Amarin Corp Plc (AMRN)

[Sam81]

H.C. WAINWRIGHT Update

With strong, persistent growth in the underlying business, REDUCE-IT becomes increasingly more like a free optionality at current trading levels.

Recently, we hosted an investor dinner with Amarin’s management team. Two key underappreciated aspects of the Amarin story emerged: (1) the underlying business of Vascepa in the MARINE indication is growing steadily, driven predominantly by new patient starts, as well as switch rates from other therapies (about 10% of Vascepa scripts, >2x last year’s rate);
(2) REDUCE-IT outcome may not be as binary of an event as the Street expects it to be (see next bullet).

On the first point, we note that if quarterly sales continue to grow at the ongoing rate that could well lead to an annual revenue in range or, in our opinion, in excess of company’s guidance (company guidance is $105M-120M; consensus is $121M with $29M for 2Q16; we model for $129M and $30M, respectively). While we continue to be optimistic about the final outcome of REDUCE-IT come end of 2017/early 2018, we argue here that even if one were to ascribe zero value to REDUCEIT, there is still upside to the stock based solely on the clockwork baseline business itself (i.e., if we reduce the POS of REDUCE-IT to 0% from 66% in our model, there is an 37% upside to current price). {Sam: In other terms, fair price of AMRN with Reduce-It miss is $3.00}

Ahead of the quarterly update, with management’s expectation that the company will be cash flow positive by year-end, and a more refined perspective on REDUCE-IT in terms of the first amendment win (see below), we reiterate our Buy rating and a $10 PT.


REDUCE-IT outcome may not be a binary event. We have long been advocates for a final REDUCE-IT win, and while it may not be essential to Amarin’s value at current levels, we continue to view it as a key catalyst that is capable of bringing the company back to its former glory (in the period between Anchor topline win and immediately prior to AdCom’s decision against Vascepa, stock traded at a high of 19.87 and low of 4.50).
Importantly, we note several underappreciated positive ramifications of the first amendment as it pertains to REDUCE-IT: (1) it effectively converts the trial readout from a binary event to a continuous event with different shades of win; and (2) it allows potential to promote REDUCE-IT outcome prior to the sNDA review.

This provides the added cushion that in the unlikely (in our opinion) event of a REDUCE-IT miss, the publication of any scientifically-sound subgroup signal (likely given the sheer size of the 8K-patient trial) may still drive an uptick in scripts....Based on this data point alone, we can gather that any shade of a REDUCE-IT win (overall or in the subgroup) will likely bring about a meaningful promotion effort (with translation into Vascepa sales) well before it gets the official regulatory nod.


link: https://drive.google.com/file/d/0B1gB2YESBJV7bjlMYkJTWDRVeTQ/view?usp=sharing