What happened

Amarin (NASDAQ:AMRN) shares were crashing on Tuesday, plunging 69.8% lower as of 9:55 a.m. The steep decline came after the U.S. District Court for the District of Nevada ruled in favor of generic-drug companies and invalidated Amarin's patent for Vascepa, which is approved by the FDA for treating high triglyceride levels and reducing cardiovascular risk. 

So what

Vascepa is Amarin's only approved drug. The entrance of generic rivals on the market would be a huge blow to the company, which only recently began promoting Vascepa as a treatment for reducing cardiovascular risk.

Man looking at red line chart crashing through the floor

Image source: Getty Images.

The court ruling applies only to the U.S. and not to Amarin's international patents for Vascepa. However, the U.S. is the most lucrative market. The presence of generic competition in the country would significantly reduce Amarin's growth prospects.

Amarin's efforts to market Vascepa have already taken a hit this year because of the coronavirus pandemic. The company announced on March 15 that it was suspending personal visits to physicians for its sales team for two weeks. Several other drugmakers have taken similar actions. 

However, this suspension of face-to-face interactions is only temporary. The patent invalidation for Vascepa, if it stands, will affect Amarin permanently.

Now what

Amarin released a statement that said the company "strongly disagrees with the ruling and will vigorously pursue all available remedies." Those remedies include an appeal of the court's decision. Expect Amarin to also file a preliminary injunction if the FDA approves abbreviated new drug applications (ANDAs) for generic rivals. Thus far, no ANDA has been approved for Vascepa.

The situation for Amarin underscores the enormous risks for small drugmakers with all their eggs in one basket. It's possible that Amarin could prevail in its challenge to the U.S. District Court ruling. In the meantime, though, the biotech stock isn't likely to rebound very much.