2Q16 PostView: 2016 Estimates Maintained as Vascepa Growth Ramps
REDUCE-IT Interim Analysis in Sep/Oct’16 is the Focal Point
{Sorry guys, something weird is happening and i can't upload via googledocs. Below is the update of Boris from SunTrust}
What's Incremental To Our View
We maintained our ‘16E sales/EPS at $121.6M/-$0.34 vs. Street’s $121.5M/- $0.53 vs. AMRN’s $112M-$125M range. The ANCHOR/JELIS promotion & formulary access [200M lives: >140M at Tier II] are contributing to sequential growth. AMRN+Kowa are focused on top-decile prescribers with >70% new patient starts & <30% switches. The REDUCE-IT pre-specified interim analysis is on track for Sept./Oct., with publication of the trial design in the near-term. AMRN exited 2Q16 with $72.5M in cash & expects to turn cash flow (+) in ’17(ex-REDUCE-IT related expenses). Reiterate our Buy/$6PT, supported by DCF.
‘16 sales & LPS unchanged, as Vascepa growth continues to ramp
AMRN raised its 2016 net product sales range to $112M-$125M (from $105M- $120M) with midpoint at $118.5M vs. our/Street’s total revenue of $121.6M/ $121.5M (which includes ~$2M+ in-licensing revenue from recognition of the $15M upfront from Eddingpharm [private] amortized over 16 years). Our model assumes ’16 Vascepa sales ramp sequentially given AMRN & Kowa Pharma (private) sales forces rolled out their respective JELIS promotional efforts in 4Q15 (Nov.) & 2Q16 (Feb), respectively. As of June 30, AMRN exited 2Q16 with cash & cash equivalents of $72.5M (vs. $107M as of YE15) and continues to expect to be positioned to enter 2017 cash flow positive from commercial operations, excluding REDUCE-IT and other related R&D expenses not required to sustain current commercial operations. The next catalyst is the REDUCE-IT interim analysis that’s on track for Sept./Oct. ’16. We expect AMRN and its lead investigators to publish a REDUCE-IT trial design paper in the near term (possibly NEJM). We reiterate our Buy/$6PT, which is based on DCF analysis.
Vascepa’s posting consecutive quarters of >50% TRx growth YoY
2Q16 adjusted TRx for Vascepa, per IMS, grew +14% QoQ & +53% YoY, marking the tenth consecutive quarter with TRx YoY growth of more than 50%, as ANCHOR and JELIS promotions start to kick-in. AMRN complemented its volume growth with a +6% Vascepa price increase (PI) on Dec. 31, 2015 & June 1, 2015 increase of +6%. AMRN & partner Kowa’s commercial strategy is focused on the top-decile high-prescribing physicians. AMRN has detailed two-thirds of its 20K high-prescribing specialists with a frequency of ~4.5 times (you need a frequency of 6+ to generate meaningful sales). Kowa is targeting 50K high prescribing physicians, but has seen them >2 times since implementing the JELIS promotion in February ’16. Vascepa accounts for ~20% of the prescription omega-3 market, suggesting room for further upside, with NRx’s >20% and >30% from targeted physicians. AMRN is also positioned to benefit from the FDA’s label change to fenofibrates (click here), contributing to a -5% decline in the >21M TRx’s written in 2015. The bulk of Vascepa TRx (70%-80%) is for new patient starts, while a smaller portion (20%-30%) represents switches. However, we note that a fraction of patients previously treated with fenofibrates/Lovaza prescriptions that are now taking Vascepa and being considered new to brand & not captured in switches, making the switch prescriptions look artificially low, according to AMRN. Vascepa’s managed care access has >140M patients covered at Tier II (low copay) formulary status [total of 200M lives under coverage]. AMRN is in formulary discussions for 2017 access. We assume the negotiations lead to a modest incremental gain in coverage for Vascepa. The MARINE (in females) & ANCHOR (>70% diabetic patient) sub-analysis provide meaningful datasets to help with promotion & drive TRx growth. We model $119.6M in 2016 Vascepa sales, +48% up YoY.
REDUCE-IT pre-specified interim efficacy analysis in Sept/Oct 2016
The most important catalyst for AMRN is the outcome of AMRN’s REDUCE-IT trial, since it could lead to a meaningful expansion of its label and commercial opportunity in patients with high triglycerides who are on statins. AMRN announced a few amendments to the trial protocol, 1) finalizing details of the statistical analysis planning 2) added a second pre-specified interim efficacy analysis at approximately 80% of the 1,612 primary events and 3) expanded to over 30 pre-specified secondary & tertiary endpoints to measure a broader array of potential clinical effects. Amarin remains blinded to the interim analysis & ongoing results of the REDUCE-IT study until after the study is stopped at either the interim analysis or at the final analysis. The REDUCE-IT trial design is modeled after nine previous outcomes trials for statins. We believe that Amarin will showcase the REDUCE-IT trial design in a peer-reviewed scientific journal [possibly the New England Journal of Medicine (NEJM)] over the next few months. AMRN indicated that the timing of the publication will depend on the trial’s Principal Investigators and journal peer review. Given the nature of outcome study and the design of REDUCE-IT, Amarin expects the DMC to recommend that REDUCE-IT continues until it attainment of 100% of the target 1,612 primary events, which is estimated to occur in 2017, yielding publication of results in 2018. However, it is possible that the trial could be stopped early, if Vascepa is highly statistically significant vs. placebo on the primary endpoint at the interim looks (p-value must be <0.0076 at the 60% interim look, & <0.022 at the 80% interim look), as well as showing robust efficacy on “certain secondary outcome measures”. The REDUCE-IT trial is expected to conclude & have final data published with a sNDA submission in 2018E. AMRN indicated on its 2Q16 earnings call that if REDUCE-IT meets its study goals in Sept/Oct ’16, the company will likely need to raise capital to support the commercialization of the indication expansion and/or consider its partnership options especially after the Kowa agreement is set to expire in 2018.
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