THE REMEDY: Amarin's Lessons In Crisis Management

July 12, 2010 - Dow Jones Investment Banker

LONDON (Dow Jones Investment Banker)--If you're running a biotech company and your lead drug has just failed in late-stage clinical trials, should you seek more funds and a new focus or just fold the business and hand remaining cash back to investors?

Such was the question facing Dr. Declan Doogan, now Amarin Corp's interim CEO, who within weeks of joining the company as head of R&D in April 2007 saw the drug Miraxion fail in Huntington's disease. Three years on, his company having been refocused on cardiovascular disease, Dr. Doogan can afford a wry smile as, speaking to Dow Jones Investment Banker, he notes "what a great head of R&D" that failure made him appear to be.

With around GBP20 million in the bank at the time of the failure--not enough to plough on with R&D--and no doubt faced with advice from bankers, investors and other interested parties pulling in different directions, Dr. Doogan said he asked himself a simple question: "Is (Miraxion's) only use Huntington's disease?" Clearly the answer was no: The drug's active ingredient had been marketed for 18 years in Japan, where it is now generic, for lipid lowering--a blockbuster indication in the Western world.

"Nobody could find a good reason why Amarin wasn't also looking at this use," says Dr. Doogan. Accordingly the company refocused on this single new indication and sought new money, finally raising $70 million late last year.

In the meantime, tough decisions had to be taken. The first was to scrap Amarin's involvement in central nervous system disorders; this pipeline, including clinical-stage projects in multiple sclerosis, myasthenia gravis and depression, is now up for sale.

Then there was a "need for greater capital efficiency"--AKA cutting costs. Amarin's U.K. operations were closed, its AIM listing cancelled, and while Dublin remained the corporate HQ for tax purposes, the firm's centre of gravity switched to the U.S. and its primary listing on Nasdaq. "After all, our number-one customer was going to be the FDA." A major piece of the puzzle was credibility, which the company only regained having raised the $70 million from new investors including Abingworth, which-- reassuringly in this age of apparent investor apathy--"gave us a hard time," says Dr. Doogan.

Amarin, a company with a relatively long and convoluted history, also had to be certain of its intellectual property, which Dr. Doogan is confident extends to at least 2021. The only overhang from previous deals, meanwhile, is a royalty payable to certain former investors in Laxdale/Scarista, from which patents are licensed.

Still, not many biotechs find themselves in the fortunate position of having a drug like Miraxion (now renamed AMR101), which was allowed to go straight into Phase III in the new indication thanks to a body of safety data both from its previous trials and its long history of use in Japan.

Amarin's plan now is to attract a big pharma licensing partner, perhaps once Phase III data come out in 2011. A licensee with a large primary care sales force is vital to compete with GlaxoSmithKline, which sells the related product Lovaza, which Amarin says is inferior to AMR101.

GSK acquired Lovaza through its $1.7 billion, 2007 purchase of Reliant Pharmaceuticals, turning a $400 million drug into one selling more than $1 billion and fully justifying the alarming takeover multiple of 4.5x sales.

So what about the M&A scenario at Amarin? After all, the title of interim CEO suggests a lack of permanence that often helps in a takeover, although Dr. Doogan, the former head of worldwide development at Pfizer, insists it's just an indication of the fact Amarin will one day need someone more focused on deal making.

But he admits, "We're a one-drug company, so of course we must be considered a takeover target."