When Will Amarin Stock Sell-Off Be Over?
Amarin Corp. PLC (NASDAQ: AMRN) is a biotechnology company based in Ireland. Among its specialties, the company claims, it does research and development (R&D) work on polyunsaturated fatty acid and lipid science.
Amarin is mostly a development-stage company. It does have one FDA-approved drug. Vascepa helps reduce cardiovascular risk, particularly for people with diabetes and high triglycerides.
Amarin is close to a one-product company, although it has substantial R&D capacity. Often treatments that lower triglycerides can cause muscle pain and a spike in bad cholesterol. The success of the drug is directly tied to the fact that cardiovascular disease is among the largest killers in the world. In the United States, it is the number one cause of deaths. Cardiovascular events like strokes and heart attacks can be particularly deadly.
Amarin describes the drug as “a single-molecule prescription product consisting of the omega-3 acid commonly known as EPA in ethyl-ester form.” It is a fish-oil-based medication. The FDA first approved Vascepa in 2014. Not until last year was it approved for treatment of high triglycerides.
One reason investors have found Amarin stock appealing is the failure of rivals to launch competing drugs. Acasti Pharma had a drug that failed Phase 3 trials. AstraZeneca ended trials of its Epanova.
There is no other competition for Vascepa on the horizon. Each company devoted tens of millions of dollars to create drugs that could take market share from Amarin. These kinds of blockbuster drugs can bring big pharma companies billions of dollars.
Amarin’s R&D is based around the launch of more drugs to address cardiovascular health. Its latest big project is called the REDUCE-IT (Reduction of Cardiovascular Events Outcomes) project. The FDA has yet to approve the results of the study.
The next large R&D project underway at Amarin is what it calls the Marine project. The goal is to determine whether the treatment can reduce very high triglyceride levels, also known as hypertriglyceridemia. It is in Phase 3 trials as well.
The final large project is called the ANCHOR trial. This intends to find out if Amarin’s treatment will help people who have high triglycerides and also take statins. The FDA approved this drug last month.
Presumably, any of these could be a major breakthrough and drive the stock price higher because of the global need to solve the horrible problems of persistent cardiovascular risk.
Amarin has given stockholders a wild ride. The share price rose from about $3 in September 2018 to $20 in a matter of weeks. In the past year, trading has been choppy.
A year ago, it traded near $16. By March, it was up to $21. It then dropped to $18 in May and went back up to $21 by November. It has dipped again since then.
Amarin trades in the United States as an American depositary receipt, which allows U.S. investors to trade stocks in foreign companies. About 10 million shares a day are traded.
A look at major analysts who cover the shares shows that widely followed Morningstar rates it as a “fair value.” The Nasdaq tracks analyst calls. In the past three months, it shows seven firms have offered opinions: Cantor Fitzgerald, H.C. Wainwright, Jefferies, JPMorgan Securities, Oppenheimer, Roth Capital and Stifel. Their average target price is $29.88, well above the current price. Oppenheimer recently downgraded the stock.
Amarin’s revenue is soaring. It recently announced preliminary results for 2019 and forecast a figure as high as $425 million. That would be up about 85% from 2018. Most of these sales were in the United States. Amarin also had $645 million in cash and no debt.
To drive sales higher, Amarin expects to boost its sales force from 400 last year to 800 in 2020. This, and wider acceptance of its treatments, should drive another massive increase of sales in 2020. The company anticipates revenue of $650 million to $750 million.
John F. Thero, president and chief executive officer, commented on the rapid improvement: “Early feedback from physicians and medical societies has been positive regarding the new indication for VASCEPA.”
A look at the third quarter of last year confirms how quickly the company can grow. Revenue reached $113 million, up from $55 million in the same period of 2018. High general and administrative costs drove a loss of $3.4 million, but that was much better than $24.5 million loss in the same period a year ago.
Management and Board
Amarin’s board is made up of seven directors. Many of them have pharmaceutical and biotech backgrounds.
Thero has been at the company for 25 years and has held his current position since 2014. Prior to that, he was Amarin’s president. He also has been chief financial officer.
Joseph Kennedy is the only executive vice president. He has been general counsel since 2011. Dr. Rebecca Juliano is the head of R&D.
Amarin has the pole position in one of the most important races in big pharma. However, as the recent past has shown, huge companies like AstraZeneca continue to chase it. The market in cardiovascular drugs is huge.
The Centers for Disease Control and Prevention (CDC) reports that about 640,000 people die from heart disease each year. This is one in four among all deaths. The cost to the American economy was $219 billion in 2014 and 2015.
Included in the CDC cost estimates are “health care services, medicines, and lost productivity due to death.” Coronary heart disease, the most common type of heart disease, kills about 360,000 per annum.
While the CDC and other medical organizations claim that the first line of defense against heart disease is good health habits (low obesity, not smoking and exercise), the number of people who become ill from these diseases is not dropping. That, among other things, is to Amarin’s advantage.