Wall Street Loves Amarin. Should You?

Despite all of Wall Street's conflict and contention, a fortunate few companies enjoy unanimous support among professional analysts. If the market's movers and shakers all believe these companies will beat the long-term averages, well, surely they will -- right?

Not so fast! With help from Motley Fool CAPS, the 180,000-member-driven investor community that translates informed opinion into stock ratings of one to five stars, we'll see whether these highflying favorites deserve analysts' unwavering support.

Today we'll take a look at biotech Amarin (Nasdaq: AMRN  ) , whose triglyceride-lowering fish oil therapy Vascepa received FDA approval earlier this summer and is now awaiting a decision on whether it should be granted a five-year window of exclusivity. Amongst the analysts that CAPS tracks, five have weighed in on Amarin, and though the investor community isn't unanimously supportive, 88% of the 245 members registering their opinion agree it will go on to outperform the broad market averages.

Amarin snapshot

Market Cap

$1.7 billion

Revenues (TTM)

$0.0 million

1-Year Stock Return

25.1%

Return on Investment

(14.3%)

Estimated 5-Year EPS Growth

N/A

Dividend and Yield

N/A

Recent Price

$11.26

No. of Analysts

5

CAPS Rating (out of 5)

*****

Source: FinViz.com. N/A = not available, Amarin doesn't pay a dividend.

But just because Wall Street loves 'em doesn't mean you have to. Analyst sentiment is only just the jumping-off place for your own research.

Something's fishy
Aside from sales, the exclusivity question is what's going to drive Amarin for the immediate future -- and will likely play a big role in what those sales become and how it affects the stock. We got a sense of that last week, when the biotech jumped almost 10% after it appeared the National Institutes of Health had indeed determined it was a "new chemical entity." The analysts are PropThink said that an article appearing on the NIH's website identified it as such, giving it the appearance of it having its imprimatur, but in reality was just an informative article published by a third party. The stock ended up pulling back from most of those gains.

Amarin expects to launch Vascepa early in 2013, when it will take on GlaxoSmithKline's (NYSE: GSK  ) Lovaza, but it won't be by itself, whatever else may transpire.

More hands pulling the oars
When the biotech announced two weeks ago that it didn't expect an FDA decision anytime soon (which was one reason why the NIH article after the statement moved the needle so much), it also said there was a three-pronged path forward for the treatment: Amarin would be acquired, and there would be a "strategic collaboration," or it would market it itself, but that would still include a third party's participation .

Speculation that Amarin would be acquired has been one of the strongest motivators for an investment. Pfizer (NYSE: PFE  ) could use another successful product on the market now that Lipitor faces generic competition, and it's an added bonus that it would enjoy patent protection. But both Merck (NYSE: MRK  ) and AstraZeneca (NYSE: AZN  ) could be interested as well, since Vascepa is compatible with their cholesterol-fighting drugs.

Bigger fish to fry
The biotech says regardless of the FDA's decision on its five-year exclusivity request, it fully expects to be granted a three-year window that ought to still be an attractive inducement to a buyer. Yet investors should be fully aware that if the regulatory agency hands down a negative decision on Amarin's five-year request, the stock will probably be jolted.

I'd view that as an opportunity, since Vascepa still has a healthy growth trajectory before it, so I'll be maintaining my own previous outperform rating on CAPS as a means of holding myself accountable for these bullish sentiments, but also with the understanding it might pull back should the FDA hand down an adverse decision. Tell me in the comments box below if you think Amarin is just spinning a whale of a tale and Vascepa is really just a small fish in a big pond.

Agree to disagree
Amarin has huge potential, but don't invest a dollar before reading 
everything you need to know about Amarin. You can start now with top Fool.com analyst Max Macaluso's premium research report, which dives into the full breadth of issues confronting the biotech. Click here now to keep reading.

Fool contributor Rich Duprey owns shares of Pfizer. The Motley Fool owns shares of AstraZeneca and GlaxoSmithKline. Motley Fool newsletter services recommend GlaxoSmithKline. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 22, 2012, at 1:06 PM, yazzbro wrote:

    Wall Street loves AMRN?? What?!?!? I think they more like hate AMRN. Wall Street is getting very antsy about the direction AMRN is going to go with Vascepa. It just seems like the longer we go without an announcement of a buyout the more Wall Street is viewing AMRN as increasingly risky. I tend to agree with that. I really think if AMRN was going to get bought out for the big dollars($30+) that would have happened already. We are really at the eleventh hour here and there just isn't any news of anything. Also this whole NCE issue that I thought wasn't that important, has become very important. I think this is why we haven't any buyout information yet. Big pharm IS looking at the NCE in this practicular case. If NCE wasn't that important AMRN would have been bought already. The simple fact that they delayed hiring a sales force until next month suggests that they are waiting for NCE. The problem with waiting for NCE is that it can go on and on for months and months before it is resolved. So what is AMRN going to do in that situation??

    However, I do think AMRN gets bought out.. Just not for the big dollars we had all hoped for. I say without NCE $18 and with NCE $22+. I think the $30+ a share take out is just not that realistic any more.(Unless there is a bidding war. Which is not outside the realm of possiblity.. Just not a likely scenario.) I am still long AMRN price target $21.

  • Report this Comment On October 23, 2012, at 2:14 AM, idahithat wrote:

    where is the hate below yazz ? and if you narrow the list down to the analysts who actually have close interactions with the Co, it gets downright Hot In Here. I think your opnions are getting shaded by AFrvys favorite short spin artist or message boards. I think you are confusing " it wont help us or you to provide play by play" with "just isn't any news".

    Personally I think the worst case will be a selling partner of an established name with first right or refusal for acquisition at some point after sales data proves out.

    analyst scorecard

    Aegis Capital

    Raghuram Selvaraju(Lead) ......... OUTPERFORM

    Canaccord Genuity

    Ritu Baral(Lead)..................BUY

    JPMorgan

    Chris Schott(Lead)..............................OUTPERFORM

    Jefferies & Company, Inc.

    Thomas Wei(Lead)......BUY

    Lazard Capital Markets

    William Tanner(Lead).........OUTPERFORM

    Leerink, Swann

    Joseph Schwartz(Lead).................BUY

    MKM Partners

    Jon LeCroy(Lead)........................OUTPERFORM

    Roth Capital Partners

    Joseph Pantginis(Lead)........OUTPERFORM

    Wedbush Securities Inc.

    Akiva Felt(Lead)..............BUY

    maybe include

    TheGutter

    af (Lead paint chip diet)........CRL

  • Report this Comment On October 24, 2012, at 8:50 AM, sam2115 wrote:

    In my opinion, FDA denial of NCE is reflected in the current price $11-$12.

    However: I expect NCE approval because although there are some similarities in the prior art with Mochida: neither their Japanese product nor GSK's Lovaza lowers LDL.

    The FDA told Amarin to do a massive Phase IV follow up trial. In my experience, ( 40 years in the industry) I can't recall them doing that where they didn't grant NCE status- can you?

    It's approaching time to get this product on the market to begin showing the $$$ potential is real and to begin converting the $1 B in Lovaza sales to Amarin sales!

    There is a lot to like about this product and now would be a good time to invest.

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