Amarin Corporation PLC (NASDAQ: AMRN) has been fighting an uphill battle since the end of March. Amarin stock was absolutely crushed at that time when a court ruled in favor of two competitors that challenged Amarin’s patent for its blockbuster drug Vascepa.
Vascepa treats cardiovascular disease and reduces the risk of heart attack through its combination of omega-3 fish oils.
Generic competitors Dr. Reddy’s Laboratories Inc. (NYSE: RDY) and Hikma Pharmaceuticals won the Nevada District Court ruling, but Amarin is hoping to win on appeal. However, that will have to wait as there is another development in this story.
Hikma Pharmaceuticals today announced the U.S. Food and Drug Administration (FDA) has given it approval to sell a generic version of Vascepa. With this FDA approval, Hikma becomes a more viable threat to Amarin, but one analyst is still positive on the stock. Also, a foray into COVID-19 treatment could be another reason for investors to get excited.
In a report that came out Friday, Cantor Fitzgerald’s Louise Chen issued an Overweight rating with a $35 price target, implying an upside of 381% from the most recent closing price of $7.28. Note that the consensus target is $17.
According to Chen, she is “still positive” on Amarin’s stock despite the FDA approval of Hikma’s generic competitor. What stands out here is that Chen believes it is unlikely that Hikma will begin selling its generic version of Vascepa before a decision on the appeal — which she believes Amarin will win.
Chen pointed out that the Vascepa supply chain is complicated, and that it would be hard for Hikma to manufacture a large amount of the drug.
Breaking the Supply Chain
It’s worth noting that just because Amarin lost its patent ruling on Vascepa, it doesn’t mean the firm has to stop selling it. It only means that there will be increased competition and that these generic drugs will be cheaper. However, the rival firms have to be able to produce the drug first before they can sell it.
Amarin, which is headquartered in Dublin, Ireland, currently has three facilities, and it is unclear if any of the competition has access to even one. Jefferies previously estimated that it would take roughly six months or more and cost about $100 million to outfit a manufacturing facility to produce a copycat version.
Another thought that might be counterintuitive is that generics makers might consider waiting to enter this market. As Amarin is spending money on advertising and growing awareness, essentially expanding the market, it is potentially doing all the legwork for them.
Theoretically, generics makers could wait as the market expands and then jump in and capitalize when it is ripe for the picking.
On Thursday, Amarin announced that it would support a trial of Vascepa as a COVID-19 treatment. The company noted that Vascepa’s ability to lower cardiovascular risk in certain patients could prove effective as patients at high risk for cardiovascular disease are also at a higher risk of dying from COVID-19.
Amarin announced support for a clinical trial to investigate the effects of icosapent ethyl (IPE), the chemical name for Vascepa, on inflammatory biomarkers and other patient outcomes in individuals with COVID-19. The trial is sponsored by the Canadian Medical and Surgical Knowledge Translation Research Group.
The trial’s primary endpoint is the effect of Vascepa versus usual care on high-sensitivity C-reactive protein levels from baseline to 14 days in adults with a COVID-19-positive diagnosis. The clinical study design also includes other endpoints that assess rates and severity of COVID-19 infection in this high-risk group.
Ultimately, if Vascepa proves effective as a COVID-19 treatment, or at least as part of the cocktail, then a $35 price target may be conservative for Amarin stock. The market hype around possible COVID-19 treatments is very real, and any company that can pivot into a treatment or cure will likely see incredible upside for its stock and revenue growth.