“Told us so?” We think there is a roughly 40% chance the Vascepa efficacy supplement gets approved without a hitch. We wouldn’t be very surprised if FDA responded to our petition by stating that they have determined the issues brought to light were not significant enough to require DDI studies. We think it is more likely they agree with our analysis, and have perhaps been turned on to a point or two that they then looked deeper at and may have realized in the abundance of data that only they and the sponsor can see that there are numerous red flags that justify requesting DDI studies of Amarin. We also think >85% chance they lose the patent litigation cases in late Jan/early Feb (most ANDA bench trials resolve in under 8 days).
Here’s the low down: if the above odds more accurately reflect the risk:reward of AMRN, and considering realistic projected peak sales, the stock should be trading nearer to a $1.2B market cap, not over $7B. Instead, the market obviously thinks well over 90% chance approval without hitch, and about equal for patent litigation win.
Essentially all stocks are speculative investments, and some carry far greater risks than others. High risk should de facto stifle the market cap relative to conservative future peak sales estimates. It hasn’t here because the market does not think the risk is at all high. Our analysis has revealed the market is quite wrong about that.
And so, it’s a bit more complex than “right,” and “wrong.” The best analogy is gaming. If someone walks up to a roulette table and places chips on 15 numbers, and wins, were they right? If they lose, were they wrong? No, they are “wrong” regardless, because they weren’t “getting odds,” as they say.
We don’t recommend this of that position on a stock, but our analysis has revealed that AMRN is severely overvalued, and far riskier to own than the market has given it credit for.
Regards,
-MRC
