One thing that all biotech traders should know is that competition is fierce, even within very specific medical niches. Take Amarin (NASDAQ:AMRN), for example. The company has had to contend with rival drugmakers Acasti Pharma (NASDAQ:ACST) and AstraZeneca (NYSE:AZN). And Amarin shareholders have had to contend with downward price pressure since mid-December.
Investors need not be discouraged, though, as the dip could be your signal to add shares at a favorable price point. Besides, given recent disappointments from the company’s chief competitors, AMRN shareholders can indulge in a bit of schadenfreude while waiting for the stock to reclaim its prior peak.
A One-Drug Wonder
As is oftentimes the case with small biotech companies, Amarin is primarily associated with a single drug. This makes biotech investing risky, but the rewards can be considerable when regulators approve a make-or-break drug.
For Amarin, that drug is Vascepa, which the U.S. Food and Drug Administration approved in mid-December “as an adjunctive (secondary) therapy to reduce the risk of cardiovascular events among adults with elevated triglyceride levels (a type of fat in the blood) of 150 milligrams per deciliter or higher.” These adults also must already have cardiovascular disease, diabetes or be at risk for cardiovascular disease.
This regulatory approval is groundbreaking.
The FDA had previously approved the drug in 2012 as a treatment for adults with “severe” triglyceride levels. But allowing its use among patients with “elevated” triglyceride levels means a wider consumer base and augmented profit potential for Amarin.
Interestingly, however, the Amarin stock price has sagged since the December announcement. At the time, the share price was trading above $24. Currently, it’s struggling to hold the $19 level.
Crushing the Competition
The price pressure, I feel, is no reason to doubt Amarin’s chances of a full recovery. If last year’s performance is a reliable indicator, then investors ought to be impressed with the company’s net total revenues of around $425 million, representing an increase of approximately 85% over the previous year. As for this year, Amarin projects net total revenues between $650 million and $700 million.
That’s encouraging for Amarin and its investors. The competition, in contrast, has seemingly experienced nothing but disappointment lately. Acasti, for one, recently conducted a Phase 3 trial of CaPre which failed to achieve its objective of reducing triglycerides by 20% when compared with a placebo. AstraZeneca, meanwhile, recently discontinued its Epanova Phase 3 trial, citing a “low likelihood of demonstrating a benefit” for patients.
I hate to call Acasti and AstraZeneca the “losers” because that sounds harsh. But it’s hard to deny that Vascepa is the clear winner when it comes to fish oil-derived heart-condition meds. You’re certainly welcome to disagree with me on that, but you’d also be disagreeing with the federal government. And if there’s one battle that investors won’t win, it’s a fight against the government.
You’d also be at odds with Cantor Fitzgerald analyst Louise Chen, who assigned an “overweight” rating to AMRN stock along with an ambitious price target of $35. Explained Chen, “AMRN has been the only company in its class with an outcomes study (REDUCE-IT) that has shown a statistically significant benefit in reducing [cardiovascular] disease. We think the news today underscores our view that AMRN is an interesting asset in a consolidating space.”
My Takeaway on Amarin Stock
You don’t have to be as optimistic as Chen, whose price objective implies a very sizable move in Amarin stock. To take a long position with confidence, you only need to trust that the government’s approval will greatly expand Vascepa’s pool of potential consumers — and that the competition is too far behind to catch up anytime soon.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.