There's Nothing Fishy About Amarin

There are one-hit wonders, and then there are those stocks that get hit only to come back for bigger and better gains in the future.

Who falls where takes more than just looking at a stock's price, so the fact that biotech Amarin (NASDAQ: AMRN  ) lost more than a third of its value over the past month after the prospects of a buyout seemed lost at sea means we need to dig a little deeper to see whether there's any reason we can hope for a recovery.

A mighty temblor
Putting money in the bank and bulking up a sales force are not typically indicators for a massive sell-off, unless that is, you were expecting the company to get bought out. Then it means there are no offers waiting in the wings, so you best get moving on your own while you still can.

Investors in Amarin have been hoping for a buyout ever since its fish oil therapy Vascepa received FDA apparoval. At the least, they were looking for the biotech to find a partner to pay for the commercialization of the drug. But when it announced it raised $100 million through non-equity financing while hiring 250 to 300 sales people for the expected commercial launch of Vascepa in the first quarter of 2013 , it was a clear indication it would be going it alone against GlaxoSmithKline's (NYSE: GSK  ) Lovaza, at least for the time being. Investors sold off the stock in a hurry, sending it plunging 20% in one day and an additional 20% since then.

Of course that had a lot to do with the FDA once again delaying a decision on whether to grant Vascepa market exclusivity as a new chemical entity. The NCE designation would go a long way toward bolstering market confidence in the potential for the triglyceride-lowering drug as it would gain five years with new competition.

A solo act
Drugs recently introduced to the market without a big-name partner have not fared too well. Dendreon (NASDAQ: DNDN  ) went the solo route with prostate cancer drug Provenge and has found it a tough road to gain traction on. Fat fighting treatment Qysmia for VIVUS (NASDAQ: VVUS  ) is suffering a similar slow start as it attempts to entice doctors to try the drug on their obese patients. Deep-pocketed partners alleviate a lot of the pressure on a company's finances.

Treating high triglyceride levels, as Vascepa does, is a lucrative market with GSK's Lovaza generating nearly $1 billion in sales in the U.S. last year while Abbott Labs' (NYSE: ABT  ) fenofibrate, which it markets as TriCor and Trilipix, generated some $1.4 billion in revenues in 2011. Of course, Lipitor from Pfizer (NYSE: PFE  ) was perhaps the most successful drug ever, generating $10.7 billion last year, but more than $130 billion over its life.

Investors thought that Pfizer might wants to takeout Amarin as a means of plugging the hole created by Lipitor's loss of patent protection, though Abbott, AstraZeneca (NYSE: AZN  ) , or even Merck (NYSE: MRK  ) might want to jump-start its own presence in the burgeoning market.

Oceans of opportunity
But don't get caught up in the spate of negativity. Amarin specifically said the hiring of a sales force is part of its larger goal of unloading the drug or the company onto someone else. It's a drug developer, not a drug salesman so its ability to keep Vascepa all to itself is not a desired goal. But just sitting on the drug until someone comes along isn't smart either, so they're doing what they need to do in case of a longer-than-anticipated bachelorhood.

What investors need to be concerned about is how long this plays out, because it has a lot of debt on its balance sheet already, so it won't be able to bleed for very long. But I think Amarin will bounce back because of Vascepa's potential to reach blockbuster status. And if it garners that coveted NCE designation, which many investors feel it will despite the delays, someone will come along and jump into that breech with two feet. But you can tell me in the comments box below if you think all this is just a whale of a tale. 

Shake, rattle, and roll
The biotech space can make or break investors over-night, and while Amarin might not disappear into thin air, the success of its new triglyceride lowering drug is key to the company's future success or failure. The company 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. Click here now to keep reading.


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