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Amarin’s Vascepa Is a Great Story Filled With Too Many Unknowns

Amarin is not just a bet on its Vascepa drug, but on the company's ability to market it

In investing there are always known knowns, the facts that we are familiar with and can verify. There are known unknowns, truths whose value you must estimate. There are also unknown unknowns, the chance that sudden change could throw everything in the air.

Does the Recent Amarin Stock Pullback Put Shares in the Buy Category?
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Amarin (NASDAQ:AMRN) stock is filled with known unknowns.

We know Vascepa, its drug based on fish oil that treats high triglycerides, can reduce the risk of heart attack in people whose levels don’t respond to statins.

We know the U.S. Food and Drug Administration has approved Vascepa. But we don’t know how many doctors will prescribe it, or how much business Amarin might get as a result.

Speculators love these known unknowns. It’s something they can bet on, something they can make guesses about. No one is yet right or wrong.

Known Unknowns

I am at the heart of the Vascepa market.

I’m in late middle age and have taken statins for 20 years. But they’re not working as they did, and I’ve had side effects. My triglyceride number has always been higher, relative to normal, than my other readings.

After the FDA approval came in December, I said it was time to cash out on Amarin. So far in 2020 that has been the right call. The shares are down almost 17%.

Even then it’s a pricey stock. Amarin estimates 2020 revenues from Vascepa between $650 million and $700 million. The market capitalization on Feb. 13 is $6.4 billion. You’re paying about 10 times sales if you buy now.

If you do buy now, you’re betting that Amarin’s new ad campaign, criticizing standard fish oil supplements for their lack of FDA approval, sends people to their doctors with questions. A follow-up campaign this summer will provide Amarin’s answer, which is to pay $414 for what amounts to 120 grams of its Vascepa. In the REDUCE-IT study on which its ads are based, patients took 4 grams per day.

The annual cost of Vascepa thus comes to almost $5,000 per year. Patients on Medicare are seeing a wide range of co-pays, from as low as $25 to as high as $328, depending on their plan.

Will They Co-Pay?

InvestorPlace’s Chris Markoch says there is a lot of hype and hope in Amarin shares. The good news could already be in the shares, as Mark Hake notes. The bears, for now, are in control, notes Chris Lau. International approvals might open vast new markets, as Faisal Humayun says. For now, Amarin is in a trading range, as Vince Martin notes.

This is the good, the bad and the ugly of biopharma. Amarin isn’t just betting on its drug. It’s betting on its marketing. It’s betting it can send patients to doctors, who will then prescribe a drug that might, or might not, be needed.

The Bottom Line on Amarin Stock

The uncertainty is why I have recommended against buying Amarin shares.

That and the fact I’m not about to get it. Not everyone will benefit from this drug. You need to see persistent high triglycerides, even with statin therapy, to be a real candidate for it. That’s how Vascepa will be treated internationally, where doctors and government-approved formularies drive what most people take.

The U.S. is different. In the United States, you can stampede people into demanding a drug, then demand that insurers cover it. That’s why healthcare is a salient political issue. Doctors, who are trained to evaluate risk and reward, aren’t driving drug uptake. Patients and advertisements are doing it.

This brings up the final known unknown regarding Amarin. How long will this be the case?

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story. 


Article printed from InvestorPlace Media, https://investorplace.com/2020/02/amarins-vascepa-is-a-great-story-filled-with-too-many-unknowns/.

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