Trading in shares of Amarin (AMRN 0.74%) was halted on Friday when the stock started to take off in anticipation of good news from the U.S. Food and Drug Administration. Later in the day, the FDA provided an early holiday present to Amarin investors: the revised label the company had been seeking was approved.

The Nasdaq's trading halt was finally released after the market closed. The exchange wanted investors to calm down and not get too excited about its drug's newly expanded label. It's easy to see why investors are so enthused. The stock has run up from $3 per share in September 2018 to $24 per share on Friday.

Optimists are already forecasting a future price of $50 per share for Amarin. Indeed, according to FiercePharma, market chatter is now valuing the company at a $20 billion market cap, or $55 a share, if the company is acquired. If that happens, it would be a nearly 19-bagger for early Amarin investors in a little more than a year.

A dollar bill folded into the shape of an upward-pointing arrow.

Image Source: Getty Images.

What does the new label say?

It was widely expected that the FDA would allow Amarin to start marketing its drug to a much wider class of patients, and on Friday, the FDA delivered: "FDA approves use of drug to reduce risk of cardiovascular events in certain patient groups." The specific risks that are reduced by Vascepa include heart attacks (31% reduction), strokes (28% reduction), and death (20% reduction), according to the company's phase 3 study.

Amarin's original label for the fish oil-derived pill said nothing about all these health benefits. The original label was only allowed to claim that Vascepa reduced triglycerides in people with very high triglycerides (more than 500 milligrams per deciliter). That's a small percentage of people.

The company wanted to expand the label to treat anybody with elevated levels of triglycerides (one-fourth of adult Americans have elevated triglycerides). And, more importantly, the company wanted the label to say that Vascepa reduced MACE (major adverse cardiovascular events) in this group. On Friday, Amarin won the day.

From the FDA's new label:

VASCEPA is an ethyl ester of eicosapentaenoic acid (EPA) indicated:

  • as an adjunct to maximally tolerated statin therapy to reduce the risk of myocardial infarction, stroke, coronary revascularization, and unstable angina requiring hospitalization in adult patients with elevated triglyceride (TG) levels (≥ 150 mg/dL) and
  • established cardiovascular disease 
  • diabetes mellitus and 2 or more additional risk factors for cardiovascular disease.

More than 50 million people have elevated triglycerides in the U.S. alone. Out of this group, Vascepa is indicated for the 30 million people who have diabetes and two or more additional risk factors for cardiovascular disease. And what are those risk factors? This includes people who smoke, don't exercise, have high blood pressure, have a family history of heart disease, or are obese. In short, the number of people who might be prescribed Vascepa is very high -- in the tens of millions just in this country.

Patients who are prescribed Vascepa will take four grams a day, according to the label. The drug currently sells for approximately $380 a month, or roughly $4,560 a year. A quick back-of-the-envelope calculation says that if Vascepa is prescribed to 10 million patients at current prices, it's a $45 billion drug. If the drug is prescribed to 10% of this group, it's a $4.5 billion drug. Again, this is just in the U.S. alone.

Let's hope the company is not acquired

Not surprisingly, big pharma is very interested in acquiring Amarin. Among its suitors are Pfizer, Amgen, Gilead Sciences, and Novartis. Anticipation is high because this drug could catalyze a bidding war.

One drug can be huge for a pharmaceutical company. Consider AbbVie, for instance. It's a $120 billion mega-cap that trades for four times its revenues. The company has $32 billion in annual sales. Most of those revenues come from one drug, Humira, which treats arthritis. This is the best-selling drug in the U.S., accounting for about $20 billion in sales annually.

Why is this relevant to Amarin? The number of people with arthritis in the U.S. is a little more than 50 million. That's roughly equivalent to the number of people who have elevated triglycerides. It's a huge market, in other words.

Can the much smaller Amarin achieve similar numbers with Vascepa? Maybe. Certainly, the opportunity is there; $20 billion in annual sales is within the realm of possibility. Of course, there is a big difference in company size and how big of a salesforce the company can put together. Also, Amarin has never sold drugs before and will have to build up its company to achieve that sort of global sales dominance.

It would certainly be easier -- and quicker -- for the small company to sell out to big pharma. Most investors would cheer for a $20 billion buyout. It's a sizable increase and a quick double.

Yet that $20 billion number is tiny compared to the market opportunity. After all, some published reports estimate Vascepa sales will max out at $2 billion a year. That's a lowball number, maybe by a factor of 10.

It might be best for the company to stay independent for a while and see how fast sales growth ramps up. Amarin has always had its share of doubters. Maybe the company still needs to prove just how big this drug can be.