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Amarin: 85% Of Doctors Polled At AHA Conference Intend To Prescribe Vascepa
Nov. 14, 2018 1:05 PM ET|
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About: Amarin Corporation PLC (AMRN)
Motorhead
Motorhead
Long/short equity
(303 followers)
Summary
Motorhead attended the AHA event where Amarin's Reduce-It trial results were revealed. There were 2,500 doctors in the audience. 85% said they would prescribe Amarin's Vascepa to their patients.
When secondary endpoint results were revealed, the entire audience erupted in applause. It was the first time any trial results received such a response, according to one cardiologist there.
There have been negative articles in Forbes, Seeking Alpha, etc. on the fact that the Reduce-It trial used mineral oil placebos. Motorhead got a response from Reduce-It's lead doctors.
While the mineral placebo issue is a misconceived risk for Amarin, should the stock drop, we would see this as a buying opportunity, as would Big Pharma and institutional investors.
We have details below of how spurious the "mineral oil" placebo concern really is.
Amarin Is Now Trading At A 1.3x PER On Our 2022 Estimates And The Recent Drop Is A Buying Opportunity
Due to the confusion and misconceptions over the use of mineral oil placebos in the Reduce-It trial, Amarin's (NASDAQ:AMRN) stock dropped by 27% over the past two days, despite better than expected secondary endpoint results in the Reduce-It trial presented at the American Heart Association (AHA) conference last weekend.
Motorhead attended the AHA event and participated in several meetings over the 2 days there. The huge drop in Amarin's stock price is a buying opportunity in my view, as it is based on concerns that the trial data might be not as good due to the use of mineral oil placebos. I explain below what Dr. Deepak Bhatt - leader of the Reduce-It trial - and other medical experts told me about this concern (basically that it's a non-issue that mainly exists in the investment community). But for a great explanation of why this whole mineral oil concern is probably insignificant, please read this excellent report by Seeking Alpha contributor Oneil Trader here.
Doctors we met at the conference said that they would begin prescribing it to their pre-diabetic patients, on top of their patients already afflicted by diabetes. Cardiologists said the same about their low and high-risk patients. Of the 2,500 doctors polled at the AHA conference, 85% said they would prescribe Vascepa to their patients. This is a significantly high number and a vote of confidence for Vascepa's efficacy.
The patient population of low to high cardiovascular risks in America is between 39m and 70m. If one assumes 50m patients will use Vascepa (which costs roughly $1,464 per year based on Amarin's revenue/prescription in Q2), one arrives at peak sales of $73.2bn in America alone, which is nearly 5x that of Pfizer's peak sales of Lipitor.
Motorhead continues to use $10.8bn in peak sales in 2022, with an operating margin of 40% and a 21% tax rate, which yields an EPS of $11.6 and PER of 1.3x. I continue to believe that the stock should trade up to $81 on steeply discounted PER assumption of 7x (38% lower than the average 11.4x among Big Pharma's 2022 average PER). But even at half of my $81 target price, Amarin's market cap of $11.8bn is only slightly more than most Big Pharma's annual R&D budgets. It would make more sense to buy Amarin and use one's big legions of MRs to expand Vascepa sales globally.
Given the overwhelmingly ecstatic response by the thousands of doctors attending the AHA event, I believe Amarin ultimately gets taken over by a big pharmaceutical firm. This could possibly happen as soon as Amarin gets FDA approval for expanded labeling, which usually takes 6 to 10 months.
Three Days At The AHA Conference
Motorhead braved the cold climate of Chicago last weekend to attend the American Heart Association (AHA) conference, where Amarin's Reduce-It clinical trial results were fully disclosed. The full details of the trial were better than expected and can be read in detail on this link from the New England Journal of Medicine here.
Motorhead attended not only the AHA Reduce-It results meeting, but also an analyst meeting with doctors who worked (but were not on Amarin's payroll) on the Reduce-It trial, as well as a cardiovascular panel discussion with mainly doctors in attendance.
