Amarin Corp Plc (AMRN)

[Crikker]

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.