In early November, fish oil drug maker Amarin (AMRN) presented data called REDUCE-IT at the American Heart Association scientific sessions for a medication called Vascepa. The presentation made a splash. Doctors overwhelmingly said they would prescribe it, but some others suggested the results were over-exaggerated. Then, in December, the European Medicines Agency deemed Omega-3 fatty acids (a major component of fish oil) to be ineffective in helping those with cardiac issues, which negatively affected AMRN, even though the drug is not even available in Europe.
All the news and drama aside, Jefferies’ analyst Michael Yee says AMRN is one of the few “de-risked” standalone blockbuster drugs in the small to mid-sized market. The analyst reiterates a Buy rating with a price target of $30, showing a 56% potential upside. (To watch Yee’s track record, click here)
Yee explains that AMRN represents one of few wholly-owned, global company with multi-billion dollar potential products, which already has an FDA approval for its drug: “Given pullback from highs of $23 and down to $15 as broader equity markets fall, we think AMRN will bounce and go back up on 2019 catalyst path from scripts and sales ramp to FDA approval and/or wild-card M&A takeout…the more de-risked nature also theoretically gives less downside in volatile markets,” the analyst explains.
However, Yee does examine the bear case. “That said, from Street perspective we acknowledge significant debate from various investor discussions, but creating opportunity over 2019-20 from current $15, financing overhang removed, etc. Bears think Q4 and ’19 consensus too high, no takeout until patent settlements, risk around FDA review/delay/approval issues, new uncertainty around EMA view of fish oils (EMA might pull old inferior Omacor/Lovaza from EU market in Q1) and ultimately AZN competitor readout in 2020 and these pot’l impacts to M&A. We think consensus a little unclear (possibly stale) and may need to sort out but much of Street seems to understand this and fundamentally, scripts keep going up (see inside) as new 400-person salesforce already has called 25k docs and gearing up for 2019 […],” Yee explains.
Yee also gives some insight as to what he sees coming up on the horizon for this company– which is a pre-announcement of the fourth-quarter revenues along with 2019 opex, an FDA filing in the first quarter and an update on new manufacturer contracts extending capacity beyond the current $1 billion (just to name a few).
How does Yee’s bullish bet measure up against the word of the Street? Quite on point, it seems, considering TipRanks analytics exhibit AMRN as a Strong Buy. Out of 5 analysts polled in the last 3 months, all 5 are bullish on Amarin stock. With a return potential of over 160%, the stock’s consensus target price stands at $34.80. (See AMRN’s price targets and analyst ratings on TipRanks)