Amarin Corp. PLC (#AMRN) just issued an 8-k informing investors that the decision to hire sales reps., which was supposed to be made by the end of November, will now be made "in the first half of December 2012". This is the second time that AMRN has delayed a decision on hiring of sales force. Recall that after Vascepa's approval, the company had guided that they would have to make a decision sometime in October. Then, during their Q3 conference call at the beginning of November, the company stated that a sales force hiring decision would be made in mid to late November. We see this development as a bullish sign for those speculating on a buyout or partnership as the potential path forward for Amarin, though we advise investors to proceed with caution.
Subtle Changes in Language
On the surface, the 8-k today suggests that the company is still mulling over three possible paths to commercialization for Vascepa, their triglyceride lowering drug. Reading between the lines however, one may see a different picture. In a previous 8-k, the company explicitly indicated that the company:
continues to consider three potential paths for the marketing and sale of the product: an acquisition of Amarin, a strategic collaboration, or self-commercialization, the latter of which could include third-party support.
Today's disclosure does not contain this particular language. The safe harbor statement in today's 8-k does mention risks about all 3 possible paths to commercialization; however, these risk disclosures are exactly the same as ones included in previous filings by the company. In our view, the lack of the "3-possible paths to commercialization" language in the body of the 8-K today and the fact that the company has delayed a sales force hiring decision a second time while still anticipating "the launch of Vascepa early in the first quarter of 2013" suggest that negotiations between AMRN and potential acquirers or commercialization partners are in an advanced stage.
New Chemical Entity Decision to be a Factor
Based on comments that management made during their Q3 conference call, the market expects the Vascepa New Chemical Entity status to be a major factor in any buyout or strategic transaction. CEO Joseph Zakrzewski stated that:
Regarding opportunities with large Pharma companies, the uncertainty around our pending regulatory exclusivity request has presented a challenge in our discussions. Whether we receive 5 years or 3 years of exclusivity, a decision in and of itself would provide some degree of clarification for many of the parties involved.
The company's Q3 form 10-Q included the following disclosure in this regard:
We have been informed by FDA that the FDA has drafted a proposed response letter to our exclusivity request, that such draft response letter has been circulated internally at the FDA for comment and the FDA has been considering the issue actively. However, we have not been informed of the content of the FDA’s draft response and cannot, based on our communications with the FDA, make a reliable prediction as to when the FDA will communicate a determination on the matter.
In other words, the company is stating that the NCE decision is holding up negotiations, and that they know that FDA has drafted a response but has not yet finalized their determination.
Putting these pieces together, our view is that the company now expects a final NCE determination by the next FDA orange book update on or around December 14th. Furthermore, AMRN is waiting for this final decision from the FDA before making a decision about whether or not they will hire a sales force.
Conclusion
Based on the disclosure today and previous statements by the company outlined herein, our view is that AMRN's discussions with large pharmaceutical companies are likely in an advanced stage. The company has deferred making a self-commercialization decision twice now, and has indicated that the decision will now be made in the first half of December. Regardless of whether or not Vascepa is granted NCE status, there is no good reason for the company to defer a decision to hire a sales force unless negotiations with potential partners or acquirers were in an advanced stage. If potential partners/buyers were not serious, it would be in the company's best interest to begin hiring salespeople as soon as possible to allow more time to properly organize and train a sales force.
We remind investors that the timing of a buyout for AMRN now, after approval and before launch is an exception and not the norm. Investors should proceed with caution as news for AMRN is likely to evolve rapidly, and in the event that the company announces a self-commercialization strategy, the stock price will decline below $9. Between now and the next FDA orange book update on Decemebr 14th, we expect more bullish sentiment for AMRN unless the company announces that they have received a negative response from the FDA prior to the update. Should the next orange book update NOT resolve the Vascepa NCE status, the company will still have to finalize their go-forward commercialization plan by mid-December in order to meet an early Q1 2013 launch timeline for Vascepa. AMRN's stock price will face resistance at $12.50 and again at $13. If the stock climbs back above the $14 level prior to December 14th, investors would do well to lock in at least some gains. While we view a potential partnership or buyout as more likely than in the past, relying on a buyout continues to be a highly speculative way to seek gains in a pre-launch early-stage biotech firm.
