DaveAlan
In the last 5 years, I have covered Amarin (NASDAQ:AMRN) 33 times. I have followed it from every possible angle, and this company remains an object lesson for me, helping dissuade me from any kind of buy-and-hold policy in biotech investing. Biotech investing can have rich rewards, but these investments tend to fall apart if you become complacent, fall asleep at the helm, and so on.
My last coverage of Amarin was nearly 5 and a half months ago. In that article, I discussed five issues – Sarissa Capital’s Alex Denner’s ever-increasing role in Amarin, a STAT report from Matthew Harper about a new twist to the mineral oil story, Amarin’s suspended guidance, earnings miss, and a change of guard.
Since July, Amarin has extended its global coverage, with fresh approvals in Switzerland, final guidance from the UK’s National Institute for Health and Care Excellence (NICE) recommending Vazkepa for reimbursement and use, partner HLS got approval for reimbursement in Ontario, and the 5th regulatory body to approve it, Australia’s Therapeutic Good Administration (TGA). With a broader label in Europe, Cantor Fitzgerald’s Louise Chen valued the European opportunity for Vazkepa at $1.1 billion in 2029, making a bulk of the estimated $1.9bn in 2029.
The company had trouble in Germany, where it first launched Vazkepa in Europe in September 2021. Their German subsidiary was unable to reach a viable agreement with the National Association of Statutory Health Insurance Funds (Spitzenverband der gesetzlichen Krankenversicherungen – GKV-SV) on the reimbursement price of Vazkepa in that country after four rounds of negotiations, and the matter has now gone to arbitration. The company was forced to stop supply of Vazkepa in Germany, and discontinue its German business operations.
Germany has a history of being tough with these negotiations. Two decades ago, AstraZeneca’s (AZN) Crestor could not be launched in Germany for 5 years because of over-bargaining; recently, Rybrevant from Johnson & Johnson (JNJ) and a Novartis medicine also faced the same trouble. However, as the company noted in its earnings call:
There has been one precedent on the German market where a product that received a negative decision that went back and applied. In that case, they actually used real world evidence, data to support the clinical benefit. I’m not saying this is exactly what we’re going to do. But I’m just mentioning that there is a path. There is a very specific path to resubmitting a file in Germany.
Here’s a long quote from their latest earnings call which helps understand the situation:
Roanna Ruiz
Roanna Ruiz from SVB Securities. I wanted to check in a little bit about Germany and arbitration decision. [indiscernible] if you still expect to be on track for a mid-November update there?
Karim Mikhail
On Germany, the timing of the arbitration is mid to end November. As you’ve seen from prior disclosures, we already took all the actions needed basically to eliminate cash burn in Germany waiting for a decision. In general, arbitrations usually do not lead to a positive decision. Let’s be very real. That’s usually a low probability of success. And if you succeed, usually there is risk in lowering the price, which will have impact on other markets.
The decision we took, which is to say, look, we’re going to suspend operations in Germany, was to protect the price in the UK and Sweden and Finland, the price we’re negotiating in Spain, as you can imagine, and other prices because the value of Germany as a country – let’s assume that a large market is 15% of total Europe, right? So, if that country is going to give you a price 15% less than your average European, you are at a loss, right? So, we are not going to accept a price less than 15% because so far we have a very consistent approval pricing level at the European level, right? If you look at our Finland price, it looks today maybe just like lower than the UK. In fact, it’s only because of exchange. In reality, it’s higher based on earlier calculations. So that’s really for Germany and arbitration.
What I want to understand is, what is making Germany be this forceful in its negotiations? What I really want to understand is – is that because of the generic battle that has been fought in the US – which Amarin kind of lost? Do the Germans think they have an ace up their sleeves in these negotiations?
This is my worry because if the Germans think they can push Amarin this far, maybe the UK’s NICE, which is usually the most proactive regulatory body in Europe, will also think like that? What happens if the other governments worldwide follow the German method? That will be terrible for Amarin; and it all comes down to one unknown judge in a small town in America.
If you don’t know the backstory: fish oil contains two omega-3 long chain polyunsaturated fatty acids, EPA and DHA. Fish oil and fish supplements have been traditionally used for their health benefits, specifically benefits to the heart. Amarin demonstrated – in a large trial called REDUCE-IT that the FDA recommended – that a certain percentage of very specific EPA (known as icosapent ethyl (IPE), a highly purified and stable EPA ethyl ester) is responsible for these health benefits. Not just any benefit, but cardiovascular benefit; this was what it took Amarin millions of dollars to demonstrate ($500mn, 8000 patients and 11 years, to be precise). Vascepa, their medicine, is not just fish oil; it is a very specific formulation of fish oil (EPA) which, and which alone according to REDUCE-IT, can reduce CV risk.
Generic companies got lucky; a judge ruled that there is nothing novel enough in vascepa, it does not deserve patent protection. As a result, Amarin lost the US market. However, there was no such ruling in Europe, and vascepa, or vazkepa as it is known in Europe, remains patent protected.
Amarin has been missing earnings estimates and lowering, and then suspending, guidance. Amarin used to have spunk – they once sued the FDA and won. These hurdles are now looking insurmountable for the little company. Europe and other developed countries ex-US are their only markets. The German action, therefore, is a deep cause of worry for the remaining Amarin investors. If arbitration does not work, the German market will be lost for good. More worryingly, other markets may take this as a bargaining opportunity. That will hurt what little market the company has been able to salvage.
Amarin, today, has a market cap of $500mn. They have a cash reserve of $306mn, net product revenue of $89.9mn, and operating expense of approximately $68mn. So they have cash, but not a lot of it. This cash does not give them a lot of leverage. If another market besides Germany goes, I think the company will be in serious trouble.
Be the first to comment