Milestone payments should trickle in as they get to different steps in the China drug approval process - we don't know what they are, but seeing as AMRN is going to have to run new trials in China, there could be a bunch of them, depending on how many they need. Analyst from SunTrust says approval isn't expected until 2019.
Vascepa - $169M ex-US deal inked
China deal a precursor to EU & LatAm deals to maximize
Vascepa’s valueVascepa’s value affirmed by 1st ex-US deal; reduces need to raise cash
Amarin announced a deal with Eddingpharm, a China-based specialty
pharmaceutical company, to develop, register & commercialize Vascepa in the
greater China market (China, Macau & Hong Kong). Under the terms of the
deal, Eddingpharm will develop and commercialize Vascepa, while AMRN will
initially supply finished Vascepa & later bulk active pharmaceutical ingredient
(API). AMRN will receive $15M in non-refundable cash up-front & up to $154M
in additional milestones related to commercial benchmarks including future
label expansion. Eddingpharm will pay escalating royalties on net Vascepa
sales in the low to high teens range. Given new clinical trials will be required &
subject to regulatory review by the Chinese SFDA, our model assumes AMRN
starts receiving royalties in 2019. As a result of securing the up-front payment,
we project AMRN will finish ‘15 with $93M of cash vs. our prior $79M estimate.
This reduces the estimated cash burn to $26M from $41M and lower concerns
about the need to raise additional dilutive capital that have been an overhang
on shares. China is one of the fastest growing emerging markets, with 2010
sales of $40B expected to grow to ~$200B by 2020 largely fueled by high out-
of-pocket spending on Western branded and branded generic drugs, aging
demographics, growth in chronic diseases (e.g. there are >100M diabetics), &
expanding healthcare coverage/investment by government. We view the size
of the milestones as implying that Eddingpharm projects peak annual Vascepa
sales at >$600M (assuming a $2-$3/day treatment cost in China). Additionally,
with multiple parties bidding (at least 3 making offers) for rights to Vascepa in
China, we view the deal as validating Vascepa’s value. Maintain Buy and $6 PT.
Further deals in EU and LatAm anticipated
We see the Eddingpharm deal as a likely precursor to additional partnerships
in Eastern & Western European & Latin American markets that could be
announced later this year. Amarin is ideally looking for a single partner in
Europe, but also is considering separate arrangement for the major Western
markets vs. Eastern Europe in parallel. We also expect AMRN to seek a partner
for major LatAm markets such as Brazil & Mexico, though timelines are more
difficult to anticipate relative to Europe. We believe that such future deals will
have similar upfront payment, milestone, and royalty structures, which are not
reflected in our estimates and would provide further upside.
Upcoming catalysts
1) 4Q14 results on Tuesday, March 3rd; 2) data on the mechanistic effects of
pure EPA at the American College of Cardiology on March 14-16 (San Diego);
3) FDA action on the overdue ANCHOR sNDA filing in 1H15; 4) interim analysis
of the REDUCE-IT trial in mid-2016; 5) completion of REDUCE-IT in 2017; 6)
top line results from REDUCE-IT in 2018 followed by regulatory submission;
and 7) additional Vascepa deals in Europe & LatAm & partnerships activities.