Was hat diese Richterin angestellt, unglaublich aber wahr:
Jefferies post Harvard expert report
Good luck guys hope you win appeal
Yee put this out 10:20 pm eastern Weds night FYI after the call
Amarin Corporation
Target Change
USA | Biotechnology
RATING HOLD
PRICE $4.98^
MARKET CAP $2.1B
PRICE TARGET (PT) $6.00 (FROM $4.00)
UPSIDE SCENARIO PT $10.00
DOWNSIDE SCENARIO PT $2.00
Patent Expert Thinks ~50% Chance of Winning Appeal Next Year - Raise PT to $6
April 1, 2020
Key Takeaway
Per our patent lawyer expert, there was a pot'l procedural error in the patent ruling, and AMRN has a pretty decent shot at appeal (and good likelihood of preliminary injunction in a few weeks as well). That said, it could take 12 mos and won't be expedited. Good sum of the parts on US + EU oppt'y (latter has 10+ yr exclusivity) for long-term investors and.call option on appeal win makes this interesting. But it will take time to next year's ruling.Our patent expert thinks the AMRN case was one of the most unusual and surprising
District Court decisions he's witnessed and there is a 50% chance of overturning it in AMRN's favor (much higher than traditional appeals). Our expert believes Judge Du made a "clearly erroneous" methodology of assessment on determining obviousness. Many of the Federal Appeal Circuit judges are big "sticklers" for correct procedure and because AMRN already was supposed to have a good chance when looking at obviousness regardless (hence why we thought good chance of winning originally), this should give AMRN a decent shot for an appeal. Our PT moves to $6 to now include even a modest chance of appeal win in 2021 plus modest US and conservative EU sales.
The Judge may have made a "major procedural error" as she shifted the burden of proof on AMRN when looking at Secondary considerations for obviousness. Primary considerations refer to 'prior art' like old patents and scientific literature, whereas Secondary considerations are more objective measures (e.g. unexpected benefit, long felt need, commercial success, skepticism, praise). Our expert believes Judge Du should have placed the burden of proof entirely on the generics (defendants) when assessing primary and secondary considerations. He said there are many examples of this and the Supreme Court has clearly recommended that method to District courts. He provided a couple of famous cases in which the Judges had applied the wrong burden-shifting framework, which the Federal appellate court later viewed to be not permissible.
Our patent expert thinks AMRN has a good chance of winning appeal due to a
combination of: (1) This was Judge Du's first patent bench trial and there appears to be a major procedural error, (2) the Federal Circuit of Appeals favors the patent holder (e.g. AMRN) 64% of the time (although only reverses invalidity/validity cases 18% of the time), (3) there are 12 active judges on the Federal Circuit and at least half are pro-procedural or pro-patentee, (4) obviousness issue will likely be reassessed and may come to the original held view the patent is novel. However, the expert noted it does partially depend on which 3 judges are assigned to the panel.
Timelines: AMRN will appeal and file an injunction to prevent generics from launching at-risk within weeks. He sees an 80% chance AMRN secures an injunction by early May, although a final appeal decision is a year out in April/May 2021. He is doubtful generics will launch at-risk until the appeal decision, but our discussions with generic companies suggest they would like to launch. Hikma appears confident with its manufacturing and has been stockpiling raw material.
Investment Thesis / Where We Differ
We maintain HOLD and believe the stock will be range-bound until there is more clarity on an appeal and scenarios where generics may not immediately hit.
For value folks, we see long-term value due to appeal decision later, no Gx immediate launch, manufacturing challenges, - and AMRN isn't really burning cash anymore, but the Street will not likely care in the near/medium term.
While generics should be expected to come, the stock mostly reflects this now. We do think generics will face challenges in reality - which creates upside value for longer-term non-consensus investors, but the Street won't likely care for now.
In the meantime, AMRN will (1) seek an injunction (2+ wks for ruling) and appeal the case (average 9+ months for decision), (2) continue to execute on commercial sales this year (will likely cut DTC and some expenses) in US, and (3) continue to interrogate EU where it is up for approval YE:20 and does not currently face any patent issues and should have 10 years exclusivity due to CVOT label, not the initial US trig label.
Scenarios
Base Case
Our base case of $6/share is based on a DCF analysis that considers a 15-20% chance AMRN wins its appeal in 2021.
In this scenario, we assume US and EU Vascepa sales both extend out to at least 2030.
We consider peak sales of $3-4B on a 4x multiple (probability adjusted).
Upside Scenario
Our upside scenario of $10/share considers a higher 30% chance AMRN wins its appeal in 2021.
In this scenario, we consider peak sales of $3-4B on a 4x multiple (probability adjusted).
Downside Scenario
Our downside scenario of $2/share assumes AMRN loses its appeal, implying generic entry as early as 2021.
In this scenario, we assume USA sales into YE:20/early 2021 and no revenues thereafter. We do not consider EU sales as well.
However, we do consider net cash of ~1/share.
Catalysts
2020: Quarterly results and sales growth of Vascepa
Mid:20: File an appeal and seek injunction ruling
Q4:20: EU approval of Vascepa
Mid:21: Potential appeal decision on the HIkma/Reddy's cases
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