Amarin Hit Hard On Summer Street Commentary, Acquisition Possible After Omthera Buyout

| About: Amarin Corporation (AMRN)

Yesterday, we saw Amarin Corporation (NASDAQ: AMRN) at a new 52-week low of $6.25 per share and a 6% drop at the closing bell after a flurry of bad news hit the stock after Memorial Day weekend.

Although the biotech sector was quite mixed Tuesday amongst the smaller pharma companies, trading was mostly bullish and it was probably quite disheartening for Amarin shareholders to see such contrarian behavior.

Despite this, prescription data showed that Amarin's flagship EPA capsule Vascepa was once again performing along with the market's expectations (moving up in terms of total prescriptions sold last week). This may have helped ease fears about the company's momentum in the short run (in the MARINE indication, or in the indication treating hypertriglyceridemia patients with TG >500 mg/dL) after a short period of stagnation.

Still, the worry is now being shifted to Vascepa's prospects in the ANCHOR indication - the hypertriglyceridemia indication for patients with less than 500 mg/dL. Amarin is in the waiting process for an sNDA that was submitted for this particular indication earlier in the year, with a PDUFA goal date of December 20th 2013.

This indication, which expands Amarin's target population to 40M in the US (relative to 4M in its current indication) is vital to the current $960M valuation of the company. Note that this valuation was much higher not too long ago, which goes to show how much faith has been lost in Amarin's ability to target the larger pool of patients.

Particularly damaging was commentary in a note made Tuesday by the equity research firm Summer Street, quoting an "Amarin insider" who claimed that there was "no reason to give Vascepa to patients with TG <500 mg/dL before the completion of the patient outcomes study. This gave Amarin quite a scare about the commercial viability of Vascepa in the ANCHOR indication, although it was revealed Wednesday by an Adam Feuerstein article that Summer Street's note was misleading, and built on misquoted statements.

The other major event which seemed to damage Amarin's performance was the surprise acquisition of Omthera Pharmaceuticals (NASDAQ: OMTH) by AstraZeneca (NYSE: AZN) for $12.70 per share ($323 M) with the possibility of additional $4.70 per share ($120 M) in milestone payments to shareholders based on the regulatory and commercial performance of the free fatty acid omega-3 capsule Epanova. This may have also been discouraging to Amarin investors, since Omthera Pharma held its IPO less than two months ago and received a big pharma buyout offer at a premium that doubled the valuation of the company overnight. The improved bioavailability of Epanova also threatens Vascepa's market share in high TG therapeutics.

Amarin, on the other hand, has been an expected acquisition target for the better part of two years and was also unable to find a partner for the launch of Vascepa into the MARINE (current) indication. Going into the second half of 2013, investors would definitely like to see some sort of deal made before Vascepa is brought to the market for the ANCHOR indication due to the difficulty of primary care drug launches. The rapidity of the Omthera acquisition by AZN implies to me that Amarin was likely approached by AZN and perhaps a few other names (including Teva Pharmaceuticals (NYSE:TEVA) as rumored), although the buyout offers were probably too low given the optimistic outlook that Amarin had at the time. Now that AMRN is struggling at near 52-week lows, it may be time to revisit the acquisition potential of this company.

Disclosure: I am long AMRN. 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: via short puts