What happened
Shares of the cardiovascular disease specialist Amarin (AMRN 0.07%) lost approximately a quarter of their value during the month of November, according to data from S&P Global Market Intelligence. The silver lining is that the biotech's shares didn't crater in response to a negative material event.
Rather, Amarin's stock appears to have simply followed the broader biotech space downward last month. Biotech stocks fell across the board in November due to the emergence of the omicron variant, a recent spike in core inflation in the U.S., and presumably, a wave of tax-loss harvesting.
Image source: Getty Images.
So what
Amarin's shares, in particular, were probably a victim of year-end tax-loss selling last month. After all, the biopharma's shares have been locked into a long-winded downward trend ever since a District Court in Nevada invalidated the key patents protecting its cardiovascular disease drug Vascepa from generic competition in the United States.
Amarin's stock, in fact, has fallen by over 70% since this adverse patent ruling on March 30, 2020. The biopharma's shares have been unable to mount a comeback this year because the U.S. Court of Appeals for the Federal Circuit shut the door on a possible reversal by upholding this controversial decision.
The good news is that generics haven't totally routed Vascepa's market share in the United States. Keeping with this theme, Amarin recently reported that Vascepa has maintained a roughly 87% share of the market this year, despite the introduction of multiple generic competitors.
Now what
Is Amarin's stock worth picking up on this latest pullback? Amarin may indeed be a worthwhile value play. Vascepa's commercial opportunity outside of the U.S. still stands at over $1 billion in annual sales. The drug also seems more than capable of sustaining $400 million or so in annual sales in the United States over the long term.
The market thus appears to be assigning Amarin's stock a valuation that is slightly below Vascepa's peak sales right now. This rock bottom valuation is especially intriguing in light of the fact that the company is on the hunt for fresh assets to diversify its core business. Now, Amarin doesn't have all that much firepower to wheel and deal. But the biopharma should be able to reel in something interesting for a few hundred million, plus a share of future royalties.
In short, Amarin's stock could be close to a bottom here, especially if the company can successfully branch out beyond Vascepa through either a bolt-on acquisition or a promising licensing deal.
