We obviously believe that funds actively invested in AMRN are relying on a faulty risk-to-return model, which is itself based on insufficient due diligence/incorrect conclusions.
It's not for a lack of trying; funds hire trusted consultants, and over time have developed relationships with the same, leaning on a track record that has proven reliable (i.e. 'consultants "Dr. John" and "Dr. Mike" have helped guide our investments in healthcare companies A - G, and we are up X% in these active/closed out plays. Both Drs. are well-published cardiologists and like REDUCE-IT, think the sNDA is a shoe-in: >95% chance of approval by end of Sept; we can reassess patent portfolio after sNDA approval,' etc.).
Some of the ways in which we think funds have gone wrong here is an insufficient weight given to regulatory thinking and precedent (i.e. what is uninterpretable is not approvable; likelihood of requests for additional data; likelihood of AdComm; potential for clinical hold on related trial), and an over-reliance on mainstream cardiologists' view of changes in LDL-C, including older paradigms no longer regarded as sound, though still adhered to by many (ex. 1 mmol/L reduction = ~22% RRR).
It will be interesting to see how this plays out, and whose research was more comprehensive/accurate: ours, or theirs. But one thing is for sure--if they are wrong, they will go on investing for their clients, brushing off but learning from the experience. Meanwhile, many retail bulls will be financially ruined, particularly because they have too much exposure to AMRN with no net (hedge).
Good luck to all, and don't forget to at least inquire with a registered investment advisor about hedging strategies if you are planning on staying long from this point forward. For example, buying Jan 2021 puts with 10-15% of your position, etc. Especially if you have well over 30% of your NPV invested in this one company (which flies in the face of 100 years of established investment theory). We believe the risks far outweigh the potential rewards here, in particular between now and September, and then again between the sNDA outcome and the patent litigation outcome in late Jan/early Feb.
You may give up a modest appreciation in share price by sitting it out or acquiring puts, but that is far outweighed by what the potential negative catalysts could do to your retirement/trading account, including (a) an Advisory Committee meeting announcement sometime over the next two weeks; (b) an announcement that the PDUFA date has been extended by 3 months, due to the request for and submission of additional data, causing a major amendment to the sNDA; and/or (c) an announcement that the EVAPORATE trial, also sponsored by Amarin Corp., has been placed on clinical hold. Both (b) and (c) in particular would cause a sharp sell-off of the stock, and could blindside you well before Sept 28th.
One example of hedging an overweight long position in AMRN would be securing Jan 2021 puts (ex. 10% of $100,000 worth of shares, or $10K used to purchase $7 and $10 put strikes would yield 500% return on stock trading below $1 by then at current bid prices, protecting some 60% of the $100K AMRN stock position against loss). This could certainly help retail investors with under $2 mil invested in AMRN.
So, please do seek out the services of a registered investment advisor to help weigh the risk/reward here and assist with hedging strategies. Unless, of course, you have never been sure of a thing and been wrong before.
Kind Regards,
-MRC Team
