Amarin Corp Plc (AMRN)

[HDGabor]

First of all: this post isn’t about GIA or BO is better (especially since we could get the answer in one scenario only: if BO offers will be submitted, refused and the Co. will GIA … no answer in any other cases). It is about how I see it … it is one opinion / view only.

Some facts / assumption that are relevant for both (GIA and BO) cases
- patents will be uphold (no ruling before Q3 [more likely Q4] 2019, since parties requested an extension on 9/14/2018 …”Close of Expert Discovery” scheduled as May 10, 2019)
- Vascepa (relevant) lifecycle is 11 years (2019-2029/2030) currently, since in 2029/30 the generic version will be available (at least by TEVA… based on the agreement with Amarin)
- US Net revenue (NR, app. $): 125 / script, 1,500 / year / (annualized) patient
- US Gross Profit (GP, app. $): 100 / script, 1,200 / year / (annualized) patient
- current US, Prescription O3 market is app. 4.5M script / year … equal with equal with 562M NR and 450M GP
- current US, Non-Statin Prescription Lipid Therapy Market is app. 25-30M script (2.0-2.5M annualized patients) / year … equal with 3.00-3.75bn NR and 2.4-3.0bn GP
- 36.7% of U.S. adults or 78.1 million persons aged ≥21 years were on or eligible for cholesterol treatment, within this group, 55.5% were currently taking cholesterol-lowering medication (app. 43M) equal with ~20M annualized patients (220-240M scripts / year)
- >25% of statin treated patients have elevated triglycerides (>150 mg/dL) … ~5M patients
- ex-US markets:
> no revenue before 2020 (as the earliest)
> total is equal with 50% of US [Meanwhile the number of patients (scripts) are higher the price is lower and most (all) of the ex-US market sales will be done by 3rd party.
e.g. China ($ … conservative / optimistic approach)
- price: 130 / script
- Amarin revenue: 26 / script (20%) + 34 (COGS and admin fee) = 60 / script
- Amarin COGS: 25 / script
- Amarin GP: 35 / script [vs 100 / script in the US]

Potential (peak) sales (again: it is impossible to calculate precisely due to lack of basic information, so it is one view / approach only):

US: 5M annualized patients (could be affected positively by off-label usage, negatively by non-usage) equal with 7.5bn NR and 5.0bn GP
ex-US: 4bn NR and 2.0bn GP
Total: 11.5bn NR and 7.0bn GP

GP (2019-2029, bn, US / ex-US / Total):
2019: 2.0 / 0.0 / 2.0
2020: 3.0 / 1.0 / 4.0
2021: 4.0 / 1.5 / 5.5
2022-2029: 5.0 / 2.0 / 7.0 (per year)

Total (2019-2029): 49.0 / 18.5 / 67.5

Of course the real numbers could be different … but it does not effect the GIA and BP (BO) scenario below.

GIA

First of all: they could GIA, they have a knowledge, experience, etc. to do this.

Amarin = with Vascepa (with R-IT indication) currently. To become a 50-100+bn revenue per year Co they have to develop additional indication for V, acquire / develop new product …

Positive / Benefit:
- all profit of V
- additional benefit(s) / indication(s) of V

Negative / Risk:
- to grow they have to be bigger (more cost, more staff, more R&D, acquisition cost, etc.) … will became a BP …will be the same as the current BPs
- the additional benefits of V (if any) should be proven by study … no guarantee for it (e.g. they thought that V is good for Huntigtions’ disease and it was a failure)
- who knows what will be developed in the future, be a competitor / alternative of V (e.g. I could not see the reason of the STRENGHT trial, since acc. to my best knowledge AZN could not launch EPANOVA without patent infringement … however I am sure they have a plan / idea how they will “earn back” the cost of the acquisition and the trial … just could not figure it out)

BP (BO)

It is important to understand the behavior of (any) big companies (inc. BPs).
- they would like to grow always
- they aren’t interested in cash-flow, they are interested in statistic (see more below)
- they think they could do everything better

Let’s assume
- my numbers above (Total (2019-2029): 49.0 / 18.5 / 67.5) are the real GP over the years
- the DCF of the 67.5 is 50.0 (it isn’t calculated just for the example)
- no additional cost in the calculation

a.) BP will calculate that they could generate (e.g.) 77,5 … DCF 57.5
b.) They will see it as increase of EBITDA by the 100% of the GP (of V) … since the amortization of the BO is below EBITDA

Positive / Benefit:
- no more risk, no more uncertainty
- better the Nov 10 presentation higher the probability that they will offer a fair amount (with a chance of “overpayment” – e.g. 60 for DCF 50 – due to a.) and b.) above)

Negative / Risk:
- the additional benefits of V (if any) won’t be calculated in the BO


All together:
- I am 100% sure that more than one offer will be submitted … bidding war is likely (no low offer … the level will be independent from current PPS, will be based on BPs’ assumptions / calculations)
- I think Amarin will be bought out

- - - - - -
“Off-topic”: PPS
- 25-30 pre Nov 10
- +30-50% on Nov 12
- Q4 (or Q119 … before sNDA submission): could be 3 digits
- - - - - -

Once again: I do not prefer one scenario over the other, I am fine with GIA and fine with BO.

Best,
G