Much of the financial media has been focused on the coronavirus from China. This is perfectly understandable. However, there are also drug developers doing very important work not directly related to the coronavirus. For instance, investors should consider Amarin (NASDAQ:AMRN) stock. The company has a life-enhancing solution in the form of cardiovascular-treatment drug Vascepa.
The share price fell in early March, so shareholders’ concerns are understandable. However, besides having a robust drug pipeline, Amarin has proven that it’s financially sound. The company’s revenue growth and other indicators suggest a sound fiscal basis. These all translate to a stock that demands your attention.
A Watershed Moment
December 13, 2019, was a momentous day for Amarin and potentially for the cardiovascular-patient population as well. That was the day when Vascepa, the company’s flagship drug, became “the first and only FDA-approved medication for reducing cardiovascular risk beyond cholesterol lowering therapy in high-risk patients approved for treatment.”
This is huge news for patients at risk of coronary events, myocardial infarction, strokes and angina. As explained by Amarin President and CEO John F. Thero, “For the first time, physicians, patients and payers have an FDA-approved treatment option beyond cholesterol lowering that has been demonstrated to significantly reduce major adverse cardiovascular events when used on top of a statin.”
You’d think that this game-changing Food and Drug Administration approval would be enough to bolster the Amarin stock price. Unfortunately, it didn’t pan out that way.
To quote InvestorPlace contributor Vince Martin, “After approval, Vascepa looked like a blockbuster … Vascepa thus seemed to have the market to itself … And yet, since Vascepa received FDA approval, Amarin stock has continued to fade.”
Martin conceded that the share-price drop has been befuddling. It’s hard to deny that there’s little rhyme or reason to the market’s reaction to the FDA approval. Besides, Amarin’s most recent earnings results should impress the investing community.
Blockbuster Earnings Not Fully Appreciated
Sometimes it just takes time for the market to understand and appreciate a company’s true value. That appears to be the case with Amarin stock. Judging by the stock’s price action, it looks like the Vascepa approval just hasn’t sunk in yet.
The company’s CEO observes, “In terms of being on formulary coverage, we’re on nearly 95% of Medicare Part D plans and on about 85% of commercial plans.” That alone should be enough to bolster the share price in short order.
Moreover, investors have evidently failed to factor Amarin’s spectacular fourth-quarter and yearly revenues into the stock price. During 2019’s fourth quarter, Amarin’s net total revenue totaled $143.3 million. This marked a quarterly record for the company as well as an improvement of 85% compared to the fourth quarter of the prior year.
Meanwhile, Amarin’s net total revenue for 2019 was equally noteworthy at $429.8 million. That figure represents an annual record for the company. It’s also an astounding 87% increase compared to its net total revenue in 2018.
Additionally, there was strong growth in Vascepa prescriptions. The data appears to indicate that normalized prescriptions of this drug increase by 84% to 85% during 2019’s fourth quarter compared to the same quarter of the previous year.
The Takeaway on Amarin Stock
If Vince Martin is confused by the drop in the price of Amarin shares, that’s perfectly understandable. When the market gets it wrong, that’s a chance to capitalize on the mispricing. Amarin shares are mispriced at the moment, and investors can now swoop in and take advantage of that.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.