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After soaring about 120% higher since the start of the year, shares of the Irish pharmaceutical company, Amarin Corporation (NASDAQ:AMRN), are now trading in anticipation of the PDUFA action date of July 26th, 2012. This is the date that the FDA will either approve or reject the drug AMR101 for the treatment of high triglycerides. Although it is arguable whether or not the FDA approval has already been priced into shares of AMRN, we do know that July 26th will be a major event for the stock. A rejection is not generally expected, although ~15% of shares are short, indicating a significant amount of money is betting on a surprise rejection.

Adding to the enthusiasm over the company is Amarin's patent protection on its novel AMR101 compound, which was granted a few weeks ago by the USPTO (shares have tacked on ~30% gains since). The patent is not set to expire until year 2030. This has fueled a new round of takeover speculation from many analysts covering the stock, and continues to keep the stock in the limelight, as the AMR101 NDA decision gets closer.

Despite the likelihood of a successful launch, and the huge prospects of the massive triglyceride drugs market, Amarin has become a rather expensive stock for what it is. Sitting at a market cap of about $2.1 billion, and with a significant fraction (or more) of AMR101's value already priced into the stock, many would say that new buyers have missed the boat, even if we get an FDA approval.

This should lead investors to other high-potential plays in the triglyceride drug market. One notable example that has been recently uncovered is Neptune Technologies & Bioresources (NASDAQ:NEPT), which is a more obscure pick that can tap the same demographic through the nutraceutical industry. This is a company that is developing NKO® (Neptune Krill Oil), which is very similar to AMR101 (which is 95% EPA without DHA refined from fish oil). NKO contains both of the Omega-3 fatty acids known as EPA and DHA (docosahexaenoic and eicosapentaenoic acid).

Based on the company's claims, NKO has a few advantages against other similar compounds, including its clinically-proven effects on joint and brain function, in addition to cardiovascular health and safety studies. Neptune has also released some good financial figures. In the last quarter of the company's fiscal 2012 year, the company announced 15% year-on-year revenue growth and an astounding 136% improvement in net income (a total of $2,384,000 for the last 4 quarters).

On top of NKO, Neptune-owned pharmaceutical company, Acasti, is developing a compound known as CaPre for hypertriglyceridemia, which is in two phase 2 trials. The TRIFECTA study is the one to watch, since it was designed to focus exclusively on CaPre with regards to its effects in reducing triglycerides in blood plasma. For the most part, we are not worried about the safety data; it is about the efficacy and the supposed benefits it has on cholesterol levels.

The study was designed with three arms (2 doses of CaPre versus a placebo) and has an estimated primary completion date of September 2012. What's most interesting to the market is that preclinical studies implied that the drug induces lower LDL cholesterol levels (the bad cholesterol), and increases in HDL (the good cholesterol) on top of the intended reduction of triglycerides. No drug on the market has this "trifecta" of therapeutic benefit.

Time will tell whether or not CaPre can produce phase II studies that demonstrate the trifecta of therapeutic benefit, but until then, we may see investors buying into Neptune simply due to its sales growth. It can also serve as a sort of substitute for Amarin stock, which has become a bit expensive, as mentioned earlier.

As of now, analysts are extremely bullish on Neptune, with some shooting as high as $10.30/share (a call by Roth Capital Partners). I expect the stock to rally until at least September 2012 based on its general undervaluation alone. $6/share seems attainable if the broader market doesn't induce downward pressure in the biopharmaceutical sector.

When September does roll around, TRIFECTA data could induce significant rallying on CaPre-related hype if the cholesterol side-effect does show up again. This is one way that NEPT can reach the lofty price targets set by optimistic analysts. The other would be through more growth in the "nutraceutical" markets.

No matter how you slice it, NEPT looks like a strong buy-and-hold candidate that is extremely attractive on the meaningless dips. I'm keeping the stock on my watchlist. Find updates on my site, along with other ideas for trading in biotech.

Source: Trading The Top Triglyceride Challengers