The Big Takeaway From Newly Revealed Reduce-It Trial Data From The AHA Conference
While the headline risk-reduction number announced by Amarin on September 27th was 25% overall - as high as Pfizer's (NYSE:PFE) Lipitor - the big takeaway from the new revelations at the AHA conference was that the risk of strokes among patients taking Vascepa was reduced from 20% to 16%, with a hazard ratio of 0.7% and an overall risk reduction of 26% versus the placebo group. This drew a huge wave of applause from the audience of 2,500 medical experts there - a first-ever at a medical conference, according to one key cardiologist there.
The 2,500 attendants - mostly doctors - had remote control keypads to answer the question of whether they would prescribe Vascepa, and 85% voted "yes." This is significant as the addressable audience of patients who could use Vascepa in America is around 80m (including patients showing pre-diabetic risks) and the minimal side-effects. This ecstatic response from most endocrinologists and cardiologists was due not only to the high efficacy and low risk of Vascepa, but also due to its low price (roughly $121/month), which is a fraction of similar treatments for diabetes like Jardiance and Victoza.
The endocrinologists and cardiologists we spoke to said that doctors will fight for managed care in America to cover Amarin's Vascepa for their patients. Endocrinologists said that it is their main duty to keep their pre-diabetic and diabetic patients from being sent to cardiologists, hence Vascepa is the answer. Cardiologists were so enthusiastic about Vascepa's 31% reduction in myocardial infarction events and 35% reduction in urgent or emergent revascularization events, that they also said they would prescribe Vascepa given the low risk.
From a medical standpoint, the Reduce-It trial results - especially the secondary endpoints - were an epiphany and drew a resounding positive response from the medical community. Not one doctor at all of the meetings we attended raised any concern about trial having used mineral oil placebos.
Some Stock Traders May Be Bearish, But Doctors Are Bullish - This Is A Buying Opportunity
Just hours after Dr. Deepak Bhatt revealed the full results of the Reduce-It trial, Forbes had a negative article out about the placebo used in the clinical trial, which was made from mineral oil (article here). That evening, Amarin held an investor meeting, where CEO John Thero gave the stage to all the doctors involved in the clinical trial and analysis of data. Two of these doctors (endocrinologist Dr. Busch and cardiologist Dr. Miller), were not Amarin employees but were involved in the trial result analysis.
Aside from touting how revolutionary Vascepa was as a treatment for high-risk cardiovascular patients, they both said they would've rather owned Amarin's stock than been prohibited from buying it via their involvement in the results analysis. One chief scientist from Amarin who saw the data before the results were revealed, said he had tears in his eyes when he saw the results, as he knew how many lives could be saved.
All in all, the doctors deeply involved with the trial, as well as the thousands who attended the AHA conference to see the full results for the first time, were highly positive on the trial results and the use of Vascepa in treating their patients.
The next day, Seeking Alpha's Super Expert on cardiovascular diseases, DoctoRx published a cautionary article regarding the fact that Amarin's Reduce-It trial used a mineral oil placebo (see article here). Amarin has a good, detailed explanation as to why they used mineral oil placebos, which can be listened to on their IR website (here).
But the basic point regarding mineral oil placebos being used in the Reduce-It clinical trial was addressed by two of Amarin's doctors, and it all does make sense from Motorhead's standpoint of having seen a Vascepa-type drug being prescribed in Japan since 1990:
"This is an outcome study not a bio marker study. In terms of outcome there was no difference in the placebo group between patients that had elevated LDL versus those that had no change or lower LDL." The Doctor went on to mention that "the Japanese JELIS study from 2005, where an EPA benefit created risk reduction of 19% had no placebo." Also, mineral oil placebo reduced inflammatory side-effects.
On the third night of the event (November 11th), we asked Reduce-It's lead doctor from Harvard Medical School, Dr. Deepak Bhatt, about the mineral oil issue as follows:
"By using mineral oil placebo in the clinical trial, didn't it distort the risk-reduction data you published?"
