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Is Amarin Corporation PLC a Buy?

Keith Speights, The Motley Fool

Rarely does a drugmaker shake things up like Amarin Corporation PLC (NASDAQ: AMRN) did with its cardiovascular outcomes results for Vascepa. But, as singer Jerry Lee Lewis put it, there was a whole lotta shakin' goin' on after Amarin announced the results from the Reduce-It trial on Sept. 24. 

Amarin's share price more than quadrupled in one day. It's now up nearly 490% since the great news about Vascepa was released. But is Amarin stock still a smart pick for investors to buy now?

$100 bills folded to form a heart shape.

Image source: Getty Images.

About those great results

It's hard to overstate just how good the Reduce-It results really were. Amarin enrolled 8,179 patients in the study who had been treated with statin drugs -- the current gold standard for treating high cholesterol -- and who had an elevated cardiovascular risk. This study began back in 2011. 

Amarin hoped that Vascepa would achieve a meaningful reduction in major adverse cardiovascular events (MACE) experienced by the patients taking the drug. The company's hopes were fulfilled and then some. 

Patients taking Vascepa had a 25% reduction in cardiovascular risk compared with patients on placebo. The statistical significance of these results was very high, with the probability that the cardiovascular risk reduction was due to some other factor less than 0.10%.

Not only did Vascepa demonstrate impressive efficacy in reducing cardiovascular risk, it also was found to have a very good safety profile. The percentages of patients in the Reduce-It experiencing adverse events and serious adverse events were similar between patients taking Vascepa and patients taking placebo. 

How big of a blockbuster?

Amarin first won FDA approval for Vascepa in 2012 for treating patients with high triglyceride levels. The drug has been a modest success, generating sales of nearly $180 million last year. But now the key question for Vascepa is just how big of a blockbuster it will be.

A couple of analysts have projected peak annual sales for Vascepa in the U.S. of a little over $1 billion. Amarin itself thinks the figure should be closer to $2 billion. Citi analyst Joel Beatty is even more optimistic, pegging peak annual sales for Vascepa at $2.7 billion. 

Keep in mind that the total market for high cholesterol drugs in the U.S. likely tops $69 billion. The lion's share of this amount is generated by statin drugs. Vascepa doesn't necessarily need to capture a bigger slice of that market; it could very well increase the size of the market.

My view is that the peak sales estimates closer to $1 billion are way too low. I think that the reduced cardiovascular risk demonstrated by Vascepa is simply too impressive for the drug to not rake in a much greater amount. I suspect that $2 billion in peak sales is a minimum, especially if Amarin happens to be acquired by a big drugmaker with a large sales force promoting statin drugs.  

To buy or not to buy? 

Amarin's market cap is currently around $5.2 billion. If Vascepa generates $2 billion or more annually as I think it could, the biotech's share price has a lot of room to run. 

I also think that there's a very good chance that Amarin is acquired. There are plenty of Big Pharma companies with large cash stockpiles that haven't made any significant deals in a while. Amarin looks like a great pick now, thanks to the Reduce-It results.

Is Amarin stock a buy? My answer is a resounding "yes." There could be more shaking going on with this biotech stock.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.