Forget Amarin: Buy Celsion For A Bigger Score

| About: Amarin Corporation (AMRN)
This article is now exclusive for PRO subscribers.

Amarin Corporation (NASDAQ:AMRN) has too many concerns, risks, uncertainities, disappointments, a poor balance sheet, and a bloated market cap. Why even touch it when there are better opportunities out there with less risk? Why not sell shares of AMRN (if you own them) and buy an undervalued winner with a bright future and a promising drug that with similar (or bigger) market size but at nearly 1/6th the market cap?

Forget AMRN. Buy Celsion Corporation (NASDAQ:CLSN) for a bigger score. CLSN is an oncology drug development company that engages in the development and commercialization of targeted chemotherapeutic oncology drugs based on its proprietary heat-activated liposomal technology. The company develops ThermoDox, a liposomal encapsulation of doxorubicin, which is under Phase III clinical trial for primary liver cancer, under phase II clinical trial for colorectal liver metastasis, and under phase II clinical trial for treatment of recurrent chest wall breast cancer.

Six reasons to go long CLSN instead of AMRN:

(1) AMRN is planning to launch its key drug Vascepa in Q1 2013. Although AMRN's market size isn't known yet, Vascepa's main competitor is a drug called Lovaza by GlaxoSmithKline (NYSE:GSK). According to AMRN's 10K, the market size for Lovaza is $900 million in the US and $1.3 billion worldwide. This suggests the market for AMRN's Vascepa isn't very large. For example, if one took a ridiculously optimistic scenario and assumed AMRN would steal 80% of GSK's market share, the market size would at best be roughly the same size (of at least $1 billion) of CLSN's ThermoDox drug.

(2) Despite the fact that the potential market size for both companies is similar (at best), their respective market caps are light years apart. AMRN trades for around a $1.5 billion market cap while CLSN trades for a far more humble $250 million. To put it in perspective, with CLSN trading at $7 and change, if its market cap were to merely equal AMRN's it would trade 500% higher over $35/share.

(3) AMRN insiders have been selling their stock in the open market for quite a while now. Conversely, CLSN insiders have been buying their stock in the open market for a while now. While insider activity is no guarantee of future fundamental performance, I'd rather be betting on the same side as officers or directors of a company.

(4) While AMRN has significant competition from the much bigger, experienced, well-capitalized GSK, CLSN's Thermodox has been described as a "...growing global unmet medical need in oncology, primary liver cancer. With a positive outcome, ThermoDox will become the most important 1st line therapy for patients with non-resectable disease." Meanwhile, CLSN lacks direct competition. This fact should be key while CLSN pursues potential partners. AMRN has been unable to land any partners despite several months of effort since their FDA approval for Vascepa. AMRN faces additional price competition when Lovaza becomes available as a generic by 2015 or sooner, warns AMRN's 10K. So not only does AMRN currently face competition from the brand name drug Lovaza, it will have to compete with the cheaper, generic copycat version of Lovaza when it becomes available.

(5) AMRN has virtually zero shareholder equity while CLSN has over $13 million in equity. AMRN just announced this week its intention to tap yet another $100 million in debt. AMRN's balance sheet, based on the company's current cash burn rate and losses, is in the process of going from bad to worse. CLSN is well capitalized and not looking to raise money.

(6) AMRN has around 20 million shares short with many of them at a healthy profit and therefore under no pressure to cover. Conversely, CLSN shorts have been getting slaughtered considering the stock is up over 250% this year and hit a new 52 week high recently. At last count there were still over 5 million shares short in CLSN and a short interest ratio over 7, giving the potential for a short squeeze to take place for CLSN.

Between larger potential market, much cheaper valuation, insider buying, lack of competition, better balance sheet, and better potential of a short squeeze, my money is on CLSN. Forget AMRN. The big score will be with CLSN.

Disclosure: I am long CLSN. 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.