Unlike other mainstream investment sectors that at least have a semblance of predictability, the pharmaceutical industry is notoriously volatile. Case in point is Amarin (NASDAQ:AMRN). Specializing in an omega-3-based treatment called Vascepa, the drug is designed as an ancillary treatment to reduce cardiovascular events for patients with elevated triglyceride levels.
Source: Pavel Kapysh / Shutterstock.com
Prior to December 2019, the Food and Drug Administration had already approved Vascepa. But Amarin stakeholders had to wait until the last month of the year for FDA approval to sell the drug specifically to reduce cardiovascular disease, as InvestorPlace.com Contributor Will Healy noted.
Amarin got the green light they were seeking. Yet its equity saw plenty of red in the charts.
Why? As I pointed out in late November, tests demonstrated Vascepa’s efficacy as a heart attack preventative platform. However, because of the underlying lucrative market — about 630,000 Americans die from heart disease annually — it attracts several competitors.
Oppenheimer analysts reported that off-label use of Vascepa is already at sky-high levels. That’s unlikely to change as demand for cardiovascular treatments invariably rises. This is not just a reflection of current health trends but of demographics as well.
Although millennials love to talk about yoga and other wellness endeavors, their actual health track record is poor. According to health-related surveys, Americans aged 23 to 38 years “suffer from higher rates of physical ailments, such as hypertension and high cholesterol.” The latter ailment is one of the factors that leads to elevated triglyceride levels, which is what Vascepa addresses.
And that’s one of the main reasons why big pharmaceuticals like AstraZeneca (NYSE:AZN) is jumping aboard and competing with Amarin. Simply put, there’s too much money on the table up for grabs.
Vascepa May Not Be All That Great
Typically, you would assume that FDA approval to distribute a drug for its initially stated intentions would be a gamechanger. However, looking carefully at the regulatory agency’s language, it sounds like they approved the drug based on what it doesn’t do than what it does. Let me explain.
First, Amarin doesn’t necessarily have a breakthrough on their hands. Obviously, fish oil has been around for as long as there have been fish. In terms of active ingredients, Vascepa is not unique. Therefore, Amarin opens itself up to competitors, particularly the well-heeled kind.
And because the treatment is based off an established platform, it doesn’t impose devastating side effects. The main complications are diarrhea, joint pain and sore throat. Therefore, Vascepa presents a more palatable case for approval rather than a truly experimental drug.
Second, Vascepa is an “adjunctive treatment option,” meaning that it’s not the whole shebang. Other treatment solutions must be in place for Vascepa to work effectively. And these other solutions include, funnily enough, proper diet and exercise.
Unfortunately for Amarin stakeholders, it raises a question: what’s more effective? Vascepa or the other solutions, which include the tried-and-true diet and exercise?
This is not just a philosophical question. For years, health-food and supplement manufacturers have pushed omega-3 products. However, Harvard Health Publishing chief medical editor Howard LeWine M.D. cautions that omega-3 is not necessarily a panacea. Dr. LeWine writes:
“Omega-3 fatty acids play important roles in brain function, normal growth and development, and inflammation. Deficiencies have been linked to a variety of health problems, including cardiovascular disease, some cancers, mood disorders, arthritis, and more. But that doesn’t mean taking high doses translates to better health and disease prevention.”
There’s a chance Vascepa isn’t really that effective, which would obviously hurt Amarin.
Amarin Is a Risky Proposition
Interestingly, the FDA acknowledges that Vascepa is not the end-all, be-all for cardiovascular disease prevention. The federal agency wrote that the “mechanisms of action that contribute to reduced cardiovascular events among patients taking Vascepa are not completely understood.”
In my view, that’s not a glowing endorsement. Furthermore, Dr. LeWine notes the following regarding omega-3’s purported efficacy:
“But the evidence for improving heart health is mixed. In November 2018, a study reported in the New England Journal of Medicine found that omega-3 fatty acid supplements did nothing to reduce heart attacks, strokes, or deaths from heart disease in middle-age men and women without any known risk factors for heart disease. Earlier research reported in the same journal in 2013 also reported no benefit in people with risk factors for heart disease.”
When you combine the above scientific ambiguity with increased competition in the space, the risk-reward profile for Amarin becomes poor. With a two-front battle, I’d prefer waiting for further results before placing a serious wager.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
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