Biotech General Discussion

Summary:

• AMRN shares were up ~20% this past trading week

• This bullish AMRN stock move was likely mainly due to keeping generic Vascepa to 11% script market share

• AMRN share price is still near its lows since it reported its REDUCE-IT data in 2018

• As the ANDA litigation ends (AMRN lost), a new set of litigations of generics (and pharma benefits managers) against AMRN have been filed

• There were a number of updates last week in the pending AMRN v. generic litigations, in AMRN's favor

AMRN reported its quarterly update last Thursday, August 5, 2021. Q2 ‘21 product revenue was $153.8M, up ~15% from the $135.3M revenue for Vascepa in Q2 ‘20. However, this revenue number was probably not the biggest reason that AMRN shares were up ~10% in the 2 trading days after its revenue announcement. Keep in mind that Vascepa Q2 ‘21 revenue was down from the Q3 2020 and especially Q4 2020 revenue numbers (BPIQ.com subscribers see our Vascepa IQ Card™). Also, for those who have not followed AMRN for a year or more, it is noteworthy that shares are still near there all-time low since the highly positive September 2018 readout of the REDUCE-IT long-term MACE trial. This is mainly because AMRN lost its first generic patent lawsuit, initially in the district court in March 2020, but finally with the recent Supreme Court's denial to review the lower court decisions (See our prior post here).

The increase in AMRN share price this past trading week in our view, was probably mostly due to the fact that AMRN has been able to hold generic competition to only about 11-12% of market share 6 months after generic entrance (See Amarin Reports Second Quarter and Six Month 2021 Financial Results and Provides Business Update). AMRN provided an interesting graphic (See FIG. 1) to support its assertion that the generic icosapent ethyl (Vascepa) market, is very different than a typical generic market, such as that for statins. The market share taken by generic icosapent ethyl (Vascepa) is only about 12% vs. 86% for generic statins at about the equivalent time after generic launch. With Dr. Reddy's laboratory launching its generic icosapent ethyl this past June ( Dr. Reddy's Laboratories announces the launch of Icosapent Ethyl Capsules, 1 gram in the U.S. Market) it will be interesting to see if AMRN's branded Vascepa's market share starts to erode more quickly.

FIG. 1 (icosapent ethyl (IPE)(Vascepa active ingredient) vs. statin generic market erosion

AMRN's increased share price this past week, might also reflect the market's excitement about AMRN branded Vaskepa's imminent launch in Germany next month, where, like all of Europe, AMRN will have market exclusivity for some years. The list price in Europe of about US$250 without generic erosion for years, seems pretty attractive given the generic U.S. monthly price as low as $88/month (See GoodRx generic icosapent ethyl page). The U.S. branded Vascepa monthly price of around $375 (see GoodRx), and there is an intro $9 for 90 day savings card price in the U.S. (Learn More). With it's new European CEO and launches in the coming months in more European countries, the promise of significant Vascepa revenue from Europe sales without generic competition is getting much closer to reality.

AMRN's increased share price this past week, might also reflect that there were some positive AMRN v. generic patent litigation news last week. In fact, there have been quite a few litigation developments not only last week but over the last months between AMRN and the generics for which AMRN investors should be aware. These include a new antitrust lawsuit filed by the generic company, DRL, against AMRN, and similar class action lawsuits filed by pharmacy benefit management companies, all in federal district court in New Jersey (See copy of DRL anti-trust Complaint attached to this article). Thus, as AMRN's first litigation against generic companies came to end with the Supreme Court putting the final nail in the coffin for AMRN for that ANDA patent litigation, another set if lawsuits against a generic takes its place, this time with AMRN as a defendant.

In a prior article, I laid out the three lawsuits that involved or affected AMRN and its generic competitors. Now there are now 4 lawsuits/buckets of lawsuits that involve or appear precedentially to be highly relevant to AMRN vs. generics, with the new anti-trust lawsuits filed by DRL and the pharmacy benefits providers, although the ANDA lawsuit filed in Nevada for all intents and purposes appears to be over and a big loss for AMRN. Thus, the current federal corporate litigation landscape involving AMRN and the Vascepa generics, include 1 lawsuit that that is pretty much over that AMRN lost, 2 pending lawsuits (bucketing antitrust lawsuits into 1 bucket) and 1 pending lawsuit between GSK and Teva that has a significant possible precedential relationship to AMRN v. generics (See summary at end of this article).

