Amarin Corporation (AMRN): All Eyes on Vascepa 2020 Sales

There’s good news and some bad news said Amarin Corporation (AMRN) to investors today, using the carrot and the stick approach.

The maker of the fish oil drug Vascepa released positive preliminary sales outlook for 2019, which appear likely to reach the top or possibly slightly higher end of management’s guidance ($425 million).

In less positive news, the company also released its operating expense (Opex) guidance for 2020. Currently, 2019 consensus Opex estimates are for roughly $350 million, while 2020 will see an increase in the region of $200-$250 million, indicating levels of between $550-$600 million. At present, the 2020 Opex estimate is $495 million or thereabouts. The new guidance, therefore, implies the figure will come in 10-20% higher than initially estimated.

However, according to Stifel’s Derek Archila, the higher Opex outlook will be offset by Vascepa’s 2020 sales.

“We ultimately expect 2020 sales to come in well ahead of management’s guidance offsetting most of the increase. Based on our current 2020 Vascepa sales forecast of $785 million (management’s guidance is ~$650-$700 million), we have AMRN reaching breakeven in 2020 even at the top of its Opex range,” Archila noted.

Amarin has been in the headlines recently; In December the FDA approved the label extension of the company’s fish oil drug, Vascepa. The FDA approval includes expanding use both for patients with established CV disease (secondary prevention), as well as for diabetic patients with more than 2 CV risk factors (primary prevention). The added expenditure is expected to go towards the launch of the expanded label and will be spent on enlarging the company’s sales force, DTC (direct to customer) advertising and inventory.

Although Amarin has a bright future, Archila argues that the stock appears fully valued: “While there is no doubt in our mind, Vascepa will be a multi-billion product, absent a takeout, we are less confident in meaningful upside from these levels and believe the unpredictability around Vascepa’s IP litigation, its relatively short exclusivity period, commercial execution risk for the expanded label launch and the fact that AstraZeneca’s Epanova CVOT results expected next year all present downside risk.” To this end, Archila kept his Hold rating on Amarin stock. (To watch Archila’s track record, click here)

In contrast, earlier today, Cantor’s Louise Chen reiterated her Overweight rating on Amarin. Chen said, “We reaffirm our OW rating and think the peak sales potential of Vascepa is underappreciated. Therefore, upward earnings revisions to levels not reflected in FactSet consensus expectations should drive AMRN shares higher”. The analyst’s price target of $35 indicates potential upside of a handsome 73%. (To watch Chen’s track record, click here)

Where does the Street stand, then? As it happens, the Street is cautiously furthering the bulls’ case for Amarin. The biotech currently has a Moderate Buy rating consisting of 5 Buys, 4 Holds and 1 Sell. The average price target comes in at $28.89 and indicates potential upside of 31%. (See Amarin stock analysis on TipRanks)

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