KISS (Keep it Simple Stupid): Why I’m Heavily Invested in Amarin

Posted on January 02, 2020 by Medtech[y] Staff

As I’ve previously written, I started focusing on Biotech investing in late 2019, with Amarin, Agile Therapeutics and VBI Vaccines as my primary positions, with a couple of trades along the way, including Matinas and Neovasc.

While I do have sizable positions in both VBI Vaccines and Agile Therapeutics, Amarin is by far the most heavily weighted position in my portfolio, and my reasoning is that the story and drug just makes sense.

Not just as a novice biotech investor, but from a patient and physician perspective as well.

With a background in the medical device industry, Agile Therapeutics’ Twirla device makes perfect sense to me but there is risk as the product isn’t FDA approved yet. Hopefully that comes in February 2020.

With VBI Vaccines, I understand the product, but am not as clinically knowledgeable to know if the company is a sure thing, and there are a lot of catalysts coming in early 2020 which have a lot of risk attached to them. That’s why I have leaned on following the smart money to get more comfortable with the companies where I have an interest in investing.

This strategy helped with my decision to be heavily weighted in Amarin, but the main reason I believe in Amarin because it just makes sense, and I believe that will translate into substantial adoption and growth by patients and physicians, especially after receiving expanded labeling from the FDA, who approved Amarin's Vascepa to reduce the risk of cardiovascular events in certain patient groups.

Having a background in sales, one of the first strategies I learned was to take the KISS (Keep it Simple Stupid) approach when processing through a problem and delivering a message to a customer.

You may think that’s oversimplifying an industry that relies on highly scientific and technical data, but the end product is for consumers, with Amarin’s Vascepa being one that can reach a mass audience across the globe. Therefore, if the product is simple to understand, it has a higher chance of success.

Vascepa, otherwise known as icosapent ethyl, is a type of omega-3 fatty acid, a fat found in fish oil. When many people try and define Vascepa, they usually say that Vascepa is FDA approved fish oil.

While Vascepa is a fish-oil derived pill, its only ingredient is prescription EPA, and does not raise bad cholesterol like Omega-3 supplements can. Additionally, common fish oils and Omega-3s are not FDA-approved and are not clinically proven.

As you can see, being compared to everyday fish oil pills / Omega-3 supplements can be a double edge sword as Amarin will need to educate physicians how Amarin is different than those supplements.

The positive here is that potential patients can easily understand the overall concept and accept it.

The barrier in accepting the concept of Vascepa by patients and physicians should realistically be a lower barrier than say, trying to understand a new cancer medication. In short, it already makes sense. Hence, back to the KISS (Keep it Simple Stupid) acronym.

The obvious negative is that it will be imperative to educate physicians and the public on the differences between fish oil supplements and Vascepa. For one, Vascepa is FDA approved and backed by some of the most impressive set of studies to come out in recent years.

In late 2019, Amarin raised its 2020 sales forecast to between $600 million and $700 million as they are in the process of doubling their sales team to 800. Amarin CEO, John Thero has a history of sandbagging revenue forecasts so that $700 million in 2020 is probably very light. Unlike many investors, that doesn't bother me. They are being conservative and the likelihood of beating those forecasts by a wide margin is pretty high.

Additionally, with the new label for Vascepa, Thero said Amarin was expecting peak sales estimates in the "multiple billions” and that the possible patient population is in the tens of millions.

While no company is a sure thing, I do believe the fact that Amarin sells a product that is easy to understand, and one that is scientifically proven to lower very high triglycerides and now reduce the risk of cardiovascular events are the reasons why scripts will continue increasing, and end up being acquired for a premium at some point in 2020, unless they decide to go on their own which I think is a much less likely scenario.

There are reports of a potential buyout to be in the $20 billion range, which would be approximately $55 per share. That seems too rich at this point in time, but when a product just makes sense to consumers and physicians, the barrier to adoption is very low and getting to that point going alone or via a buyout is achievable.

Most biotech's don't give you the chance to think about how a patient will react when they learn about a drug or are prescribed one. That's what's unique about Vascepa and where I think many people miss the point about it's future market opportunity. The fact that they are being compared to fish oil supplements will ultimately be what allows Vascepa to become the next blockbuster drug in the world.

It just makes sense.