Amarin Corporation plc (ADR) (AMRN) Shares Sink on Secondary Offering

“More means less.” Amarin Corporation plc (ADR) (NASDAQ:AMRN) demonstrated this seemingly contradictory maxim today following its announcement of a new public offering. Shares promptly sank by 8%. With more shares on the market, the less each share is worth. Let’s take a look at the details.

Adding up the ADSs
Amarin plans to sell 21.7 million American Depositary Shares, or ADSs, in a public offering. The underwriters of the sale will also have a 30-day option to purchase another 3.255 million shares. The shares will be offered at prevailing market prices.

There are currently 150.7 million or so outstanding shares of Amarin Corporation plc (ADR) (NASDAQ:AMRN)’s stock. This new offering represents around 14% of outstanding shares, with the option available to underwriters making up another 2%. In one sense, a drop of only 8% with potential share dilution of twice as much doesn’t sound too bad.

As of the end of March, Amarin had cash and equivalents of a little more than $203 million. Why have another public offering now? The company wants to use the proceeds generated to fund its continued commercial launch of triglyceride-lowering drug Vascepa. At the current pace it’s burning through cash, Amarin will need more in 2014. It’s better to take care of business sooner rather than later.

Tale of two charts
Amarin Corporation plc (ADR) (NASDAQ:AMRN)’s recent history is basically a tale of two charts. The company’s decision to launch Vascepa on its own has taken a toll on its stock. However, the good news is that Vascepa sales have been climbing.

AMRN data by YCharts.

Source: Company SEC filing.

It should be noted that the June prescription number for Vascepa comes with a couple of caveats from the company. The last two days of the month aren’t included in the total. Also, the figure is based on weekly compilations of data, which Amarin Corporation plc (ADR) (NASDAQ:AMRN) says tend to understate the number obtained later in the monthly compilation.

Why have share prices continued to fall at the same time that Vascepa sales have grown? In large part, the answer boils down to skepticism.

Many are skeptical about Amarin’s ability to successfully commercialize Vascepa to its full potential against larger competitors with fish-oil pills. GlaxoSmithKline plc (ADR) (NYSE:GSK) markets Lovaza and has made nearly $3.8 billion from the drug over the last five years. AstraZeneca plc (ADR) (NYSE:AZN) bought Omthera Pharmaceuticals in May, primarily to gain its fish-oil drug Epanova.