Amarin: New Management, But No Radical Changes To Strategy, Or Outlook

In my previous article, we saw Sarissa taking over Amarin’s (NASDAQ:AMRN) management completely. The earlier CEO and top management were let go. A day after I posted that article, they announced an interim CEO - Aaron Berg - who has been at Amarin for a decade. For the last 5 years, Mr Berg was Senior Vice President and Chief Commercial Officer of Amarin.

Since then, the company declared earnings in May, did the usual earnings call but under the new, Sarissa-controlled management and the new CEO, and presented at Jefferies and Goldman Sachs conferences. In other important developments, Vascepa was also approved in Mainland China and in Saudi Arabia. I will cover these things and then consider the investment thesis for this stock that I once used to have in my portfolio.

In the previous quarter, the company made about $82mn from Vascepa in the US. Despite a fall of 7% from the same quarter of the previous year, they still hold 57% of the IPE molecule market share in the US, despite generic competition. This is outstanding, and it has been made possible by a number of factors, including control of key raw materials, appropriate pricing, and the solid data from the REDUCE-IT trial, which competing molecules do not have. However, citing “additional cost reductions and timing of reimbursements, Amarin lowered its full-year outlook for operating expenses to $270M – $285M from $290M – $305M in the previous forecast.” There are now 5 generics approved in the US, with Teva being the latest launch. The company expects a modest decline in prescription levels for the remainder of the year and “beginning in Q2, a decrease in our net selling price as we work to retain key customers to the brand.”

The new CEO also noted that they need to do better in the EU:

However, we are not where we need to be in Europe. While we will continue to work to optimally manage the U.S. business, I am focused with the team on ways to accelerate patient access and revenue in Europe.

Despite early launches in the U.K. (England & Wales), Sweden and Finland, what is slowing down Vazkepa in the EU is extensive formulary negotiations, which seems to be the European way of doing things, unlike in the US, which is always relatively pro-industry in these things. As the company mentions, in Europe, their team is burdened with “various Health Technology Assessment (HTA) processes and pricing & reimbursement discussions in all markets where Amarin has submitted market access dossiers.” The added time is because despite having a same size population as the US, in Europe you need to negotiate with about 30 different countries. They have begun a very small revenue stream in the EU (mainly in the UK, not exactly the EU, right?), and they had European product revenue of $0.4 million compared to $0.3 million in Q4 2022, reflecting very early revenues from the U.K.

The following excerpt tells us how difficult the EU negotiation is country by country:

In Spain, we've completed a third round of negotiations, which is not uncommon in this market, and the process is ongoing. The next step is another round of negotiations expected in the near term.

In Italy, the team is anticipating additional feedback and minutes from a recent round of negotiations in order to determine the best next steps. The process in France is difficult, and we don't expect a decision this year.

In the first quarter, Amarin got approvals in Israel and New Zealand. In early January, their partner EddingPharm received approval in China. The two partners now plan to seek reimbursement and launch Vascepa in China by the year-end. They will also aim to expand their label in cardiovascular risk reduction (CVRR). Amarin will receive $5mn as a milestone fee upon approval, and is also eligible to receive tiered double-digit percentage royalties in net sales in that country.

The molecule was also very recently approved in Saudi Arabia, where apparently 30% of adults are at risk of cardiovascular disease (CVD) events. Vascepa is the first and only drug approved there “as an adjunct to statin therapy in adult patients with elevated triglycerides (TG) levels (≥150 mg/dL) who are at high-risk of cardiovascular (CV) events due to established cardiovascular disease or diabetes mellitus and at least one other risk factor for cardiovascular disease.”

The company, in other developments, has worked hard to reduce costs. Since June 2022, they have embarked on a cost reduction plan which has saved them $100mn. Their expenses are still quite huge for such a small company. Cost of goods sold for the three months ended March 31, 2023, was $38.0 million, which includes a one-time $12mn charge due to an amended supplier agreement. Selling, general and administrative expenses for the three months ended March 31, 2023, were $59.6 million, while research and development expenses $5.7 million. They have a cash balance of $305mn.

Risks to an investment in Amarin

Amarin is going through a major transition phase right now, with Sarissa’s onboarding, however I see nothing new in terms of radical changes at Amarin. Amarin continues to be the same old wounded gladiator who lost a match in an unfair judgment, and is probably never going to fight again. There are two areas where, if Amarin had wanted to, it could have brought in radical changes. One is M&A, and the other is any major addition to its portfolio. On both these questions, management side-stepped deftly. They have no plans, and they are looking. Guess what, so are we - we have no plans to invest, and we are looking for future developments.

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