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What happened

Amarin Corp.'s (AMRN -3.37%) stock gained more than 70% last year, according to data from S&P Global Market Intelligence.

AMRN Chart

AMRN data by YCharts

The biotech's stock got a major lift from the surging sales of its highly refined fish oil pill Vascepa. Digging into the details, Vascepa's annual net sales are forecast to exceed $125 million for 2016 when the final numbers are released next month. If that line holds, Amarin's total net product revenues will have grown by more than 50% over the last twelve months. 

So what

The quickening tempo of Vascepa's commercial uptake in 2016 presumably reflects Amarin's legal settlement with the FDA last March, which cleared the way for the company to promote Vascepa off-label to a much larger patient population (individuals with only moderately high triglyceride levels) than it's officially approved for (individuals with very high triglyceride levels). 

Now what

Although Amarin's expecting Vascepa's sales to climb by another 25% to 32% in 2017, the real story to keep track of is the progress of the drug's ongoing cardiovascular outcomes trial REDUCE-IT. REDUCE-IT has now entered its final year of data collection and is on track to potentially hit a stopping point in the third-quarter of this year. At the latest, investors will know the final outcome in early 2018. 

If positive, this landmark study could open the commercial floodgates for Vascepa by allowing it to be prescribed broadly to patients on statin therapy, but who continue to have problems controlling their "bad" cholesterol levels. Amarin estimates that tens of millions of Americans fit that description, implying that Vascepa is only scratching the surface of its commercial potential at present.  

Before investors get ahead of themselves, though, it's important to keep in mind that clinical studies are always a high-risk event. And that's particularly true for a small-cap company like Amarin, which is counting on REDUCE-IT to transform Vascepa into a franchise-level drug.