Amarin Corporation plc (ADR) (AMRN), AstraZeneca plc (ADR) (AZN): A Winning Biotechnology Bet

There are mixed views on effect of this acquisition on valuations of Amarin. Some argue that the acquisition proves the multi-billion potential of Amarin’s Vascepa while other consider Epanova in the hands of AstraZeneca plc (ADR) (NYSE:AZN) a threat of Vascepa sales.

EPA vs. DHA

Epanova is pretty similar to Lovaza in terms of chemical nature as both drugs are a combination of EPA (eicosapentaenoic acid) and DHA (docosahexaenoic acid). On the other hand, Vascepa only contains the EPA. Epanova takes the lead on both Lovaza and Vascepa when it comes to the patient’s ability to absorb the compound. Unlike Vascepa and Lovaza, patients on a low fat diet can easily absorb the drug. This high absorption means that approximately a 5 times lower dose of Epanova is required as compared to Lovaza.

It has long been rumored that EPA is superior to DHA, as the latter is held responsible for a rise in non-HDL cholesterol. HDL (High-density lipoprotein) is the good cholesterol which ensures the reduction in LDL (Low-density lipoprotein). LDL cholesterol circulates your arteries and can build up plaques, which makes arteries narrow and less flexible.

However, the Phase III trial “ESPIRIT” shows that Epanova reduces non-HDL cholesterol levels by almost 7%. Vascepa still has a clear advantage in its control of LDL levels, compared to Epanova and Lovaza. Amarin is also undertaking the ‘REDUCE-IT’ trial to assess the effects of Vascepa on cholesterol levels of patients.

Bottom-line

The acquisition of Epanova should be good news for investors of Amarin Corporation plc (ADR) (NASDAQ:AMRN). This is another testament to the huge potential of Vascepa. The initial sales data on Vascepa is hopeful and can get another big-pharmaceutical player interested in the drug.

Vascepa has already shown its ability to treat multiple levels of Triglycerides, along with a number of other health benefits. Research shows that EPA can help in type 2 diabetes and some cardiovascular complications created by the disease, such as thickening of carotid arteries and coronary artery disease.

AstraZeneca plc (ADR) (NYSE:AZN) has paid an 88% premium to the market price of Omthera. If Amarin finds a buyer, the premium can go even higher, especially if we take in to account the wider applications of Vascepa as compared to Epanova. The street expects Vascepa sales to rise to $271 million by the end of 2014. If Amarin goes for a premium in the same range as Omthera, we can get a target price of $13 for the company.

Mohsin Saeed has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article A Winning Biotechnology Bet originally appeared on Fool.com.

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