Cantillon

Sat, Jul 28, 2012, 01:00

Inside the world of business

Amarin success will attract major suitors

Amarin, a small Dublin-based biopharma business, has struck gold with the approval of its first product AMR101 from the US Food and Drug Administration. AMR101, now known as Vascepa, has shown significant efficacy is lowering high levels of triglycerides – blood fats – which can cause coronary disease.

Significantly it does so without adversely affecting the levels of other blood components, including one known as bad cholesterol, or LDL-C. This is an issue for Vascepa’s only competitor in the market, a drug called Lovaza, which is produced by GlaxoSmithKline. Lovaza boasts sales of close to $1 billion, giving some indication of the opportunity now open to Amarin.

Jon Lecroy, a US analyst with MKM Partners, says Vascepa has the potential to reach sales of $1.25 billion in 2017 and Dr Manus Rogan, whose Fountain Healthcare led the fundraising that saw its development through, last night likened it to a Lipitor or a Crestor, the world’s two best-selling cholesterol drugs.

That remains to be seen. For now, Amarin has to decide how to proceed. Chief executive and chairman Joe Zakrzewski has previously been bullish in asserting the company’s intention to go it alone in manufacturing and marketing the drug but, in the era of the patent cliff, there will be no shortage of suitors among the major pharma companies.

Amarin will also pursue a wider label for the drug. At the moment, it is licensed for people with very high triglycerides (levels above 500mg per decilitre), which amounts to about four million people the US alone, the company has said previously. Securing approval to treat those with levels of between 200 and 500 mg/dl would increase this target market tenfold and the company has trial data showing its effectiveness in treating this group.

Whatever of the future, the FDA green light is a major triumph for a company that has diced with bankruptcy on more than one occasion – relying on the largesse of Elan at one point in the late 1990s and, more recently, on a $70 million fundraising led by Fountain Healthcare, the Irish life sciences venture capital group.

AIB must take action on personal debt

The enthusiasm being shown by AIB’s newish chief executive for shutting branches is in marked contrast to the speed with which he is addressing the issue of overborrowed customers.

David Duffy said that the number of cases in which it had used the advanced forbearance techniques – which the taxpayers have paid for via the €21 billion recapitalisation of the banks – stands in the mid-teens. Very slow progress.

However, in the same time period Mr Duffy has identified 67 branches which can be closed.

The common thread is that Mr Duffy is concentrating on the sort of things that please shareholders. They like to hear to about cost savings – such as closing branches – but start getting a little neuralgic when bankers mention debt forgiveness and forbearance.

Fair enough you might say, if it was not for the fact that Mr Duffy’s shareholder is the Government and by extension the taxpayer.

The Government – via the Central Bank – has made it clear that it wants to see real progress being made by all the banks in working their way through the mountain of unsustainable personal debt on their balance sheets.

The money has been provided via the recapitalisation that forced an international bailout, and the tools to be used have been identified by the Keane Report.

The half-hearted progress revealed by Mr Duffy yesterday smacks of wilful defiance.

It also seems short-sighted. The personal debt problem will not go away and the Government – with the backing of the troika – has made it clear that if the banks don’t deal with it voluntarily they will have solutions imposed on them via the new non-statutory insolvency procedures and the more lenient bankruptcy regime due to come into effect next year.

Ball in court of credit agencies

THE GOVERNMENT’s surprise return to the bond markets this week and the raising of €5.2 billion to go towards the first major debt repayment of €8.2 billion in January 2014 raises interesting questions for the credit ratings agencies.

Ireland is rated as non-investment or “junk” status by one of the three main credit ratings agency, Moody’s. Standard and Poor’s and Fitch still have the country rated at low levels but at least they don’t have the country in the junk yard.

Moody’s downgraded Ireland to junk a year ago on the basis that there was a “growing likelihood” that Ireland would need more bailout assistance from the troika of lenders in late 2013 when the bailout programme ends. The National Treasury Management Agency said that the €5.2 billion, including €4.2 billion raised in new money, on the sale of bonds maturing in up to eight years would significantly reduce the “funding cliff” bond in early 2014.

Certainly, the first bond to fall due after the EU-IMF bailout programme was always going to be the acid test of whether the State could avoid a second bailout. The so-called “top-slicing” of what was originally €11.8 billion of debt due to be repaid in January 2014 by pushing out €3.5 billion of the debt at the start of this year through a debt exchange reduced the height of that cliff.

This week’s bond sale and further swap of €1 billion on existing debt has turned what was still a significant challenge into a more manageable €3 billion repayment.

That should reassure Moody’s that a second bailout is not inevitable or at least reduces what was a “growing likelihood”. Even changing its outlook on Ireland to positive on the back of this successful re-entry would help.

While the cost of the borrowing was high at just under 6 per cent, the fact that the Government raised money will help the NTMA raise more. A change of view from the credit rating agencies would certainly add to the momentum created by this positive step towards an exit from the bailout.

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