Suntrust comments:
What's Incremental To Our View
We lowered our ‘15E Vascepa sales to $78.6M (+45% YoY) from $95M vs. AMRN’s $77.1M-$78.6M range as AMRN postponed promotion of the JELIS study into 4Q15. We maintained our out-year est’s., as Vascepa TRx growth is accelerating [+13%/+12% sequential & +51%/+56% YoY Symphony/IMS] driven by the ANCHOR promotion. We expect the JELIS promotion in 4Q15 to fuel Rx growth since it showed a 53% reduction in CV risk. Our model assumes AMRN is cash flow (+) in ’16. Risk/reward seems attractive; with performance driven by Rx trends & the REDUCE-IT free call option on its outcomes trial. Reiterate Buy/$6PT
Lowered ‘15E on delayed JELIS promotion, but maintained ’16 at $175M
We lowered our ‘15E Vascepa sales to $78.6M (from $95M), which is at the upper end of AMRN’s $77.1M-$78.6M ($77.9M midpoint) range, but below the $84M consensus est., due to a delay in the promotion of the JELIS outcomes study into 4Q15. AMRN decided to initiate promotion of ANCHOR in its first cycle of promotion in late August, but delayed the roll-out of the promotion of JELIS until 4Q15. As a reminder, AMRN won a preliminary ruling against the FDA on 1st Amendment rights to promote ANCHOR 25M patients with elevated triglyceride levels) & JELIS (53% reduction in CV risk in Japanese patients; click here to see our note titled “AMRN will promote ANCHOR & JELIS studies” dated August 7). The FDA is not appealing the lower court’s decision, which is stayed until Dec. 17, 2015 as AMRN & the FDA resolve their differences. To reflect the delayed promotion of JELIS into 4Q15, we increased our SG&A to $95.6M from $92.2M, or 120% of sales vs prior 96%. R&D expense decreased slightly by -$0.8M to $48.7M as the REDUCE-IT trial is 97% enrolled. Lower revenues combined with higher opex results in ‘15E LPS of ($0.54) vs. our prior ($0.45) and consensus of ($0.53). Our ‘16E sales remain unchanged at $174.5M, but lowered ‘16E EPS by -$0.03 to $0.02 due to +$6.5M increase in opex to $110.4M. We project AMRN to finish ‘15 with $117M of cash vs. our prior $95M estimate. We see upside to our cash flow estimate since AMRN appears ideally positioned to secure additional Ex-US Vascepa deals (click here for our note on the economics of the Eddingpharm deal in China). AMRN is in active dialogue with potential partners in ex-US regions, evaluating opportunities to launch Vascepa in the EU, LatAm, Russia, & the Middle East. We view additional ex-US deals validating the product concept & contributing cash for investment in AMRN’s long-term growth. The acceleration in Vascepa volume coupled with additional ex-US deals increases the likelihood that AMRN turns cash flow positive in 2016.
Vascepa volume is accelerating, with sequential growth in low teens
According to Symphony Health/IMS, Vascepa’s TRx grew +13%/+12% QoQ, respectively, and 51%/56% YoY. ANCHOR lipid data promotion was initiated in August followed by ANCHOR inflammation/oxidation promotion, with the JELIS promotion set to launch in the next few weeks. We would expect to see an acceleration of Vascepa growth over the next few months. AMRN has >200M lives under coverage, with >130M lives having access to Vascepa with a Tier-2 co-pay.
ANCHOR promotion sets the stage for JELIS in November
AMRN won a preliminary ruling against the FDA on 1st Amendment rights to promote ANCHOR & JELIS (click here to see our note titled “AMRN will promote ANCHOR & JELIS studies” dated Aug. 7). The FDA is not appealing the decision, and is stayed until Dec. 17, 2015. AMRN’s goal is to make the preliminary declaration final, since the ruling was both broad & specific. We view this as not only a win for AMRN, but a win for the entire biopharmaceutical industry. First, the context of the statements of ANCHOR data that was part of the litigation was declared to be truthful and non-misleading, which there was no contest from FDA. This enabled AMRN to promote the use of Vascepa in the ANCHOR patient population (25M potential users with elevated triglycerides) in mid-August in two phases. Secondly, the JELIS promotion allows AMRN to “speak in a truthful non-misleading way to promote Vascepa” in the JELIS population. Despite the Court’s ruling that AMRN may use all applicable data to market Vascepa in a truthful, non-misleading manner, ARMN is focused on ANCHOR data, emphasizing “quality [of information] over quantity” in what are still preliminary conversations with most physicians (as of 09/30/2015, the 20,000 top-target physicians for AMRN had been called upon by ARMN sales reps fewer than two times on average). AMRN management also emphasized that while they expect the REDUCE-IT trial to yield interim data in 2016, they expect the trial to continue to completion (estimated completion is in 2017 with results published in 2018). Management stated that "if the REDUCE-IT study is not stopped in 2016, this should not be a surprise to anyone and should in no way be interpreted to suggest that this study is not positioned for success." AMRN has enrolled >7,800 (~97%) of the targeted 8,000 patients in REDUCE-IT, with full enrollment expected by year end. The DSMB is actively monitoring the event accrual rate, which is on track to reach the 60% threshold required to trigger an interim analysis by mid-2016 with investor interest expected to rise ahead of this event.
JELIS - 53% reduction in MACE in HTG ≥ 150 & low HDL (<40 mg/dl)
The 8,645-patient JELIS trial tested outcomes for Epadel (EPA, same active ingredient in Vascepa) and all TG levels were included. All patients received statin therapy on top of either placebo or 1800mg of EPA daily (in 3 doses). The primary endpoint was major adverse cardiovascular events (MACE) such as heart attack or stroke. On the primary endpoint, the EPA group showed a 19% reduction in MACE compared to placebo (p=0.011). Notably, in the subgroup that had both hypertriglyceridemia (TG ≥150mg/dl) and low HDL (<40mg/dl), the reduction in MACE was 53% (p=0.043). Also, the JELIS study targeted a fairly low-risk TG population with average TG level slightly above 150mg/dl, which is similar to REDUCE-IT. The Japanese population is distinctive from Western populations in at least one material way—diets high in fish result in higher levels of EPA in the Japanese population. The population examined in the REDUCE-IT trial is far more severe than in the JELIS population. Thus we would expect to see a reduction in MACE rates at least as high as that seen in JELIS.
