HCW - AMRN: Europe Can Present Second Wind for Vascepa, Despite Program’s Infancy (Buy PT 10)
European Vazkepa on verge of launch; approval expected April 2021. With domestic Vascepa’s European counterpart Vazkepa on the heels of a positive CHMP opinion, we note formal approval from the European Commission is expected in April 2021. Specifically informed by: (1) Amarin’s displayed domestic launch aptitude from Vascepa’s expanded label in cardiovascular (CV) risk reduction; (2) preliminary market access discussions in preparation for commercial launch and (3) the company’s actively growing European commercial team, we believe that pending approval, Vazkepa is well positioned to enter the European market comprised of upwards of millions of patients at high risk for CV events, despite potential statin therapy. While we believe education remains a top priority in terms of Vazkepa awareness and understanding of its CV risk reduction profile, we believe key strategic strengths of the prospective European launch are driven by: (1) Amarin conducting commercial launch without a strategic partner, with the potential to in turn reap the progressive country-by-country commercial benefits based on coverage market access negotiations; and (2) design of its intended label to focus on Vazkepa’s evidenced CV risk reduction benefit and not targeted to triglyceride (TG) reduction, which we note had presented the Achilles’ heel for the threat of generic entry within the U.S. market. A key point to appreciate about prospective European launch is that Vazkepa would be entering a CV market where there are no immediate competitors in the space and with established IP protection from generic entry. While we note Vascepa has continued to perform from a revenue standpoint domestically, reporting 43% year-over-year growth in net total revenue for 2020, we believe that the European presence of Vazkepa can directly drive both CV risk reduction awareness and top-line growth looking into the near-term horizon.
You thought that was it? China approval potentially near end of 2021. We emphasize opportunity for global expansion continues with strategic partner Edding (private) for the potential approval of Vascepa in China, further broadening the reach of its preventative CV risk benefits. We note approval is anticipated near the end of 2021, with: (1) the Chinese National Medical Products Administration (NMPA) reviewing icosapent ethyl for Mainland China approval; and (2) the Hong Kong Department of Health reviewing icosapent ethyl for approval in Hong Kong. Further informed from Edding’s positive topline from its pivotal Phase 3 trial, we believe that a potential approval in the region could be well received among high TG patients at risk for CV events. Lastly, as we turn our sights back to domestic positioning of Vascepa, we believe commercial progress continues to benefit specifically from: (1) Hikma Pharmaceuticals’ (HIK.L; not rated) launch of generic icosapent ethyl comprised of a skinny label targeted to treat severe hypertriglyceridemia (SHTG) patients, which Amarin notes is limited to approximately 7% of current Vascepa usage; (2) continued question of generic manufacturing capacity, product purity and stability; and (3) the prospect of Vascepa being able to potentially compete with regard to pricing informed from co-pays and rebates, as Amarin continues to determine the overall cadence of educational marketing.
4Q in numbers. The company recorded total revenues of $167.3M for 4Q20 compared to consensus of $164.4M, representing 17% YoY growth despite limitations posed by the ongoing pandemic. Total revenues of $614.1M were reported for full-year 2020, and represented 43% YoY growth. The company reported net income of $4.9M, or $0.01/share for 4Q20, and reported net loss of $18.0M, or $0.05/share for full-year 2020. Reported R&D expenses were $39.0M, and SG&A expenses were $463.3M for full-year 2020. As of December 31, 2020, the company reported $563.4M in cash and investments.
Valuation and risks. We reiterate our Buy rating and $10 price target. Our price target of $10 is based on equally weighted average of: (a) $9.23/ share, as a 30x multiple of taxed and diluted FY29 GAAP EPS of $0.95 discounted back to FY21 at 15%; and (b) an NPV of $10.16/share (discount rate 10%, growth rate 2%). Risks to our investment thesis include: (1) Vascepa commercial ramp-up and/or peak sales not meeting our projections; and (2) further competitive disruption of the omega-3 market by branded drugs or generics and/ or OTC supplements beyond our model.
