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Will the FDA Approve Amarin's AMR101?

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If you gave me an even-money bet on whether the Food and Drug Administration will approve Amarin's (Nasdaq: AMRN  ) AMR101, I'd take that bet without batting an eye.

But the stock market isn't an even-money bet. There's no possible way that Amarin's shares will double on an approval of AMR101. Depending on where it closes before the decision is handed down, we could see little to no jump in the share price because nearly everyone expects an approval to happen.

Efficacy and safety are about as clean as you can get. AMR101 passed two phase 3 clinical trials, and the FDA didn't even bother to hold an advisory committee meeting to query its outside experts about the data.

The only thing that could derail AMR101 right now is probably a manufacturing issue -- either how it's made, or how Amarin tests the drug's purity. With manufacturing being a black box for investors, it's impossible to know the likelihood of a rejection. Best guess is that there's a small chance of a rejection -- less than 10% -- and if manufacturing is an issue, hopefully it can be cleared up fairly easily.

If an approval isn't going to get Amarin's stock zooming higher, then what does Amarin need to do to get investors excited? Getting bought out for a substantial premium would be a good start. And finish.

AMR101, which reduces triglyceride levels, would complement cholesterol drugs well; AstraZeneca (NYSE: AZN  ) and Merck (NYSE: MRK  ) would both be a good fit. There were rumors that Pfizer (NYSE: PFE  ) was working on a marketing deal, but that would have made more sense before Lipitor went off patent. Now I don't see the fit except that Pfizer is a marketing machine and Amarin needs one.

The question of AMR101's exclusivity, the time it can market the drug before the launch of a generic drug, is likely the deciding factor on the acquisition price for Amarin or how much upfront cash a licensing partner will be willing to put up. Getting AMR101 designated as a new chemical entity, which would give Amarin a guarantee of five-year exclusivity, would be nice, but ultimately it'll be the patents that will determine how long Amarin or its partner/acquirer can sell the drug.

First, let's see an approval, and then we can worry about that.

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Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Pfizer. The Motley Fool has a disclosure policy.
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  • Report this Comment On July 25, 2012, at 4:38 PM, yazzbro wrote:

    I agree that the approval is already priced in. It is the NCE status and a buyout scenario that is what investors are waiting to hear.(889 patent info would be good to.) Tomorrow though I think there is more info coming out than just the approval. It wouldn't shock me to see NCE status addressed and buyout info. Remember the price really popped after positive phase 3 trials and that was more because of buyout rumors than the phase 3 results. So, tomorrow you should see a pop of a $1 or so on approval news alone. But any info like NCE, Expanded label or buyout will see shares fly into the $20's. Cheers.

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