If a patent win in US courts is the best-case scenario for Pronova BioPharma, it is a bit of a holding action. The Norwegian group is facing sales erosion on multiple fronts starting this year, with European generics and potentially Amarin’s omega-3 fatty acid competitor AMR101 launching and only entry into smaller new markets to buffer against losses.
Still it is the most encouraging news heard in quite awhile for Pronova - shares jumped 30% to a 10 month high of NKr10.25 in late day trading today - and provided a boost to Amarin as the decision was seen more widely as strengthening the intellectual property estates of other companies using purified fish oil to lower triglycerides. However, Pronovo's move to diversify toward clinical nutrition and consumer health products is a sign of a rather empty pipeline; the most immediate promise comes from an anticipated Japanese launch later this year. Despite today’s uplift, stock levels in excess of NKr18 seen two years ago remain firmly in the past.
A US federal judge in Delaware ruled against Teva and Par Pharmaceutical's bid to invalidate Pronova’s '667 and ’077 patents, which cover compositions and methods of using omega-3 fatty acids and which expire in March 2013 and April 2017 respectively. It turns back an immediate threat of US generic competition and protects a forecast $348m in royalty and supply revenue for the Norwegian firm and $981m in sales for US partner GlaxoSmithKline.
The first generic entry will now occur in 2015, the result of an out-of-court settlement last year with Apotex (Pronova's compromise with Apotex a step in the right direction, March 30, 2011). Because of Pronova’s expertise in purifying fish oil, the group will supply product to Apotex, so its chief source of revenue is not forecast to be disrupted; royalty income is estimated to be $32m this year.
That expertise in purifying the fish oil was believed to insulate it from generic threat more widely – indeed, European exclusivity fell in 2009 but no competition has emerged. However, Germany and the UK have approved Teva’s generic version of what is branded Omacor in Europe, and approvals in other populous states like France, Spain and Italy may be coming – analysts from UBS raise the possibility that manufacturing Lovaza/Omacor may be easier than previously thought.
Immediate hopes of expansion for Pronova lie in Turkey, Brazil, Argentina and, probably most important, Japan. UBS analysts anticipate approval this year in Japan, where it is partnered with Takeda, but they add that Epadel, the name of Amarin's AMR101 in Japan, generated $433m in sales in 2010 and this may reflect the most an omega-3 can sell. Current consensus forecasts put sales at $191m in 2018, a far cry from the $981m it is expected to sell in the US this year, according to EvaluatePharma data.
Amarin, too, was buoyed by the news, rising 6% to $12.27 Tuesday after news of the court ruling broke late in the day. Whilst analysts believe AMR101 is sufficiently differentiated from Lovaza based on its effectiveness in people with lower triglycerides and its reduced pill burden, a lack of low-cost competitors in the fish-oil space will not hurt its chances of achieving forecast sales of $2.17bn. Their absence will certainly help improve its chances of establishing a premium price to Lovaza.
It was a doubly good news day for Amarin’s intellectual property estate; before the markets opened the New Jersey company announced the US Patent and Trademark Office had issued another AMR101 patent, strengthening its case and helping to further ease worries about the strength of its IP estate (AHA 2011 - Amarin's patent concerns set to prevail despite more strong data, November 17, 2011).
Amarin has regained some of the ground it lost in the past year over those worries, although its shares remain well below the $19.50 range seen last May in the wake of AMR101’s two successful pivotal trials.
AMR101 is clearly the big threat to Lovaza, and with a PDUFA date of July 26 could be ready for a late-summer launch three years ahead of even an authorised generic version of Lovaza. The sun is setting on Pronova’s fish-oil pill; emerging markets and diversification may be a way to sustain revenue, but investors are not likely to get excited about the group again until it shows it knows how to generate new growth.