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Amarin: Dead Stock Walking With Negative Vascepa Panel Vote

Stocks in this article: AMRN

At this point, Amarin has no other options but to roll the dice and bet the company's survival on a positive outcome from Reduce-It. The study end is a long way off but the company just has to see it through.

What happens if Reduce-It fails?

Amarin probably goes belly up. Like I said, Reduce-It is a win-or-go-home scenario.

Does Amarin have enough cash to stay solvent until the results of the Reduce-It study are ready?

Doubtful. With the last financing in July, Amarin has about $270 million in cash on hand. The company admitted Wednesday night that costs reductions and/or layoffs are a possibility to stretch out the cash. Management wouldn't say definitively if another financing would be necessary before Reduce-It is completed.

Right now, Amarin's operating expenses are annualized at about $200 million a year, with a big chunk of that derived from running the Reduce-It study. Do the math yourself.

Can Amarin count on Vascepa sales under the currently approved indication to generate more cash?

Not entirely. Vascepa's launch has been a disappointment. Prescriptions are growing but slowly, so you're only looking at Vascepa peak sales in the $100-200 million range. Don't forget, Vascepa is also vulnerable to potential generic competition. All this explains why Amarin's share price has under-performed so badly this year. Amarin will report third-quarter results on Nov. 7.

Amarin -- dead stock walking?

Pretty much. I'm lousy at predicting where stocks settle out after big setbacks but it's safe to say Amarin shares will take a big hit Thursday. The stock was halted all day Wednesday at $5.17.

Looking forward, it's hard to get excited about Amarin again until we get closer to Reduce-It data, or if we see a sharp uptick in Vascepa sales. I don't expect the latter to happen any time soon.

I read on some of the message boards and StockTwits that Big Pharma might be more interested in buying Amarin now that the company is on the rocks. Do you see a takeout of the company likely?

Only read message boards for entertainment and laughs. Never say never, but an acquisition of Amarin today makes little sense. For starters, why would Big Pharma pay a premium -- even a small premium -- for Amarin with the all-or-nothing nature of the Reduce-It study looming ahead? If Amarin trades down to $3 per share, which equals a market cap north of $500 million, you're still talking about a fairly hefty price tag for a company that may not be worth anything in three years. Lots of risk.

And why would Amarin even accept a bargain basement takeout offer today when it has the chance to be worth so much more if the Reduce-It study succeeds?

Do you believe the odds favor a positive result from Reduce-It?

Ha! I was waiting for you to ask me that question. No, I don't. If I were a gambler, I'd bet against Reduce-It, not because Vascepa is a lousy prescription fish oil, but because I just don't believe triglyceride reductions in these mixed dyslipidemia patients will result in significant reductions in cardiovascular events. The science and clinical trial precedents seems spotty.

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