSE: PFE )
and GlaxoSmithKline (NYSE: GSK ). Given Pfizer's experience with Lipitor, the
company has the expertise and infrastructure to make AMR101 a top seller. Also,
the medication would be a nice replacement for Lipitor, which is on the cusp of
losing patent protection. Glaxo has its own prescription drug fish oil capsule
called Lovaza, which is used to lower very high triglyceride levels. The company
might want to make a run at Amarin because the possibility exists that the
apparently superior AMR 101 could make Lovaza obsolete. If that happens, Glaxo
would take a punch to the gut – the loss of a $1 billion drug. So far, Amarin
management seems content to plow ahead on its own. The company has signed supply
agreements with two active pharmaceutical ingredient makers and two
encapsulators to make the product once it's approved. AMR101 is an
ultra-purified form of the omega-3 fatty acid called EPA, derived from fish oil.
Across two phase III clinical trials, AMR101 has demonstrated the ability to
significantly lower triglyceride levels without raising LDL, or bad cholesterol
levels. If all goes as planned, Amarin plans to file for FDA approval during the
current quarter. The drug application will focus on patients with high levels of
triglycerides tested in the first trial. But the big sales and profits are in
treating the much larger group with medium triglyceride levels. To get the OK to
go after that audience, Amarin is running an outcomes study for AMR101 called
REDUCE-IT, for Reduction of Cardiovascular Events with EPA Intervention Trial.
If all goes well, the six-year trial could prove a bonanza, allowing the company
to market AMR 101 as a treatment to reduce cardiovascular events –such as
heart attacks, strokes rather than just claiming that the drug reduces
triglyceride levels. Investor enthusiasm for Amarin was dampened somewhat
recently when the company said its U.S. patent application for AMR 101 was
rejected, a decision it plans to appeal. That said, the stock is still up 36%
this year. Amarin had filed for multiple method-of-use patents that would grant
additional years of exclusivity to AMR101 as a treatment for patients with very
high levels of triglycerides, or soluble fats in the blood. This additional
patent protection would keep generic competitors out of the market during the
period of peak sales for the drug. Monness Crespi Hardt analyst Avik Roy said
the patent issue is one reason for his neutral rating on the stock. However,
others pooh-poohed the rejection, including several sell-side analysts from
Jefferies, Lazard and Canaccord Genuity, who called the AMR101 patent concerns
overblown or misinterpreted.