With DRL launching its generic Vascepa this past June, another patent lawsuit in the near future filed by AMRN against a generic, this time DRL instead of Hikma, or as an added defendant in the pending case against Hikma, is a real possibility. It is interesting to note that DRL was careful to note with its press release announcing its generic icosapent ethyl launch the following:

"Please note that Dr. Reddy’s Icosapent Ethyl Capsules is not approved for the following indication:

as an adjunct to maximally tolerated statin therapy to reduce the risk of myocardial infarction, stroke,

coronary revascularization, and unstable angina requiring hospitalization in adult patients with

elevated triglyceride (TG) levels (≥ 150 mg/dL) and established cardiovascular disease or diabetes mellitus and two or more additional risk factors for cardiovascular disease." (See Dr. Reddy's Laboratories announces the launch of Icosapent Ethyl Capsules, 1 gram in the U.S. Market).

Thus, DRL is being careful to try to provide less factual grounds for AMRN to argue that it is inducing infringement of its REDUCE-IT-related patents, such as some of those that AMRN asserted against Hikma. As a reminder, in AMRN's Complaint filed against Hikma, they specifically mention the fact that Hikma did not make a similar statement in its announcement releasing its generic icosapent ethyl" "99. Hikma’s March 2020 Press Release does not state that Hikma’s “generic version” of VASCEPA® should not be used for the CV Indication or that the effect of icosapent ethyl on cardiovascular mortality and morbidity had not been determined. See Ex. L" Furthermore, a similar fact was important in the GSK v. Teva case discussed previously in our articles on BPIQ.com, and discussed below.

The antitrust lawsuits filed in New Jersey federal court this past April provide interesting information for investors regarding AMRN's attempts to lock up suppliers of the active ingredient for Vascepa, to inhibit generics from entering the Vascepa market in the U.S. They appear to corroborate AMRN's argument that it has taken contractual steps to lock-up the supply of the active pharmaceutical ingredient (API) in Vascepa, icosapent ethyl. Here's one quote from the Complaint that DRL filed in its lawsuit against AMRN: "In particular, after prevailing in patent litigation in district court in March 2020, DRL promptly began preparations for launch, only to discover that Amarin had foreclosed all the suppliers of the icosapent ethyl API who have sufficient capacity to support a commercial launch in a timely manner." (See attached Complaint). There is much more detail regarding AMRN's supply agreements with its API manufacturers and how they at least delayed DRL's launch, in DRL's complaint, as well as the class-action anti-trust lawsuits filed by the pharmacy benefits companies. The question now is whether AMRN's actions amount to illegal antitrust activity. We plan to follow the facts and developments of this litigation to provide insights.

On August 5, 2021, the Federal Circuit panel decided the rehearing in the GSK v. Teva litigation. In summary, in a detailed opinion the same 2 judges on the panel once again came out in favor of GSK, that Teva induced infringement. This is the decision that AMRN wanted since in its lawsuit against Hikma, it sits in GSK's position as branded drug company/plaintiff. And again the same dissenting judge, judge Prost, dissented again finding in favor of Teva. We attach the entire majority and dissenting opinion in case you have a spare hour(s) to read about the nuances of induced infringement, which are at the heart of the AMRN v. Hikma and Health Net case, with many similar facts and the same Delaware district court. One takeaway from the majority opinion is the importance of facts and experts, and the jury's decision given the facts and expert testimony. Furthermore, as you can see with this split panel of 3 judges, and as we discussed previously in our AMRN v. generic blog posts on BPIQ.com, the federal circuit judges that are named to the panel that reviews a particular appeal matter, especially in cases that are subject to subjective analysis/considerations. This case is not over. There will likely be another Petition for en banc review and an eventual petition to the Supreme Court, especially given a split panel and many amicus briefs filed after the initial Federal Circuit decision. In my view, this case has a much higher chance of being heard by the Supreme Court than AMRN's ANDA case against the generics, where the Federal Circuit panel did not even feel the case was close enough and/or significant enough to render a written opinion. In GSK v. Teva we not only have a detailed and lengthy original majority opinion and dissenting opinion by the Federal Circuit panel, we have the same in the rehearing. Plus, we have many more amicus briefs that are in the record and will be filed as this case moves forward.

Finally, it is noteworthy that AMRN appears closer to winning several expected procedural victories earlier this month in its Delaware patent infringement lawsuit against the generic company Hikma, and the insurance provider Health Net. The magistrate judge recommended that the court deny (AMRN would win) the Motions to dismiss filed by both defendants and the Motion to sever filed by Health Net. If the main judge assigned to the case follows the magistrate's recommendation, which I believe is likely but not a certainty (although I haven't reviewed statistics on this), AMRN will win on these initial procedural motions. This result, especially the Motions to dismiss, is expected since, as pointed out by the magistrate judge who heard those motions, and as I pointed out in my prior article on BPIQ.com, the bar for AMRN was pretty low.