Dr. Bhatt's response is as follows:
We could've used no placebo, like the JELIS trial (conducted by Japan's Mochida Pharmaceutical in 2005), but would then be criticized for not using any placebo at all. (JELIS showed 19% risk reduction in cardiovascular events, but used no placebos).
We could've used a sugar pill, but the patients would've probably noticed and it wouldn't have been a blind trial.
We could've used olive oil, but that would've been deemed stupid by the medical community.
Besides, only 4cc of mineral oil a day were used on the placebo group, which is hardly toxic.
We took into account that investigators of the trial would know this, so used mineral oil placebo anyway. I even use it for my kids sometimes when they're constipated.
Furthermore, the use of mineral oil placebo showed no correlation to increase or decrease in LDL cholesterol levels. Many patients had LDL go down. So "there's really no 'there' there."
We've only received queries like this from the investment community.
MOST IMPORTANTLY: Amarin's Marine Trial (Stage 2), which received FDA approval, also used mineral oil placebos.
If Doctors Love Vascepa, Amarin Is A Takeover Target
Our impression, after having met many times with Mochida Pharmaceutical - the originator of Epadel, a similar drug to Vascepa sold only in Japan - is that America still has huge doubts about "fish oil" medication, as it can be bought over the counter (OTC). But both Vascepa and Epadel use highly purified fish EPA without the DHA content in Omega-3 supplements. One of the cardiologists at the last night's panel discussion was an expert on how bad OTC Omega-3 supplements are: they only have 20% content of pure EPA at most, and 60% fatty acids. This may be why Omega-3 supplements are getting thrown under the bus.
There is a huge over-allotment of call options on Amarin at the moment, implying 36% upside as of Friday, the day before the AHA conference, so the stock could sell off. Motorhead will be buying on any weakness.
This is because the negative article in Forbes that started the doubt and concern about Amarin's use of mineral oil placebo was written by a journalist (who has a track record of reporting on medical issues, so not a novice) who has been negative and used the same medical doctors as sources in his article right after the AHA Reduce-It reveal.
Seeking Alpha's DoctoRx seems to be a pro in this field, so we would value his opinion and comments all the more. But after 3 days at the AHA conference (Ground Zero), seeing the enthusiasm among the attending doctors towards the Reduce-It results, we get the sense that Vascepa - which has already seen a 15% increase in sales since the September 27th headline announcement - will be vigorously prescribed by most doctors in America.
Besides, The Main Point Is That Vascepa Is Safe And The World Needs It
Even if there was a placebo group that used mineral oil placebos in the Reduce-It trial, the risk is close to zero and the cardiovascular risk reduction, at worst, drops to 19% - like Japan's JELIS trial, which used no placebo but led Epadel sales to rise by 50% - why wouldn't doctors prescribe Vascepa? When we first spoke to CEO John Thero over a year ago, he told Motorhead that most physicians would be happy with a 7% risk reduction ratio if risk was minimal.
We have spoken to medical experts in India, where the rate of diabetes is the highest, and they had never heard of EPA treatment for cardiovascular diseases. China has a huge portion of their population afflicted by diabetes and this is new ground for Amarin. Trust the doctors, not the share price action when it comes to Amarin. Doctors will be the ones advising Big Pharma on when to take Amarin over.
Full Disclosure
Motorhead, as the pseudonym suggests, is mainly an investor specialized in automotive stocks, and has written several articles on Seeking Alpha about Tesla (NASDAQ:TSLA) and Amarin (AMRN US). However, we have invested in healthcare stocks for 14 years and have close ties to Mochida Pharmaceutical (4543 JP), which originated the EPA-based cardiovascular treatment that is basically the same as Amarin's Vascepa. We also have close ties to Nippon Suisan (1332 JP), which produces the highly purified EPA for Mochida.
Disclosure: I am/we are long AMRN.
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. |
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