The run-up to Amarin's (AMRN) advisory committee on October 16th has been muted by the ruling favoring generic manufacturing of Lovaza, but also by a sense amongst would-be investors that the payoff may not be worth the risk after all. And there is more risk than some would have you believe. More on that later.
There's also a sense of foreboding rooted in the FDA's silence and Adam Feuerstein's loud warnings of delay.
In my first and only article on Amarin found here, I essentially stated what I still feel today. Vascepa is a wonderful drug that will gain market share within its present indication. I also mentioned that I believed Adam Feuerstein's pessimism regarding Anchor approval suggesting a delay until the cardiovascular benefits of Vascepa can be confirmed was overblown at best. The FDA had already ushered Vascepa to success in the Marine indication because its agenda of supporting ObamaCare by keeping patients out of the hospital through preventative care trumped any misgivings it might have had. And I thought then that Anchor approval would run a similar course.
Recently, I liquidated my position in Amarin and moved my principal and profit to Cyclacel (CYCC). I did this because I listened to the Amarin presentation at Canaccord Genuity and heard several things that gave me pause suggesting that Mr. Feuerstein might be correct after all.
Silence
Let's take a measure of President John Thero's confidence index expressed at Canaccord in these remarks. It should be noted that Mr. Thero prefaced nearly every statement concerning the advisory committee meeting and Anchor's sNDA with brimming conviction in its approval.
Now from an adcomm perspective we've not yet gotten the briefing book from the FDA. That's not prevented us from having multiple mock advisory board committee meetings. We had planned for an adcomm for our Marine indication but we ended up not needing one because the FDA decided not to have an advisory board for that. Similarly, we've been planning for awhile for an advisory board meeting for the Anchor indication in the event that we would have one and the FDA has told us that they would assign that particular day. So we've been going through multiple mock advisory board meetings.
This has been done with our internal staff. This has been done with the help of a professional firm that does specialize in doing these things. And also we have lots of advisors and we've been pulling in other doctors who have a lot of experience at advisory board participation to try to challenge ourselves on questions that could be asked and haven't yet found a question that we don't believe we have very good answers to.
So we begin with a continuance of the FDA's silence on NCE with the withholding of a briefing book. And forgive me for saying so John, but your extensive preparations seem to contradict your declarations of faith. But let's give Mr. Thero the benefit of the doubt here and simply commend him on preparing well for battle. Make no mistake however, battle is exactly what Amarin is preparing for.
Hidden Bias
Now there are those of you who might believe that the FDA approval process is solely a function of scientific analysis appraising the benefits and detriments of a certain drug or device. And I'm not here to attack your position. I do however have a different one.
I believe that in addition to this objective assessment of a candidate based on its merits there are also subjective elements at play. The agenda element I spoke of earlier would be one. And, of course, there are others.
(click to enlarge)
My core theory goes something like this. Representatives of the FDA are human beings subject to all manner of temptations, frailties and unconscious motivations that each of us is subject to on a daily basis. One aspect of our human condition is an innate proclivity to think prejudicially in terms of our friends. We define our friendships essentially by what a person can or cannot do to further our own survival.
Representatives of big pharma like AstraZeneca, Novartis, Biogen, Gilead, Amgen and GlaxoSmithKline (GSK) meet with FDA representatives and surrogates hundreds of times a year. Friendships are struck. And when an outside party - defined as someone who meets with the FDA once or twice a year comes along with a competing product they're likely to meet with resistance rooted in subconscious motivations. How this plays out can be interesting.
Take for instance the recent rejection of Aveo's Tivozanib. In an article entitled, The ODAC Postmortem: Lessons Learned Part 1, Aveo, PropThink's Dr. Aafia Chaudhry suggests "four main areas that contributed to a negative panel vote. 1. Tone set by Richard Pazdur, MD, Director of Division of Oncology Drug Products, and by Mikkael Sekeres, MD, Chair of ODAC Voting Committee"
Here's Dr Chaudhry.
FDA framed the tivozinib review in the context of their concerns about the increased potential detrimental survival signal; the availability of other approved therapies in this setting; and their concerns with flaws in the study design and the unexplained 30 day safety/mortality discrepancies. Pazdur was very vocal throughout the session in reiterating these points, and the committee's questions certainly focused extensively in these areas. Sekeres opened the questions to the sponsor with a scathing criticism directed to Robert Motzer, MD (principal investigator for the AVEO pivotal study) on the poor study design. In my opinion, the position of the FDA and the ODAC Chair definitely set a negative and somewhat hostile tone for the proceedings.
Sounds frustrated, yes? Dr. Chaudhry is certainly suggesting an absence of objectivity. Of course Pfizer's Sunitinib was standard of care in the disease space that Tivozanib was attempting to enter and Aveo chose to avoid a head-to-head comparison in their pivotal trial. But it might be more helpful to understand that Pfizer representatives have developed long lasting friendships with FDA personnel.
Now, am I suggesting that FDA rejected Tivozanib on bias? No, I'm not. The trial was poorly structured and failed on merit or lack thereof. I'm simply bringing this to your attention to illustrate a point that Dr Chaudhry certainly seems to confirm as existent.
