It is truly amazing to witness all of the acrobatics that AMRN bulls will perform to ignore the obvious. JZ’s most recent sell-off of shares, which further makes the recent pump PR very suspiciously timed and adds to the evidence insiders may have committed securities fraud, is also evidence of something obvious: he, along with every other insider except the CEO, does not want to hold shares of AMRN, and would rather at every opportunity trade them in for cash now. Why? Why dump constantly? They must believe the risk in holding shares outweighs the potential reward from their appreciation in value.
We are now approaching $90 million
worth of shares dumped by insiders since the AHA meeting in Nov. No one on the planet knows as much about (a) the content of previous discussions with potential acquirers and licensees and their misgivings/apprehensions about the chance of getting label expansion and the security of the IP; (b) the content of the ongoing patent litigation cases, and the confidence/lack thereof their attorneys have in a win (notice the CEO will only sheepishly say “we like
our IP,” okay well you can “like” anything, but it doesn’t make it good or strong or likely to hold up in court); (c) what their regulatory expert consultant(s) have been advising them on how the process has been going with FDA so far, what it means and doesn’t mean, and the impact a Citizen Petition may have, and the potential for FDA to place a clinical hold on EVAPORATE or not. And, relatedly, the advantages in undertaking a massive secondary ($300mm - $400mm+) before negative catalysts can significantly, perhaps irrevocably, affect the share price. And that if they do not raise very soon, it could prove foolish.
This upcoming week we are entering the most likely window of time in which FDA will communicate to the applicant (Amarin) the content of their internal mid-cycle review (goal: within 2-weeks after it is held), and with it relay to them their decision on whether or not to hold an AdComm meeting, and if they will, what date will be set. The applicant will then publicly report what that date is before it has a chance to appear on the web. July 8th - 12th is the most likely window now in which we will be told of an AC meeting and the date. Somewhat later is of course also possible. But if the 22nd comes and goes without any mention of an AC meeting, then at that point there probably won’t be one, and you may breathe a temporary sigh of relief. Why a sigh of relief? Because by far and away the most common reason to hold an AC meeting is because “there are significant questions as to the safety and/or efficacy of the drug.” In fact, if a drug is approved without an AC meeting, the FDA makes a note of just that in its letter to the sponsor. For example:
Your application for Firdapse was not referred to an FDA advisory committee because the safety profile of amifampridine phosphate is acceptable for the intended population, the design of the clinical trials was acceptable, and the efficacy findings were clear.
Thus, the converse would be cause to hold an AC meeting. There’s a reason why analysts have been hounding management about any signal there may be one. We think it highly probable one is announced this week or next, because there are serious questions surrounding the design of REDUCE-IT, in particular the use of mineral oil placebo that appears to have hindered cardiac medications, and of course as relates to the reported efficacy results of the study, casting doubt on the purported ability of 4 g/d Vacsepa to significantly and robustly reduce the risk of ASCVD. Thus, upon the mention of an AC meeting, the stock will sell off. Insiders know this, and it is likely one of the reasons they have been selling at key “opportunities,” apparently ones they give themselves (such as the recent PR).
The picture is coming together as to why almost every insider has been dumping their shares at every opportunity: they don’t believe.
That brings us back to hedging possibilities for those with an inordinate percentage of their NPV invested in AMRN, who aren’t following insiders’ exit. Please do seek out advice from a registered investment advisor on risk and hedging strategies. Here is one common strategy that has been used for some time, using current AMRN put strikes and prices as example. It is very effective for protecting positions under $10 mil in value:
-sell 15% of position; keep 85% of AMRN long shares.
-use this cash to buy to open $15 strike puts expiring 17th Jan 2020 (cost: ~$1.50 ea)
Then, two scenarios will occur:
1) sNDA approval with no issues ==> stock rallies to ~$27-$30 or better. Gain 30% of 85%, or ~25%; lose 90% of 15%, or 13.5%; Net net +12% of former full position.
2) AC meeting announced, EVAPORATE possibly placed on clinical hold, AC votes against approval, FDA issues CRL and/or extends PDUFA date 3 months (to end of Dec), then issues CRL, requiring drug-drug interaction studies before approval ==> stock falls to $17, then $12, then ~$8, then ~$1. You hold all positions and recoup ~5% of share value (95% loss) and see your options appreciate 9-fold. Net net you realize a +40% gain. In fact you are better off if it fails even.
OR, you stubbornly refuse to hedge, and:
1) sNDA approval with no issues ==> stock rallies to ~$27-$30 or better. Net net +30% of former full position.
2) AC meeting announced, EVAPORATE possibly placed on clinical hold, AC votes against approval, FDA issues CRL and/or extends PDUFA date 3 months (to end of Dec), then issues CRL, requiring drug-drug interaction studies before approval ==> stock falls to $17, then $12, then ~$8, then ~$1. You hold all positions and recoup ~5% of share value. Net net you realize a -95% loss.
Shouldn’t it be very clear which is currently the better play in AMRN? If negative news comes Monday or during next week, dropping the share price to $19 or lower, or even $17 or lower, you can still hedge if you insist on holding shares.
But, that is just an example. We do not give investment advice, so as mentioned, please seek out the advice of a registered investment advisor.