Amarin: Stay Long, Stay Strong

| About: Amarin Corporation (AMRN)

I'm generally quite cautious around stocks that are permanently placed in the market's spotlight, but Amarin Corporation (Nasdaq: AMRN) is quite exceptional.

While it took a while for Wall Street to get enthusiastic about some specially refined fish oil pills, we had to discover the potential behind Amarin's flagship drug Vascepa (formerly called AMR-101) at some point. Amarin is now trading 300% higher relative to October 2010, and is worth just under $2 billion as a company without a penny in revenues thus far. Clearly, expectations were (and still are) high.

We also see that a huge number of those AMRN buyers were actually traders looking to sell Vascepa after FDA approval for quick gains. This partially explains the 12% drop we saw on July 27th (the day Vascepa got FDA approval). Another major factor is the NCE status of Vascepa, which haunts the stock even today since it threatens the product's exclusivity.

Apprehension over the NCE status of Vascepa explains why AMRN has been bouncing between ~$12-14/share and seems to lack market conviction in any rallies or dips. There is also fading confidence in an acquisition of AMRN itself, which was "almost assured" to happen by now.

Wedbush actually downgraded AMRN to neutral on October 3rd because of this reason, and set a drastically reduced price target of $15/share. It took another trading session for AMRN shares to shrug off the blow. Realize that AMRN does not like to drop below $12/share these days, even if the market is nervous about the status of Vascepa's NCE.

Since analyst downgrades by themselves only move stocks briefly, it's an ideal time to buy shares that are intrinsically worth $20 or so for $12. Here are a few of many reasons that they should be higher:

-Vascepa is vastly superior to Lovaza, its main competitor, since it doesn't raise bad cholesterol in hypertriglyceridemia patients.

-Lovaza generates an enormous sum of $1 billion in annual revenue for GlaxoSmithKline (NYSE:GSK). AMRN should be able to beat Lovaza down once it enters the market.

-Another big pharma would have the financial resources to wipe out Lovaza faster (and better) given marketing rights to Vascepa, which adds to the likelihood of an acquisition of Amarin.

-Vascepa is patent-protected for the next 18 years.

-Vascepa is going to enter the 200-500 mg/DL zone for high triglyceride patients very soon, and has huge unrealized potential in preventative treatment due to its cholesterol benefits.

Still, Amarin investors are getting discouraged. At this level, I'd argue that AMRN is actually pricing in a "no NCE, no buyout" outlook. Since it's so uncomfortable to be long right now, it's the perfect time to grab more shares, or establish a new position. Options traders are already on the move with significant buying of call options. While riskier, this is a way to amplify the gains that are likely to come in AMRN.

It's not going to be a smooth or quick ride, but Amarin is a stock that has done a lot for patient investors. This is not a stock you want to sell anytime soon.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AMRN over 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.

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