Can This New Drug Win Against Established Competitors?
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It’s not just about offering a better drug, but it’s also about launching it at the right time in the market. This is what I learned while studying about Amarin (NASDAQ: AMRN), which has a new drug out to cater to a vast number of patients in the cardiovascular realm. The phase III trial results have all been positive, yet, the presence of established competitors can leave some investors unsure about the drug’s place in the market.
Despite the existence of blockbusters like Lovaza, Tricor, and Trilipix, Vascepa does have the potential to make it big. Next question is, “Well, Vascepa has chances as a drug, but can Amarin make use of this opportunity?” As discussed below, the scales are tipping in favor of Amarin.
All that is in favor of Vascepa and all that is not
Factors in favor:
The drug has been developed to treat patients with hypertriglyceridemia, which is a huge market. Its performance was good in the MARINE trial, in which investigated treatment of patients with very high triglycerides was done using the drug. Performance in the ANCHOR trial indicated that the drug was potent in the treatment of patients with high triglycerides who were also on statin therapy.
Additionally, post-hoc analysis of the ANCHOR trial results have revealed the drug’s ability to reduce the levels of Apo C-III, which is associated with increased cardiovascular risk. Finally, the REDUCE-IT study results, if positive, would be an icing on the cake because they demonstrate the drug’s efficacy in reducing the risk of adverse cardiovascular events in patients, when used in combination with statins.
However, if the results do not turn out in favor of the drug, it would not cast doubt over its efficacy as a hypertriglyceridemia drug.
Chances are high that the REDUCE-IT trial results would be in favor of the drug, since it has demonstrated the ability to significantly lower triglyceride levels in patients who are on statin therapy, and post-hoc studies have shown reduced Apo C-III levels, which are associated with cardiovascular risk.
On the commercial front, FDA’s approval of Chemport as a supplier of API for the drug, helps contribute to the company’s plans for global manufacturing chain expansion.
Factors not in favor:
No decision has yet been made by the FDA on the NCE (new chemical entity) status of the drug. This will impact patent-longevity. The company has also not yet established a partnership with another company regarding the marketing and distribution of this drug in the U.S. or elsewhere.
There was a recent update in FDA’s Orange Book that stated, “there is no unexpired exclusivity for this drug.” The company’s shares recently fell after news of the Orange Book update came out. Amid the wait on the NCE decision, news of the Orange Book update led to deterioration investor confidence. Overall, the company’s commercial moves, as well as the strength of its product are positioning it well for success in the market.
The major competitor of Vascepa in the market is GlaxoSmithKline’s (NYSE: GSK) Lovaza. The drug generated about $926 million in sales for the company in 2011. This shows the large market that Amarin is getting into with Vascepa. Outdoing a well-performing drug would be tough and depends on the superior differentiating qualities of Vascepa.
The primary advantage this medication offers over Lovaza is that it lowers triglyceride levels in the blood without raising LDL (bad cholesterol) levels. Lovaza, on the other hand, does raise bad cholesterol levels. Currently, GlaxoSmithKline is involved in an inquiry over fixing the price of its products. It has been accused of entering into price-fixing agreements with its rivals for one of its top-selling drugs, paroxetine.
It seems the company may have entered into such deals to offset the losses it is facing from generic competition. A recent positive piece of news however, is that the FDA advisory panel has backed GlaxoSmithKline’s lung drug.
The other competitor on the scene is Abbott Laboratories (NYSE: ABT). Abbott has a drug called Tricor, which is used for lowering cholesterol levels in patients at risk of cardiovascular disease. The drug reduces LDL and triglycerides level, while increasing HDL levels. Another one of its drugs called Trilipix is also used for treatment of high cholesterol and high triglyceride levels.
The combined revenue of Tricor and Trilipix was about $1.7 billion in 2011. However, last year, the company was caught in a lawsuit involving illegal promotion of their drug Tricor. The lawsuit accused the company of promoting Tricor’s off-label use for prevention of cardiac health risks in diabetic patients.
Additionally, the company is facing generic competition from the likes of Teva and has in fact entered into a licensing agreement with the company recently. Indian pharmaceuticals company, Lupin, also launched a Tricor generic in the U.S. last year in November, and is likely to be followed by Ranbaxy and Wockhardt.
No doubt Amarin’s competitors are huge, but the company’s product has its current advantages over the medications of the two giants for this highly profitable market of hypertriglyceridemia. Amarin needs to heavily market its product at this opportune time and establish itself as a strong player in the market.
Amarin’s product is coming at a time when its bigger competitors are facing a rough patch with generic versions entering into the market. Amarin should tease out every single differentiating factor between its Vascepa and the other major drugs on the market, and ensure patients and physicians are well educated regarding them.
One factor that will be very important in the long-term success of this drug in the market, however, is the patent exclusivity period that it will be able to get. For this reason, the NCE decision is eagerly awaited.
Outlook for Amarin
Analysts have estimate a rise in the revenue for the next quarter by about $6.11 million and for the next year by $223.17 million. Amarin’s growth estimate for the next year is 65.2%, while that of the S&P 500 is 12.9%. The growth estimate comparisons for the next five years are 74% for Amarin, 12.54% for the industry, and 8.98% for the S&P 500. So, we can see that the stock is undervalued currently and is a good investment option.
Amarin has been taking positive steps like implementing early physician awareness and speaker programs, as well as implementing a co-pay reduction program that offers Vascepa to patients for a co-pay cost equivalent to competitors. Marketing campaigns are also underway to support the sales force and educate doctors and patients about the new drug. Looks like Amarin is headed in the right way with Vascepa and is likely to reap benefits soon.
This article is written by Shilpi Ghosh (BS, UCLA, MS in Biomed, Cal Poly, MBA in Finance, IIFT) and edited by Shas Dey, StockRiters' Editor-in-Chief. Neither StockRiters nor any of its Directors or employees have any position in any stock mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!