Amarin Stock Looks Like a Heart-Healthy Buy on the Dip

Amarin's Vascepa is on track to be a multibillion-dollar franchise

The weak performance of Amarin (NASDAQ:AMRN) has been a head scratcher. Back in December, the company announced a major approval from the U.S. Food and Drug Administration. There was also a strong fourth-quarter report.

Even Though It's Risky, Amarin Stock Is a Worthwhile Buy
Source: Pavel Kapysh / Shutterstock.com

But Wall Street didn’t really care. Since early December, Amarin stock has gone from $24 to $16.

Now the recent volatility in the markets has taken a toll, no doubt. And there are some other worries about the company’s aggressive spending to build out its infrastructure.

Yet despite all this, I think the selloff in Amarin stock has been an overreaction. Why? Well, let’s take a deeper look at some of recent developments.

First of all, the FDA approval was definitely a game changer. The agency agreed to a new indication and label expansion for the flagship drug, Vascepa. Note that the drug was shown to reduce cardiovascular disease for those with elevated triglyceride levels. This was the conclusion after an extensive clinical trial that lasted seven years. The FDA approval was also unanimous, which is not too common.

To put things into perspective, other pharma companies — like AstraZeneca (NYSE:AZN) and Acasti Pharma (NASDAQ:ACST) — have been developing their own treatments. But they have proven to be ineffective. As a result, Amarin will be the first to market in this category.

In the meantime, the company is aggressively expanding Vascepa in foreign markets. Consider that Amarin received regulatory approval in Canada. There has also been a marketing application in Europe. And then there is China. Amarin’s partner in the country should complete the clinical trial by the end of this year.

Next, Amarin’s growth has been ramping nicely. In the latest quarter, revenues jumped by 85% to $143.3 million, hitting a record for the company. Net income came to $7.1 million, or 2 cents a share, up from a loss of $33.7 million, or 11 cents a share in the same period a year ago.

Amarin also reaffirmed its outlook for 2020. The revenues are expected to range from $650 million to $700 million, driven primarily by Vascepa.

The Risks

Amarin definitely faces some real challenges. Let’s face it, building the needed infrastructure will not be cheap — or easy.

The company plans to expand the sales force in the U.S. to about 800 reps, representing a doubling on a year-over-year basis. It can be tough to educate and onboard such employees. So, it seems reasonable that there will be some growing pains.

Another issue for Amarin stock is that the company must deal with a patent lawsuit from generic drug companies, Dr. Reddy’s Laboratories (NYSE:RDY) and Hikma Pharmaceuticals (OTCMKTS:HKMPF). True, it does appear that Amarin has a good case. But then again, litigation can be dicey.

Bottom Line on Amarin Stock

The market for Amarin is certainly massive. Keep in mind that heart disease is the leading cause of death in the U.S. and costs about $500 billion per year. Vascepa can also be used in conjunction with those taking statins. And note that more than 35 million people in the U.S. take these.

In light of all this, it should be no surprise that Vascepa has the potential to be a multibillion-dollar franchise. This should make Amarin very attractive as a buyout candidate for companies like Pfizer (NYSE:PFE) or Merck (NYSE:MRK).

Thus, Amarin stock really does look attractive, especially in light of the recent selloff.

Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence BasicsHigh-Profit IPO Strategies and All About Short Selling. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.


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