I'm getting a little bi-polar about Amarin. I just can't convince myself to be bearish on it at the price it's currently trading at. I'll wait for most of my Amarin (NASDAQ:AMRN) readers to pick themselves up off the floor after reading that.
Take another minute. Breathe - in, now out, now in again. Ready?
Despite what most people that have read my sentiments on Amarin in the past think, I'm not a "paid basher"/"Amarin competitor" or any of that nonsense. I'm just a man, doing his own analysis that staked a short position through an options spread in the company and made my arguments as to why I was doing it. I've been a skeptic of Amarin trying to launch their own drug, Vascepa, without the help of big pharma. Despite lighting a ton of money on fire last quarter, prescription growth continues to push reluctantly upward while the stock has been pounded downward. It's been a brutal 6 months for Amarin longs that have gone long without hedging.
Like most of you, I'm a guy that analyzes situations and tries to make money accordingly. I thought Amarin was a great short while it was trading in the $9 region as I stated in my first article. It's a short that would have yielded over 30% - who can argue with those results?
Stock: Amarin (AMRN) on 2/20/13
First article: The War Over Amarin
Recommendation: Short/Options Spread
Price at time of publishing: $8.73
Current Price: $5.92
% Change: -32.19%
I mean, we're all here to make money at the end of the day, and what better way than to play the upward, as well as the downward swings? I'm going to make the argument that the next money to be made on Amarin is through an upward swing.
From its website, "Amarin Corporation is a biopharmaceutical company focused on the commercialization and development of therapeutics to improve cardiovascular health. Amarin's product development program leverages its extensive experience in lipid science and the potential therapeutic benefits of polyunsaturated fatty acids. Vascepa (icosapent ethyl) is Amarin's first FDA approved product and is available in the United States by prescription."
After the drug's approval, the company failed to produce any major pharmaceutical partners, brought on its own sales staff, and is taking a stab at launching Vascepa on its own. So far, the launch is going pretty well; not astronomically well like some had hoped, but definitely not poorly for the situation the company was put into. Numbers continue to run commensurate to prescription predictions and the stock has continued its sharp decline from the $15 region to the $5 region of late.
It's been a couple of weeks since I've checked in on how things are going with Amarin and their launch of Vascepa. I checked back in on the prescription data that I've missed last month and have noticed that total Vascepa prescriptions continue to rise - slowly, but steadily.
Here's my three main reasons for my change of heart:
1. Script Data Continues to Truck Along
The one thing that I continually have a problem arguing against are the hard numbers that come in every week with regards to Vascepa prescriptions. My previous argument to be skeptical about prescription data was as follows:
The launch, argued by bulls to be in line to reach 100M prescriptions by the end of the year, has gone nothing more than "adequately." Even Amarin executives on the last two conference calls have been anything but excited about how things are going, simply choosing to say "we're encouraged" several times over.
While Vascepa's numbers are basically tracking well, there are a couple of indeterminable factors. It's important to remember that historical performance doesn't necessarily predicate how things are going to go for the rest of the year. If a baseball team puts up three runs in the first inning, they're "on track" for 27 runs that game - will they reach it? Maybe, maybe not.
Recently, over the past few weeks, the numbers on a weekly basis are looking a bit weaker for Vascepa. This could be because of cyclical growth in prescriptions, or possibly a pullback in the drug. Again, another instance where time will tell the tale. Hardly an ironclad argument - again, an argument based primarily on forward-looking speculation.
Sure, my argument in the past has been that the numbers aren't great, but what I can't argue with is what seems to be continued growth. Here's what Vascepa's total script data looks like as of last Sunday:
For those of you that are not mathematicians, the line going upward is a continued sign that Amarin's in-house sales team continues to hammer along and make progress getting Vascepa to market.
2. RSI & Stock Correlation with Scripts
You don't need to be an expert chartist to notice the difference between the line in the above "Prescription Data" chart, and the trend that the stock has been in over the past 5 months:
Aside from the fact that script data is heading in one direction while the stock heads in another, the stock has dipped below oversold territory for the first time since this downtrend began. The RSI broke under 30 last month, signaling that the bottom might start to be at hand.
Interestingly enough, TheStreet.com, a site that is generally skeptical of Amarin, was one of the places to point this out:
Legendary investor Warren Buffett advises to be fearful when others are greedy, and be greedy when others are fearful. One way we can try to measure the level of fear in a given stock is through a technical analysis indicator called the Relative Strength Index, or RSI, which measures momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.
In trading on Monday, shares of Amarin Corp plc (AMRN) entered into oversold territory, hitting an RSI reading of 29.8, after changing hands as low as $5.90 per share. By comparison, the current RSI reading of the S&P 500 ETF (NYSEARCA:SPY) is 34.9. A bullish investor could look at AMRN's 29.8 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side.
Oh, cruel irony.
3. Emotional Buildup to December
This isn't going to be the argument that die-hard Amarin longs want to hear, but it'll likely perk up the ears of people looking to make some money.
I don't know about you, but every biotech stock that I've watched over the past couple of years has made a run up to any type of binary decision. Investors are quick to pile onto a biotech stock before any type of major decision or binary event in order to try and secure their place for the pop upwards.
I wrote about the tactic of shorting biotech stocks after these emotional run-ups in another article, when I said:
One trend that I've noticed is that there is a lot of emotion behind biotech stocks leading up to catalysts. Most, like my recent experience following Celsion (NASDAQ:CLSN), have great stories of searching for great cures in addition to having the ability to make savvy investors rich if they're on the right side of the trade.
What I've noticed from a lot of biotech catalysts is that the emotional charge behind the event often leads stock running far higher than rational, and that on good news the share price usually pulls back and corrects. Here are three examples of biotech catalysts and corresponding price movements:
Shorts playing the exact right time in these three could be yielding anything from 30% and up if done correctly. You need to feed off of other people not having control of their emotions when dealing with biotechs and use that to find realized gains in your portfolio.
Buying Amarin here does you one better; it puts you in place to take advantage of the emotional buildup before the FDA advisory meeting in December. Sure, if you sell after a gain and before the news comes out, you may be missing a substantial profit - but you may also be mitigating your risk in a serious way.
Buyers here are likely to benefit from the emotion that is sure to accompany the run-up to ANCHOR news at the end of the year.
With Amarin down yet again this morning at the open (currently $5.65), I'm making my outlook on Amarin a buy and hold through the end of 2013. I think the stock bottoming against the steady prescription numbers we continue to be privy to make the company a bargain at this point. I'd be a buyer here.
I'll rescind my bullish call here if any of the following take place:
- prescription data slows dramatically week-over-week (or total prescriptions start to regress in any facet)
- the company reports a cash burn that is equivalent to last quarter's
- prescription data winds up being a continued major product of discounts, giveaways and samples
As always, best of luck to all investors.