It will be interesting to see how this second patent litigation of AMRN against Hikma and Health Net turns out in the likely event that the litigation moves forward. It seems that the market has given up on AMRN and U.S. patent litigations against generics based on the losses in the ANDA litigation. While I do NOT believe this Delaware case against Hikma is a an easy win for AMRN, AMRN's chances are more than remote and whether AMRN wins or loses will be based on different patents, and different application of facts to different legal theories than the Nevada ANDA litigation. Furthermore, the GSK v. Teva case discussed above, shows the great degree of uncertainty and the factual and legal complexities at play. Thus, AMRN's loss in the ANDA patent litigation cannot be used to dismiss AMRN's chances in this second patent litigation.

So where does all of this leave us at AMP with respect to whether AMRN is attractive at its current market cap of about $2B? In short, we continue to hold our significant positions in AMRN in our various tracking funds. We continue to feel that the market has over-reacted to AMRN's ANDA patent litigation defeat in the U.S. Even if AMRN loses significant market share to the generics in the U.S. in the coming years, that market is likely to grow at least several fold as more physicians and patients become aware of the benefits of Vascepa (icosapent ethyl). Thus, AMRN has a good chance of growing its revenue in the U.S. in the coming years, even if it loses significant market share. And AMRN has a chance to win the current pending patent litigation against Hikma and Healthnet, helping it retain market share. Finally, with respect to the U.S., AMRN's efforts to lock up API supply is having an impact on the ability of generics to compete. If AMRN can win the antitrust lawsuit, this API supplier issue may help AMRN to continue to limit price erosion from the generics.

Likely more significant than the U.S. opportunity, is AMRN's Vascepa opportunity in Europe and other jurisdictions outside the U.S., which are not affected by the nuanced patent laws in the U.S. that affect skinny label generics, and where regulatory agency market exclusivity would last for years (AMRN has no remaining FDA market exclusivity in the U.S). Thus, to launch in a foreign jurisdiction like Europe before this exclusivity ends, a competitor would need to run its own successful clinical trials and then win in the the likely patent lawsuit filed by AMRN if they attempt to launch in that country. All factors considered, at Amp we hold our positions in AMRN and remain long-term AMRN investors as we feel the company is very undervalued at a $2B market cap and enterprise value.

Manny Vacchiano, JD, PhD and Amp co-founder

Licensed U.S. patent attorney

This article is not investment, tax, or legal advice. Please do you own diligence and seek advice from professional advisors representing your interests.

Article history:

8/7/21 initially published at ~3 PM Central

8/20/21 corrected typo "AMP" to "AMRN" in penultimate paragraph

8/23/21 Corrected that early August magistrate issued a recommendation re: the case against Hikma and Healthnet continuing, that the court still needs to decide on. Fixed additional typos and made minor clarifications.

SUMMARY OF LITIGATIONS BETWEEN AMRN AND GENERICS, OR RELEVANT THERETO

1. Hikma and DRL vs. AMRN - AMRN's ANDA (generic drug) litigation against Hikma and other generic defendants (filed in Nevada on 8/24/18;

Lawsuit appears to be over:

6/29/21 AMRN lost after June 2021 Supreme Court denial to review lower court decisions against AMRN.

2. AMRN & Mochida v. Hikma - AMRN (and Licensor Mochida) patent litigation against Hikma and Health Net (insurance company) (filed Oct. 2020 in Dist. Delaware)

11/5/20 Hikma launched generic Vascepa

11/30/20 AMRN filed patent lawsuit against Hikma

1/24/21 AMRN adds insurance company, Health Net", to lawsuit

8/3/21 Court rules that this lawsuit will continue in denying Hikma and Health Net's motions

3. GSK v. Teva - A "skinny label" patent litigation that GSK brought against Teva for its generic version of GSK's cardiovascular drug Coreg® that is similar to AMRN's "skinny label" patent lawsuit against Hikma (Delaware case 2 above)

5/14/18 appeal filed

10/2/20 Fed Cir. Panel surprisingly reverses D. Ct. and rules in favor of GSK that Teva induced infringement. This was a good result for AMRN because it showed that a generic company could be found to induce infringement in a "skinny label" case with some similar facts to AMRN's current Del case. However, the Chief Justice of the Federal Circuit issued a long dissenting opinion and the case stirred a lot of comment and attention.

12/2/20 Petition for rehearing or en banc review filed by Teva

2/9/21 Teva's Rehearing request was granted

2/23/21 Oral hearing held related to rehearing

8/5/21 GSK again wins 2-1 split decision in Fed Circuit panel rehearing

4. DRL v. AMRN (and numerous lawsuits of pharmacy benefits providers vs. AMRN) - Generic company, DRL, and in separate litigations, several pharmacy benefits management companies, filed antitrust lawsuits against AMRN for locking up icosapent ethyl supply from major API suppliers.

4/27/21 - 8/5/21 antitrust lawsuits filed by DRL and pharmacy benefits providers against AMRN

#AMRN #Vascepa #Hikma #DRL #cardiovascular