Late last year, it looked like Amarin (NASDAQ:AMRN) was starting to turn the corner. The company received the all-important go-ahead from the Food and Drug Administration to sell its Vascepa fish oil drug to a wide patient population. Previously, Vascepa was only approved for a narrow group of patients with extremely high triglycerides. But even before the recent craziness, Amarin stock was troubled.
Last year, when Amarin got the go-ahead to use Vascepa for many classes of cardiovascular disease, the company built up its sales force and appeared set for a huge 2020.But it hasn’t come to be. In fact, Amarin stock has tanked to start 2020.
In a frantic trading session last Thursday, it fell to as low as $8 per share, down 60% from recent highs. Shares are back up slightly now, as they closed at $10 on Monday.
Regardless, they are still way in the red for the year. What’s gone wrong for Amarin? And are the problems temporary, or is this a permanent setback? Here’s what you need to know about Amarin and Vascepa going forward.
The Case for Vascepa
Amarin shared a new investor presentation with its followers earlier this month. In their presentation, they made a compelling pitch for Vascepa. Cardiovascular disease is a huge, and worsening, problem. With that in mind, it’s clear that something is needed besides statin drugs for treating high cholesterol. As of December 2019, Vascepa is now the only non-statin approved for this use case.
With this landmark FDA approval, the game has changed for Amarin. They can now try to make Vascepa a blockbuster mass-market drug. They’re doubling their U.S. sales force to 800, and are seeking a host of international approvals for the drug.
Even before getting the mass market clearance, Vascepa had reached an impressive tally of 8 million prescriptions. Now, with the FDA’s broad label appeal, management sees Vascepa being a leader in a multi-billion dollar market.
To that end, we already see a great revenue growth trajectory. The company pulled in $430 million in revenues in 2019; that was an 87% surge from 2018. For 2020, it sees revenues spiking to at least $650 million.
While the company is still loss-making at this time, it believes it has enough cash to make it to profitability without needing to raise more funds. So if all the indications are positive, why did Amarin stock just make new 52-week lows on Thursday?
Frustrations Mount for Amarin Owners
Amarin stock owners have faced a most difficult ride over the past few years. That’s because Amarin has seemingly achieved a number of strongly positive developments. Yet, each time they get something done, the stock price pops for a few days and then goes back down. You have positive drug trial data readouts, the advisory committee approval of Vascepa, the subsequent FDA approval of Vascepa, the product getting approved in Canada, and so on.
Most recently, the FDA gave Amarin broad label approval to sell Vascepa for a wide range of cardiovascular conditions, rather than simply niche uses; that approval was supposed to be a game-changer that would open a huge market for Vascepa. This was supposed to be the turning point that would make Amarin hugely profitable; investors had been waiting for this for many years. But the surge to profitability didn’t play out as expected.
Instead, Amarin stock is now down roughly 40% since that FDA decision. Now bulls are pointing to an upcoming patent ruling later this month.
Amarin is claiming that generic drug-makers, including Dr. Reddy (NYSE:RDY) are trying to infringe on Amarin’s intellectual property by making a generic version of Vascepa. Should Amarin win its lawsuit, perhaps it would cause Amarin’s stock to rebound. At this point, though, bulls should be nervous, as Amarin has had numerous “catalysts” come and go without making an appreciable difference in the share price.
Amarin Stock Verdict
If you are on the fence about Amarin stock, here’s another data point to consider. Amarin’s President and CEO, John Thero, sold 200,000 shares of Amarin stock earlier this month at $16 each, bringing in a cool $3.2 million. Given that Amarin stock was trading above $20 for much of the past few months, it’s not particularly encouraging to see the CEO dump a big block of stock down at $16. As the stock is subsequently down to $10 now, it was admittedly a timely sale, however.
Still, after all the trials and tribulations Amarin has faced, you’d much rather see insiders buying, rather than dumping the stock. Particularly with several catalysts supposedly on the horizon, and a major ramp-up of the sales effort for Vascepa, this could be a positive inflection point for the company.
Despite that, however, insiders are not rushing to snap up Amarin stock. You may want to keep that in mind before doubling down on your positions in it, either.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. At the time of this writing, he held no positions in any of the aforementioned securities.