Shares of Amarin Corporation (AMRN) opened the new trading week with a bang, jumping by over a buck on Tuesday - good for a seven percent gain - before giving back half of those gains on Wednesday as traders likely parlayed the quick spike into some opportune profits. Amarin has been one of the more-watched stories in the healthcare sector over the summer, especially since the late-July approval of Vascepa for the treatment of very high trigylcerides sent shares into a dramatic tailspin that resulted in a twenty percent drop in price. Although shares did begin to rebound rather quickly, investors - and potential buyers of the company - were still awaiting the outcome of pending catalysts that could confirm the true overall value of Vascepa over both the short and long terms. One of those catalysts developed this week and led to Tuesday's share price spike of seven percent.
Amarin announced this week that the United States Patent and Trademark Office (USPTO) has published notification of Notices of Allowance for multiple U.S. Patent Applications that will significantly strengthen the protection of Vascepa from competition until at least 2030. While many expected that the slew of Amarin's patent applications would start receiving such notices in due time, the realization of those expectations adds the validation needed for investors and potential buyers of the company to accurately gauge the potential value of the product over time. Given that many see Vascepa as a potential blockbuster - once approved for all indications of high triglycerides - the added protection may add billions to the value of a potential buyout deal.
Also on the horizon is the expected decision on Vascepa's status as a new chemical entity (NCE). Such an approval would again provide added protection for the product and validate the true long term value of the product.
Although shares retraced by over three percent on Wednesday, each of these catalyst events helps to confirm the validity of investor and analyst speculation that puts the near to mid term value of AMRN shares at over the $20 mark. In fact, following the Vascepa approval, some analysts already covering the stock reaffirmed their 'Buy' ratings and enthusiastic price targets. It's also been speculated that any potential buyout deal of the company would be valued at about $25 per share. That's why the additional patent coverage and NCE status is so crucial to investors at this point, because it validates the potential of the $20-plus price targets.
Until the story is all played out, expect the continued volatility of AMRN shares seen this week. Also keep in mind that while many speculate on a potential buyout, there is still the chance that Amarin does not sell. Should that be the case, then the full share price rebound may take a little longer to materialize as it'll take a revenue stream and proof that Vascepa can live up to its blockbuster hype in order to convince investors that the potential is real.
As proven by Dendreon's (DNDN) Provenge, predicted blockbuster stories don't always pan out.
Neostem Inc (NBS) is another company in the healthcare sector making a major move in the healthcare sector this week. Shares of this developmental company developing a pipeline of stem cell therapies moved by thirteen percent on Wednesday as the company prepares to embark on a road show that will put its developmental stem cell therapies in the spotlight at five major investor conferences. The busy schedule commences this week in New York where Neostem representatives will present at the 19th Annual Newsmakers in the Biotech Industry - BioCentury & Thomson Reuters.
While investor conferences are a great way to build exposure for a developmental company, competition for investor interest is thick - so there must be a story to tell. For Neostem, a company positioning itself as a leader in the field of regenerative medicine, the story could be gaining enough momentum to quickly become exciting, as evidenced by this week's price run and the run that materialized earlier this year that led to a share price double.
NeoStem's most advanced therapy candidate, AMR-001, is targeting the multi-billion dollar market of preventing major cardiac events following acute myocardial infarction (AMI). According to estimations by NeoStem in a recent company report, numbers also cited by the American Heart Association, of the roughly 800,000 annual AMI patients, about 20% are considered ST segment elevation myocardial infarction (STEMI), a condition that places patients at risk to experience conditions of progressively deteriorating heart function. It is that 20% of patients who will be systematically targeted for treatment via Neostem's ongoing PreSERVE trial. In an early sign of validation, an independent data monitoring committee reported last month that the company had received approval to continue moving forward with the trial.
While not a telling sign of overall success, it is validation enough that the treatment may be working as intended.
Neostem has something else that most other still-developmental companies do not have - a qualified revenue stream. Through an early-2011 acquisition of Progenitor Cell Therapy, the company operates a large-scale contract manufacturing facility that provides contract development services for a variety of clients currently developing cell-based therapeutic treatments. PCT is already a recognized leader in the industry and revenue has already grown by 95% during the past two reporting quarters, according to numbers presented the latest quarterly report, with continued growth expected. Such a growth rate enables Neostem to help support day-to-day operations, help fund pipeline development while also reducing the risk of a major dilutive event - a huge bonus in the eyes of potential investors.
Bear in mind that the company is still speculative and while a revenue stream will help reduce the need of major dilution during pipeline development, it may not alleviate the need to do so altogether.
Judging by this week's price run and volume boost, however, it looks like investors are becoming interested in the prospects of the company again.
Dislcosure: Long AMRN.
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