What happened
Amarin (AMRN -0.95%) stock gained 28.6% in January, according to data from from S&P Global Market Intelligence. For context, the the S&P 500 returned 8% last month.
Last year, the Irish biotech company's stock was on fire, gaining a whopping 239%. The S&P 500, including dividends, lost 4.4% in 2018.
Image source: Getty Images.
So what
Amarin stock probably got a tailwind last month from robust market conditions, but we can largely attribute its strong January performance to two company-specific catalysts. The first was the company's optimistic presentation at the J.P. Morgan Healthcare conference which caused shares to spike 8.1% higher on Jan. 9.
A day later, the stock came back for an encore, soaring 22.1% on market chatter about a potential buyout. StreetInsider wrote that pharmaceutical giant Pfizer is interested in making a bid for Amarin to gain possession of Vascepa, Amarin's omega-3 fatty-acid drug derived from fish oil.
Data by YCharts.
This type of buzz is nothing new. Since late September when Amarin released robust results of its Reduce-It cardiovascular outcomes study of Vascepa, there's been chatter that the midcap biotech could be an acquisition target for a large pharmaceutical or biotech company involved in the cardiovascular drug market. It was the release of these results that fueled Amarin's stock powerful rise last year.
As I previously wrote, "The study showed that Vascepa (which received Food and Drug Administration approval in 2016 as a treatment for high triglyceride levels) reduced the risk of major adverse cardiovascular events by 25% in patients already taking statin drugs compared to those receiving a placebo, which is a highly statistically significant result." Armed with this strong trial result, Amarin plans to submit an application to the FDA by the end of March to expand Vascepa's label to include patients similar to those in the Reduce-It study.
The case for the label expansion isn't a slam-dunk. The reason some market participants are betting against the stock -- or "selling it short" -- is centered on the fact that mineral oil was used in the study as the placebo. In November, when Amarin presented Reduce-It's full results at the American Heart Association meeting, it was revealed that the placebo group showed a not insignificant rise in LDL (or "bad cholesterol") levels. The potential implication is that the mineral oil wasn't acting as a true placebo in the study. So there appears to be a possibility -- how large is the million-dollar question -- that the FDA could deny Amarin a label expansion, which would probably mean the company would have to redo the study, with another substance acting as the placebo.
Check out the latest Amarin earnings call transcript.
Now what
As I've previously written: "Investors should evaluate Amarin on its own merits when making an investment decision. It's not a good idea to buy any stock based mainly or solely on buyout rumors, as the stock's bid-up share price could decline if such speculation doesn't come to fruition."
