Acquisition Rumors Aren’t the Only Thing Moving Amarin Stock

It’s been three weeks since the U.S. Food and Drug Administration recommended that Amarin’s (NASDAQ:AMRN) prescription-strength fish oil drug, Vascepa, be approved for broader use to help patients at risk for heart and stroke problems. Amarin stock jumped on the news but has since fallen back into the low $20s. 

Acquisition Rumors Aren't the Only Thing Moving Amarin Stock

Source: Pavel Kapysh /

The word on the street is that some of the biggest players in pharmaceuticals are sniffing around Amarin’s business. Some speculate that the Amarin stock price could be worth as much as $56 a share in the hands of a strategic buyer.

With M&A heating up in the biotech industry, could Amarin be worth $20 billion to a strategic buyer?

Amarin is currently valued at $7.8 billion by investors. A $20-billion buy would mean paying a 160% premium to its current stock price. Maybe I’m old fashioned, but that strikes me as just a little too rich for a drug that’s only been approved for sale since July 2012 and then only to lower patients’ triglyceride levels.   

Are investors getting a little ahead of themselves?

A Closer Look at Amarin Stock

Amarin released its Q3 2019 earnings in early November. Revenues grew 103% to $112.4 million. Through the first nine months, business was so good it exceeded company sales for all of 2018.

As for Vascepa, Amarin reported that the total number of prescriptions at the end of September was 826,000 at the midpoint of estimates from third-party healthcare data providers, up 89% from the same period a year earlier. 

“Growth in net product revenue was supported by increased prescription levels of Vascepa® (icosapent ethyl) capsules. The increased prescription levels reflect both a higher number of Vascepa prescribers and an increase in the average prescriptions per prescriber,” stated the Q3 2019 press release. 

Not bad for a drug that’s limited to treating patients with high triglycerides. Imagine what it could do with a broader application to lower fat levels for a significant number of Americans at risk for heart problems. Currently, these people are using drugs such as Lipitor and Zocor to lower their cholesterol.  

The FDA believes Vascepa can reduce the number of people with heart problems. It’s expected to make a final decision by Dec. 28. The recent findings by the regulatory body suggest Amarin will receive good news by the end of this month.

“There is no doubt this drug could benefit a substantial portion of the U.S. population and meet an unmet need,” said Dr. Jack Yanovski, a panelist and hormone specialist from the federal National Institutes of Health.

Some analysts expect Vascepa to deliver annual sales as high as $3 billion.

While it wouldn’t be good enough to make 2018’s list of the top-selling drugs, it’s important to note that most of the drugs on this list are related to cancer or arthritis. As far as I can tell, there is only one cardiovascular drug, Xarelto, that’s on the list.  

So, the interest level from Big Pharma should be high.

Is Amarin Stock Worth $56?

Let’s assume that Vascepa hits the analyst target of $3 billion. Amarin currently has $286.5 million in revenue through the first nine months of the fiscal year. In Q4 2018, it had revenues of $77.3 million. Double that in 2019, and you get full-year sales of $440.1 million, 92% higher than in 2018.

So, we’re talking about a seven-fold increase in Amarin’s sales from the broader use of Vascepa. Amarin is trading at 19.7 times sales. If it gets to $3 billion and maintains the same multiple, it would have a future market cap of close to $60 billion. 

The question then becomes how long it will take to get to $3 billion. 

It’s currently growing revenues at 50% for a drug that’s used for just one application. The potential user base to lower fat levels is so much higher. 

While some other company may develop a drug that puts Vascepa on the sidelines, it’s hard to imagine that happening in the next 12-24 months. In the meantime, Amarin gets a big headstart on its competition. 

That alone could have the Pfizer’s (NYSE:PFE) of the world come calling. 

I think it could be worth $20 billion to a strategic buyer. In 2020, we might find out who that is. 

At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

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