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I agree that was the point I was trying to make.
If a company tried to acquire even 25% (just shy of 100 million shares) the incremental purchasing along with trend following traders would drive the pps quite high very quickly
ABBV Comparison
CBB - I think your logic makes sense but there are a number of reasons why ABBV isn’t a good comparison in 3 years time
First is net margins. If AMRN keeps its business model simple there should be no reason to bloat their overheads. ABBV has a gross margin of 77% but a net of only 17.6%. Assuming AMRN increases its overheads to $1 billion in 3 years it would still leave $3.5 billion net before taxes, assuming 21% tax rates (assuming we’ve already exhausted our loss carry forwards) gives us roughly $2.6 B net, 43% net margin.
ABBV is much further along in their growth curve than AMRN will be in 3 years time. They are only expecting around 10% profit growth this year while AMRN should still be in the exponential part of their curve or the $6 B sales estimate may be too conservative. This would dictate a significantly higher P/E. ABBV with a 10 P/E and 5.1% dividend yield is a value stock, not a growth stock.
Significantly higher growth with 2.5 times net margins for AMRN makes ABBV a poor comparator IMO.
I put forward a simple model and challenge others on the board to say what is wrong with it. The only variables are. Sales, gross margins and overheads, shares outstanding, and P/E ratio. I look forward to others thoughts.
Valuations
Quick Saturday morning pps estimate while I watch premier league soccer - go Liverpool (play tomorrow) YNWA
2021 sales with ACC and AHA SOC, Europe approval, Canada (much smaller), increased insurance coverage, etc... = $6 billion. 75% gross margins = $4.5 billion minus $500 million overheads divided by 400 million predicted outstanding shares = $10/share. Forward P/E for a high growth company of 25-30 equals $250-$300 pps end 2021.
Would be interested to hear others thoughts and comments on this
New prescription
Picked up my first V prescription today. Those pills are big. Cost just under $75 for 30 days. Can’t wait for my junk to grow,??
CELG is also a good example in that most of their growth was while they were GIA. That stock went from $5-$10 to over $120 before it settled back down to $70 and was offered a BO at $90. If I’m not mistaken the market cap for CELG when it was as around $100/share was around $100 billion. The 2 differences I see between us and CELG is 1. CELG has more than 1 drug and 2. Vascepa is a much bigger blockbuster than anything CELG has.
GIA for the next 18-24 months, enjoy one hell of a price rise and then sell out for a nice premium. Not a bad outcome if you ask me, but long term GIA might be even better.
One quick addendum to my other post. CVRs are used to bridge gaps in valuations between 2 sides. If we had the mother of all CVRs as part of a deal a buyout could get done sooner rather than later.
CBB
There are lots of different models to value stocks. One using only present sales when there is such a high expected growth rate would be inappropriate.
IMO the reason why a buyout won’t happen anytime soon is that a big pharma would have to pay such a high premium to satisfy the holders of AMRN shares that they would have trouble getting approval from their own shareholders. Look at BMY and the kickback they are getting about buying CELG with a much more modest premium than AMRN would demand.
I think we should enjoy the ride during the exponential growth that appears to be right in front of us and then sell the company for a smaller premium (% not necessarily $) but a much higher price, hopefully well into triple digits.
PR Prediction
I was just on the company website and couldn’t find any mention of this fantastic ADA news. I just get the feeling they are keeping their powder dry for a big PR that is more than just sNDA submission. I just have a sneaky feeling.
JL - thanks for the info on pricing for my mom’s prescription, I’ll pass it on to her
PCP Knowledge
Yesterday morning my mother told me her PCP was “pushing” for her to start Vascepa. She is reluctant due to the price being $375/month. She is not in a position to add this cost to her budget and doesn’t have particularly high trigs or cholesterol though I’m not sure the exact numbers. She is 75.
In the afternoon I had my annual physical. I’m on generic Crestor and have been for years. When reviewing my lipid panel my trigs were 95 and total cholesterol was 165. I mentioned Vascepa to my Dr. She was aware of it and the trials but said she had never prescribed it. She prescribed it to me with very little prodding. I think she wanted to see it in action. I’ll find out this afternoon the cost when my wife goes to pick up the prescription.
