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Amarin Stock Crashes as FDA Plans Panel Review

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Amarin stock is currently trading at $14.17, 20.44% lower than its close in the premarket trading session. Yesterday, the company announced its receipt of a notice from the FDA about the agency’s plans for an advisory committee meeting on November 14. The meeting will review the company’s sNDA (supplemental new drug application) for the label expansion of Vascepa based on the results from its REDUCE-IT outcomes study.

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Amarin stock has risen 30.86% so far in 2019 and a phenomenal 497.65% in the last year. Investors have been awaiting the FDA’s approval of Vascepa by the PDUFA (Prescription Drug User Fee Act) date of September 28, 2019. However, the FDA advisory committee’s meeting being in November likely implies a delay of the decision on a Vascepa sNDA. Amarin expects the new PDUFA date to be in December.

Why are investors disappointed?

The unexpected FDA decision of an advisory committee meeting implies a delayed commercial launch of Vascepa in an expanded indication. This, in turn, will result in lower-than-expected uptake of the drug in 2019. Amid this backdrop, investors are concerned about the company’s ability to reach its guidance numbers. To learn more about Amarin’s 2019 guidance, read Amarin Stock Rises on Updated Fiscal 2019 Guidance.

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REDUCE-IT trial design

The FDA’s decision at the advisory committee meeting has also raised concerns about the possible shortcomings in the REDUCE-IT trial’s design. In the REDUCE-IT trial, Vascepa demonstrated a 25% relative risk reduction in the first occurrence of a major adverse cardiovascular event compared to the placebo in patients already treated with statins. However, critics have been highlighting the use of mineral oils as placebos in REDUCE-IT. It’s being claimed that mineral oil can reduce the absorption of statins, thereby giving Vascepa an unfair advantage in the trial. Amarin has responded to these accusations.

The strength of the REDUCE-IT data has played a pivotal role in the increased adoption of the drug among physicians and patients. This, in turn, fueled the company’s commercial progress in the first half of 2019. Hence, any queries raised about the credibility of the REDUCE-IT trial’s design may affect the uptake of Vascepa in the coming quarters.

In the second quarter, Amarin reported revenue of $100.79 million, a year-over-year rise of 91.46%. Its revenue was $1.25 million higher than the consensus estimate. However, in the event of an unfavorable advisory committee meeting decision, Amarin may not be able to continue its rapid revenue growth in future quarters.

Amarin’s valuation

Amarin is currently trading at a forward PE multiple of 142.77x. The multiple is significantly higher than those of its peers Novartis, AstraZeneca, GlaxoSmithKline, and AbbVie. The high expectations for Vascepa in light of the robust REDUCE-IT trial results have been the key growth driver for the company’s share price.

The six analysts tracking Amarin have an average target price of $32.67 on its stock, which indicates a potential upside of 130.88% in the next 12 months based on its last closing price.

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