Why Amarin Shares Swam With the Fishes

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 Amarin (NASDAQ: AMRN  ) , a biopharmaceutical company focused on developing therapies to treat cardiovascular diseases, were thumped again, falling as much as 12% after the Food and Drug Administration issued another unfavorable announcement regarding its triglyceride-reducing drug, Vascepa.

So what: Yesterday, following the closing bell, the FDA told Amarin that a change in triglyceride levels would not be enough to merit the approval of a drug meant to lower the risk of cardiovascular problems in select patients. This news comes on the heels of the FDA's advisory panel meeting just two weeks ago that voted overwhelmingly against recommending Vascepa for approval, and suggested the company run a lengthy study on the effect of its drug in terms of reducing heart attacks in patients -- a trial that would likely take two or three years to complete. In addition, FBR Capital initiated coverage on Amarin today with a "market perform" rating and a price target of just $2, nearly 5% below yesterday's closing price.

Now what: Things just keep going from bad to worse for Amarin. It doesn't look like there's any way for Amarin to expand Vascepa's indications without running this lengthy heart attack efficacy study. What this means for Amarin is ongoing losses in the meantime for two reasons -- because its current indication for extremely high triglyceride level patients isn't going to get the company anywhere near profitability, and the likelihood that it'll need to raise cash to run the additional trial. My best guess is that it has enough cash to operate through the end of 2014, but that's it unless it gets some fresh capital. I would certainly like to see the light at the end of this tunnel, but the FDA has practically cut off any of Amarin's possible catalysts for the next couple of years.

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