Amarin (NASDAQ:AMRN) popped more than 10% on Thursday on seemingly no news.
As best I can tell, investors were jumping in ahead of the potential that Amarin's lipid-lowering drug Vascepa will be given five years of exclusivity through new chemical entity status. The Food and Drug Administration updates the Orange Book, which lists exclusivities, on the Friday of the second full week of the month, which is today.
It's pretty common for binary events to attract last-minute buyers. NuPathe (UNKNOWN:PATH.DL) was up 15% yesterday as investors anticipated an approval of the biotech's migraine patch Zecuity. The positive news came after hours.
Some will claim that the price spikes indicate that the positive news was leaked. I'm a little more skeptical, figuring day traders are just waiting until the last minute to jump in. If they invested a week or a month early, they wouldn't be day traders, now would they?
Might Amarin gain NCE status this month? I certainly hope so, but it didn't during the updates in August, September, October, November, or December. I'm not sure why investors think it'll come in January.
Is NCE status for Vascepa worth $130 million, the value that Amarin went up yesterday? Let's hope not. Amarin's best case scenario is that the NCE status is completely worthless.
Let me explain. The NCE status gives new chemicals five years of exclusivity. The debate over whether Vascepa deserves it is because the drug is basically a purified version of GlaxoSmithKline's (NYSE:GSK) fish oil Lovaza.
But that NCE status runs concurrent to patents. If patents extend beyond the five years, which is often the case, the NCE exclusivity is essentially useless. If Amarin's claims of patents on Vascepa through 2030 hold up in court, the NCE status won't be worth much.
Where the NCE status might be useful is in securing a partner or an acquirer. The company has been looking for a suitor since Vascepa was approved back in July, probably longer. One theory, which seems reasonable to me, is that Amarin's management and potential acquirers -- Merck (NYSE:MRK), AstraZeneca, and Teva Pharmaceuticals (NYSE:TEVA) have been floated as potential acquirers -- can't agree on a price because valuing patent litigation risk is difficult. A decision on the NCE status would clear up that unknown, although it's no guarantee that a deal will eventually get done.
Nevertheless, let's hope a decision one way or the other is made today.
Fool contributor Brian Orelli has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.