This Biotech Stock Will Gain From Your Weight Loss

Chris Lau, Kapitall: A small biotech stock can be risky, but we found one taking full advantage of America's push to get in shape. 

The bullish sentiment in Amarin Corporation ( AMRN ) is improving. Since reporting quarterly earnings last month that missed on consensus revenue estimates but beat on earnings, shares are now up 23%. Is the recovery going to hold, or will the rally be stopped short again?

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Solid second quarter

Amarin generated revenue of $7.3 million, when you include the $1.8 million in the deferred net value of its FDA approved Vascepa (icosapent ethyl derived from fish oil). Combined with a weight loss program – a low-fat and low-cholesterol diet - Vascepa can help lower triglycerides and other fatty substances in the blood. Prescriptions for the medication rose to a normalized 47,335, up from 10,484 from the previous quarter. And in recent clinical trials, the company also reported that concentrations of VLDL (very-low-density lipoprotein) were reduced by 12.2% in subjects receiving the therapy for 12 weeks.

Healthy balance sheet

Amarin ended the second quarter with $149.4 million in cash as at June 30, 2013. This was helped by $121.1 million in equity financing.

Prospects improving

Access to Vascepa for clinicians is good, but the company continues to limit its availability. There were over 9,000 physicians prescribing Vascepa at the end of the second quarter. Amarin wants to focus only on the knowledgeable clinicians who are high prescribers of other lipid therapies. This improves the overall safety profile for the drug.

On August 26, Amarin submitted a Supplemental New Drug Application for Novasep Group, an additional Vascepa active ingredient supplier. This will increase Amarin’s ability to supply and produce more Vascepa.

Alternative investment

Amarin is outperforming competitor Arena Pharmaceuticals ( ARNA ) in the one year period. This could be due to heavy short sellers weighing on Arena. Short float is 30.3% for Arena, compared to 14.75% for Amarin.

Click on the interactive charts to see analyst ratings and stock prices over time.  

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Arena spooked investors after revealing that a patient in its drug trial for a new drug experienced a heart problem. APD811 is an experimental drug, but the biggest source of the company’s sales and profits is BELVIQ , an obesity drug that received FDA approval in June, 2012.

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Patient investors will be rewarded

Amarin appears likely to reward patient shareholders. Similar to Arena, initial sales for Amarin’s drug will take time to grow, as the company ramps up production. Those who buy Amarin at current levels could see gains over the next 12 months.

 

Written by Chris Lau, Kapitall contributor. Analyst ratings and stock prices s ourced from Zacks Investment Research.

Disclosure: Author has a long position in ARNA.

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