Although Amarin (NASDAQ: AMRN) remains heavily watched, it doesn't seem to be garnering the kind of interest it did in 2012 when everyone thought that the company was gong to be bought out.
Despite the strength of the market this year, especially in the biotech sector, AMRN shares have stayed pretty close to $8.50/share since early January and haven't been able to gain any real momentum in either direction. I think that this not only indicated quite a bit of uncertainty over the valuation of Amarin leading up to the solo launch of Vascepa, but also a lack of interest.
I think that the recent launch (January 28th) for Vascepa is going to garner some new interest in the stock, perhaps as the market revisits the potential undervaluation of Vascepa's target market(s).
Recall that competitor GlaxoSmithKline's (NYSE:GSK) Lovaza brings $1 billion per year in revenue just from patients that have triglyceride levels of >500 mg/dL. If Vascepa is even on track to match Lovaza, AMRN would be trading closer to $20/share right off the bat. Many Amarin investors believe it will go a lot further than Lovaza based on expansion of its current indication for hypertriglyceridemia.
The real potential comes from the ANCHOR indication which would expand Vascepa's profile into the much broader "cardiovascular risk" space. We are going to see the sNDA for that be submitted before the end of this month (February), which means that we should have an FDA decision before the end of 2013. This is another event which should increase speculation in Amarin again, as the anticipation for a potential FDA approval for Vascepa for the ANCHOR indication will be a very big deal.
If Vascepa's sNDA receives approval, the market potential for the drug expands about ten times. With the ANCHOR indication, it's within reason to say that Vascepa could be generating $2-3 billion in annual sales, if not more (in the United States alone). This is due to the sheer number of adults in the United States who are at risk of cardiovascular events, and the doctors who would see no harm in upping their omega-3 fatty acid intake through a prescription medication.
Investors who have not established a position in AMRN have a chance to get the stock at what I consider a bargain. Post-FDA approval stocks are very tricky and sometimes very disappointing for investors, but I think that the potential undervaluation of Amarin/Vascepa currently outweighs the possibility that the launch will be sloppy.
Amarin was mentioned on the watchlist in Bio-Wire Weekly for the reasons stated above. I am bullish on the stock, although I don't expect it to move too high in a short timeframe. This is why I suggest that AMRN investors sell covered calls that are far above the current market price of AMRN (maybe $12-13 calls) for upcoming months.
This will generate passive income for any AMRN shareholders who are sitting with a stagnant stock. The drawback is that a sudden acquisition of AMRN could mean that investors miss out on some gains - although I find this scenario highly unlikely right now.
Disclaimer: I am not an investment advisor, so this article should not be considered as official investment advice. Anyone who wants to trade either of these two stocks should perform due diligence of their own.
Disclosure: I am long AMRN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.