Tens of millions of Americans take statins to control their bad cholesterol and lower their risk of cardiovascular events, including stroke and heart attack. If a six-year outcome delivers positive results later this month, they could also wind up taking Vascepa, a pure omega-3 medication manufactured by Amarin (NASDAQ:AMRN). Is Amarin on the cusp of a billon-dollar blockbuster?

In this clip from The Motley Fool's Industry Focus: Healthcare, analyst Kristine Harjes is joined by Motley Fool contributor Todd Campbell to explain why this study is so important to Amarin's future.

A full transcript follows the video.

This video was recorded on Sept. 5, 2018.

Kristine Harjes: Amarin, ticker AMRN, has been steadily climbing since August in anticipation of a boom or bust cardiovascular outcome study of the company's drug, Vascepa, which is a purified fish oil pill that is approved to lower triglyceride levels. Todd, the drug is already approved. Why does this trial make any difference?

Todd Campbell: It's theoretically a huge binary event for Amarin. While Vascepa has been on the market for a number of years, the use of it has been hamstrung because of concerns between doctors of whether or not there's a direct link between reducing triglycerides, fat in the blood, and reducing the likelihood of, say, a stroke, a heart attack, or death, so, a cardiovascular event. This trial sparked a trial that Amarin started six years ago, called Reduce-It. Reduce-It is evaluating whether or not Vascepa can indeed improve outcomes for cardiovascular patients. If the trial is a success, then theoretically, you open up the market to tens of millions of people who are currently on statins yet still have relatively high levels of triglycerides. If it's a failure, then doctors may simply look at it and say, "Yeah, I don't know if I should be using this at all for anyone."

Harjes: Well, especially because you can get pmega-3 over the counter, but the Vascepa is differentiated because it is a unique formulation taken at a fairly high dose that is supposedly purer. So the hope there is that it will actually be demonstrated to be able to have these long-term cardiovascular positive outcomes, or at least lowering the negative outcomes, in a way that has not been proven in any of the other multiple studies about normal old omega-3.

Campbell: Bears will point to study after study after study, failed studies, showing that just taking over-the-counter supplements of omega-3 don't lower your risk of having one of these cardiovascular events. Now, the bull side of the argument would be that omega-3 that you buy over the counter also has other things in them, including something called DHA, which is known to raise bad cholesterol levels. So, theoretically, while omega-3 over the counter can reduce triglycerides, it may also be increasing bad cholesterol, making it a wash effect. That's the bull argument -- when this study reads out, what we'll find out is that very high doses of pure EPA will indeed move the needle on outcomes.

If that is true, then this company thinks that it could have a top-seller on its hands. It's already doing, about $52 million as of Q2 in sales for this drug, up from $45 million last year. They're projecting $230 million in sales. This is without the Reduce-It results. $230 million in sales this year. And they've got enough capacity to be able to serve up to $500 million in sales right out of the gate, if Reduce-It is a success. So, obviously, they're banking on a favorable outcome. But as we've seen time and time again, biotech -- right, Kristine -- there are no guarantees!

Harjes: Yeah, absolutely. This is, as you mentioned earlier, a huge binary event. If it goes well, there's enormous potential here. Currently, the indication is limited to people with severely high triglyceride levels, which is around four million people in the United States. Interestingly, promotion of the drug for patients with simply high TG levels, you're allowed to do that, it's permitted, although it isn't actually an FDA-approved indication. But if this trial is a success, then the FDA might -- keyword "might" -- expand the label to patients that are having trouble controlling their triglyceride levels even after statins. Who knows where they'll draw the line? But, it could potentially open up a 75-million-person market in the United States. Again, that's compared to the current four million. So, even though Vascepa has had moderate success with its sales, it's nowhere near the peak sales estimate of $2 billion if the trial goes well, and all goes according to plan. And this is a company that kind of needs this. Right now, they're losing money. In 2017, they lost $68 million on revenue of $181 [million]. This is a trial that has a lot riding on it.

Campbell: What's interesting in the backstory of that moderate vs. high triglycerides, they ran trials for both, and they showed efficacy in both the people with very high, 500 milligrams per deciliter. They also showed efficacy in the 200-499 milligram. The FDA approved the very high, but they didn't approve the moderate because they felt like, "We need to see cardiovascular outcomes data before we can go ahead and do this." Amarin had to actually sue the FDA for the ability to actually promote it while talking to doctors.

The study that's going on right now that's wrapping up -- data coming out within the next few weeks, people -- that enrolled patients with 200 milligrams and up. So, theoretically, if it lowers cardiovascular events in that 200-milligram patient population, and the FDA signs off on adding that information to the drug's label, then, yeah, you could see this company move pretty quickly to profitability. The reason I say that is that, yes, they're losing money right now, but a lot of those losses are because of, one, preparing for the potential for a positive Reduce-It readout, and two, conducting the Reduce-It trial, which has enrolled thousands of patients and is incredibly expensive. Once all of those expenses disappear, yes, you'll now have to maybe spend a little bit more on commercialization, but you already have a sales team in place. Theoretically, you're just giving them more arrows in their quiver that they can use when talking with doctors.

Harjes: For sure. We've talked a lot about the potential upside for Amarin. What do you think is the downside? How bad would it be if Reduce-It was not a success?

Campbell: Very bad. [laughs] Again, I think this is a binary event. If they don't demonstrate there's the ability to lower cardiovascular events, why prescribe it? If you can't draw the direct link between high triglycerides, lowering them, and then that leading to better outcomes for patients, why make patients take another pill?

Harjes: Yeah, exactly. It's interesting to me, though, that I don't think there's any sort of clear expectation for whether the trial will go one way or the other. You have bulls and you have bears, which means that right now, the price is kind of in between. It does have the potential to move drastically higher or drastically lower. I definitely would not recommend the stock to anybody without a humongous tolerance for risk.

Campbell: I think that is very, very good advice.

Harjes: But it'll be fun for those of us that like to watch biotech news and potentially talk about it on podcasts, as well.

Campbell: Yeah, it could be huge! What it could mean for patients, it could save people's lives. I'm rooting for them to have a success, no question.

Harjes: Of course. And I'm sure it will be covered on Industry Focus as soon as we have the news.

Kristine Harjes has no position in any of the stocks mentioned. Todd Campbell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.