Options other than going it alone and doing a buy out.
I don't see a total buyout of any sort anytime soon, and not before label expansion approval. Even after label expansion, at least early on, I believe the odds are against a complete buyout unless a very, very high price is paid. It goes back to me thinking Amarin probably doesn't want to give up control of their potential wonder drug at this time. Its still hard to know the true value now, and it’s just too early for other reasons.
But I do think the chances are very good for a co-promotion or partnership or granting of rights in limited territories like Europe or the Middle East. Why? It would be beneficial to both sides. Amarin has the drug, but Big Pharma has the money and other resources that Amarin could certainly benefit from.
As much of a potential goldmine as Vascepa appears to be, I doubt Amarin has enough money or resources by itself to develop it’s drug as broadly and as quickly as the company would prefer. At this point, are they even operating at a profit? So leveraging ownership of the drug for cash or other resources could be tempting. But in return, a big pharmaceutical might want significant control, in Amarin stock, or in a significant percentage of ownership in a joint partnership, or in rights to exploit the drug now or later down the road. Another option for Amarin might be a co-promotion deal where it could join forces with another drug company to market and develop the drug in exchange for a portion of the profits. If any deal is brewing, it it may take some time to nail down, because the devil is in the details, and the details may be very complicated.
But with such deal, Amarin would be able to retain ultimate ownership and control over the drug while obtaining some much needed financing or other resources.
A second reason why something less than a buyout makes sense? Well, because such a deal wouldn't be for the whole enchilada, being off on valuation wouldn't be nearly as consequential. With a buyout, you only get one shot at getting it right, and you might be way off, but there is no do over. So there is a lot of pressure on both sides to bargain hard and get it right. With something less, such as territorial rights, if you guess the value wrong, the consequences are not so bad, just some reduced profits. Amarin could even structure it so that no guessing is required, such as by doing a co-promotion, where a partner would be paid for services provided and based on actual profits split between companies. Formation of a joint partnership could be similar, where the partners could agree to divvy up profits as they were made. In either case, If the drug only sold a little, the companies would make a little. If it sold a lot, they would each make a lot. So no guesswork on future revenues would be needed. The same could be the case for granting territorial rights in exchange for royalties if the royalties were based off a percentage of sales instead of a fixed dollar amount. Or there could be some combination fixed dollar and percentages.
On the other hand, Amarin could just sit and wait and continue as it has been if it doesn’t see any offers it likes. After label expansion, I think the value of the drug will be much higher, and their bargaining position will be that much stronger if any kind of deal, including a buyout, were to be struck. So there’s an upside to waiting also. And if they get label expansion approval, who knows, maybe at that point sales will take off and a deal will be much less attractive to the company.
AI
