Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: A week after announcing a marketing deal for its fish-oil drug Vascepa with a Chinese distributor, investors decided that Amarin Corporation plc (AMRN) has run a bit too far, too fast. After more than doubling so far this year, shares in the company tumbled more than 15% earlier today.
So what: Investors' pessimism exiting 2014 has turned to optimism in 2015 on hopes that lackluster sales for its triglyceride lowering drug Vascepa can turn a corner.
Following news that the FDA had tabled a potential label expansion for Vascepa in October 2013 that would have significantly enlarged its addressable patient population, shares in Amarin had collapsed from $6 to less than $1 exiting 2014.
Sales of Vascepa climbed 17% quarter-over-quarter to $16.5 million in the fourth quarter, bringing full year sales to $54.2 million, up 105% from 2013. Importantly, the company's cost-cutting helped reduce its year-over-year losses too. SG&A dropped by $44.5 million last year, leading to a drop in net cash used in operating activities from $190 million in 2013 to $72.3 million in 2014.
Investors have also cheered news that the company had locked up an important deal with Eddingpharm ltd to develop and commercialize Vascepa in China. As part of that agreement, Amarin got a $15 million upfront payment and could eventually earn an additional $154 million in milestone payments, plus royalties.
Now what: Clearly, Amarin has had a remarkable move, but investors may want to pause before jumping in and using today's drop to buy. Although Vascepa's sales are growing, they're limited by the narrow label for use in hypertriglyceridemia, a rare form of high triglyceride levels. Amarin is also hamstrung by high expenses tied to the ongoing REDUCE-IT trial that it's conducting to eventually try to win that important label expansion. As a result, while the company's expenses have fallen, it's still burning through cash. For that reason, while things have been going Amarin's way so far this year, I'm content to keep watching this one from the sidelines.