Amarin (AMRN -4.65%) can't seem to catch a break these days. Despite strong first-quarter results before the opening bell on Wednesday, the biopharma's shares nosedived by an unsightly 6.31% yesterday. Amarin's stock has now lost nearly 13% of its value over the past month. 

Did Amarin's first-quarter update contain a hidden bombshell that can explain this high single-digit drop in its share price? Fortunately, the answer to this critical question is a resounding no.

A business woman sitting at a desk shrugging her shoulders.

Image source: Getty Images.

As a matter of fact, Amarin is doing better than ever as a commercial entity. New prescriptions for the company's fish oil pill Vascepa jumped by an eye-popping 80% year over year in the first quarter, causing the company's quarterly revenue to rise by an astonishing 67% to $73.3 million for the three-month period. So, to understand this sharp sell-off, we need to dig a bit deeper.

A vortex of headwinds

There are four clear culprits behind Amarin's recent struggles. First and foremost, biopharma stocks have begun to pullback in a big way over the last month due to the political rhetoric surrounding drug prices in the United States. And as the presidential election ramps up, this hot-button issue is certain to weigh on biopharma equities like a ton of bricks. Amarin, unfortunately, probably won't get a pass in regards to this pricing controversy -- despite Vascepa being fairly cheap for a branded medication. 

The second issue is the uncertainty surrounding Vascepa's Reduce-It indication. The company filed for the drug's supplemental new drug application for this high-value indication at the end of March. Assuming a normal review cycle, Vascepa's proposed label expansion should occur sometime early next year. That being said, the Food and Drug Administration is an unpredictable entity when it comes to regulatory reviews, and the agency does have a contentious history with Vascepa. So even though a rejection is unlikely in this case, it is also not outside the realm of possibility. 

The third big headwind facing Amarin is the fact that its shares have gained almost 600% since the company reported positive top-line data for the Reduce-It trial only a few months ago. Its shares are thus trading in nosebleed territory based on Vascepa's present sales trajectory (with a price-to-sales ratio of 25.2). 

The fourth factor is the negative impact of short-sellers. An unfavorable political landscape, a pending regulatory review, and a blistering run fueled by a late-stage win have acted in concert to give short-sellers plenty of ammunition. Amarin's short interest has, in fact, ballooned in the past 12 months.

AMRN Chart

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Bottom line

Amarin probably won't deliver market-beating returns anytime soon. The crux of the matter is that the company needs to officially secure Vascepa's Reduce-It indication and subsequently prove that this prescription fish oil pill can indeed generate megablockbuster-level sales. Until then, Amarin's short interest seems destined to climb even higher. 

The bright side is that Amarin could turn out to be a dirt cheap growth play at these levels. After all, Vascepa has the very real potential to evolve into one of the best-selling medications by the middle of the next decade, giving the company a healthy revenue stream with which to create additional shareholder value. There's also a strong possibility that a big pharma or blue chip biotech will simply acquire Amarin at a significant premium following Vascepa's label expansion.   

All in all, Amarin's long-term investing thesis remains perfectly intact following these latest quarterly results -- despite the biopharma's sinking share price. Short-sellers are simply taking advantage of the uneven playing field to make a quick profit, a trend that's likely to continue until Vascepa has definitively proven the naysayers wrong.