What happened
Shares of Amarin (AMRN 1.60%), a mid-cap drugmaker, dropped by 13.4% last month, according to data from S&P Global Market Intelligence. Shares took a beating in January for two reasons:
First, Amarin has long been rumored to be a top buyout candidate. A worthwhile tender offer has yet to materialize, however. As a result, investors looking for a quick buck on a high-priced buyout appear to be moving on to greener pastures.
Second, nearly all biotech stocks took a sizable downturn toward the tail end of January due to the growing concerns over the Wuhan coronavirus. The core reason is that this emerging viral pandemic is now expected to have a profound effect on the global economy in 2020.
Image source: Getty Images.
So what
With U.S. investors seemingly losing their appetite for risky pharma stocks last month and a buyout off the table for the moment, Amarin's sharp decline in January isn't altogether surprising. Before this sell-off, after all, the drugmaker's shares were trading at one of the richest premiums in the entire healthcare sector.
The good news is that Amarin's valuation is now in bargain territory. The biopharma's shares, in fact, are currently trading at around three times the low-end peak sales estimate for its prescription omega-3 treatment Vascepa.
Now what
Is Amarin stock a strong buy right now? While it still has its fair share of critics, Vascepa has no equal in the marketplace. So, given the sheer size of Vascepa's newly expanded label, there's no good reason to believe that Amarin won't eventually return to its winning ways. Bargain hunters, in kind, may want to scoop up some shares on the heels of this double-digit pullback.
