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TheStreet Open House

Biotech Stock Mailbag: Amarin or Arena Takeout?

BOSTON ( TheStreet) -- Marlie Y. kicks off this week's Biotech Stock Mailbag: "Can you talk about the stocks that most interest you today and that may have big moves in the coming months? Thank you for your work and response to this question."

Clinical trial results send biotech stocks soaring (or sinking) more than FDA drug approvals, so keep the following stocks on your radar screen -- all of which should have data from important clinical trials released in the third quarter.

Vertex Pharmaceuticals (VRTX) (proof of concept results from its hepatitis C "nucs"); Amicus Therapeutics (FOLD) (migalast in Fabry disease); Acadia Pharmaceuticals (ACAD) (pimavanserin in Parkinson's disease psychosis); and Zalicus (ZLCS) (Synavive AR in rheumatoid arthritis.)

I'd say the most highly anticipated clinical data release remaining this year is from Johnson & Johnson (JNJ), Pfizer (PFE) and Elan (ELN) -- the bapineuzumab phase III studies in Alzheimer's disease.

LIR asks, "Which stock gets bought first, Arena Pharmaceuticals (ARNA) or Amarin (AMRN)?"

If forced to choose, I'll vote Amarin, mainly because selling the company is widely known to be an exit strategy sought by management. It helps that Amarin's prescription fish-oil pill AMR101 is highly effective and has blockbuster potential -- assuming approval on July 26, an eventual expanded label and long-term market exclusivity. All three of those goals are attainable.

What worries me about making this prediction? An Amarin takeout now, or soon after AMR101's approval, would buck precedent. Most bio-pharma M&A occurs early in a drug's clinical development or well after approval, history shows. A buyout premium of 50% to 100% today implies an Amarin price of $23 to $30 per share, which is a lot to swallow without more definitive proof that AMR101 is the billion dollar-plus drug it's built up to be. At $30 per share, Amarin's market cap would be $4 billion.

While I expect rumors of an Arena takeout to crop up with mind-numbing regularity (just like Dendreon (DNDN)), a real deal in the near term is unlikely. Too many question marks surround the commercial potential of Arena's weight-loss drug, Belviq, to believe that a large drug company would risk buying the company now, if ever.

I'll go with Amarin and cross my fingers.

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