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By Jake King

Coincident with securing $100M in non-equity financing, Amarin Corp. (NASDAQ:AMRN) announced after the close on Thursday that it will begin hiring a sales force to launch Vascepa, its approved treatment for high triglycerides. The announcement comes as a major disappointment to investors, as many had been holding out for either a buy-out or a major drug company partnership. In kind, AMRN traded down ~18% in the pre-market on Friday, and given that most investors will not want to stick around to see the company launch the drug itself, the shares could continue to fall.

In PropThink's prior coverage, we estimated downside in AMRN could be as low as the $7-$8 range if investors lost faith in a potential acquisition of the company. Over the past several years, most biotech drug launches have flopped, primarily because small companies did not commit sufficient resources to support a given new drug roll out and/or health insurance companies blocked access to new expensive therapies by putting in place high patient co-insurance payments. Vascepa has potential to fall prey to these same issues, and we believe investors may end up selling their stock in front of the launch and getting back in at better levels once Vascepa's launch ramp becomes more clear.

The "go it alone" announcement comes just a week before the FDA releases its latest edition of the Orange Book, which may finally determine Vascepa's New Chemical Exclusivity status (read more here). Unfortunately, the news that the company has chosen to launch Vascepa alone signals little confidence from Amarin management that they will receive an NCE designation for the drug. Without the designation, which would grant the product five years of unchallenged market exclusivity, potential acquirers or partners have been, and could remain, hesitant to take a stake in Vascepa.

Amarin shares likely to remain under pressure unless NCE status is granted or the company demonstrates Vascepa's commercial success. Amarin is embarking down an expensive and resource-consuming road by launching Vascepa on its own, hence the $100M financing announced last night. Investors are well aware of the possibility that the drug could fall short of expectations, at least initially, and resources could be consumed even faster than analysts are forecasting. The company plans to hire 250-300 specialty sales professionals who already have three- to five-year existing relationships with the physician groups that Amarin will be pursuing with Vascepa. Thursday's announced "hybrid debt-like instrument" may not even be sufficient to commercialize Vascepa properly, given that cardiovascular drugs addressing large markets can require marketing and sales budgets in the hundreds of millions of dollars for a full-scale launch. The company did note in its press release that the possibility for another avenue still exists: "Amarin's hiring of a sales force is part of a continuing strategy to evaluate three potential paths to Vascepa commercialization: an acquisition of Amarin, a strategic collaboration, and self-commercialization, the latter of which could include third-party support."

No deal, no support for the stock. Again, we see Thursday's announcement as a signal that the partnership and acquisition search has not gone well, in part due to no NCE status. The company preparing for Vascepa's commercialization on its own is the worst-case scenario, and many investors are likely to head for the hills given that this is not what they had hoped for. There still is a chance that the company could gain NCE status next week, which could get the shares trading better again as investors would remain hopeful for a major pharmaceutical company buy out or partnership. Should the FDA's decision on NCE status not go the company's way, shares of AMRN have potential to dip down to the mid-single digits. We reiterate that a core position hedged with options, or a pure options strategy, are the best ways to remain involved in AMRN.

See more articles and reports at PropThink.com.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: PropThink is a team of editors, analysts, and writers. This article was written by Jake King. We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article. Use of PropThink’s research is at your own risk. You should do your own research and due diligence before making any investment decision with respect to securities covered herein.You should assume that as of the publication date of any report or letter, PropThink, LLC and persons or entities with whom it has relation ships (collectively referred to as "PropThink") has a position in all stocks (and/or options of the stock) covered herein that is consistent with the position set forth in our research report. Following publication of any report or letter, PropThink intends to continue transacting in the securities covered herein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation. To the best of our knowledge and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and not from company insiders or persons who have a relationship with company insiders. PropThink was not compensated to publish this article. Our full disclaimer is available at www.propthink.com/disclaimer.

Source: No Buy-Out, No Support For AMRN Suggests Investors Will Dump