Reasons to Buy This Pharmaceutical Company: Amarin Corporation plc (AMRN)

The small pharmaceutical companies have a number of weaknesses when compared to big pharmaceuticals. While they usually have competent management that can effectively oversee the development of a drug candidate, it is extremely rare that they also possess the resources to effectively market their own product. This is the very reason small pharmaceuticals are such attractive acquisition plays. If a company has managed to develop an interesting candidate it is highly likely big pharmaceutical companies would come in for an acquisition. There is also willingness from the one being acquired because they understand that they do not have the resources to commercialize their own product.

Amarin Corporation plc (ADR) (NASDAQ:AMRN)Amarin Pharmaceuticals

Amarin Corporation plc (ADR) (NASDAQ:AMRN) has faced investor wrath due to this very reason. The company was supposed to be acquired soon after the approval of Vascepa but failed to find a buyer due to uncertainty surrounding its New Chemical Entity Status (NCE) and sadly for Amarin investors there is still no clarity on the NCE status of Vascepa. If the company does achieve the NCE status it will get patent protection for 5 years and only 2 years if there is no NCE status.

Despite these obstacles Amarin is a strong buy and has the potential to totally replace GlaxoSmithKline plc (ADR) (NYSE: GSK)’s Lovaza. There are also drawbacks of an investment in Amarin such as its weak marketing ability and potential competition from upcoming drugs such as Neptune Technologies & Bioressources-Ord (NASDAQ: NEPT)’s CaPre.

Commercialization

Due to the NCE setback the company has been forced to commercialize Vascepa. The stock has gone into a free fall due to bad market sentiment about these efforts. Last week Amarin officially launched its drug Vascepa® (icosapent ethyl) capsules in the United States. The drug will target the population with a very high triglyceride or VHTG, through physician prescription. There is a huge target market for Vascepa as there are approximately 4 million adults in the US alone with VHTG.

The drug will compete directly with GlaxoSmithKline’s Lovaza. GSK had acquired the maker of Lovaza Reliant Pharmaceuticals for approximately $1.65 billion and the drug generates sales of more than billion dollars every year. This launch of Vascepa can have an adverse effect on GSK which is already suffering from expiring patents. Vascepa can take away the sales of Lovaza because it reduces triglycerides without increasing LDL levels. There is also evidence that Vascepa can significantly lower LDL levels in patients which makes it easily the first choice for doctors.

Recent News

In recent news the company has received a Notice of Allowance for Amarin’s U.S. Patent Application Serial Number 12/815,569 based on the results of Phase III of Amarin’s Anchor Study. According to company disclosures this would cover the use of 4 grams per day of highly pure icosapent ethyl, or EPA, including Vascepa, to lower triglycerides and LDL-C. The company is all set to file a Supplemental New Drug Application for the Vascepa ANCHOR indication with FDA by the end of this month.

Valuations

Amarin is currently trading at a 60% discount to its mean sell side target price of $19.5 and at a 45% discount to its 52 weeks high. Research reveals that Vascepa can be a blockbuster product and can have a billion dollar sales potential from the US market alone. According to sell side estimates there are approximately 75 million people in the United States with triglycerides above 150 mg/dL. A very small percentage of these are being treated for VHTG. A primary reason for this low percentage is the doctor hesitation to prescribe medicines such as Lovaza that increase LDL levels. This is the reason I believe Vascepa can be such a big hit because it would be easier for doctors to prescribe Vascepa, enabling it to target an even larger market than Lovaza. The approval of supplement drug application based on Anchor results can significantly improve Amarin valuations.  I believe the stock can double once the FDA decision comes through making this an ideal entry point.

Risks

The main risk with an Amarin investment is its limited ability to market Vascepa. This can mean a slow start to Vascepa sales but this should not be a major concern for the long run. Another major concern is entry of new market players with their own omega-3 products. An interesting newcomer in this regard is Neptune’ CaPre. The candidate is a krill oil based drug being developed by Acasti, a subsidiary of Neptune. It is currently in Phase II trials and it’s too soon to determine the level of threat it can pose for Vascepa.

The article Reasons to Buy This Pharmaceutical Company originally appeared on Fool.com and is written by Mohsin Saeed.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!