Amarin said in a statement that it "strongly disagrees" with the ruling and that it will pursue all available remedies
Shares of Amarin (AMRN) are under pressure on Tuesday after a federal judge ruled in favor of generic companies Dr. Reddy's (RDY) and Hikma Pharmaceuticals (HKMPF) in the patent litigation for its Vascepa capsule franchise. Following the news, Goldman Sachs and Jefferies downgraded Amarin to Neutral-equivalent ratings, while Citi analyst Joel Beatty called the legal defeat a "major negative" for the shares.
PATENT LAWSUIT: On Monday, the United States District Court for the District of Nevada ruled in favor of generic companies Dr. Reddy's and Hikma Pharmaceuticals in the patent litigation for Amarin’s Vascepa capsule franchise. Six patents on the cholesterol drug, which all expire in 2030, are invalid, ruled District Court Judge Miranda Du. In a statement following the decision, Amarin said it "strongly disagrees with the ruling and will vigorously pursue all available remedies, including an appeal of the Court's decision and a preliminary injunction pending appeal to, if an ANDA is approved by FDA, prevent launch of generic versions of Vascepa in the United States." Based on Amarin's review of the FDA's website, an abbreviated new drug approval for Vascepa has not been approved, which would be required for launch of a generic product in U.S., the company added. As such, Amarin "does not believe there is an impending generic launch by the litigants that would compete with Vascepa "at this time."
MOVING TO THE SIDELINES: In a research note to investors following the announcement, Jefferies analyst Michael Yee downgraded Amarin to Hold from Buy with a price target of $4, down from $30. The analyst pointed out that he expects the stock to be range-bound until there is more clarity on an appeal to the negative patent decision and scenarios where generics may not immediately hit. For value investors, Yee sees long-term value, noting Amarin is not really burning cash anymore. Nonetheless, Wall Street will likely not care about this in the near- to medium-term, the analyst contended. Overall, Yee was surprised by the patent ruling and loss, and argued that while generics should be expected to come, the stock mostly reflects this now.
Voicing a similar opinion, Goldman Sachs analyst Paul Choi also downgraded Amarin to Neutral from Buy with a price target of $4, down from $27. As Amarin management considers various options, the near-term stock performance will be limited, pending clarity on FDA approval of the new drug filings, a future circuit court appeals decision, and how quickly and effectively the company monetizes the opportunity for Vascepa in international markets, Choi contended
Meanwhile, Oppenheimer analyst Leland Gershell upgraded Amarin to Perform from Underperform given the sharp decline expected in the stock following the patent ruling. While the company intends to appeal, the ruling significantly reduces expectations around the product's market exclusivity period and Gershell puts generic launches in 2022-23 as a "best case," adding that at-risk launches could occur much sooner, pending ANDA approvals. Vascepa's "heavily-truncated exclusivity" meaningfully impairs Amarin's cash flow generation opportunity and "effectively removes" the company's appeal to a prospective acquirer, added Gershell, who sees the stock trading in line with the market from here.
'MAJOR NEGATIVE' FOR THE STOCK: Also commenting on the news, Citi analyst Joel Beatty told investors that he views Amarin's legal defeat to potential generic filers as a "major negative" for the stock. The analyst's base case is now that multiple generic Vascepa launches by competitors will occur in the U.S. in either 2020 or 2021. However, the outside the U.S. value of Vascepa should not be overlooked, and the drug's European rights has potential value of over $1B, Beatty contended. The analyst believes that with Amarin's U.S. sales opportunity "greatly diminished," much of value to the U.S. sales of Vascepa will now depend on the company's ability to be a lower-cost manufacturer than its competitors. Beatty kept a Buy rating on Amarin.
Stifel analyst Derek Archila also told investors in a research note of his own that the negative intellectual property ruling is a "serious blow" for Amarin. The analyst lowered the firm's price target on Amarin to $8 from $24, while keeping a Hold rating on the shares and saying he would not be buying the shares here given the uncertainty the decision has created around the future of Vascepa sales and Amarin's near-to-medium term cash runway. Looking forward, it is prudent to assume the ruling stands, meaningful cost cuts will be needed and Vascepa is likely to retain "only modest share in a limited generic market," Archila argued.
'NOT GAME OVER YET': Keeping an Overweight rating and a $35 price target on the shares, Cantor Fitzgerald analyst Louise Chen argued that while Amtarin's loss of its Vascepa patent case was surprising, the stock should "over-correct" and then potentially bounce back from there as this is "not game over yet." After catching up with Amarin's management, the analyst noted that the company will appeal the ruling and that the decision does not affect international opportunities in the EU, China and rest of the world, which "could still total billions of dollars in sales."
PRICE ACTION: In morning trading, shares of Amarin has dropped about 70% to $4.00.