Amarin’s (NASDAQ:AMRN) prospects have improved after its third-quarter revenue and profits beat analysts’ average estimate. Most importantly, for those who are bullish on AMRN, the company posted a small, earnings-per-share profit of 1 cent. This is a turning point in the company’s history, and it may mark a positive turning point for Amarin stock.
Although the company is slightly profitable, its priority is on growing its business. So stepped-up hiring may limit the company’s profits in the near-term, but it’s necessary to solidify its future prospects.
The burdens caused by cardiovascular (CV) disease are worsening. There is an urgent need to help treat patients with cardiovascular disease. The performance of Amarin stock will depend on the company’s ability to obtain more effective outcomes for CV patients than the standard of care.
Earlier this year, in a major trial, Amarin’s drug Vascepa, which had previously been used to treat high triglyceride levels, showed the ability to meaningfully reduce the risk of CV disease in at-risk patients.
AMRN is now applying to the Food and Drug Administration to use Vascepa to reduce CV risk. The FDA is expected to make a decision on the application by the end of the year. If approved, Vascepa is positioned to become the first drug — other than cholesterol management medications — to effectively address residual CV risk.
Strong Q3 Results
The price of AMRN rallied after the company reported that its revenue had surged 103% over the prior year to $112.4 million. Higher prescriptions of Vascepa capsules drove this strong growth. Next, AMRN will prepare for the drug’s anticipated use as a treatment for those patients with high risk of CV disease.
To do so, it will need to ramp up its advertising and operating spending in order to educate healthcare professionals and patients.
On Nov. 14, an FDA advisory committee met to discuss the drug’s expanded use. It agreed unanimously to recommend approval for expanding the label. Amarin stock soared 43% in the last week as a result.
In Q3, prescriptions of Vascepa grew to around 865,000, up from 458,000 last year. As the company doubles its sales representatives team from 400 to 800, expect its sales growth to accelerate further.
The Outlook of AMRN
Amarin ended Q3 with a healthy cash balance of $677.1 million, up from $426.4 million as of the end of 2018. Equity financing and positive cash flow from operations lifted its cash levels.
Investors should be pleased that the company, for now, does not need to raise additional funds to support the expanded use of Vascepa. In the quarters ahead, higher sales of Vascepa will lead to sustained profitability.
Robust Outcome Data
Investors should appreciate the robust and consistent results of Amarin’s studies. They are easy and clear enough to understand. On its conference call, AMRN claimed that:
“[t]here’s been some data out there, which shows cardiovascular risk as it relates to triglyceride levels, which shows that your cardiovascular risk really begins to increase with trig levels … within a 70 mg to 80 mg per deciliter range and then goes up. And doesn’t go down, but sort of plateaus between the 150 mg and 200 mg per deciliter range.”
The Bottom Line on Amarin Stock
Based on Amarin’s future cash flow, simplywall.st has a $56 price target on Amarin stock. And so, even after the stock soared from below $18 to $24 last week, some analysts believe it still has room to climb higher.
More broadly, analysts as a whole have a higher average price target (per Tipranks) of $29.11. Chances are high that the price of AMRN stock will trend towards the above price targets as Vascepa launches. If the expansion of Vascepa is not unexpectedly delayed and there are no huge new additional costs, AMRN stock is worth buying at these levels.
As of this writing, Chris Lau did not hold a position in any of the aforementioned securities.
