Since peaking in July, 2012 at around $15, shares of Amarin Corporation plc (ADR) (NASDAQ:AMRN) declined steadily to close recently at $8.47. Amarin was flying high last summer because investors were betting that the company would be taken over. Investors also expected that positive FDA decisions would drive Amarin shares higher. More recently, in comparison to other pharmaceutical companies rallying on FDA-related news, Amarin continued an additional decline of over 20% in December. In a 6-month period, Amarin shares are down over 40%.

VIVUS, Inc. (NASDAQ:VVUS), which makes Qsymia, is down 40%, while Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) , maker of the FDA-approved Belviq drug, is flat in the same time period:

(Chart Source: Kapitall)

In November, Vivus reported slow sales during its quarter, resulting in a $40.4 million loss.

In another FDA update to its Orange book in mid-December 2012, Amarin’s fish oil pill Vascepca was given “no unexpired exclusivity.” No NCE decision was made, either. This heightened uncertainty and acted as a negative catalyst. The uncertainty is weakening the resolve of investors bullish on the company. In a conference call for its third quarter results, the company was asked the impact of a lack of NCE clarity. Mr. Zakrzewski, Amarin’s CEO, said that all available options are the same while a decision by the FDA is being made. The three options available are: (1) selling the company, (2) creating a strategic partnership, and (3) launching products with its own sales force.

FDA-related uncertainty could still push Amarin shares lower in the short-term, despite fundamentals remaining the same. Amarin’s patent for Vascepca could mean $1 billion in commercial sales. The $100 million in non-equity financing, while negative for common shareholders, ensures the company has adequate liquidity to market and sell the product. The financing initially represented just 5.6% of market capitalization.

Balance Sheet Analysis

Amarin had $215.1 million in cash at the end of September. When the financing is included, Amarin will have $315.1 million. 250-300 specialty sales professionals will be hired. Assuming a salary of anywhere between $50,000 and $100,000, Amarin will use between $12.5 million and $30 million in additional staff costs a year. Each sales staff will have a three to five year relationship with a physician groups. This will improve the sales efficiency, and increase the likelihood of commercial success for Vascepa.

For the current quarter, investors should expect $20 million to $30 million in additional spending due to commercial supply costs.

Comparative Analysis

Vivus represents a good comparable company for Amarin. Like Amarin, Vivus may need to find larger-sized partners to improve sales. Any free trial offer, similar to the approach Vivus is taking for Qsymia, would be negative for Amarin. This would undermine the implied efficiency of Arena’s hired sales staff.

Risks may be lower on the supply side, as Amarin also has 2 FDA-approved encapsulators: Banner Pharmacaps and Catalent. Both would diversify Amarin’s supply chain, reducing supplier risk.

Belviq, an obesity drug made by Arena, has the potential to be successful at launch. Arena partnered with Eisai to market Belviq, so strong physician interest to prescribe Belviq will be supported by marketing from Eisai.