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Shares of Amarin Corporation (NASDAQ: AMRN) finally seem to be recovering from a prolonged sell-off in July and August - possibly on the "adequate" prescription sales data that has recently been coming through for the company's flagship drug Vascepa. Shares bottomed at a newly-made 52-week low of $5.12/share before rallying (strongly) in the last few weeks. This recent rally fought against the broader bearish trend in the pharmaceutical space as well as the broader market.

In perspective: Amarin is up 15.8% in the last 30 days, the NASDAQ Biotechnology Index (NBI) is down 3.58% in this time frame, and the S&P 500 is down 4.49%.

This is an encouraging turn of events for Amarin shareholders who have otherwise seen a truly disastrous year. Investors, still upset over the fact that the company was unable to secure a buyout or partnership before the market launch of hypertriglyceridemia drug Vascepa, have punished the stock with a >50% drop in share price since the decision was finalized in December 2012 (along with a non-dilutive debt financing). The NCE status of Vascepa also remains undetermined to the frustration of bulls and bears alike.

Recent Lack of Action in Amarin

Because of the lack of predictable catalysts in the last few months and the relatively unsurprising trend in Vascepa sales, trading interest has slowed down a bit. The NCE status of Vascepa, which would have been revealed in the FDA's monthly Orange Book release, did remain a popular "catalyst" trade throughout the year. Throughout the last few months options traders have attempted a number of straddles in an attempt to capture Amarin's volatility in the event of an NCE, although these trades failed due to the lack of any FDA decision.

It is still unknown when this decision will be made, although we can infer that the binary event will have a noticeable impact on share price. The NCE status of Vascepa will determine whether the drug received 3 or 5 years of exclusivity in the US market. Since this alters the long-term revenue potential of the product in its hypertriglyceridemia and cardiovascular risk indications, it should have an even larger impact on the current valuation.

Based on enterprise valuation, we can say that Vascepa is currently worth a bit over $1 B. Analysts are not expecting Vascepa sales to break $100 M this year, although the growth is expected to be enormous over the next few years. By 2016, analysts are anticipating Vascepa sales to be north of $500 M given that the drug stays on its current path and expands into new indications.

Amarin and Vascepa in Q4 2013

As we enter the fourth quarter of 2013, we expect some returning interest in Amarin as we approach very big catalysts for Vascepa.

From our previous note:

Recently, the FDA announced the scheduling of an Advisory Committee for the sNDA submitted by Amarin earlier in the year. An approval for this would expand Vascepa's hypertriglyceridemia indication into the 200-500 mg/dL range, and would add "mixed dyslipidemia" to the Vascepa label (this is also referred to as the "ANCHOR" indication). While this is not as expansive as the REDUCE-IT (cardiovascular risk) indication, it is a huge step forward for the drug and allows the company to market to ~40 M patients in the United States as opposed to the current ~4 M.

The AdCom will take place on October 16th, 2013, and the PDUFA goal date for the ANCHOR sNDA is December 20th, 2013.

Generally we would expect increased volatility of the stock before these events, although the opposite can occur as well. What we do know is that these events will have a profound impact on the long-term success of Vascepa. Expect big reactions from Wall Street soon.

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.

Source: Amarin Regains Ahead Of Vital Q4 Catalysts