Amarin Spikes, Then Sputters Along With The Market

Oct.10.11 | About: Amarin Corporation (AMRN)

Hopes of a market recovery were real early on in the week last week, as a down day on Monday was followed some up-ticking and rebounding from many companies in the biotech and healthcare sectors.

For some, such as Keryx BioPharmaceuticals (NASDAQ:KERX) and Dendreon (NASDAQ:DNDN), pending news and developments might make their respective rebounds for real, but that might not be the case for all rebounding plays in the sector.

Shares of Amarin (NASDAQ:AMRN), for example, looked primed to take part in the renewed positive sentiment in the market by trading higher during the day on Friday, but the unsupported spike that saw shares touch a high of $9.65 sputtered later in the day and closed at $9.15.

Amarin has fallen significantly from its highs of the year, which were hit after positive trial results were announced and then immediately follow-up by rampant buyout speculation. Many investors, however, see the recent slide as an opportune time to buy, given the positive outlook for approval after the solid Phase III results of AMR-101.

With that being said, the company has only just filed with the FDA for AMR-101 for the treatment of high triyglycerides, leaving a lot of time between now and the expected FDA decision time, which will probably be in mid-2012.

Given that fair amount of time, and given the short attention span of investors and traders in the biotech sector, AMRN might not get much play between now and the lead-in to results.

For the time being, at least, that catalyst could be deemed a non-factor.

The wild card, however, is any partnership or buyout speculation; after all, it was that such talk that mainly fueled the run earlier in the year.

The most recent indications from the company have been that neither scenario is likely, and that Amarin plans to go it alone, but seeing the troubles that smaller companies have recently endured with launching new products on their own, an about-face could materialize at any time for the right price.

Barring any speculative talk, it's probable that AMRN will truck along with the general market sentiment until it's closer to FDA time, at which point a pre-approval run-up is likely.

Keep in mind, however, that the trend has been to see a sell-off on the back end of approval news - even the positive type - so keep some trading shares handy.

Disclosure: I am long KERX, DNDN.