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Amarin Corporation plc (ADR) (AMRN): Why You Shouldn’t Bet On This Product Launch Yet

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For the last few weeks, there has been a heated debate regarding the success or lack thereof from biotechnology company Amarin Corporation plc (ADR) (NASDAQ:AMRN)‘s new product launch. Those who are bullish note encouraging month-over-month script growth in the thousands for the cardiovascular drug Vascepa. However, as the company issues even more shares to fund Vascepa’s marketing, is it still worth an investment?

Month Scripts Written Month-Over-Month % Gain
February 3,224
March 7,260 125%
April 12,314 70%
May 16,076 31%
June 18,367 14%

You can change, magnify, or twist these numbers however you’d like, but the truth is that Amarin Corporation plc (ADR) (NASDAQ:AMRN) is (currently) failing in its drug launch. June’s lack of progress is a large reason that Amarin’s stock is trading lower by 8.5% on Tuesday. Well, that and the fact that Amarin announced yet another public offering to fund Vascepa’s sales and marketing.

This Launch Ain’t Cheap!

Amarin Corporation plc (ADR) (NASDAQ:AMRN)Amarin Corporation plc (ADR) (NASDAQ:AMRN)’s latest public offering could generate up to $150 million in proceeds if all options are exercised. Conveniently, this comes just eight months after the company raised $100 million, and shot down any speculation that a purchase or partnership could happen.

Since December, the company’s last offering, Amarin Corporation plc (ADR) (NASDAQ:AMRN)’s stock has fallen 55%, and many longs are devastated at the implications of this latest round of financing, since it shows that the costs associated with the launch of this (so far) failing drug are excessively higher than many had predicted.

The Unspoken Risk Of Self-Marketing

There’s no doubt that Amarin Corporation plc (ADR) (NASDAQ:AMRN) is blowing a lot of money to sell a drug that is not producing great month-over-month sales growth. This is a drug that was once heralded as a multi-billion dollar product. While this may all look bearish right now, it also shows the risks associated with companies who have no choice but to self-market their own drugs.

As a person who worked decades in both R&D and selling/general/administrative expense segments of Big Pharma, I know all too well the costs associated with launching and developing a product. Back in the year 2000, a $400 million budget wasn’t uncommon to develop a new therapeutic. Today, those costs sit closer to $800 million; and that’s just to develop and bring to market.

Then, to promote and market a newly approved drug, pharmaceutical companies adjust their spending to the potential demand and market competition. Most budgets for product launch sit around $500 million in the first year, or as a formal rule you can expect a $2 cost for every $1 earned.

Why Is The Spending So High?

Dendreon Corporation (NASDAQ:DNDN) is a classic example of a clinical drug company that was overwhelmed with the “potential” of a billion-dollar product, but was unable to market efficiently and live up to the high expectations.

Dendreon Corporation (NASDAQ:DNDN)’s prostate cancer drug Provenge faces competition from Bristol-Myers’ Yervoy and Johnson & Johnson’s Zytiga. Thus, Provenge not only requires a minute-to-minute manufacturing process where Provenge has to be shipped, created, shipped again, and then given in a day’s time, but Dendreon also spends $320 million annually in selling and general marketing purposes to compete with products from Big Pharma.

Amarin does not face other FDA-approved medications for high triglycerides, but it does face competition from over-the-counter fish oil products. Thus, during the company’s last quarter, it reported an operating loss of $62.39 million, and spent $40 million in selling and marketing the drug.

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