Friday, August 23, 2019

Amarin: A Competitive Intelligence Analysis On Vascepa


Summary
Hindsight is 20/20 yet higher-level intelligence drives future profits. As such, I focus on forecasting the upcoming regulatory binary for Vascepa's label expansion and other corporate developments.
Despite Vascepa's dominant position, there are competing molecules such as Lovaza and over-the-counter Omega-3 supplement (OOS) that investors should assess.
In the spirit of sharing, I'll present part of what I discussed today inside my private investment community earlier than usual.
The best thing that happens to us is when a great company gets into temporary trouble ... We want to buy them when they're on the operating table. - Warren Buffett
As the weekend is winding down, I'll conduct competitive intelligence analysis on Amarin Corporation (AMRN). The inspiration from a ScienceDirect article that an Integrated BioSci Investing ("IBI") member shared catalyzed this analysis. As such, I'd like to express my gratitude to all IBI members for your continuous intellectual generosity. Equally important, I appreciate the counter-viewpoint. And, I encourage you to continue sharing your inputs.
In my view, IBI is a community where we learn from one another to become better investors. Therefore, all respectful debates are welcoming. By dissecting opposing arguments, we can learn about an investing thesis on a deeper level where most value resides. Without further ado, I'll take a deep-dive into this commentary.
Figure 1: Amarin chart (Source: StockCharts)
Accordingly, I found the recent article on Vascepa's competitor intriguing for various reasons. Notwithstanding, they all underlies the "impurity" and "subpar quality" of over-the-counter supplements (i.e. OOS), which I attributed to their regulatory laxity. The author remarked,
Elucida Research in Beverly, MA, found that Omega-3 fatty acid (3FA) levels fluctuated greatly from product to product, from as low as 33% to as high as 79%. However, it also determined that high levels of saturated fat and oxidized 3FA found in the supplements may actually undermine their possible health benefits.
As Elucida elucidated, one can best hope for a 79% Omega-3 from OOS. Adding further injury to insult, I believe that the aforementioned 79% is not pure eicosapentaenoic acid (EPA) like Vascepa. Asides from "fillers and oxidized Omega-3," OOS harbors the silent cardiovascular-disease inciter (i.e. docosahexaenoic acid or DHA).
Specifically, research proved that DHA raises the level of low-density lipoprotein (i.e. bad cholesterol or LDL-C), the culprit of heart diseases. As such, when you consume OOS or other Omega-3 products (Lovaza), they contain both DHA and EPA. Consequently, the health benefits - triglyceride ("TG") and cardiovascular risk reduction from EPA - are neutralized by DHA's LDL-C elevating effect.
As proof in the pudding of Vascepa dominance, there is a "fundamental shift" in the medical guideline. In the August Advisory, the American Heart Association (AHA) shined the light into DHA by explicating its negative health consequences.
Figure 2: AHA recommendation (Source: AHA)
As the truth is revealed, the AHA switched stance to endorse pure EPA. The endorsement comes on top of the Vascepa recommendation as Standards of Care by the American Diabetes Association (ADA) in March.
Being the only one of its kind with true purity, Vascepa is dominating over competitors such as OOS and other Omega-3 molecules. In other words, the research supports Vascepa over competitors. For instance, Lovaza (a prescription Omega-3) is rendering obsolete due to the LDL-C elevation tied to its DHA.
As a ramification of new findings, I strongly believe that the upcoming supplemental New Drug Application ("sNDA") bodes well for Vascepa label expansion. To view it another way, Vascepa is backed by both the ADA and DHA. Since the advisory committee (ADCOM) members comprised of cardiologists and endocrinologists, it'd be contradictory for them to recommend against Vascepa. After all, their governing associations endorsed the stellar drug.
Shifting gears to another impurity, most OOS also contain "saturated fatty acids (i.e. SFA)." That begged the question of what are saturated fatty acids and how they affect one's health?
As fatty acids (FAS) having a side chain (i.e. R group) without a double bond, SFAs do not hold an associated "kink" (Omega-3) in its molecular structure. Therefore, SFAs are analogous to bricks that neatly stacked on one another to form a "solid wall." Notable SFA examples are chicken and pork fats which become a solid-like cake at room temperature.
Figure 3: Differentiating fatty acids (Source: Pubchem)
Since SFAs easily clump into a solid, they contribute to the atherosclerotic (i.e. cholesterol plaque) formation. In a gradual process, the plague will occlude the coronary artery to induce a heart attack also known as myocardial infarction.
Figure 4: Atherosclerosis (Source: Merck manual)
In contrast, FA with a double bond in the side chain is deterrence to the solid formation. By remaining in a liquid state, it's much easier for these good fats to be flushed out of our physiology. Like a sponge, Omega-3 EPA sucks out the bad fat (LDL-C) from our arteries and liver.
That being said, let's check out a real-world example of good fat with a double bond that is not Omega-3.
Most of you probably heard that olive oil is conducive to one's health. I like my olive oil served with bread or in a salad. Notably, olive oil's benefits arise from the sole double bond in its side chain which confers it the name "monounsaturated FA (i.e. MUFA)." Similar to MUFA, the beauty of Omega-3 is the double bond that created a kink in the molecule at the Omega position.
That aside, "oxidized Omega-3" are found abundantly in OOS and thereby reduces their efficacy. Essentially, an oxidized molecule is already damaged by the oxidation process. Hence, it loses the therapeutic efficacy. Consequently, the oxidized Omega3 in OOS are defunct even for those at the upper extreme of 79%. This is far less beneficial than the higher quality >99% purity of Vascepa. I elucidated in the prior research,
OOS do not undergo rigorous clinical trials as required for Vascepa. Consequently, there is no way to ascertain a supplement's clinical benefits and safety. Notably, regulatory laxity comes with a cost. Due to the rising health concerns, the FDA now requires supplement companies like General Nutrition Center (GNC) to report adverse events. Nonetheless, that's a far cry from a comparable regulatory standard of pharmaceutical drugs. Hence, competent doctors are highly unlikely to prescribe OOS over Vascepa because physicians practice evidence-based medicine. As such, this explicates the fact that amid the wide availability of OOS, Vascepa sales still ramp up drastically.
As usual, the choice to buy, sell, or hold Amarin is ultimately yours to make. Before making your decision, it's best to consider all perspectives and arguments. In my opinion, it's prudent to build shares in this stock to anticipate a rally toward the sNDA approval. If the rally is muted, the increasing sales for years to come will certainly galvanize Amarin toward its intrinsic value.

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