"Amarin Falls 10% Amid Patent Concerns," read one headline from Friday after trading volume of nearly ten million sent shares of Amarin Corporation (AMRN) tumbling.
To the contrary, however, headlines from the day before read to the tune of, "Amarin Shares Rebound 12%."
The "rebound" materialized after news on Wednesday hit the wires that the US Patent and Trademark Office (USPTO) had rejected Amarin's patent application for AMR-101, its treatment for very high triglycerides that is currently before the FDA for approval review, and sent shares south by ten percent.
It's safe to say that, at least for a week, AMRN was a day trader's dream.
Given the volatility of the previous trading week, this is one to keep on the watch list for the coming week, too. The potential for short term price swings underlies the inherent long term potential of this stock that traded for as high as nearly twenty bucks after multiple Phase III trials were deemed successful and news of a potential partnership stole the headlines.
The FDA is expected to announce its decision on AMR-101 approval in July, as outlined in a recent company report, and it is widely considered a safe bet for approval, give the positive results from the Phase III trials.
Amarin is also sitting on a solid cash position, which reduces some of the inherent risk associated with investing in 'FDA decision stocks', and is another factor that could be attractive to potential partners or buyers.
Given the mid to long term potential of the company and AMR-101 on the open market, the patent concerns may continue to weigh heavily on the short term movement of the share price. Multiple media reports and analyst comments indicate that the general sentiment falls in line with an ultimate issuance of the Amarin patent by the USPTO, but that does little to quell the nerves of those investors who may not like the added speculative nature of their Amarin investment.
The volatility surrounding this company following the patent news may also be supplying the longs with an ample opportunity to add shares in anticipation of the July FDA decision, which could be preceded by a speculative price run.
Generally, biotech and small pharmaceutical stocks tend to run at some point leading into approval decisions, but lately the trend has been to see a fall-off after the announcement, whether positive or not. Amarin may not be subjected to such a post-decision decline if partnership news quickly materializes, but also keep in mind that there is still a long way to go between approval and a market launch that justifies a sharp spike in share price.
Some high profile new product launches have met stiff resistance at the commercialization stages, which is another reason why investors these days are opting to 'sell the news'. Human Genome (HGSI) and GlaxoSmithKline's (GSK) lupus drug Benlysta and Dendreon's (DNDN) prostate cancer treatment, Provenge, come to mind in this regard. With the solid success of AMR-101 in late stage trials, however, the ramp-out in sales could come quicker than other recent launches such as the above-mentioned.
Amarin's patent notice was labeled as "non-final," so it's a story to keep watching. In the meantime, investors will be eyeing July's date with the FDA as a potential catalyst.
For the coming months, AMRN will be a stock to watch, and potentially buy on the dips.
Disclosure: No position.