Amarin: An Opportunity To Add To The Position

| About: Amarin Corporation (AMRN)

By: Ahmed Ishtiaq

Sometimes a temporary fall in the price of a stock provides an opportunity to make substantial profits. At the moment, Amarin Corporation (NASDAQ:AMRN) is down due to a lack of movement on the buyout front. Amarin gained 31% during the year, mainly because of the anticipation of a takeover. However, a takeover has failed to materialize by now, and investors are becoming pessimistic.

The company announced that it had acquired financing of $100 million and started hiring a sales force. For any company, a sign of marketing the product should be a good sign. However, market is not very excited about Amarin entering the market on its own. Amarin has a lot of investors who bought into the company due to its potential for a takeover and quick profit. I believe long-term investors are undeterred by the recent developments, and are holding onto their investments.

Decision to go solo

Amarin's decision to enter the market without a partner may not be as appealing as a takeover. However, I believe it is not the end of the world for the company. I have always maintained that Vascepa has the ability to be a success on its own. Lovaza, marketed by GlaxoSmithKline (NYSE:GSK), is bringing in revenues around $1 billion a year. Lovaza is a drug which is associated with certain side effects. On the other hand, Vascepa has a safer profile and a superior efficacy profile, making it a better candidate for success.

The company plans to launch the drug in the first quarter of 2013, and the sales force will consist of 250-300 professionals. Amarin is looking to hire professionals with three to five years of existing relationship with physicians. The key thing to remember here is that the company has not yet given up on the other two strategic alternatives. The door is still open for the acquisition or partnership with a major biopharmaceutical company. The biggest stumbling block in the way of a potential acquisition is the NCE status of Vascepa. Some clarity on the NCE front should accelerate the acquisition talks. The ability of the company to achieve financing without any dilution shows that there is a great deal of confidence in the company from institutions. Furthermore, about 64% of the shares of the company are held by institutional investors. The recent sell off came from the investors who were solely looking to profit from the potential acquisition of the company.

Comparisons with Vivus are wrong

Some people are comparing Vascepa launch with Vivus' launch of Qsymia, its anti-obesity drug. I believe this comparison is absurd and ill-informed. There are two distinguishing points which caused Vivus (NASDAQ:VVUS) to have a less than impressive launch of Qsymia. First, the drug has an extremely restrictive label - distribution through only mail orders will not bring sales in millions in the first month. Secondly and more importantly, Qsymia only received 20% insurance coverage. The stance of insurance companies and FDA on obesity has recently changed due to the massive expenditures on obesity related diseases.

It was a hard task to convince insurers to cover the cost of a drug they still believed was a lifestyle choice. Vascepa is in a different boat and represents an important treatment in the cardiovascular section. I do not believe Amarin will face the same problems as Vivus in its drug launch if the company enters the market without a partner. Although, relative inexperience of the company may count as a negative. However, comparing it to the launch of Qsymia is not right in my opinion. Nonetheless, Amarin investors should not expect short-term gains if the company launches the drug on its own. Investors will have to be patient, and the reward will come eventually.


I remain confident that Vascepa will be a success in the long term. There is still a possibility that the company may be acquired by a big pharmaceutical company. However, NCE status of the drug will have to be clear. Amarin has amassed an impressive portfolio of patents for Vascepa, and the company continues to try and protect the commercial potential of the drug. There is a real medical need for drug, and it can bring in massive revenues for the company. However, investors should not expect too much at the start and hold on to their investment. I believe the recent sell off gives long-term investors an attractive opportunity to add to their positions.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: EfsInvestment is a team of analysts. This article was written by Ahmed Ishtiaq, one of our equity researchers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

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