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It's Cool Steve Rosenman Loves Amarin But His Math Is Screwy

Even if you accept Rosenman's position, his numbers (Selvaraju's numbers, actually) don't make much sense. Amarin has been very clear that it will not market Vascepa to the mixed dyslipidemia patient population on its own. The company needs a partner.

That means Amarin will not record $687 million in Vascepa sales in 2014. A partner, if one ever materializes, will grab a big chunk of those dollars. We don't know what sort of agreement Amarin and a marketing partner may reach, but you can imagine a 50-50 profit split or a royalty deal. Either way, Amarin doesn't get $687 million in top-line revenue.

But heck, let's be really generous and just go with Rosenman/Selvaraju's numbers, which forecast earnings of 94 cents per share in 2014. A $32 per share stock price in 2013 implies a forward (2014) price-to-earnings multiple of 34. (The P/E would be even higher if I discounted back, but I won't bother.)

There aren't many biotech or drug firms trading today with P/Es of 34. Alexion Pharmaceuticals (ALXN) and Regeneron Pharmaceuticals (REGN) are in that ballpark but it's hard to justify placing Amarin in their league. Tthe average P/E for large cap biotechs -- Celgene (CELG), Gilead Sciences (GILD), Biogen Idec (BIIB), etc -- is in the mid-high teens. Amarin might be worth $16-18 per share, anything higher is just pimping.

Let this serve as a reminder that sell-side analysts are like butchers -- both have heavy thumbs on the scale. Rosenman forgets this valuable lesson.

He also needs a better calendar. He predicts FDA approval of Vascepa's expanded "ANCHOR" label in the third quarter. Amarin only submitted the supplemental new drug application in February. The FDA will likely take 10 months to review the Vascepa submission, which puts the approval decision date in December. FDA could grant priority review to Vascepa but I'm at a loss for reasons why in the absence of cardiovascular outcomes data.

-- Reported by Adam Feuerstein in Boston.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.
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