Amarin's Time Is Soon

| About: Amarin Corporation (AMRN)

Amarin (NASDAQ:AMRN) is one of the more closely watched bio-technology companies on the market today. As many already know, Amarin's FDA approved drug, Vascepa, had a recent market launch on January 28, 2013. Of all the companies I follow, none evoke such an emotional response from its shareholders and followers as Amarin.

While I have done a great deal of due diligence on Amarin over the past 2 years, I must admit that part of my routine is to read articles, follow message boards, StockTwits, etc, to gauge the general sentiment of the investment community towards the company. While doing this, you have to be careful about reading too much into general commentary and baseless opinions, which often take the form of either fear mongering or unsupported pumping. Interestingly, when you follow a company long enough, it's not hard to determine the "Hero" and the "Villain" when it comes to which analysts evoke the greatest reaction and response when putting forth their own personal views on a company. In the case of Amarin, it would appear Steve Rosenman is the "Hero" while the role of villain is split between Adam Feuerstein, (a bio-tech analyst for "The Street"), and Alex Heisenberg, whose recent article caused backlash like I've not seen in some time. While not commenting on any of these individuals specifically, I will say that, in general, when it comes to the "hero" writing or commenting on a specific company, they tend to overly focus on the "upside" without noting the risks in sufficient detail, thus leaving followers feeling blind-sided when things don't pan out as expected. Likewise, the "villain" can come off as almost having a grudge against the company itself and therefore entirely focus on downside risks, (tangible or not), often painting the bleakest of pictures for would-be investors. If/when the stock price gains momentum, followers inevitably feel cheated out of possible gains. In the end, investors should do their own due diligence and not completely rely on analyst opinions, commentary and dialogue.

So, all of that said, what can I add? Well, through the course of my due diligence hopefully I can provide an objective opinion on whether Amarin presents a good investment opportunity. As such, I offer the following:

1) NCE Impact

The question of whether or not Vascepa will receive the FDA's NCE status or not remains unanswered, (which would give the drug five year market exclusivity versus three years of exclusivity with the new product designation). While I have read various opinions on the ultimate impact on the company, and share price specifically, it should be noted that there are two distinctive possible impacts at play...short term and long term.

In the short-term, the lack of clarification regarding NCE apparently impacted the company's ability to find a tangible suitor for the price it is likely asking, thus causing them to launch Vascepa on their own. I am not naive enough to think this is the only reason big pharma has not yet purchased Amarin, but do recognize it as a contributing factor. Given this, many day-traders, short-term investors, and even certain hedge funds, have divested themselves of Amarin shares, while Amarin has seen ever increasing focus from short-sellers. All of this has been putting downward pressure on the share price. While it can be argued that further NCE status delay, or even denial, has been priced in at these levels, further downward share price pressure could come.

Conversely, if NCE status is granted, I fully expect the share price to explode back to above $12 within minutes of the news breaking, with recovery all the way to $15+ within another week or two. Like many, however, I believe NCE status has been more than a bit overblown in terms of its ultimate long-term impact. I have to think the future will prove that the question of NCE was truly irrelevant. I was once a Vice President for a large retail pharmacy chain. In my position, I was responsible for having full knowledge of generic drug legislation, while it was my business to know when certain molecules, (a term used for an approved drug), were coming off patent. Once it was determined through the courts that a drug's patents were no longer valid due to expiration or challenge, generic competition would follow.

The most important point in this regard is that, in all my years of experience as an investor and in retail pharmacy, I've never been involved in a conversation regarding when a drug's market exclusivity status runs out. Why? Because it simply doesn't matter. What matters is the strength of a drug's patent portfolio because that is what will eventually have to be challenged in court for any generic competition to come to market. Three years versus five years of exclusivity has zero impact on the strength of a patent, it just means the patent can be challenged sooner. If the patent is sound and therefore a 2030 expiration is upheld, the date at which companies were able to challenge its relevance is completely meaningless. When investors hear of popular drugs such as Pfizer's (NYSE:PFE) Lipitor becoming generisized, believe me, it has nothing to do with what their exclusivity status was after FDA approval. The overwhelming majority of generic drugs that come to market are as a result of patent expiration, not because the drug's patent portfolio was challenged and proven invalid. This brings me to the next, and even more important issue investors need to be focused on.

2) Market Potential for Vascepa

So let's get this one out of the way quickly...Vascepa is a fish-oil, which for some unknown reason has become the focus of some beleaguered analysts. The real question has to be...who cares what it's made of, is it safe and effective in relation to its primary use, in this case, lowering cholesterol? The simple answer is yes. The FDA approved Vascepa based on its efficacy and safety profiles, which is not only good enough for me, but more importantly, potential patients and physicians.

Vascepa, unlike its major competition in GlaxoSmithKline's (NYSE:GSK) Lovaza, lowers HDL cholesterol while also seeing stability or even a decrease in LDL cholesterol, giving it not only a major competitive advantage, but likely access to a much larger market through its Anchor indication currently in Phase III studies with an expected PDUFA date within the next 12 months. While many may try to trivialize the market for FDA approved fish-oil based drugs, it should be noted that Lovaza currently does over $1B in annual sales within the US alone, while only having access to about 10% of the market for which Vascepa would have access in the event their Anchor indication gets FDA approval.

Much has also been made about the potential impact of Lovaza coming off patent and generic competition entering the market place. As an investor, I worry about this because I have to gauge the investment community reaction in the short and long term. In the short term, this could be weighing on the share price, as well as being a factor in buy-out negotiations. Big pharma may be concerned about sales risk and are therefore taking a "wait and see" approach, or at the very least, could be trying to apply a discount rate to the purchase price which has thus far been unacceptable to Amarin management. In the long term, I believe the superior efficacy and safety profile will allow Vascepa to compete and gain sales in the Marine indication market, even against generic competition, while Anchor indication will be unaffected (90% of market), because Lovaza does not compete in this market, nor will its generic successors.

3) Potential Buy-out

Management has been cited on several occasions, including on their conference call on December 6, 2012, as saying they are actively engaged in buy-out negotiations. Even in announcing their recent decision to hire a sales force, they once again re-iterated their ongoing evaluation of the potential sale of Amarin. At this juncture, I have absolutely no reason to believe they are lying in his regard. That said, and as noted above, there are several factors at play here. I believe the question of whether Vascepa is marketable and will be successful is beyond moot, however, the degree to which generic drugs in the Marine indication will impact sales, regardless of risk and efficacy profiles, remains a point of negotiation.

Meanwhile, patent portfolio, FDA approval for the Anchor indication and NCE status also remain questions as it relates to agreeing on a current buy-out price. The more uncertainties there are, the more negotiation that will take place as potential suitors will try to discount for risks while Amarin will downplay the risks and demand more for its investors. In the end, I believe we're talking about a price range anywhere between $18 to $35 per share, depending on what suitors see as relevant with regard to a valuation. In any case, the current price per share is being weighed down by short-term issues and bears no relevance to the long-term value this company holds.

So, here is the most objective opinion I can offer...if you are short-term minded, as many are, play AMRN in the swings and either short or go long based on news when it comes. The pps is likely to continue to fluctuate in a relatively tight range pending NCE status, sNDA of Anchor and Vascepa sales results. Long term, and I mean within 8-12 months, the share price should grow a minimum of 50% from the current level as sales grow, a PDUFA date is set for the Anchor indication, the patent portfolio continues to grow, NCE status becomes known (one way or the other), and buy-out speculation continues to grow.

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.

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