Amarin Manipulation and Opportunity

Amarin Corporation (AMRN), a pharmaceutical company that is currently marketing the recently approved Vascepa, is being offered at an almost outlandishly low share price.

As the article is being written, Amarin (AMRN) is down around the 5.30’s, far below its previous 52-week low (before FDA approval). It is clear that short of some lurking, largely unknown phenomenon, Amarin has fallen prey to manipulation. Not implying any illegality, due to its infancy, and relatively small float, bear raids have been repeatedly successful in driving down the stock price, especially along with media “pieces” from the same circle of authors that continuously seem to push a curiously negative agenda surrounding the company and fall quite short of accurate or insightful.

Currently, with a lull in big headlines and possible catalysts, the bear interest has succeeded in greatly depreciating the stock price, as the avalanche took with it retail investors that have despaired, given up, or were simply forced to sell due to margin calls as the stock price plummeted.

The point of true success for any bear raid, is when the price fall gathers momentum on continues on by itself; this is when true profit is possible, as the bear raiders can not only buy back their shares at the much lower prices after the crash, but even then pick-up shares for long term investment at rock bottom prices.

Amarin share price has, as is relatively unusual, been completely detached from company fundamentals and performance for the past months. As the company continues to meet all its stated goals in a professional and timely manner, and continues to ramp up sales week after week of their flagship Vascepa, in line with conservative estimates and projections, the price per share continues to erode. Small but significant positive headlines pepper Amarin’s recent past, from the granting of patent after patent securing its long term value, to clinical results reinforcing Vascepa’s ability to perform what it intends to do; lower triglycerides without virtually any negative side effects.

Does that mean that patients who use it to lower their triglyceride levels live forever? Likely not, but that is not a claim neither Amarin nor the FDA label has made about Vascepa. It simply lowers triglycerides, and there are plenty of doctors who wish to lower their patients’s triglyceride levels without negative side-effects. Lovaza’s sales figure prove that without a doubt.

Many Amarin longs did make a crucial miscalculation however.  The Lighthouse itself previously suggested Amarin as a good long term investment, including in this article (with much greater detail and insight on the company) when Amarin was trading at the mid 7s (the call that the launch was not a failure as it was being deemed then by devious or unimaginative writers at the time was completely correct, and the trajectory of script sales has been remarkably close to what I laid out).

Regardless however, Vascepa and Amarin will either be successful or not be successful; but neither result necessarily justifies any stock price. The truth is that early hype about the drug, its potential, and most importantly an impending buyout, arguably pushed the price far too high given the uncertainties. This has given the drug maker plenty of room to come crashing down.

Not enough emphasis was placed by many small and retail investors on what a “successful” launch meant, and how it translated into cash flow and subsequently a reasonable stock price. This does partly explain why the launch and company continue to do well, but the price continues to drop. The same people who deemed the launch a failure were in part influenced by the unrealistic expectations of those who predicted and hoped for much better.

In any event, just like a successful Vascepa launch does not justify any stock price, disappointed longs, a delayed FDA NCE decision and no news of a buyout likewise do not justify any (low) price either. The current stock price puts Amarin at a mere 800 million market capitalization. If Vascepa does not get NCE status from the FDA, and if it does not get approval for its ANCHOR (nor Reduce-IT) indication, it is still comfortably worth more than this capitalization.

The current trend of script sales, plus Lovaza’s sales figures are enough to warrant a higher price. Lovaza likewise is not approved for an indication equivalent to the ANCHOR population and has a label roughly equivalent to Vascepa’s current MARINE approved indication (though it has many off-label users in any event). It is also not currently protected by an NCE status, it is far less protected by patents than Vascepa, and has a slightly inferior performance to Vascepa with significantly worse side effects. Still, it has sold nearly a billion dollars annually.

The ongoing fear of negative catalysts has clouded both the possibility of positive catalysts, and the fundamental price in either case. If Amarin had no plans for further label indications (no ANCHOR, no Reduce-IT), and no NCE status, but was happy to market a slightly superior version of Lovaza in the Marine indication, the PPS would probably now be higher. The mere existence of the opportunities (Yes on NCE, yes on buyout, partnership, yes on Anchor, satin therapy, Reduce-IT etc) has terrified the market due to their inherit risk. An opportunity is not a certainty, but it is superior to nothing.

To those who are holding Amarin currently, entering at these prices for a mid to long-term investment seems an excellent prospect. Is this the bottom? Of course it is impossible to tell, but it is certainly a very attractive price for the company. Those already holding it should consider increasing their holdings to “average down” their entry point value, or simply holding on. Despairing at the whims of the market at absolutely no change (at least no negative change) to the fundamentals is usually not a good idea.

Of course, as I have addressed earlier, Amarin’s hard to explain silence towards its shareholders is not helping, and some clarifications and statements from them would go along way to stabilize the price around fundamentals and risk/reward parameters. It seems to be a courtesy if not an obligation, that they owe to their owners who have risked their capital in belief and support of their success.

In any event, whether Amarin’s executives have good reason or not for their silence, they seem to be performing the management of the company professionally, and good advise for investors would be not to repeat their previous error; ignoring company fundamentals and the company’s value.

The risk/reward calculation has swung wildly in favor of buying Amarin at these incredibly low prices. Be ready not to despair, to understand that you may not have identified the bottom (which tends to be impossible) but rather made a sound investment, to ignore the market whims in the short term, and to rely on the logic of your original investment, Vascepa’s long-term success in relation to its market price.