The latest twist in the prescription fish-oil saga emerged today when a federal appeals court issued a ruling that clears the way for generic versions of Lovaza, which has been a $1 billion seller for GlaxoSmithKline $AMRN $GSK

The latest twist in the prescription fish-oil saga emerged today when a federal appeals court issued a ruling that clears the way for generic versions of Lovaza, which has been a $1 billion seller for GlaxoSmithKline $AMRN $GSK

The news, however, was taken by some investors to be a big challenge for Amarin, a much-smaller player that sells the rival Vascepa pill.

Both drugs are approved for treating people with very high triglyceride levels, which is approximately 4 million people in the US. Amarin, however, has been a controversial story this year as the drugmaker attempts to win FDA approval to market Vascepa to people with high triglycerides, a market that is variably at estimated to be 10 times larger, and mixed dyslipidemia.

Next month, the FDA is holding an advisory committee meeting to review the application, although there has been debate about whether the agency will approve the wider indication without an outcomes study to demonstrate the pill can reduce the risk of cardiovascular events. A study with 8,000 patients is under way, but results will not be known until 2016.

Although Amarin stock fell on the court ruling, at least one Wall Street analyst remained bullish. Leerink Swann analyst Joseph Schwartz wrote in an investor note that he does not believe Vascepa and Lovaza compete on price, “but will primarily be compared by physicians and payers on their efficacy and safety profiles and respective labels.” He also expects the FDA panel to endorse the wider indication next month.

Of course, generic competition often means pricing pressure, and such concerns explain investor reaction. But Amarin execs had previously acknowledged generic rivals (see pages 10 and 11). Just the same, generic versions of Lovaza are not expected to compensate for a competitive disadvantage – the Glaxo pill can raise bad cholesterol, since it contains a different Omega 3 fatty acid than Vasepa.

This helps explains some of the bullishness among Amarin watchers, although the true litmus test continues to be how payers view this category. Express Scripts, for instance, requires so-called step therapy – patients must first use other therapies that have failed before the pharmacy benefits manager will approve Vascepa for treatment. To entice consumers, meanwhile, Amarin is promoting a coupon program that lowers prescription costs.

In an investor note last week, Sun Trust analyst John Boris wrote that he also expects FDA approval and that Vascepa eventually represents a $1 billion product and twice that much if Amarin (AMRN) finds the right big pharma partner. And h opines that if the outcomes study accomplishes its goal, Vascepa could be marketed to one of three US adults, compared with one out of 50 that might Lovaza might reach.

The premise behind all this speculation is the notion that fish oil will continue to be seen as a useful tool in combating high cholesterol and triglycerides. Toward that end, earlier this summer, Amarin released positive data from a Phase 1 clinical trial assessing the pharmacokinetic profile of a fixed-dose combination of Vascepa and the Crestrol cholesterol pill, which is a statin.