What’s next for Amarin (NASDAQ:AMRN) stock? After the Food and Drug Administration (FDA) expanded the label for its flagship Vascepa drug, Amarin stock could rally tremendously in the coming years. Even before the FDA ruling, Vascepa’s sales were surging fast. Analysts, on average, predict that Vascepa generated between $410 million and $425 million of sales in 2019. That’s an 85% jump versus 2018!
Sales of Vascepa are also set to climb this year, thanks to the expanded label. According to SVB Leerink’s Ami Fadia, Vascepa could reach peak sales of $4 billion-plus a year.
But since December, the AMRN stock price has dipped from its 52-week high. The shares peaked at $26.12 on Dec. 16, but now trade under $20 per share. Why are investors cashing out, even though Vascepa is poised to become a blockbuster drug?
Some remain skeptical as to whether Vascepa will live up to the hype. As InvestorPlace columnist Josh Enomoto wrote in a Jan. 3 column,Vascepa is an “adjunctive treatment option.” In other words, it’s not a “cure all” for cardiovascular disease.
Upcoming litigation could also impact the AMRN stock price. Amarin is fighting patent challenges from several generic drug makers. With these factors in mind, let’s dive in and see whether Amarin stock will rise or fall in 2020.
Will Vascepa Make Amarin Stock a Takeover Target?
After the label for Vascepa was expanded, big pharma may want to get their hands on this potential blockbuster. As I’ve previously discussed, Pfizer (NYSE:PFE) is shedding legacy businesses to chase growth opportunities. Acquisitions of smaller biopharma companies like Amarin are key to this strategy.
For big pharma, M&A is cheaper than R&D. InvestorPlace contributor Dana Blakenhorn recently cited a FiercePharma article which listed a grab bag of potential AMRN acquirers. But according to the FiercePharma piece, Amarin isn’t looking to “cash the check” i.e. sell itself. Instead, AMRN is going it alone, increasing its sales force via 800 new hires.
That strategy makes the outlook of AMRN stock price more uncertain. But Amarin may not be such a hot takeover target. InvestorPlace columnist Vince Martin pointed out in December why AMRN may not be at the top of big pharma’s shopping list.
According to Martin, cardiovascular drugs are rarely blockbusters. Big pharma is more interested in acquiring companies with oncology and CAR-T treatments in the pipeline. That is where major pharma names are fishing at the moment.
There are good reasons, however, why Amarin stock could become a takeover target. Conversely, there are good reasons why buyers may not pay a big premium to get their hands on Vascepa. So investors should not buy AMRN stock based on this factor alone.
Patent Litigation Could Impact the AMRN Stock Price
Vascepa may be having its day in the sun. But what if AstraZeneca or Acasti Pharma develops a better treatment, potentially leaving Vascepa in the dust? Also, Amarin is fighting off generic drug makers’ attempts to market generic versions of Vascepa.
Vascepa is under patent protection until 2030. But that hasn’t stopped Dr. Reddy’s (NYSE:RDY), Hikma Pharmaceuticals (OTCMKTS:HKMPF) and Teva (NYSE:TEVA) from challenging its patents. Amarin previously settled with Teva, allowing the Israeli firm to sell a generic version of Vascepa in 2029.
But Dr. Reddy’s and Hikma want to duke it out in court. Amarin’s lawsuit is slated to go to trial on Jan. 13. The fate of the company’s patents could impact the AMRN stock price.
What are the chances of Amarin prevailing? The prior Teva settlement may tilt things in Amarin’s favor. But no matter the outcome, AMRN stock price could rise either way. Investors could already be pricing litigation risk into the shares, and eliminating that overhang will be positive for Amarin stock.
A favorable ruling would be icing on the cake. By protecting Vascepa’s patents until 2029 (when Teva will release its generic version), a favorable ruling would make Amarin’s crown jewel a more valuable asset to a strategic acquirer.
The Bottom Line: All Bets Are Off For Amarin Stock in 2020
After its big moves in 2019, Amarin stock may already be fairly priced. But if the company’s sales climb meaningfully, AMRN stock price could go higher. While the company is willing to “go it alone,” a strategic acquirer could offer a hefty premium to add this drug to its pipeline.
But Amarin stock is not a slam dunk going forward. Competing drugs could leave Vascepa in the dust. If Dr. Reddy’s and Hikma Pharmaceuticals prevail in court, generic versions of Vascepa could hit shelves sooner than anticipated.
With these uncertainties in mind, tread carefully with Amarin stock. Consider it a buy if the shares dip further, but don’t chase this potential takeover target.
As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.