Shares of cardiovascular health sciences company Amarin (NASDAQ:AMRN) surged 22% on Thursday. That continues an amazing ride for the maker of Vascepa, an Omega-3 fatty acids treatment to fight very high triglycerides. Amarin stock has soared from $3 in September to as high as $23 following its decisive REDUCE-IT study results.
These results showed that Amarin’s formulation of Omega-3 oils performs superiorly to other generic options. After years of criticism, Amarin demonstrated that it isn’t “just another fish oil pill” as the bears had always retorted.
Since the trial results, Amarin stock has remained highly volatile. Yes, it’s clear Amarin has a viable commercial product on their hands now, but how many doctors will start prescribing it?
Can Amarin make it as a standalone operation or does it need a larger commercial backer? All these questions came to a head on Thursday when rumors broke that Pfizer (NYSE:PFE) or perhaps AstraZeneca (NYSE:AZN) was going to acquire Amarin outright. Amarin stock soared.
Pfizer Buying Amarin? Probably Not
Biotech journalist and Twitter heavyweight Adam Feuerstein weighed in on the Pfizer rumors, tweeting: “Help me with the logic here: $AMRN CEO John Thero just spent 4 days in [San Francisco] meeting face to face with investors while ALSO negotiating a $PFE takeout? People, please…”
It’s not uncommon for biotech management teams to pull out of conferences when they are about to be acquired. Particularly if Amarin already knew that Pfizer or someone else would bid for the company, why bother with in-person investor relations? There’d be more important business to attend to.
Also, it’s worth noting that Pfizer’s comments at that same biotech conference didn’t indicate that a deal is coming soon. Pfizer’s CEO Albert Bourla noted that the company greatly stepped up its share buyback in 2018. It did so, Bourla said, in order to be able to boost R&D spending without hitting earnings.
Adding to that Bourla commented rather directly that:
“In the years before we had an issue with growth, so we were looking to buy revenues now or soon because this is what was lacking. Right now we are not in this situation. Right now we are in a situation that our R&D is very productive and I feel that mostly R&D type of deals is what we need to enhance even further our pipeline, given that we have higher confidence in our capabilities to do it, given that now we have very good focus on R&D.”
Pfizer’s CEO stated it clearly: they don’t need to acquire more drugs to obtain growth. The R&D pipeline is stuffed. Pfizer is unlikely to want to drop $8 billion or more to acquire Amarin at this time.
Amarin: Short-Term Struggles
A lot of Amarin stock bulls expected shares to fly up toward $30 in the immediate wake of the shockingly good REDUCE-IT trial data. Analysts have pegged future peak annual sales estimates for Vascepa at $2 billion to $4 billion sometime in the 2020s.
Given Amarin’s healthy patent position on the drug, this has the makings of being a blockbuster therapeutic. There’s still the hitch that the company needs to convince the FDA to expand its marketing label for the drug later this year. However, given the strong data, this shouldn’t be too much of an issue.
For now, however, Amarin is still experiencing relatively soft sales. Amarin released guidance suggested that it will sell just $350 million of Vascepa in 2019. That was well short of the market’s expectations.
So far, since the REDUCE-IT data came out, Amarin has seen a decent bump in its weekly prescriptions. They’re up from 11,000 pre-data release to 15,000 now. That’s solid progress. Still, it’s clear that without much more marketing and/or a wider label approval from the FDA, it will take awhile for Amarin to gain serious sales traction.
Amarin Stock Takeaway
That said, Amarin finds itself in a decent position nonetheless. It had $249 million in cash as of the latest report, suggesting that it has time to ramp up its sales operations as a separate company.
Amarin lost $98 million on $205 million in revenues last year, suggesting it isn’t especially close to profitability. Analysts forecast a much smaller, but still negative, net income figure for this year as well. Regardless, with that cash position, Amarin isn’t desperate to find a suitor and can wait for an attractive offer.
For now, I see AMRN as a solid trading stock. When there are short-term rips, such as the 22% pop on the Pfizer rumors, it is a good time to take profits. When the stock dips, say on weaker than expected earnings or prescription fills data, you can buy back in at a better price.
In the short-term, I consider it highly unlikely that Pfizer or someone else like AztraZeneca is about to purchase Amarin. The actions from both companies’ management teams suggest that a deal is not imminent.
As such, it makes sense to ring the register on AMRN stock following the recent move from $13.50 at the start of the year to $18 now. If you like the Amarin story, you will get another chance to buy back in at a cheaper price as there are no immediate catalysts to drive Amarin stock higher.
At the time of this writing, Ian Bezek held no positions in any of the aforementioned securities. You can reach him on Twitter at @irbezek.