What happened
Amarin (AMRN 2.03%), a small-cap cardiovascular care company, saw its shares dip by as much as 15% during the first four days of trading this week, according to data provided by S&P Global Market Intelligence. The drugmaker's stock has rebounded to some degree since hitting this intra-week low, but its shares were still down by a hefty 6.2% as of Thursday's closing bell.
The good news is that Amarin's stock didn't fall in response to a company-specific event. Rather, the biotech's shares have simply followed the broader pharmaceutical space downward this week. Underscoring this point, the bellwether SPDR S&P Biotech ETF has dropped by an unsightly 14.9% over the prior four trading sessions. Since the start of the fourth quarter of 2021, capital has been steadily flowing out of small- to mid-cap growth stocks due to the Federal Reserve's plan to raise interest rates multiple times over the course of 2022.
Image source: Getty Images.
So what
One positive development for shareholders of this beaten-down pharma stock is the news that the activist investing firm, Sarissa Capital Management, has apparently been gobbling up shares at a breakneck pace this year. As a result of these recent transactions, Sarissa is now Amarin's largest shareholder.
Why is Sarissa's aggressive buying of Amarin's stock noteworthy? Sarissa is headed up by the noted activist investor Alex Denner, who has a long history of getting involved with underperforming biopharmas and subsequently leading them to the negotiating table. In 2017, for example, Denner reportedly played a critical role in the takeover of Ariad Pharmaceuticals by Takeda Pharmaceutical.
Now what
Amarin, for its part, definitely qualifies as an underperforming biopharma. Thanks to COVID-19 and generic competition for its cardiovascular drug Vascepa in the U.S., Amarin's stock is presently trading at less than three times forward-looking sales. So, if history is any guide, Denner will probably figure out a way to get Amarin acquired at a rich premium. A buyout isn't guaranteed of course. But a takeover does appear far more likely in light of Sarissa's outsize ownership stake.
