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Even If It Hurts Amarin Stock, Reducing the Vascepa Sales Push Is Smart

Will Ashworth

On March 15, Amarin (NASDAQ:AMRN) announced that it was suspending all field-based face-to-face interactions until March 30. While it will continue to monitor the situation, it’s likely that the March 30 deadline will come and go, extending well into April. A lengthy pause on the sale of its cardiovascular drug Vascepa could be detrimental to Amarin stock.

Even If It Hurts Amarin Stock, Reducing the Vascepa Sales Push Is Smart
Even If It Hurts Amarin Stock, Reducing the Vascepa Sales Push Is Smart

Source: Pavel Kapysh / Shutterstock.com

“As a company focused for more than a decade on fighting cardiovascular disease, which in the United States alone results in one stroke, heart attack or death every 14 seconds, we are determined to do our part to protect public health and the health of our many valued employees,” said John Thero, CEO of Amarin. 

Of course, over the long haul, the coronavirus has provided investors with an opportunity to buy Amarin at a price that hasn’t been seen since September 2018. If you’ve got the risk tolerance to ride out this insanely volatile market, you ought to be rewarded for your confidence in the company. 

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It Did the Right Thing

As for Amarin itself, it’s doing the right thing, despite the money it’s leaving on the table to do so. It’s not the only drug company to be suspending face-to-face interactions. However, many of these companies don’t have billions of dollars in future revenue at risk.

In late February, I argued that the company’s move to double its U.S. sales force to 800 to meet the demand for Vascepa, along with the future approvals of the drug in Europe, Canada, and elsewhere, made Amarin stock a smart buy despite the apparent risk.

Generic manufacturers Dr. Reddy’s (NYSE:RDY) and Hikma Pharmaceuticals (OTCMKTS:HKMPF) have sued Amarin for the right to infringe on its patent protection for Vascepa. Dr. Reddy’s lawsuit is expected to be ruled on by U.S. District Court Judge Miranda Du as early as the end of March.

However, given how much the world has changed in recent weeks, I have to wonder if it won’t come in April or May. In the meantime, those of you that have already bought, somewhere between $10 and $20, are left to stew over what the judge’s decision could mean to Amarin’s sales.

How Much Revenue Will Be Lost?

Heading into spring, Amarin was ready for Vascepa to take the world by storm. Analyst estimates have reached as high as $4 billion a year at its peak, much higher than current levels. The profits on $4 billion in sales would be tremendous. The coronavirus has put these thoughts on hold.

In the meantime, the company will use the postal service to send out educational materials, copay cards, and samples in place of personal visits. Jefferies analyst Michael Yee believes the lack of face-to-face visits will result in flat to negative growth in Vascepa sales in the near term as we all cope with the outbreak. 

He does note that investors would likely not punish the company for a weak quarter understanding that most public companies are in the same boat. Further, a positive result from its litigation would most certainly send its stock back toward $20. 

In Q1 2019, Amarin had net total revenue of $73.3 million. That was up 67% from Q1 2018. Most of the increase was due to Vascepa. In Q2 2019, its revenues increased by 91% to $100.8 million, $100.4 million from its cardiovascular drug. In Q3, they increased 103% to $112.4 million and in the fourth quarter, they were up 85% to $143.3 million. 

So, sequentially, its revenues grew in all four quarters in 2019. If I’m reading the analyst correctly, I believe he’s saying its sales in Q1 2020 will be anywhere from $143 million down to $130 million or lower. If he’s talking about year-over-year, that would result in a 50% decline in sales or worse. That would be devastating to Amarin’s stock. 

Devastating, but not a knockout. That’s because Americans suffering from cardiovascular disease and high triglyceride levels are still going to need Vascepa in the weeks and months ahead. Eventually, the company’s sales force will get back out there. 

The Bottom Line on Amarin Stock

At one point in the fourth quarter of calendar 2019, Amarin stock was trading at $26.12, 141% higher than where it’s trading today. In four months, it has lost almost 60% of its value. 

Compared to many of the health care stocks that have gained notoriety in recent weeks due to the coronavirus, Amarin is the real deal. It might be hurting the top- and bottom-line by keeping its staff, patients, doctors, and all the other stakeholders it deals with out of harm’s way, but in the end, it’s the right thing to do.

Amarin’s turn will come. And when it does, you’ll be happy you bought some stock during this period of unprecedented volatility.   

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

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