Buyout or Burnout for Amarin?


Amarin (NAS: AMRN) is approaching the point of no return. Its lipid-lowering drug, Vascepa, was approved back in July, but the company hasn't launched the drug yet. At that time, Amarin laid out three possible scenarios for a launch in early 2013: selling the company, a strategic collaboration with a big pharma, or launching the drug on its own.

Since then, the biotech has been lining up suppliers of the fish oil contained in the drug and manufactures to make the capsule, but it has been fairly mum on its plan for the launch.

It's getting to be the time when Amarin needs to stop cutting bait and fish.

In general, drugs prescribed by specialists can be successfully sold by biotechs. A larger sales force isn't going to help Dendreon (NAS: DNDN) sell more of its prostate cancer drug Provenge for instance. Give that Vascepa will be mainly prescribed by specialists initially, launching on its own wouldn't be the end of the world, but it's only a temporary fix.

Vascepa is currently approved to treat patients with very high triglyceride levels. There are 4 million Americans with triglyceride levels above 500 mg/dl, but many of them are treated by specialists that could be targeted by a modestly sized sales force of 250 to 300 sales reps.

Amarin ran a second phase 3 trial, dubbed Anchor, which showed the drug helped patients with triglyceride levels above 200 mg/dl in combination with statins such as Pfizer's (NYS: PFE) Lipitor, AstraZeneca's (NYS: AZN) Crestor, and Merck's (NYS: MRK) Zocor, but the FDA wouldn't allow the data on the label until Amarin had substantially enrolled a clinical trial confirming that the drug actually improved clinical outcomes -- heart attacks, strokes, and the like -- rather than just laboratory tests.

The company is ready to submit the Anchor data as soon as the study has reached the enrollment level required by the FDA, which should happen by the end of Feb, putting an approval for the expanded indication in the fourth quarter 2013. The expanded label will increase the potential market to about 40 million patients, requiring a large sales force that targets primary care physicians.

VIVUS (NAS: VVUS) is using the same strategy of launching on its own and then getting a larger partner down the line. In the long run it could create value, especially if potential partners are low-balling the price now. With decent sales under foot, a partner or acquirer will see the value and investors will end up with more in the long run.

But that strategy takes time, and biotech investors aren't known for their patience. If Amarin decides to launch on its own -- and we should get a decision on that shortly -- it seems likely that shares will drop on the news. Unless you're confident in management's ability to get a sale soon, I'd stay on the sideline and wait for an opportunity to pounce on the bad news.

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Fool contributor Brian Orelli has no positions in the stocks mentioned above. The Motley Fool owns shares of AstraZeneca and Dendreon. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

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