It seems like only yesterday I was looking at companies with weak balance sheets to possibly short and came across Amarin Corporation (AMRN) at the top of my list. I ultimately decided to pass since although its balance sheet is bad, their debt and payments aren't due any time soon.
With hindsight being 20-20, it was obviously a bad move that I didn't short, with AMRN currently tanking. After the closing bell on Thursday, AMRN had a press release followed immediately by a conference call announcing that as of now it plans to launch its newly approved triglyceride-lowering drug Vascepa on its own (and will hire 250-300 sales reps) and obtained $100 million in additional financing to do it. That went over like a fart in church among investors. Shares immediately took a sharp dive in after hours, as correctly called would be the reaction by one author who warned:
"If Amarin decides to launch Vascepa on its own shares will most likely drop due to the cost and difficulty of small pharma drug launches."
So where does AMRN go from here? Some items to consider:
(1) In the conference call, management stated they will need $20 to $30 million for supplies to launch their drug. Okay fine. That level of cash is not a problem for now especially since no debt payments for the new financing would be due before November 2013.
(2) The lack of a partner begs the question of how valuable and ultimately successful is the Vascepa? And what sort of risks, especially financial, does AMRN face launching it on their own versus the benefit starting from scratch? Is this a move of desperation?
(3) Why were insiders selling so aggressively before drug launch?
(4) Both the press release and the conference call claim the company is still looking at all options including possible partnership or sale of the company, but the tone to me sounded very somber and unconvincing in the call. Or do they possibly have multiple suitors at the same time and are playing chicken by threatening to go at it alone? Doubtful with that insider selling.
For now, the 20 million shares short have a very nice payday. Where AMRN goes from here remains to be seen. I certainly don't see a compelling reason to short at these depressed levels. I don't see a compelling reason to go long either. AMRN will stay on watch however as info develops.