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Why Amarin Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biopharmaceutical company Amarin (NASDAQ: AMRN  ) sank 10% today, after announcing plans to sell 21.7 million American depositary shares in a public secondary offering.

So what: The new offering represents around 14% of Amarin's outstanding shares -- with underwriters having a 30-day option to purchase an additional 2% -- so Mr. Market is naturally trying to discount the deal's dilutive effects. Of course, the cash-strapped Amarin said it will use the proceeds to continue the commercial launch of its triglyceride drug Vascepa, so the offering might payoff in the long term. 

Now what: Management will keep seeking approval from the U.S. FDA to market Vascepa as a treatment for patients who have high triglyceride levels and also are taking a statin to control their cholesterol. And as Foolish biotech expert Keith Speights wrote earlier, "There ... appears to be a reasonable chance that the FDA will approve the drug for individuals with high (as opposed to very high) triglyceride levels later this year. Amarin's shares could very well be much higher by year end." So while Amarin remains just too speculative for average Fools, today's double-digit drop -- the stock is now off a whopping 65% from its 52-week highs -- might be an attractive opportunity for biotech-savvy bargain hunters.

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9/23/2016 4:00 PM
AMRN $2.94 Up +0.24 +8.89%
Amarin CAPS Rating: ****