Investors who picked up the battered shares of Amarin Corp. AMRN at the end of March are looking pretty smart.
Since losing about two-thirds of its value after a patent on its heart drug was declared invalid by a U.S. judge, the stock has rebounded nicely, up about 55% to nearly $6.50. Recent investors appear to have shrugged of the gloom and doom due to a number of factors.
First, Amarin plans to appeal the judge’s decision. Second, the ruling only covers the U.S.; Europe and other international markets represent a big opportunity, with sales potential in the billions. A decision on the company’s application is expected to be made by the European Marketing Agency in the fourth quarter of this year. In addition, Amarin is now much cheaper for suitors.
Whatever the case, the unfavorable patent ruling was a gut punch, given Amarin’s hopes to transform Vascepa, a drug derived from fish oil, into a blockbuster, according to an article in STAT News. Vascepa accounted for all of the company’s 2019 sales of $430 million and analysts were expecting the drug to generate revenue of $700 million this year.
The patent ruling not only blindsided the company, but Jefferies analyst Michael Yee as well. Banking on a favorable decision, he had been telling investors to buy the stock.
As to a sale of the company, Cowen analyst Ken Cacciatore thinks that could be on the table with one caveat: the deal should include a contingent value right, according to a TipRanks article. The CVR would earn Amarin’s shareholders a financial benefit if the patent ruling in the U.S. is reversed.
At its current price, Cacciatore thinks Amarin is attractive. He still has the stock as an Outperform, with a price target of $8.
The two companies that challenged Amarin’s patent for Vascepa in the U.S. stand to benefit from the ruling, but it might take a while. Generics makers Hikma Pharmaceuticals (LSE: HIK), based in London, and Dr. Reddy's Laboratories RDY, an Indian company, still have some major obstacles to clear before they get to market, according to Yee.
One of the biggest is developing manufacturing facilities for the omega-3 fatty acid on which Vascepa is based. Amarin already has three plants for that purpose, and it might take challengers six months to get one up and running.
Disclosure: The author holds no positions in any of the companies mentioned in this article.
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