Today, an advisory committee appointed by the FDA met and voted to recommend to the FDA that it expands the label for AMRN's cardiovascular drug Vascepa based on the landmark, large multi-year Reduce-It trial results, initially reported last year and published in the New England Journal of Medicine. Vascepa is a derivative of the fatty acid EPA that is purified from fish oil. Vascepa currently has a label that indicates that it should be used in adult patients with triglycerides at or above 500 mg/dL, which is a very high triglyceride level. The Reduce Trial results establish that Vascepa benefits patients with a triglyceride level at 150 mg/dL or higher who previously had a stroke or heart attack (see actual secondary prevention risk category below) by reducing their risk of having another major adverse cardiac event (MACE), such as a heart attack or stroke. The data were less compelling for a primary risk group of people that were at least 50 yrs old, had diabetes, and had at least one additional risk factor for cardiovascular disease (See primary prevention risk category below), but not a prior stroke or heart attack. The AdComm's comments on whether Vascepa's label should be expanded to include a primary risk group were mixed and, in many instances, unclear.
The question of AMRN's valuation for investors, now comes down to the how far the FDA will let AMRN expand the label for Vascepa. The irony is that the more restrictive the Vascepa label, the more lower risk patients will continue to take over-the-counter fish oil dietary supplements, which are not required to, and typically don't have such label restrictions, yet have been shown in several MACE trials NOT to have a benefit on reducing major cardiovascular events. This appears to be because the beneficial fatty acid for which Vascepa is a derivative, is counteracted by a harmful fatty acid and/or because of the lower dose of fatty acids in these dietary supplements. The attractive part for AMRN is that even if their label is limited to the secondary prevention risk group, who already had a heart attack or stroke, this is still a very large population that could produce enough revenue to justify its current $7.7 billion market cap. For example, see this CDC data that shows that over 8% of adults aged 65 and over have had a stroke. That's why we double-down on our position in AMRN across our funds within the last few months, when its stock price had dropped below $15/share. For full disclosure, we took some of our profits off the table as the stock ran up over $21 leading to this AdComm. However, a much broader label would convince more doctors to prescribe Vascepa to an even much larger population that would expand that possible revenue, and AMRN's valuation, much higher.
As mentioned above, today's FDA AdComm's comments on whether Vascepa's label should be expanded to include a primary risk group were mixed and, in many instances, unclear. The FDA transcript from the committee member as they confirmed their 16-0 vote in favor of expanding the Vascepa label at least for the high-risk, secondary risk group, is filled with typographical mistakes or blanks, but reflects this lack of clarity (document with portion of AdComm transcript). Plus, the primary patient population from the Reduce-It trial was limited to diabetic patients at least 50 yrs old with an additional risk factor (See primary prevention risk category below). Thus, it is unlikely that AMRN would get the broader label that they are seeking (see AMRN wish label below). However, it's typical and likely wise, to try to get a broader label in order to negotiate back to a middle point with the FDA. It is also noteworthy that the FDA briefing documents and position on Vascepa appears to be pretty favorable from this Advisory Committee meeting, which is not typical for such AdComm meetings.
At the end of the day, for investors hopefully you have been watching this stock closely and have already made considerable money as the market pulled the stock back for various reasons even after the Reduce-It results were published, despite the likely outcome of an expanded label that at least justifies the current $21.49 price ($7.7B market cap). Things are a bit more risky going forward as valuations of clinical stage biopharma companies even after drug approvals and label expansions, can fall as product sales don't hit investor expectations. Such valuations typically are a range that is bound by current value as a stand-alone company versus a higher value if acquired by a larger company that has other drugs that can be more efficiently sold by the same sales force. Thus, although there could be quite a bit of price movement leading up to the FDA's decision deadline of December 28, 2019 (actual decision is likely to come on or before that date, but could come after that as well), as rumors about acquisition of AMRN by a larger company continue to come and go before and after this date, so will AMRN's stock price. These price swings should provide more opportunities for investors. Furthermore, quarterly revenue data report-outs, which have shown impressive Vascepa sales growth since the Reduce-It trials were reported, will continue to affect the valuation of AMRN. At about $400 million annual Vascepa revenue, AMRN might look a bit pricey currently, at almost 20X valuation. However, with the >100% annual revenue ramp rate since the Reduce-It trial results were announced, and continued sales increases with the expanded label, such a valuation does not look so lofty. We still have a considerable position in AMRN, and will likely continue to have a position and move it up and down as the stock price swings on M&A chatter. Furthermore, there is an important patent ruling coming next year, and a possible settlement(s) before that ruling, that could should impact stock price.
AMRN's Desired Label from AMRN's AdComm Briefing Document
Reduce-It Trial Secondary Prevention Risk category from NEJM article.
Reduce-It Trial Primary Risk Category from NEJM Article