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We try to provide unbiased, balanced and helpful insight into long-term prospects of the businesses we follow. We mainly base our analysis on the fundamentals and assess the long-term growth potential of the companies. In addition, we also analyze the dividend stability of different companies,... More
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  • Amarin Will Be A Good Long-Term Pick

    There was a lot of excitement around Amarin (AMRN) when the company received approval for its drug, Vascepa. The drug is Amarin's first approved drug and it is prescribed to patients with very high triglycerides levels. Since the approval of the drug, the company has been active in securing the intellectual property and the marketing rights of the drug, and it has been extremely successful on that front. Amarin has secured patents for a number of conditions for Vascepa, which should allow the company to market the drug effectively. There were a lot of expectations but the launch of the drug has not been according to the expectations of the market. As a result, the stock has lost more than half of its value over the previous twelve months.

    What Were the Reasons For the Decline?

    Investors were excited by the prospects of Vascepa at the start as the drug showed extremely encouraging results. Furthermore, the company was trying to get the new chemical entity status (NCE), which would have allowed the company to exclusively market Vascepa for seven years without any generic competition. The NCE status would have also made Amarin an extremely attractive buyout target, which excited the retail investors and the stock price kept moving up. However, the delay in the NCE status caused the stock price to gradually move down.

    Future Prospects

    As the stock price was coming down, Amarin launched the drug. There were fears that the company might not be able to successfully launch the drug on its own. The upward movement in the stock mainly came from the prospects of a takeover by a larger firm - however, the takeover never came and the company decided to launch the drug. There is a common pattern developing in development stage bio-pharmaceutical companies - market burdens these companies with almost unrealistic expectations, which results in a negative impact on the stock price as the companies report lower figures.

    The company reported $5.5 million in revenues for the second quarter - the market was not impressed by the results and it continues to doubt the future prospects of the company. In my opinion, market is being extremely harsh to Amarin - the company has more than doubled its prescription and there is a lot of growth to come over the coming few quarters.

    We have seen that the market has put unrealistic expectations on Vivus (VVUS) and Arena (ARNA), which has caused these companies to suffer since the launch of the drugs by these companies. Vivus and Arena are both operating in the anti-obesity market and are fighting for the same target market. Both of these companies have fallen short of the lofty expectations put on by the market. There are some key factors that need to be kept in mind when talking about a new drug launch: one of the most important factors is the acceptability and the return customers. I believe these companies should be given at least a year before handing out the final verdict.

    The level of acceptability for Vascepa is extremely high as compared to the drugs by above mentioned companies, shown by the increase in the prescriptions. If the growth in the prescriptions continues, then the rise in revenues will be substantial for the company. Amarin is actively trying to further enhance the intellectual property portfolio and the spectrum of the drug. Overall, I believe the future prospects of the company are bright and Vascepa will bring in substantial revenues for the company.

    Conclusion

    I am cautiously optimistic about Amarin, and I believe there are more positives for the company going forward than negatives. The price of the stock might not move upwards in the short-term. However, in the long-term, I expect the stock to gain substantially. For the current Amarin investors, I believe they should hold on to their positions. However, new investors might want to wait a while before buying as I believe the stock price will remain stagnant for a short while. Buy Amarin as the stock starts to move up, as it will only move up from there.

    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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Aug 28 11:08 AM | Link | Comment!
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