So what does this have to do with Amarin?
Well you would think that one of those many advisors President Thero spoke of earlier would have gone over his prepared remarks at Canaccord and weeded out this one regarding GlaxoSmithKline.
Now we are marketing this [Vascepa] to the very high triglycerides population right now. Most of Lovaza use is not in that population. So the only thing it's approved for - most of Lovaza use is not in that indication - most of it is off-label in the 200 to 500 category which is where we're going with Anchor.
Today, we're being very careful to not market our drug off-label. We think we're going to be getting that indication in December and the last thing we want to be doing is going into FDA conversations with them suggesting somewhere that we're marketing it for that indication already.
When we do get that indication which we're counting on, we intend to make it very clear to docs that they have a misconception over Lovaza being approved for that indication. In fact, Lovaza was studied twice for that indication and failed to get approval due to its LDL increase.
Furthermore, we're going to be working with, continuing to work with the payers to insure that they're aware of the off-label use of Lovaza and seek, at least with certain of the plans the opportunity to put further restrictions on off-label use of Lovaza.
What's that old expression? Some things are better left unsaid. I think that qualifies!
Apparently, certain business persons believe that their audience is comprised strictly of investors interested in their product and that competitors aren't paying attention. Furthermore, they must believe that noting the strategic advantages of their product over a competing brand has only one possible outcome - stirring investor interest. I believe that Mr. Thero may have stirred an undesirable amount of interest amongst a larger audience than he has bargained for.
Another FDA Agenda Amarin Continues to Ignore - Corporate Tax Avoidance
As previously mentioned, I noted the benefit of approaching this FDA with a product designed to make patients healthier and keep them out of the hospital - ObamaCare.
There is however another agenda that the FDA might be pursuing unbeknownst to corporate applicants in the drug approval process. And that is a disdain for companies that gloat over avoiding taxation by establishing their corporate centers of operation abroad.
Amarin never seems to miss a chance to remind investors of their low tax obligations afforded them by their location in Ireland. Might I suggest that the FDA has been listening to that as well.
(click to enlarge)
Consequences of Holding Through Adcomm and Approval in December
Generally speaking, I avoid binary events. There seems to be little to gain by holding through them and much to lose. Though adcomm is scheduled for October 16th, the FDA has notoriously leaked a document in advance of such proceedings that provides a tip to the direction it might take. Investors should be alert not to fall asleep thinking that their investment dollars are safe up until the scheduled day of reckoning.
Also, holding through a positive adcomm might not provide the price per share lift I anticipated months ago. Vascepa prescriptions have been rising but revenues have not kept a commensurate pace. I believe Q3 will be the exception and sales figures will speed past $100M for the quarter. This together with a positive adcomm could see prices appreciate rapidly. Then again, maybe not.
The problem for investors now is weighing that possibility against that of delay. There's no doubt Anchor will one day be approved for Vascepa, but any delay would weigh heavily on the company's prospects. It would likely force them to either accept a partnership in advance of eventual approval on uneven terms in order to make marketing expenses or sell the enterprise for a fraction of the lofty figures bantered about by longs over the past year or so.
If neither of these options were chosen, investors might have to slog through more secondary offerings or perhaps Amarin would choose to borrow more money instead. Regardless, the price of the stock would then slide and stagnate for an indeterminate period of time.
This would be the year's saddest outcome of all. Vascepa is an extraordinary product with health benefits that are equal to its low side-effect profile. Amarin should be granted FDA approval for the Anchor indication. And on every rational level, it's quite possible that it will be. It's certainly the right thing to and the best thing to do for patients.
Now, if only we lived in a world where these were the only considerations.
Always be well...
Michael Webb
Disclosure: I am long CYCC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
Additional disclosure: Any information or opinion expressed herein may not be true, accurate or correct and it does not constitute any suggestion to buy, sell, hold or adopt any investment strategy for this stock or any stock that may be mentioned. Reliance upon information in this article is at the sole discretion of the reader. The sole purpose of my article is to entertain by providing information the accuracy of which is as good as the public sources it was derived from. Do not act on anything I have written. Rather, do your own due diligence and consult an investment professional before making any investment decision. Acting on what any one writer, including me has imparted to you is foolish at best. I have no better access to resources or gift of opinion formulation than you do. I sometimes make mistakes. There are a myriad of things which can happen in lieu of any forward looking statement I have made. Any stock featured or mentioned in an article I compose is subject to all manner of influences which can change its value in dramatic fashion upwards or downwards. These events can be of a wide variety not limited to news related occurances, managerial decisions, trial failures, stock manipulations and so on. I make every effort to declare positions I have in stocks I cover or mention in an article but reserve the right to move in and out of said investments at my own discretion based upon the wisdom of doing so. I implore you to do your own due diligence, invest at your own considerable risk attaining the just reward your efforts have wrought. And always be well.
It seems strange to me that someone would "gamble" over $62k on a call option that expires next month simply on a "hunch." In my opinion, this almost always means that someone "knows something." After the option buy, I decided to buy some shares of the stock.
