Amarin Inventory: Indicators Of Higher Instances (NASDAQ:AMRN)

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I had given up on Amarin Corporation plc (NASDAQ:AMRN) after its plunge from the high-20s to below $10. However, a number of recent developments at Amarin are making it interesting again. Some of these developments were nicely summed up up in a comment from a reader on my previous Amarin article:

No mention of Denner and Sarissa? NO mention of combo to restore US market? No mention of probable AMRN legal success against HealthNet which will restore US market. No mention of upcoming suit by EPADI to reveal HIKMA’s fraud perpetuated upon the court?

This article will discuss these developments, but first, a brief background and update.

After losing its legal battle for its patent, Amarin stock took a deep plunge from which it never recovered. Ironically, though, Vascepa has done quite well commercially despite seeing a possibly covid-related decline in 2021. In 2020, it made $614mn, but that declined to $580mn in 2021. The company says it is Covid-related; we shall see how it does in 2022.

One reason that’s been suspected for the slight decline is generic introduction by Hikma and Dr Reddy’s. However, it should be noted, first, that these generics have what Amarin calls a “skinny label,” meaning they are approved only for TGL reduction and not for CV reduction like Vascepa. Now, a standard, ethically questionable approach some generic manufacturers take is to get a generic drug approved on such a skinny label, and then selling it also for the meaty level. The TGL label only covers 7% of the market, so it is understandable that such actively induced infringement, if true, could be harmful for Amarin.

The other related issue is that these drugs are covered by insurance, so Hikma’s alleged induced injury alone may not suffice; there needs to be active support from an insurer.

Amarin filed suit against both Hikma and such an insurer, Health Net, alleging a) that Hikma has done such active induced infringement, and b) that Health Net has also done inducement by covering use of Hikma’s product even for the patented indication. After both defendants filed to dismiss, a lower court rejected the dismissal suits. However, a US District Judge allowed Hikma’s dismissal suit while rejecting Health Net’s. Here’s the judgment from Jan 4, 2022.

I found the learned Judge’s argument unconvincing. The judge, while admitting “intent to induce,” found an actual act of inducement lacking:

The citation of Vascepa’s sales figures go to Hikma’s intent to induce. Intent alone is not enough; Amarin must plead an inducing act.

I find that unconvincing because there is no difference between “intent to induce” and an “inducing act” in this context. Vascepa’s sales figures are hugely constituted of its sales from the CV label which Hikma does not have. To cite that figure in its marketing material is a clear “inducing act” to my way of thinking. Hikma is intentionally using sales figures from a label it does not own to “induce” patients to buy its drug for that label, while cleverly couching it in a different language. I tend to agree with the lower court judge, who said:

Amarin’s claims “plausibly suggest … that Hikma’s label and public statements could instruct and/or encourage third parties to use its product for the” indication that Amarin said is covered by the patents at issue, Judge Hall said. She added that Amarin has also plausibly claimed “Hikma both knew and intended that third parties would use its product for that purpose.”

“In my view, that is enough,” Judge Hall wrote.

It’s a good thing, however, that this judge at least allowed the Amarin suit against Health Net to proceed. What was said:

Conversely, the court concluded Amarin’s complaint was sufficient to state a colorable cause of action for inducement against insurance carrier Health Net. The court focused on several factors. First, Health Net had knowledge of the patents in suit by virtue of a letter Amarin sent to Health Net explaining that it had patent protection for the CV indication. Second, Health Net offered coverage of Hikma’s generic drug, regardless of whether it was used for the SH indication or the CV indication. Third, Health Net affirmatively placed Hikma’s generic on a more favorable formulary tier than Vascepa®, knowing that this would make the generic more financially attractive to the end user and would thus encourage greater utilization of the generic over the brand, again regardless of the therapeutic use. Finally, Health Net imposed a prior authorization process which required a pharmacist to select on a form the indication for which the patient was receiving the generic, and which included the patented CV indication. Taken together, the court found that these allegations of affirmative acts by Health Net to encourage use of Hikma’s generic for the patented CV indication were sufficient to survive dismissal.

This lawsuit will, therefore, proceed, and if Amarin is successful – two courts have now sided with its view – then generic manufacturers will have a hard time getting insurance for generic Vascepa for the CV label. This will be a big – HUGE – win for Amarin, almost as good as winning the patent dispute itself.