I’m in Raleigh NC and my mom is in Pittsburgh. Both PCPs well aware of Vascepa and willing to prescribe. This leads me to think the real missing ingredient is insurance coverage not physician knowledge of the product. I believe the big sales and pps increase we all are waiting for is dependent purely on insurance coverage IMO. The cost/benefit study from the company showing the decrease in overall costs from fewer MACE can’t come soon enough.
As far as maximizing my investment I believe the company staying independent while it increases coverage and enjoys the exponential increase in sales and share price that is likely to come during that time would be preferable. After that selling to big pharma at a nice premium would be fine. I don’t want the exponential part of the curve being owned by big pharma though it would make me lots of money.
5/13
Jesse. I think I am like many on this board that have significantly more wealth due to your posts. I never would have had the guts to hold 38,000 shares in September before the R-it results without your posts and explanation of the science behind Vascepa.
Get cranky or belligerent whenever you want. I have $700,000 reasons to ignore any bad and celebrate the good. I even bought some more shares after the big pop in September that are making me money. Thank you
Ps - my son graduates from basic training at Ft Jackson this week and heads to Ft Benning for OCS after, I’m going to use some of my winnings to buy him a big Ruth’s Chris steak in Columbia during the few hours I’ll get to be with him
In this case I do think it was right doing the conversion due to the explosive growth. When you look at normal 6-8% investment returns you should take current and future tax brackets into account. However, with the kind of explosive growth we’v Seen and still likely to see (nice numbers Sam - thanks) paying taxes on the seeds should be cheaper than paying taxes on the crop
If you pay 25% in taxes now and the remaining 75% triples, or if you triple now (with the 25% you would have paid in taxes also tripling) and then paid 25% in tax it would equal the same amount of money.
The Roth has RMD advantages but the traditional has advantages if you can defer when in a higher tax bracket and bring it out in lower tax brackets.
Traditional IRAs/401ks work best when you get the tax deduction at a higher tax rate and take the money out at a lower tax rate. If the rate is equal the math says they are both the same, however, the Roth doesn’t have required minimum distributions. Heirs have to take RMDs with either, but not pay tax on the Roth distributions.
The Roth can be very beneficial if you are trying to stay in the 10 or 12% tax bracket in retirement and have long term capital gains and dividends taxed at a 0% rate. However, if you are doing conversions and it is putting you in higher tax brackets you may want to reconsider your strategy.
The best trick I’ve seen for a backdoor conversion is actually for a Roth. If your 401k allows for in service withdrawals you can fund your account with the maximum of deductible contributions (I think $25k this year for people 50+) and then fund with additional after tax contributions which if allowed under the plan can be rolled into a Roth immediately. I did this last year and put the max in my 401k as a deductible contribution and then put $18k in after tax and rolled it into my Roth.
Make sure you don’t leave any after tax in your 401k or you’ll have to fill out IRS forms when you do withdrawals in the future detailing the taxable amount of the withdrawal and the tax free amount (I believe it is form 8606).
I don’t post much, but I had to respond. Your post is one of the dumbest I have ever seen. Way to add value.
HP. - It’s crazy you attacking JL. I’m a suit, I work for a big brokerage firm and have worked for 3 of the 4 largest over the years. JL’s insight into this company and drug has made me $700k and was much better than any company analyst I’ve seen over my 20 year career. Who cares if he is/isn’t accurate on speed of adoption and market penetration in 2019. The bottom line is he was right on how this drug works and how good the results of the trial would be. This stock has plenty of room to run as everyone else wakes up to what he already knew and shared with the rest of us. I have 40k shares at an average cost of approx. $4. Had 38k before trial results announced and bought 2k more because I got sick of multiplying profits by 38 in my head. It’s much easier to multiply by 40 than 38!
Sorry sts. Sent the other post before I read this one. You were already aware of the return of principal issue
Thanks STS
I would also add to be real careful with buying closed end funds only on stated yield. Many closed end funds have managed dividend policies. This means they are going to pay out a certain dividend whether they earn it or not. The additional amount above what they earned is a return of part of the principal of your investment. It is easy to hide the issues with this when the underlying assets are increasing in value but if the underlying assets are dropping in value and they are paying part of the principal back as part of a managed dividend policy you will see a significant drop in the NAV of the fund. This is often compounded because many closed end funds use leverage as well.
