Is Amarin Corporation Plc Stock About to Double?

By Markets Fool.com

Score one for the little guy. Small-cap biopharmaAmarin Corp.(NASDAQ: AMRN) finally caught a break yesterday in its ongoing dispute with the Food and Drug Administration over the company's highly refined fish oil pill Vascepa. Specifically, U.S. District Judge Randolph D. Moss reversed the FDA's previous decision to deny Vascepa the coveted "New Chemical Entity" status.

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Source: vascepa.com

In a nutshell, this means Vascepa will enjoy a five-year period of exclusivity, enacted retroactively from the time of approval, as a treatment for patients with triglyceride levels higher than500 mg/dL.

As Vascepa received FDA approval in July 2012, the pill therefore won't face any legal challenges to its patent protection until at least July 2017. Yesterday's ruling also prevents the FDA from even accepting generic drug applications, or ANDAs, for Vascepa until July 2016, allowing the drugmaker to dismiss the pending litigation over ANDA filings submittedpreviously to the federal agency.

Under the worst-case scenario, generic versions of the drug could enter the market no earlier than around 2020. And that's assuming a would-be competitor could successfully sideline Vascepa's massive patent portfolio that covers the drug until 2030.

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Given that investors flooded into this stock following this ruling, let's consider if now is indeed the time to buy this beaten-down biopharma.

The Street thinks Amarin is a loser, but here's why it could be dead wrong
Amarin has long been one of healthcare's most heavily shorted stocks, which helped to drive shares down to where they are today:

AMRN Chart

After yesterday's news, short-sellers might be reconsidering their jaw-dropping position in the stock to some degree. But the fact remains that the Street isn't enamored with Amarin's long-term prospects.

The short thesis is that Vascepa's FDA approved niche market (patients with very high triglyceride levels) is too small to turn the drug into a major commercial success. So far, this outlook has proven correct. Despite the drug being on the market for over two years, Amarin'sfirst-quarter salesnumbers for Vascepa suggest it won't even generate $100 million in revenue this year, although the drug did achieve a stately 42% year-over-year sales boost in the quarter.

The short thesis, though, might be blown out of the water if Amarin wins its pending lawsuit against the FDA, in which the company is seeking authorization to inform doctors, on First Amendment grounds, about Vascepa's ANCHOR trial results for patients with moderately high triglycerides -- a large extension of the current indication, which is just for very high levels.

Gaining access to this far larger market that could cause the drug's sales to grow by leaps and bounds. That would obviously be a huge catalyst for Amarin's stock price.

What's next?
Although it's impossible to tell how long Amarin's lawsuit against the FDA will take to play out, the important issue here is the company's cash runway. In other words, will Amarin have to dilute shareholders in a major way before additional catalysts can enter the picture?

Because of its ongoing cardiovascular outcomes study, REDUCE-IT, the biopharma is burning a little over $10 million a month. If we factor in Vascepa's revenue and the company's current cash position of about $140 million, we are looking at cash runway that should extend comfortably into the second quarter of 2016.

That should give the courts enough time to render at least a preliminary decision on whether to allow Amarin to inform physicians of Vasepa's potential benefits for patients with lower levels of triglycerides.

Amarin stands a good shot at winning this legal battle against the FDA as well. After all, the company is simply requesting that it be allowed to speak to healthcare providers about the drug's other clinical trial data that "may" provide scientific support for a broader use in the real world. Given that Vascepa did show a statistically significant 21.5% reduction in fasting triglyceride levels compared to a placebo in the ANCHOR trial, there is some strong factual evidence to support Amarin's legal position.

What the company definitely cannot say at this point, however, is that Vascepa lowers the risk of cardiovascular events. That issue won't be resolved until the REDUCE-IT trial concludes in either 2017 or 2018.

So as long Amarin doesn't stray into these deep waters on the cardiovascular front, which would clearly constitute "misbranding," pharma reps should be able to tell doctors that a large clinical trial supported the hypothesis that Vascepa iseffective at reducing triglyceride levels, without increasing LDL-C levels, in patients on background statin therapy.

That's a statement of fact. And it's why this beaten-down biopharma stock could be setting up to regain some of its former glory in the coming months.

The article Is Amarin Corporation Plc Stock About to Double? originally appeared on Fool.com.

George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.