Shares of Amarin Corporation may be set for a breakout due to positive news over the company’s flagship pharmaceutical product, Vascepa.
Company Overview and Industry Outlook
Amarin (NASDAQ:AMRN) is a biopharmaceutical company that specializes in the development of fatty acid prescription pharmaceuticals. Vascepa, an omega-3 fatty acid FDA approved medication, is designed for patients with triglyceride levels exceeding 500 mg/dl. When taken as directed, Vascepa decreases the levels of triglycerides for those that suffer from hypertriglyceridemia, a well known condition where high levels of fat are found in the blood. Hypertriglyceridemia is commonly found in middle to older aged individuals and is becoming more of a problem throughout America. We live in a world today where nearly a third of the United States population have high triglyceride levels. This is an astonishing statistic and I believe that demand for Vascepa will increase in the future, thus driving the stock higher. High triglyceride levels in the blood is also known to decrease cardiovascular health and increase chances of developing diabetes. Amarin’s main focus is to improve cardiovascular health and alleviate some of the complications from diabetes - all of which they plan to do through lipid science and engineering.
Expansion and Growth
In Q1 2017, Amarin posted revenues of $34.344 million, which was a 35% increase from the previous year. Gross margins also expanded from 73% to 76%, as the company continued to increase revenue and decrease costs per unit of sales. Amarin also noted that its licensing business has continued to grow. In 2015, the company entered into an agreement with an Asian company where Vascepa would gain exposure in Mainland China, Taiwan and Hong Kong. Long term sustainable growth could be on the table for Amarin and stockholders as international exposure continues. However, perhaps the most appealing number in the report was the amount of prescriptions delivered to patients over the course of the year (Mar. 2016 to Mar. 2017). Prescriptions delivered to patients rose to 335,000 from 212,000, representing a 58% increase in the amount of prescriptions delivered. Despite falling sharply in 2013, the stock is up 88% over the past year.
It Gets Better
Amarin Corporation has not just stopped at providing medication for individuals with triglyceride levels of over 500 mg/dl. The company is conducting studies that serve to improve cardiovascular health for individuals outside of the >500 mg/dl population. For example, Amarin is testing the effectiveness of Vascepa in patients with triglyceride levels of >200 mg/dl and <500 mg/dl. Amarin is also testing to see if the medication will reduce cardiovascular events. Upon the results of these studies, and whether the FDA will approve the medication under these metrics, significant stock price appreciation could be seen within the coming years.
(Source: Company Website)
To me, it seems as though Amarin is attempting to squeeze into new demographics. Let me again focus your attention to the previous statistic: approximately 1 in 3 individuals suffer from high triglyceride levels in America. What’s more, a triglyceride level of >200 mg/dl is considered high. So it can be said that approximately one third of individuals in the US have triglyceride levels that exceed this 200 mg/dl level. This is a tremendous amount of people! So far, the studies have continued to exceed expectations and prove that Vascepa is a powerful medicine used to improve cardiovascular health. And then comes the question that if the FDA decides to approve Vascepa for treatment among patients in the other studies, how many more doctors and patients will demand the medication? Upon approval of the two studies, or even one for that matter, I’m predicting a significant price appreciation in Amarin’s stock. Investors can potentially see the $15 to $20 (where the stock traded prior to 2013) level recaptured by the year 2018.
Amarin Corporation has had a pretty solid year despite the dramatic sell off in 2013. Price action of the stock is continuing to trend upward on positive news of the company's main drug. Given the past quarter, guidance does not look terrible and there are many new opportunities for investors to look forward to, such as the ongoing studies being conducted by the company. I’m convinced that Amarin is committed towards improving cardiovascular health among individuals that struggle with high triglyceride levels. Given the high amount of people with high triglyceride levels in America, it is hard to think that the FDA will not approve such a drug for multiple demographics. Also, given the large increase in prescription deliveries, it is clear that there is a positive patient/doctor sentiment towards Vascepa. Investors should listen carefully to Amarin’s upcoming earnings call and be cognizant of changes in any of the studies (listed above), prescription deliveries and international licensing agreements.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Some of the information regarding product deliveries were derived from third party sources and may not be exact. Product deliveries tend to be cyclical and should not always be indicative of upward trending results.