The other question raised by my reader was the EPADII lawsuit. This lawsuit was brought by a group of “ad hoc” Amarin shareholders who called themselves EPADII – or EPA Drug Initiative II (an earlier EPAD I successfully pressured the FDA to approve Vascepa a decade ago). This time they were not successful. A Federal Circuit panel shut down the lawsuit after hearing two days of argument from the group’s lawyer.

There is a lot of merit in the actual content of the suit; but the judges shut it down using the time-tested method of questioning the group’s legal standing in the matter. Appeals to higher courts on Chief Judge Miranda Du’s opinion also suffered similar out-of-hand dismissals. You can read about that here and here. You can read about the statistical error that was the core of this lawsuit here – if you have access. You can read about the actual lawsuit here. I won’t go into it because it has been dismissed, and there does not seem to be any possibility of getting relief in the US Court on the patent invalidation issue, which is sad.

Coming to the combo thing; Amarin is developing a fixed dose combination of Vascepa and a statin. As Steve Ketchum, Amarin’s executive vice president, president of R&D and chief scientific officer, said:

VASCEPA’s indication for cardiovascular risk reduction provides for the use of the product on top of statin therapy. Our plans to develop and produce a product that has the two components in one has the potential to be a more convenient product for HCPs and patients.

On April 1, the company presented in vitro data to prove their point:

Experimental trial research presented at the American College of Cardiology’s 71st Annual Scientific Session showed that the combinations of EPA/atorvastatin active metabolite (ATM) and of EPA/rosuvastatin (rosuva) reduced lipid oxidation by 86% and 75%, respectively (p<0.001 )

This theory has a long way to go in the clinic before there’s such a fixed dose combo therapy. However, the core takeaway here is that “while statins and EPA can work independently to reduce lipid oxidation which can contribute to cardiovascular risk, they might work even better together,” according to the company.

If such a combo is successful, Amarin can take the ground off from under the generic maker’s feet. Watch this space closely for updates on this topic.

Lastly, we have Alex Denner’s Sarissa’s increasing stake in Amarin. This was the news from January 25, when Mr. Denner increased his position from 2.2% to 6.1%. With this move, Sarissa is now Amarin’s largest shareholder, above BlackRock’s 5.3% and BVF Inc’s 4.1% – BVF is owned by Mark Lampert. Of course, the latter two are passive investors, so a lot of focus is now on what Mr. Denner wants to do with his newfound clout.

Denner, who sits on the board of Biogen and was once responsible for a much needed shakeup of the company, is a well-regarded name in the activist investor universe. A protégé of Carl Icahn who seems to have parted ways after a fallout, Denner was able to sell The Medicines Company to Novartis for a whopping $9.7bn in 2020. Earlier, he was responsible for selling Bioverativ and Ariad Pharmaceuticals. Frankly, his bio is a long list of multibillion dollar sales, and interestingly, Sarissa Capital “focuses on improving the strategies of companies to enhance shareholder value.” That could mean something very interesting for Amarin. Note that when he orchestrated the The Medicines Company sale, he held less than 3% of the company.

Another interesting titbit of news that is probably unrelated to anything here is this one about Russian oligarch Roman Abramovich’s putting in anonymous funds in a number of major US funds, including Sarissa.

Coming back to Alex Denner and Sarissa, Denner, who has a Ph.D in Biological Sciences, was able to complete the The Medicines Company sale within 7 months of his filing the 13D. Interestingly, The Medicines Company also developed and marketed a cholesterol-lowering drug. When it was sold, it was neither FDA-approved, nor did it have any revenue.

One persistent problem with Amarin has been that, under its former CEO John Thero, Amarin took a petulant “I-shall-not-sell” attitude towards its assets. Now that the company has seen major setbacks – and Thero has left the company – there’s a strong chance the current regime will be more amenable to a sale if the right person can orchestrate it. If the company does not fight a sale plan – which is essentially what Alex Denner does – then this will be easy. However, if they do fight it, then their Ireland office and UK incorporation may pose challenges in the way of Dr. Denner quickly becoming a director at the company, see here.

However, these are a number of positive developments at Amarin, of which I was once a shareholder. Unlike an approval, earnings – or a patient ruling – these developments are slow burners. It will take time to see anything happen, much less for the stock to move as a result. However, if Amarin is able to a) win the Health Net case, or b) get the combo drug in the clinic, or c) get an M&A buzz going through Sarissa’s orchestration; if it can do any or all of these things, Amarin stock will start moving up again. I plan to get in on the stock at the first sign of such activity.

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