Amarin (NASDAQ:AMRN) is in a holding pattern. As promised, the company submitted the supplemental New Drug Application for its prescription fish oil pill, Vascepa, last month, but its shares failed to respond to this news. In fact, the biopharma's stock has essentially trended in line with the broader pharmaceutical space since this key event took place on March 28

Why is Amarin's stock in the doldrums? Despite the megablockbuster opportunity presented by Vascepa's Reduce-It indication as an add-on to statin therapy in patients with elevated cardiovascular risk, there are a handful of outstanding issues that might not sit well with regulators at the Food and Drug Administration. And until this key regulatory risk dissipates, Amarin's shares will probably have trouble pushing higher. 

A man wearing a blue shirt clutching at his chest.

Image source: Getty Images.

Given this ongoing tug-of-war between bulls and bears, it's arguably a perfect time to consider whether this battleground stock is worth buying -- or perhaps avoiding -- ahead of this landmark regulatory event. Let's break down both sides of the argument to find out.  

The bear case

Reduce-It stands out as being one of the only studies to support the notion that omega-3 supplementation significantly reduces the risk of adverse outcomes, such as cardiovascular death, nonfatal myocardial infarction, and/or nonfatal stroke.

Skeptics, however, have advanced the idea that Reduce-It's reported 25% relative risk reduction of cardiovascular events was amplified by the study's use of mineral oil as a placebo. In brief, the placebo arm of the study showed a noticeable increase in LDL levels (that's bad cholesterol) over the study period, which might have caused a concomitant increase in serious cardiovascular events among patients receiving the placebo.

Amarin, for its part, has argued that this mineral oil issue is a red herring. To drive this point home, a more detailed analysis of the data revealed a similar rate of cardiovascular events across patients on placebo regardless of their LDL levels over the course of the study period. In short, Amarin believes that this 25% relative risk reduction in cardiovascular events cannot be attributed to a rise in LDL levels in the placebo arm. 

Next up, Vascepa's purported cardioprotective mechanism is a huge mystery following the Reduce-It readout. While Vascepa is designed to lower triglycerides, patients in this study reportedly benefited from treatment irrespective of their triglyceride levels. Amarin has tried to explain this counterintuitive finding by noting that Vascepa improves a host of cardiovascular parameters, not just triglycerides. 

Finally, Vascepa did produce a minor safety signal in Reduce-It. Patients in the Vascepa-plus-statin arm exhibited an increase in atrial fibrillation compared with the placebo wing of the study. Amarin's medical experts later downplayed this concern by pointing out that the numbers weren't high enough to be a cause for concern. 

What this all boils down to is that the FDA will probably hold an advisory committee to adjudicate these issues before making a formal decision on Vascepa's proposed label expansion. That's not necessarily a bad thing, but it is one more hoop Amarin will have to pass through. 

The bull case

The bull case for Amarin is quite simple. With Reduce-It's label expansion in hand, Vascepa's sales should grow exponentially from this point forward. Wall Street thinks the drug will do at least $2 billion per year at peak, but the company has laid out a solid case for a much larger figure.

Point blank: Vascepa might one day generate sales of over $10 billion per year. That estimate may sound far-fetched at first, but the fact is that the obesity epidemic continues to drive a sharp increase in cardiovascular deaths worldwide. The bottom line is that Vascepa's Reduce-It indication would unlock a multibillion-dollar-a-year marketplace -- one that continues to grow larger with every passing year. 

This staggeringly large commercial opportunity will also probably attract a healthy number of suitors to Amarin's doorstep within the coming months. After all, Vascepa has the potential to be a one-of-a-kind cardiovascular treatment. That's the kind of high-end revenue stream that tends to draw big pharma and blue-chip biotechs to the bargaining table.  

Verdict 

Regulatory reviews are always unpredictable. Drugs with seemingly rock-solid late-stage data have been outright rejected in the past, while therapies with questionable efficacy and safety profiles have breezed past the FDA. That's the background against which investors need to play their proverbial cards when it comes to Vascepa's upcoming regulatory review. In short, the stock's sudden slowdown, after a blistering ride over the past few months, is arguably justified in light of the regulatory risk involved.

However, the bulls do have a rather compelling case. The FDA has become more lenient in recent years, so it's hard to imagine regulators will reject Vascepa's proposed label expansion for any of the issues outlined here. Moreover, the mineral oil placebo might have had a role in ramping up Vascepa's perceived cardiovascular benefit, but this singular factor simply can't explain away all of Reduce-It's impressive top-line results. So barring an unforeseen or undisclosed piece of the puzzle, Vascepa should get an OK from the FDA for its Reduce-It indication. 

Is Amarin a buy? Although a rejection is still a possibility, the odds arguably favor Vascepa based on all the available information today. Aggressive investors, in kind, might want to take advantage of this quiet period to start to build a position ahead of Vascepa's next major catalyst. This battleground biotech stock, after all, could explode higher on a positive regulatory decision slated for early next year.