My family's portfolios are filled with internet retailers that are skyrocketing, Software-as-a-Service stocks that are soaring, and one vaccine biotech that has jumped 2,000%. It's my first year writing for The Motley Fool, and simultaneously the best year of my 20-year investing career. But I've had some screw-ups, too.

In one article, I advocated that investors buy shares of Luckin Coffee. The next day the company said its revenue reports were fraudulent. But perhaps my biggest failure was with Amarin (NASDAQ:AMRN). I suggested on multiple occasions that investors might want to buy shares of the Irish biotech because of the company's amazing drug, Vascepa. In March a trial judge in Nevada invalidated several of the  drug's patents. Amarin's stock dropped 70% overnight. Ouch.

Man with head on desk as stock chart goes negative.

Image source: Getty Images.

I haven't bought any more shares of Amarin. To me, this market reaction was completely justified, given what happened in court. And yet, now that I have had some time to think about it, I'm seeing a bullish case for Amarin (particularly at these prices).

Amarin can lose its patent fight over Vascepa and still win the prescription war

Why did Wall Street whack Amarin? The stock market is very familiar with the "patent cliff" and how pharmaceutical stocks in particular can get killed when drugs go off-patent. So, for instance, when Pfizer lost its patent protection for Lipitor, billions of dollars in revenue evaporated.

The stock market assumes a similar fate awaits Amarin. But this is a strange situation. Unlike Pfizer, Amarin has not had the opportunity to build up the market for its drug. The U.S. Food and Drug Administration (FDA) only recently allowed the company to expand its label. At the time Amarin, and many of its shareholders, saw a huge blockbuster opportunity with Vascepa. But that market has to be built. Doctors have to be educated. Amarin is the entity that will pay for all that. If this Irish biotech abandons the American market, nobody will be in hospitals advocating for Vascepa.

Are the generic companies involved in the lawsuit, Dr. Reddy's Laboratories (NYSE:RDY) and Hikma Pharmaceuticals (OTC:HKMP.Y), going to educate doctors about the wonders of icosapent ethyl (the generic version of Vascepa)? No. Building up consumer demand is not what generic drug companies do. 

Aside from that, these companies are actually barred from trying to market their drugs as beneficial to heart health.

Compare the FDA labels

Back in May, Hikma got FDA approval for its Vascepa generic. The company's label for the drug says that "icosapent ethyl is indicated as an adjunct to diet to reduce triglyceride levels in adult patients with severe hypertriglyceridemia."    

That was the original label for Vascepa, more or less. Which isn't surprising, because the patents that were invalidated are in regard to selling Vascepa to people who have very high triglyceride levels. That's a tiny market opportunity, which is why Amarin spent many years -- and a lot of money -- paying for a clinical trial to prove that Vascepa is beneficial for heart health.

So for a generic company like Hikma to make a lot of money with icosapent ethyl, the company would have to hope that doctors are prescribing Hikma's drug off-label. Doctors can do that, of course, it's not illegal. But why would a doctor prescribe an off-label generic when you have an inexpensive drug, Vascepa, that is FDA-approved for improving heart health?

Here's Amarin's new label: "The U.S. Food and Drug Administration [has] approved the use of Vascepa (icosapent ethyl) as an adjunctive (secondary) therapy to reduce the risk of cardiovascular events among adults with elevated triglyceride levels (a type of fat in the blood) of 150 milligrams per deciliter or higher."

The Amarin label is way better than the Hikma label. Vascepa reduces the risk of cardiovascular events in a broad class of people. Hikma's label reduces triglycerides in a tiny number of people. 

Why should investors be bullish about Amarin?

It's really bad news for Amarin (or any pharmaceutical company) when a drug is not approved by the FDA, either because it's unsafe or because it doesn't work. That's the classic bad news for a drug company. It can and will crash your stock. 

The invalidation of several patents says nothing about the efficacy or safety of a drug. It's bad news, but a different kind of bad news.

Patents are important because they give you intellectual property rights, meaning you can sue people and shut down all those other companies that are trying to steal your revenue. Invalidating a few of Amarin's patents did open the door to competition. But these generic companies are forbidden from marketing their drugs as improving heart health, whereas Amarin's patents in that area are still strong.

That's not the only disadvantage for the generics. In a recent earnings call, Amarin CEO John Thero noted that while generic companies might have the supply capacity "to support tens of millions of dollars in revenue," that amount was "only a small portion" of what Vascepa -- and Amarin -- could eventually do.

Don't forget Europe!

Of course, the big news for Amarin next year will be the approval for Vascepa in Europe. The company has already filed its Marketing Authorization Application (MAA) with the European Medicines Agency and the European Commission. If accepted, Amarin will be free to market Vascepa across Europe as reducing cardiovascular risk for appropriate patients.

There are more than 80 million people in Europe with cardiovascular disease, so this opportunity is massive. And while the U.S. market opportunity is a lot murkier than it was, the claim that generic companies will seize most of this market seems questionable at best. Interested healthcare investors may find Amarin an intriguing buy at these prices.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.