Amarin Corp Plc (AMRN)

[Sam81]

H.C.WAINWRIGHT Update: reiterate Buy rating and a $10 PT

Link: https://drive.google.com/file/d/0B1gB2YESBJV7bTRac1JoV2lKSnM/view

- we stress that not only does the legal ruling allow communication of both the ANCHOR and JELIS data right now, but down the line, it also allows promotion of a successful REDUCE-IT read-out prior to FDA approval. Following these positive developments, we reiterate our Buy rating and a $10 PT

- While Vascepa was not intended for the sole management of LDL (it aims to reduce TG levels), in past clinical trials in both MARINE and ANCHOR, it has demonstrated a unique ability to lower TG and other lipid measures without increasing LDL cholesterol, presenting an advantage over its competitors (i.e., Lovaza, in essence making Vascepa, Lovaza+). We argue that as part of the sales promotion/physician education process, this advantageous lipid profile would not escape physicians’ attention (after repeat visits), and coupled with the significantly lower price point of Vascepa ($2,400/yr), should present an attractive add-on option to existing cardiovascular therapy (i.e., statins, where fenofibrates like niacin are no longer labeled for use as add-ons for statin as of earlier this year) before going on the more steeply priced PCSK9 inhibitors

- As this space continues to pick up steam in the next few years, we believe that Vascepa’s inherent optionality as a potentially synergistic add-on to existing regimens remains underappreciated.

- Our bull thesis on REDUCE-IT timetable and outcome. Despite and beyond current quarterly sales and legal actions, we continue to maintain our focus on the readout of the REDUCE-IT outcome trial as the sole determinant of Amarin’s long-term value. The company has reiterated that the timing of the read-out is less of a function of the event rate (enrollment and events tracking to expectations) and more of a function of the less predictable data analysis time. As a response to this, we point to the event dates on our timeline/probability matrix inside as the more pertinent dates while the data analysis approximation may be pushed out. Assuming a 2 month data analysis time frame, we project an interim readout in April-June 2016, with low probability of early termination for efficacy, and assuming a 4 month data analysis time frame, full study readout likely in March-May 2018 with high probability of success.

- Valuation and risks. Our price target of $10 is based on an equally weighted composite of: (a) $9.75/share, as a 35x multiple of taxed and diluted FY22 GAAP EPS of $1.33 discounted back to FY15 at 25%; and (b) an NPV of $10.32/share (discount rate 12%, growth rate 2%). Risks to our investment thesis and target price include: (1) failure of the REDUCE-IT study; (2) Vascepa commercial ramp-up and/or peak sales not meeting our projections; (3) delay or failure of Vascepa to obtain FDA approval in the ANCHOR indication; and (4) further competitive disruption of the omega-3 market by generics and/or OTC supplements beyond our model.