Amarin: Is The Trend Still Your Friend?

| About: Amarin Corporation (AMRN)

Shares of Amarin (NASDAQ: AMRN) have been a complete roller coaster ride since the company reported Q4 2012 results (which can be found here) on February 28th.

The initial reaction to the earnings report on March 1st was clearly negative, which was demonstrated by AMRN's immediate drop to a yearly low of $7.55/share. I suspect that this was driven by a general aura of uncertainty in the conference call, which was made particularly bad by CEO Joe Z.'s dodgy comments pertaining to any discussion on the actual market performance of Vascepa up to that point.

The prescription sales that we did have in hand - the weekly estimates provided by third party research firms like IMS and Symphony, showed very modest figures that served as a reminder of how difficult drug launches can be for smaller pharmaceutical companies. On the bright side, it was mentioned by Amarin's CEO that Vascepa is performing on the same level of Lovaza during its initial launch.

I think investors should have walked away from the conference call with a neutral opinion given the rough balance between positive and negative hints about Vascepa's performance in the market, but the market ultimately decided on a "sell now and ask questions later" approach.

In hindsight, this was a terrible idea that would have lost investors huge amounts of money in a short period of time had they acted on their natural impulses to follow the trend. This is particularly true for the investors who may have panicked at the very bottom of the recent slump, which would have resulted in quick ~12% losses that would have been erased in a matter of days.

The lesson learned was investing in the long or short side of Amarin exposes you to an extraordinarily volatile stock that is prone to seeing extreme sentimental shifts at the blink of an eye. The "trend" is not always your friend, and may sometimes show up to shake you out of positions at a loss.

While it's important to stay mindful of any new pieces of information about the company, I don't think that we should be reading too much into the gyrations that the stock will inevitably make as we head towards the company's next earnings report in May 2013. Also keep your eyes peeled for an NCE decision on Vascepa by the FDA in every Orange Book release, since this will surely have a noticeable impact on the stock price.

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: I am also short AMRN via covered calls, hedging my long position

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