If you want to find out more about your closed end funds check out the closed end funds association website. Cefa.com. Good luck
You’re right. They call it UBTI. Unrelated business taxable income. If it exceeds a certain level you have to pay taxes even though in an ira and believe it or not with the irs- fill out more forms!
What discount rate did you use?
Well done. Stopping before you finish so as not to get anyone pregnant
If death is 50% screw Vegas let’s do Monaco
My pleasure LB. Bonus points for anyone that can say what the term “get off at Edge Hill” means to someone living in Liverpool.
MLP is master limited partnership. Very common in the oil patch. Mostly pipelines and infrastructure. Since they get to charge a toll they’re not usually as sensitive to the price of oil as some exploration and refining companies tend to be. Also be careful as each one you own will generate a k1 which will add to your tax filing issues. Accountants love charging extra for the extra paperwork and the k1s aren’t guaranteed to arrive by April 15.
The highest dividend paying stocks tend to be negatively correlated with interest rates just like bonds tend to be. Interest rates rise, the stock price drops. The very highest often times dividend yields often signal the market sees a problem with that company. Often times an over leveraged balance sheet that might lead to a dividend cut.
I would suggest to look at well run companies with slightly above average, but below the highest dividend yields, but a long history of increasing their dividend at a reasonable rate. Should help the stock price grow as well as much higher dividends in the future.
RetiredCEO. Are you English? Scouser1 love saying piss off
Good luck with your operation. My dad had a double bypass when he was 54 years old. He passed in January this year of lung cancer at age 79. He had 2 stents put in somewhere along the way as well, I don’t remember exactly when but he lived a very full and active life until about 7 weeks before his passing.
I hope everything works out well for you. It did for my dad for 25 years and then it was something else that got him.
Not a Amarin millionaire yet but getting close. 38,000 shares long at $3.40 avg cost. Don’t intend selling for awhile. About half are LT gains
Anyone worried about insiders selling through 10b5-1 plans should look at this link. These plans are a smart way to diversify large holdings over time without the SEC making allegations. We don’t want Martha Stewart running Amarin
https://corpgov.law.harvard.edu/2016/03/24/a-guide-to-rule-10b5-1-plans/
Don’t understand $20 price target even if only easier secondary endpoints met. Especially if 3 Ps (patient, physicians, payer) are happy Company already doing $200 million in sales. At $1 billion with 40% net and 20 P/E ratio = $8 billion market cap or roughly $25 per share. I believe this is grossly underestimating earnings power of this drug.
LB the trust should keep the same tax character as if it was owned by an individual. I.e. long term cap gains will be treated the same if it is in the trust or held by an individual. However, if the trust has income, and I believe short term cap gains would be included here, then you get to the highest marginal rate at around $12k on income instead of the 100s of thousands needed for married filing joint. Check with your accountant
Tax issues. 1 There are no RMDs on Roth IRAs unless you inherited the Roth. Then your heirs are required to take RMDs but not pay taxes as it comes out. 2. You can do paperwork at the brokerage firms so they don’t withhold in a taxable account. However proceeds and cost basis will be on your 1099 and reported to the IRS. 3. Same as a taxable account you don’t have to have money withheld from IRA distributions. However it will be reported on your 1099 and if under withheld may need to do quarterly taxes the following year. See your accountant about this. 4. If you give appreciated stock to a qualified 501c3 charity not only do you not have to pay the capital gains but you’ll also get a tax deduction. There are certain limitations so check with your accountant. 5. If you are charitably inclined and give money each year but want to match your deduction to a year that you have outsized earnings (I.e. selling AMRN at a big profit) considers donor advised fund. Donate highly appreciated stock to fund get current year tax deduction direct donor advised fund administrators to make contributions to your charities over multiple years
I hope this helps. Feels nice to contribute to this board.
Pyrr you remind me of one of those guys that keeps fighting even when you are beaten and bloodied laying in the street in pain. Regarding your questioning of the pricing of a secondary even if it is 10 million shares at $11 the dilution of 10 million shares with 300+ million outstanding will have limited short term effect vs the momentum now in the stock. My question to you is what is the present value of $3+ billion/year net cash flow until 2030? The answer with even aggressive discounting rates is a stock price much higher than current.
Thanks to everyone who provided scientific and other key info. Allowed me the confidence to take an outsized position even though I had big losses after adcom. Special call out to JL