The magic seems to have abandoned Amarin Corporation (AMRN), as the stock is down 15% since the start of 2020. The reason? The drug maker is bearing the brunt of investor concerns about competitors closing in on its key drug, Vascepa.
Amarin’s trial against generic competition from Dr. Reddy’s Laboratories and Hikma Pharmaceuticals concluded on 31.1. The company has asserted 15 claims from six patents against ANDAs filed by Hikma, Dr. Reddy’s and Teva (Teva and Amarin have already settled).
The patents all relate to Vascepa, an FDA approved capsule used alongside a healthy diet to help lower fats (triglycerides) in the blood. The active ingredient in Vascepa is highly purified omega-3 fatty acid called ethyl-eicosatetraenoic acid (“ethyl-EPA” or “EPA”). Following various application rejections for patents of Amarin’s formulation of EPA that lowered TGs without also increasing “bad” cholesterol (LDL-C), the company was awarded the patents when, surprisingly, the results showed its dosage regime for pure EPA does not increase of LDL-C levels and it reduces apolipoprotein B (“Apo-B”) levels.
The defendants dispute the claims on account of non-infringement and invalidity. A ruling is expected to be made by March 31, with overall sentiment on the Street and beyond indicating Amarin stands to walk away victorious.
So, good news, no? Not according to Oppenheimer’s Leland Gershall. The 5-star analyst has held a bearish view on Amarin for a while now, and concludes that even in the very likely case of an Amarin win, there is still plenty of downside to come. Gershall argues that although shares could rally on successful litigation, he expects any strength to be short-lived if a M&A fails to materialize and investors focus increasingly on valuation.
If that wasn’t negative enough, should the unlikely outcome of a decision against AMRN materialize, Gershall cautions on significant downside potential driven by “elimination of any M&A exit expectations in addition to early loss of Vascepa exclusivity.”
Gershall added, “With label expansion of sole omega-3 product Vascepa granted, consensus expectations are: 1) sales will inflect and grow to $2B+ by 2023-24; and 2) the company will be earnings positive starting in 2020. In contrast, we forecast sales growth to underwhelm and heavy selling costs to impede profitability, making both scenarios unlikely.”
To this end, the 5-star analyst reiterated an Underperform rating and $13 price target on Amarin stock. The implication? Downside of nearly 30%. (To watch Gershall’s track record, click here)
Countering the bearish sentiment is Jefferies’ Michael Yee. The 4-star analyst argues the stock could rise 10%-20% on a positive ruling. Following the end of the proceedings, Yee is confident Amarin is likely to prevail, and, therefore, remove “the chief overhang on the stock.”
Accordingly, Yee keeps his Buy rating intact, along with his $30 price target. (To watch Yee’s track record, click here)
All in all, based on the word of the Street, Gershall seems to be the sole bear running loose here. It appears consensus sentiment matches well with Yee’s eager eyes, with TipRanks analytics showing AMRN as a Buy. Based on 11 analysts tracked in the last 3 months, 6 rate the stock a Buy vs. 4 Holds and 1 Sell. The 12-month average price target stands tall at $29.78, marking over 60% upside from where the stock is currently trading. (See Amarin stock analysis on TipRanks)