Stifel on Amarin (AMRN): Nothing Fishy About This Stock — It’s a Buy!

Do you have high cholesterol? Investors in Amarin (AMRN) kind of hope that you do — but ideally, not too high.

Anywhere between 150 and 500 milligrams per deciliter of triglycerides will do just fine.

Amarin, as you may be aware, is a commercial stage pharmaceutical company that focuses on treating hypertriglyceridemia (too many triglycerides in the bloodstream), which can lead to cardiovascular disease. Unlike many — even most — pharmaceutical companies that you may hear about, Amarin actually has a salable product, a purified omega-3 fatty acid derived from fish oil that it markets under the name “Vascepa.”

Marketed since 2012 for the treatment of triglyceride levels in excess of 500 mg/dL, Vascepa is well established in the market, and selling well enough to drive nearly $230 million in trailing revenues for Amarin last year (but no profits just yet, sorry).

The good news is that that might change, and the reason it might change — as Stifel analyst Derek Archila tells us in his initiation of coverage of Amarin stock with a “buy” rating and $27 price target. (To watch Archila’s track record, click here)

Archila believes the results of a clinical trial of Vascepa to treat high cholesterol in patients with triglyceride levels below 500 mg/dL, but above 150 mg/dL (levels considered anywhere from “borderline” to “high,” but not quite “very high”) have been “impressive.” As Archila relates, this trial, known as the REDUCE-IT trial, revealed better than 25% reductions in the risk of cardiovascular disease for patients with borderline-to-high levels of triglycerides in their bloodstreams.

Seeing these results, Archila notes that 95% of the physicians it surveyed, who already prescribe Vascepa, plan to prescribe Vascepa more often over the next 12 months, for borderline-to-high risk patients. Indeed, before the year is out, these doctors expect to have between 10% and 25% of their high cholesterol patients taking the drug. Moreover, among doctors who do not yet prescribe the drug, roughly 80% surveyed say they will begin prescribing Vascepa after seeing the results of the REDUCE-IT study.

Based on the results of this trial, and physician reaction, Archila is convinced that as doctors increasingly prescribe Vascepa to treat even borderline-to-high levels of high cholesterol, “this will most certainly lead to robust growth” for Amarin — and “likely [growth even] above management’s 2019 guidance.”

How much growth are we talking about, exactly?

For all of 2019, Archila is projecting $374 million in sales — better than 60% growth over last year’s revenues, and ahead of even Amarin’s projections of $350 million. In 2020, the analyst sees Vascepa sales growing a further 50% (to $566 million), before ultimately peaking at $2.5 billion in annual sales in 2029.

In terms of profits, Archila believes Amarin will turn the corner and earn its first profit ($0.03 per share) in Q4 this year, then proceed to earn $0.34 per share in 2020.

Granted, even $0.34 per share isn’t a huge amount of profit to justify Amarin’s current near-$19 stock price. (It actually works out to a forward P/E ratio of 55). But if Amarin continues growing its sales at 50% and better, maybe — just maybe — the high price is worth it.

Archila is certainly not the first analyst with an optimistic outlook for the fish oil drug maker, as TipRanks analytics showcasing AMRN stock as a Strong Buy. With an average price target of $31.60, analysts are predicting an upside of nearly 65%. In total, the stock has received 6 ‘buy’ ratings in the last three months. (See AMRN’s price targets and analyst ratings on TipRanks)


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