We believe the AMRN story near-term remains driven by a key strategic decision
on whether to sell company, partner Vascepa, or launch the drug itself. We
expect this decision to be made in late November. We remain bullish on longterm
prospects even with self-commercialization and see long-term value in the
patent estate with potential stock upside on ANCHOR patent issuances.
PT remains $28 ($27 AMR101+$1 cash). Risks: clinical, regulatory, IP, competitive.
AMRN is actively considering three potential strategic paths:
acquisition, strategic collaboration, or self collab w/wout 3rd party
support. Management noted that uncertainty on whether the FDA will
grant Vascepa new chemical entity (NCE) designation has presented
a challenge in discussions, although interested parties appreciate the
protection afforded by a growing patent estate including 8 issued or
allowed patents (3 composition, 5 method of use). AMRN has requested
that FDA make a timely determination, and believes that there are strong
arguments for 5-yr reg exclusivity under Hatch Waxman legislation but
cannot make assurances that the FDA will agree.
• Language in the 10-Q suggests that an FDA decision is imminent;
we believe it could potentially come late next week, in keeping with the
FDA's policy to update the Orange Book by the end of the second full
week of each month.
We estimate a $27 per share fair value for AMRN in 12 months via discounted cash flow (DCF)
analysis, representing a $4.5bn enterprise value on a fully diluted basis including all outstanding
warrants. Our valuation may be conservative since AMR101 could obtain up to five years
additional Hatch-Waxman exclusivity beyond 2021 patent expiration and is building a patent
portfolio with IP protection beyond 2030.
Reiterate BUY, $26 target; maintain positive view on Vascepa approval
and commercial, partnering potential. We continue to expect BD talks to
intensify and Vascepa to receive NCE (five-year exclusivity). Our $26
target is based on a sum-of-the-parts analysis, combining a DCF of high
triglyceride sales and pNPV of mixed dyslipidemia sales.
Amarin continues to progress toward an ultimate strategic decision and the company
reiterated many of the themes discussed since Vascepa approval in late July. While we
believe an exclusivity determination has little impact on the overall valuation of the
franchise, a conclusion would free Amarin to finalize its strategic planning and launch
of the product. We remain OW on AMRN shares given our view that Amarin can
realize significant value for the Vascepa franchise under any of the company's three
proposed scenarios (although clearly on different timeframes).
Using a DCF analysis on our assumptions that Amarin uses a "go it alone" strategy in
commercializing Vascepa, we see significant upside from current valuation.
Additionally, if Amarin decides to partner the product or sell the company entirely,
we expect additional upside from our valuation analysis.
Maintain Dec-13 price target of $24. Our discounted cash flow (DCF) analysis
leads us to a valuation of roughly $34/share for AMRN by the end of 2013,
following approval of Vascepa in the MARINE indication in 2012, approval of the
ANCHOR sNDA in late 2013 and a successful outcomes study read-out in the 2017-
18 timeframe. We assume that the company will launch Vascepa in early 2013 on its
own. In addition, we expect Amarin’s expense structure to continue to increase
through 2025 and that Vascepa maintains exclusivity through 2028.
The three strategic pathways remain in play. Amarin held its quarterly call this
afternoon, highlighting recent developments such as IP progress, approval of an
additional Vascepa encapsulator and positive reception of initial marketing efforts.
Of more immediate interest, the company continues to pursue three potential
pathways forward for Vascepa: buyout, partnership and self-launch. Although it is
unclear precisely how much progress has been made on the deal-making front
since the last update in August, the company did explain that the negotiations with
big pharma have been hampered by a lack of clarity on Vascepa’s NCE status.
Meanwhile, although Amarin expects to begin hiring a sales force by the end of
November (to stay on track for an early Q1:13 launch), it will remain engaged in
buyout and/or partnership discussions if necessary.
Reiterate NEUTRAL and $15 fair value. AMRN stock admittedly appears more
attractive for a buyout trade as shares move lower, now that expectations have
been reset and the company has bought some additional time to get a deal done.
That said, we believe the chance of a deal in the immediate future (prior to NCE
resolution) is low and the continued uncertainties regarding NCE and the strategic
process keep us on the sidelines for now.
FYE Dec 2011A 2012E 2013