Omthera takeover leaves Amarin as last man standing

If you had suggested in November that the prescription fish oil space was about to become a hotbed of activity for pharma deal bankers you would have been laughed at by just about anyone who was not an Amarin bull.

But fast forward six months and two of the three players have indeed been taken over, AstraZeneca’s move today sealing the fate of Omthera Pharmaceuticals less than two months after the target company’s float. However much Amarin has been hyped, its failure to attract a partner at a time when deals have clearly been forthcoming for its competitors, coupled with a host of operational problems, must now surely presage a share price rerating.

While Astra’s decision to focus on a range of small acquisitions might be questioned there is a clear rationale for the purchase, not to mention that the financial outlay is relatively small: $323m up front, for which the group picks up Omthera and its $63m cash balance, plus $120m in future earnouts.

In comparison Amarin’s $1.0bn market cap looks rich. True, neither Amarin’s nor Omthera’s purified omega-3 product – Vascepa and Epanova, respectively – has secured US new chemical entity (NCE) status. But Amarin’s bloated valuation coupled with the NCE problem is the likeliest reason for its lack of partnering interest, and the muddle around getting Vascepa to the market, now compounded by the Omthera takeout, should give Amarin’s bullish followers pause for thought.

Shifting fast

Omthera’s takeover comes barely five months after BASF completed the $845m acquisition of Pronova BioPharma, whose Omacor/Lovaza is the other purified fish oil in this space. Lovaza’s US licensee, Reliant Pharmaceuticals, was bought by GlaxoSmithKline in 2007 for $1.7bn.

Perhaps even more remarkably, Astra’s move has come less than seven weeks after Omthera completed a $64m Nasdaq IPO. Why Omthera did not agree terms with Astra before April is a moot point, although a desire to allow the markets to set a baseline valuation is a possibility.

Much more important is Astra’s rationale, which centres on making a US filing for Epanova for severe hypertriglyceridemia in mid-2013, followed by a supplemental NDA for treating mixed dyslipidemia, as well as development of a fixed-dose combination with its statin Crestor. Some or all of the $120m in contingent value rights are likely related to these events.

Analysts at Bryan, Garnier & Co wrote today that it was "more than legitimate [for Astra] to have an omega-3-based drug in its portfolio. This is also a chance for the group to limit the erosion of Crestor sales.”

For once IPO investors have made a killing – seeing a 72% return on Omthera in under two months (Omthera aims to fund Epanova launch with IPO, March 12, 2013). No consensus forecasts exist for Epanova, according to EvaluatePharma, although after Omthera’s float Piper Jaffray speculated on revenue potential of $402m in 2020.

In comparison, Lovaza sold $961m last year, while consensus for Vascepa stands at a meaty $1.3bn in 2018. That said, the Vascepa expectations have come down strongly – two years ago analysts had forecast 2018 sales of $2.3bn.

NCE conundrum

Of course, that was before it became clear that the US FDA was not going to grant Vascepa NCE status any time soon, leading Amarin to embark on a solo launch in January – six months after securing approval – after failing to attract a partner on acceptable terms.

Without NCE status Vascepa will have three instead of five years’ market exclusivity, plus whatever protection its slew of use patents provides. The likeliest reason for the FDA’s reluctance is the similarity between Vascepa and Lovaza, an established drug. Omthera has said that because Epanova is a free fatty acid form of omega-3 oils, as opposed to ethyl-ester forms like Vascepa and Lovaza, it is eligible for NCE designation.

However this plays out, the NCE debate will continue to cloud the prospects of Epanova and Vascepa alike, but given Astra’s small outlay the risk to the UK firm is limited. Amarin investors, on the other hand, now have even more to worry about.

To contact the writer of this story email Jacob Plieth in London at [email protected] or follow @JacobEPVantage on Twitter

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