Every time a door shuts, another window of opportunity opens, the old saying sort of goes. At least that is how one analyst currently sees the situation for Amarin (AMRN), the maker of high triglycerides treatment, Vascepa.
The biotech was assaulted last week on two fronts. First, the company lost a patent trial against two generic drug makers seeking to sell their own versions of Vascepa. The negative verdict was swiftly followed by a massive sell-off, sending the stock tumbling by 70% in one trading session.
But all hope is not lost yet, says Cowen’s Ken Cacciatore. The verdict against Amarin pertains only to the US market, which now means the international market, and predominantly Europe, are where Vascepa’s commercial opportunities lie. The marketing authorization application for Vascepa is expected to be decided by the European Marketing Agency (EMA) in 4Q20.
With this in mind, Cacciatore thinks there is only one way to go: “With the European commercial decision approaching – and given our belief in the size & durability of the EU opportunity which could reach $1.5-2B and is protected to 2033 – we believe a sale (not a license) makes most sense. And to ensure that the optionality of a potential U.S. patent appeal reversal is retained, we believe a CVR could realize that value. A sale & CVR simply makes the most sense.”
A CVR occurs when one company acquires another and gives existing shareholders certain benefits in proportion to the number of shares they already own. In this case, because there is still the possibility the verdict can be overturned in the US and lead to “potential significant value,” such a scenario properly protects shareholders.
Warming to the theme, Cacciatore adds another argument for a CVR: “A potential global commercial player would not only have the infrastructure to commercialize in Europe, but they could also quickly leverage Vascepa in the U.S. over the remaining 12 months before the appeal is decided.”
“The bottom-line,” Cacciatore concludes, is that the current trading level still provides an “exceptionally compelling opportunity.” As a results, Cacciatore reiterates an Outperform rating on Amarin shares alongside an $8.00 price target, which implies about 60% from current levels. (To watch Cacciatore’s track record, click here)
Overall, Wall Street is torn between the bullish camp and the analysts who opt to hedge their bets on the drug maker. Based on 11 analysts tracked in the last 3 months, 6 rate Amarin stock a Buy, while 5 say Hold. That said, at $21.14, the average price target puts the upside potential at 329%. (See Amarin stock analysis on TipRanks)
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