On Feb. 25, Amarin (NASDAQ:AMRN) reported a fourth-quarter loss of 2 cents per share on sales of $143.3 million. The per share loss narrowed from 11 cents a year earlier, while the company’s sales surged 85% YOY, topping analysts’ average estimate of $136 million. As expected, sales of the company’s cardiovascular treatment, Vascepa, were the big driver of its revenue increase. But that wasn’t enough for investors, as Amarin stock sank 7% on the day after the earnings report.
On Feb. 27, the stock again plunged, losing nearly 10% on its way to a weekly loss of 18%. The shares have tumbled 25% since the start of the year.
The average analyst price target on Amarin is $28.80, or about 80% above yesterday’s closing price. While there are credible reasons to think AMRN can rebound, its recent price action and a lack of near-term catalysts for the company suggest analysts may be inclined to lower their price targets. That, in turn, could impede a recovery by the shares.
However, the company plans to continue its current approach to boosting sales of Vascepa.
Amarin is a one-trick pony, as Vascepa is its only drug on the market. Relying on one drug isn’t uncommon among mid- and small-cap biotechnology companies. But investors looking for biotech companies with many drugs would do well to stick with large-cap names.
As many as 15 million Americans need a drug like Vascepa, and Amarin is taking steps to exploit that demand by doubling its sales force. And in January, the company unveiled a new ad campaign designed to drive sales of the drug. Amarin is also expected to begin a new ad campaign later this year after the Food and Drug Administration signs off on it. Additionally, the company has a lucrative market to itself, at least for now.
“Amarin has recently benefited from the continued face plants of competitors in the field, including AstraZeneca’s (NYSE:AZN) Epanova,” according to FiercePharma. “In January, the British drug maker scrapped a large-scale Phase 3 trial of Epanova as an add-on to statins for lowering cardiovascular risks among patients with mixed dyslipidemia, a disease marked by elevated triglyceride levels.”
The company has also gotten most insurers to cover Vascepa. “Nearly 95% of Medicare Part D plans and…about 85% of commercial plans” now cover the drug, CEO John Thero said in an interview with Reuters.
As positive as those factors are, they are baked into Amarin stock. Muddying the waters for Amarin is an ongoing patent-infringement trial in which it’s a plaintiff. In the case, Amarin is seeking to keep generic competitors to Vascepa out of the market until 2030. This case is very much a “must win” for Amarin in the eyes of analysts, some of whom are forecasting epic moves by its stock following the ruling. Jefferies has said Amarin’s stock could decline to $5 if the company loses the case.
The Bottom Line on Amarin Stock
There are plenty of variables and unknowns with Amarin now, and markets typically don’t like uncertainty. Assuming the company wins its patent-infringement case, its shares will likely rally, as investors will go back to focusing on Vascepa and Amarin’s viability as an acquisition target.
The sales of Vascepa can reach $2.5 billion or more by 2024, but that’s a long time to hold onto a volatile stock that’s facing near-term headwinds.
If investors can cope with the looming uncertainty facing Amarin, the shares are worth a look. For those looking for more of a sure thing, either wait for Amarin to prove its mettle or consider a biotech name with a deeper product bench.
As of this writing, Todd Shriber did not own any of the aforementioned securities. He has been an InvestorPlace contributor since 2014.