Most of us have probably heard the old saying, "can't see the forest from the trees," meaning sometimes we get so focused on the details that we lose sight of the big picture. I believe that old saying simply, eloquently and accurately describes the current analysis of Amarin Corporation (NASDAQ:AMRN). Amarin developed and successfully shepherded its flagship drug Vascepa through clinical trials and FDA approval in July of this year. Vascepa is a potent and ultra pure form of ethyl-EPA for patients with very high levels of triglycerides in the blood.
While there are endless discussions about details such as NCE status and the implications for a buyout, daily price fluctuations and what they mean, etc...I contend that many are forgetting about the big picture - mainly that Amarin is clearly setting itself up for a buyout and it will likely be taken out for over $20 a share based on conservative revenue estimates for Vascepa. The human mind can often times have difficulty accepting the most obvious conclusions.
Below I have listed 6 obvious reasons I believe Amarin will be bought out before the end of 2012.
1) Enormous and Proven Market - An estimated one-third of Americans adults have triglyceride levels that are borderline or too high - this represents an enormous market opportunity and blockbuster potential for Vascepa. Vascepa's competition will be mainly from GlaxoSmithKline's (NYSE:GSK) Lovaza which generated $1 billion in sales in 2011 and Abbot Labs (NYSE:ABT) Tricor, which generated about $320 million in sales in 2011. Vascepa has been shown to be safer and more effective than these competitors.
2) 'Big Pharma' Patent Cliffs - Several large pharma are losing patent protection on valuable drug franchises such as Pfizer's (NYSE:PFE) Lipitor, AstraZeneca's (NYSE:AZN) Seroquel and Nexium, Merck's (NYSE:MRK) Singulair, and Ely Lily's (NYSE:LLY) Evista and Cymbalta . These large companies will be looking for blockbuster drugs to replenish their pipelines.
3) Vascepa Is Patent Protected - Amarin has done a commendable job in building and securing a formidable patent wall around Vascepa. Amarin has secured patent protection out to 2030 for several critical Vascepa patents with several more in the process of being secured setting Amarin up nicely for a buyout. Regardless of whether Amarin secures new chemical entity (NCE) status from the FDA, I believe Amarin will be taken out. If Amarin were granted NCE status it would just increase the buyout price.
4) No Marketing Or Distribution Plans For Vascepa - Amarin still has not released any definitive plans for the marketing and distribution of Vascepa and there are no other drugs under development in its pipeline. It is not easy to commercialize a new drug - especially from scratch as would be the case for Amarin. Given this, it is likely that talks are under way with potential suitors.
5) Positive Analyst Targets and Expectations - The mean price target of analysts covering the stock is $25.39 with JPMorgan's discounted cashflow analysis shows $39 by the end of 2012. MKM's analyst Jon LeCroy, M.D. sees an acquisition in the second half of 2012.
6) Cancelled UBS Appearance and Quiet Period - According to PropThink, Bloomberg reported that Amarin pulled out of the UBS Life Sciences Conference and is under a self-imposed quiet period while waiting on the FDA decision regarding NCE status. The FDA does not give firm dates for decisions regarding NCE status so it is leading investors to speculate that Amarin is in advanced discussions with a potential acquirer.
For the first time in over a month, AMRN closed the day under $12. I believe this presents a very compelling buy so it should be no surprise I was a buyer under $12. I will continue see the 'forest' and accumulate cheap shares while others argue and debate about the 'trees'.
Disclosure: I am long AMRN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: This article is informational and intended to spur thought and discussion. This article is NOT a substitute for your own extensive due diligence and does NOT qualify as investment advice. DO NOT BUY OR SELL STOCKS BASED ON THIS ARTICLE. I do not short stocks nor do I invest in options.