AMRN - Amarin: Sarissa Has Control But Amarin Will Need Patience

2023-04-16 09:15:01 ET

Summary

• Sarissa Capital has taken full control of Amarin.
• The previous management was doing some slow but decent work, but did not get time to show results.
• Sarissa hasn't disclosed material plans.

In February, I wrote that while Amarin ( AMRN ) has problems, Sarissa does not offer solutions. Two months later, it does appear that whether they have a solution or not, they certainly have an agenda, which is to completely revamp Amarin’s management. This they successfully did, with first, going onboard the BoD, then allowing all non-Sarissa members to resign, and finally getting the CEO himself to resign from Amarin. Thus, Amarin is now fully in Sarissa’s control. Whether that is good, bad or nothing, we will see soon enough. That the stock is down 25% since the takeover could be indicative of what the market thinks of this move right now.

Amarin’s board is now completely replaced by Sarissa people. Sarissa’s CFO, Senior Managing Director, General Counsel, and a number of old Sarissa hands are on board, and nobody from the previous board remains. This will have one good effect: if at all the new board is able to come up with a strategic plan for the future of Amarin, there will be no problem getting a unanimous decision.

In my February coverage, I mentioned some of the good things the previous board had done. I will quote that, because it is worth reviewing once again, being the less popular view right now:

Amarin's ability to retain 60% of the US market shows it has fought hard and well. Revenue, too, after having gone down from the $150-$160mn per quarter range in 2021 to about $90-$100mn range last year, seems to have stabilized at that level. If the company can simply stabilize the US market at that level while building it ex-US, they will have accomplished a major feat. On top of that, the company says it has made a solid effort to reduce cash burn, through restructuring, reducing the US sales force and so on - and if the results are correct, this seems to have been borne out. Cash burn has been reduced by about a fifth of what it used to be earlier. Operating expenses are also vastly reduced.

If the above figures are true, Amarin’s previous team was trying to make it a viable business again, with some strong measures for top line and bottom line improvement. I am quite impressed by the 60% US market retention, which speaks to the management’s ability as much as to Vascepa’s differentiation from generics. I do not doubt that this is a result of the very impressive REDUCE-IT trial data. The old management’s efforts in the EU were also quite good. Read their last earnings press release for a recap .

What investors really want to understand is: with new management on board, what will change for Amarin? If they pursue the same trajectory as before - stabilizing US, improving EU, penetrating RoW - will there be any reason to expect they will do it with more vigor than the previous management? Does Sarissa have any experience selling CV drugs in the US, EU and internationally?

Or will they go for something new? Like selling out the company, or maybe buying molecules to run through trials? Last quarter, they had free cash flow of $4mn, for the first time, and they have $300mn in the bank. If they can improve that figure, they can certainly get to a comfortable position to consider strategic investments.

In their last earnings call before the earlier management team quit, they were asked if the new board members had guided towards any shift in strategy. Here’s the exchange:

Cade Cruz

This is Cade Cruz on for Paul Choi. Our question is how are you thinking about potential shifts in strategy? And has the new board provided any comments or directional guidance on a new strategy? Thank you, so much.

Karim Mikhail

Thank you. So, first of all, I mean, the new board members, it's still very fresh. I mean, the meeting was yesterday. Today is day one. We're in very early stages of onboarding. But I mean, for the moment our strategy is very clear, right? Shareholder value creation is about expanding and launching and succeeding in Europe while maintaining the profitability in the US because that's necessary for us to make it there.

So, these are the key priorities for the moment. We have not had any shift in strategy, but as management, we have always been very open to re-evaluate what's happening in the market and what we need to do, because if you look at what happened in the market over the last two to three years, things have developed and evolved significantly.

So, we stay very open to the market, to the situation and to adapt our plans and our strategies accordingly. But for the moment, I believe, we have a clear path to the future and moving ahead. Thank you. Thank you again for the question.

So, there’s no discussion really about whether there’s any shift in strategy. Sarissa is keeping its cards close to its chest, as we have seen already.

Meanwhile, the old CEO is gone, and not too amicably either. Read this :

Mr. [Karim] Mikhail has "asserted" he is entitled to severance payments due to his resignation, which the company disagreed with and said it would dispute the claim. Amarin is conducting an executive search to find his successor.

Alex Denner, at least, promises to take some time to figure things out. As they said :

Although the new board has begun its work with urgency, we appreciate that Rome was not built in a day. The work to be done is substantial. We will proceed diligently and thoughtfully as shareholders deserve our best efforts.

Denner is probably best known for his The Medicines Company rainmaking efforts; however Amarin, with its myriad of troubles, is no MDCO. However, like MDCO’s inclisiran, Vascepa, too, is a practice changing medicine. So maybe someone somewhere will find a way to make money out of it. “Projected” EU sales is still $1bn, and projected RoW sales is also $1bn. Nobody knows how to get there, not Amarin’s old management team, and not, as far as they have divulged so far, Sarissa.

For further details see: