Note on Patent trial & valuation
Patent Trial – What happened?
Amarin lost its patent suit in district court to two generic drug makers, Dr. Reddy’s Laboratories and Hikma Pharmaceuticals who had indicated they would launch a generic version of VASCEPA. A victory for Amarin would also shut the door to other generic drug makers until 2030. The risk of a loss was that it would open the door to generics, but the probability was deemed small by most legal analysts – until this week when Judge Miranda Du of the District Court of Nevada concluded that the generics did indeed infringe on Amarin’s patents, but the patents were invalid due to obviousness.
Amarin’s share price plummeted 75% on March 30th. The US market is deemed at risk now (the ruling does not pertain to Europe or Asia) and any premium baked into the share price for a potential buyout is gone. This was the last meaningful hurdle for Amarin before having a clear run at becoming a multi-billion-dollar business, and they tripped. It is about as bad of an outcome for Amarin as anyone could have imagined.
Next Steps for Amarin
Amarin has vowed to appeal the verdict and seek an injunction against both companies for the duration of the appeal. Additionally, while the overall ruling is seen as a big surprise, it appears the judge made a significant procedural error and Amarin may have significant grounds for reversal in the Federal Circuit.
The company must file an appeal by April 9th and the injunction later in the month. It is highly unlikely that any of the generics would do an at-risk launch because of the immense cost and associated risk if the ruling was reversed.
The appeal is held in Federal Appeals court in DC with a panel of 3 Federal Circuit judges. Oral arguments would likely be in January, 2021 and the panel would render a majority decision in March or April.
Revised valuation (for now)
If the verdict stands, we set a $11 per share price target. The US business will likely still reach almost $1 billion in sales, but will quickly plateau. The value to Amarin will range between $2-$3 billion. The European business is conservatively valued at $2 billion via a potential partnership and Asia remains a wildcard with both approval and partnership needed.
A reversal puts Amarin back in the driver’s seat and VASCEPA back on track to becoming a blockbuster drug. However, until we have more clarity on the appeal, we will assume the verdict stands.
Download the entire report here Amarin