Amarin Corporation plc (NASDAQ:AMRN) shares took a tumble today following news yesterday evening that the company was set to make a cash grab into the market, diluting shareholders with a $200 million ADS deal through Jefferies and Cantor Fitzgerald.
This type of announcement will almost always spook some money out of a stock. However, in this case, it is a particularly interesting reaction given the surrounding narrative.
Amarin Corporation plc (NASDAQ:AMRN), as you know, has been rolling on momentum from its astonishingly successful Reduce-It trial, wherein data showed a remarkable impact on risks for serious negative cardiovascular events for patients deemed to be at high-risk of such events, reducing heart attack, stroke, and cardiovascular death by as much as 25% over years of data for thousands of patients in the study.
We say “as much as” because, as you are also likely aware, the placebo arm of the study employed mineral oil, which presents some potential for skewing of comparative results – though even skeptics at this point can only make a case that Vascepa has a strong preventative impact at worst.
Now, the company faces the need to prove that it can take the product to market successfully. Why? Because that is how the founding shareholders will secure the best negotiating position as we move toward some type of seemingly inevitable take-out offer from larger players in the space.
This capital raise is certainly dilutive, but the extra $200 million in cash will go a long ways toward securing an extra billion bucks down the line, we would suggest. The ability to demonstrate that this company can go it alone if need be is exactly how the eventual buyout price will be maximized.
After all, the price for the company is not a theoretical or abstract process. And it’s not simply about how much money another company could make from Vascepa if in charge of mobilizing it in the marketplace.
Instead, it’s the lowest the buyer can get it without Amarin feeling like it can walk away from the table and find a better deal. That’s it. And an extra $200 million in the cash stockpile represents the ability to demonstrate to the pool of potential buyers how successful the product can be in the market for a period – to show concrete trends and then start a bidding war.
In other words, the dilutive consequences of this move may not be the most important point to consider. In addition, the reaction to the headline may have been enough to shake out weak-handed longs and the clear the bus, freeing the tape up for more upside.
Amarin Corporation plc (NASDAQ:AMRN) trumpets itself as a biopharmaceutical company that focuses on the development and commercialization of therapeutics for the treatment of cardiovascular diseases in the United States.
The company’s lead product is Vascepa, a prescription-only omega-3 fatty acid capsule, used as an adjunct to diet for reducing triglyceride levels in adult patients with severe hypertriglyceridemia. It is also involved in developing Vascepa for the treatment of patients with high triglyceride levels who are also on statin therapy for elevated low-density lipoprotein cholesterol levels.
Amarin Corporation plc sells its products principally to wholesalers and specialty pharmacy providers through direct sales force. It has collaboration with Mochida Pharmaceutical Co., Ltd. for the development of EPA-Based drug products and indications.
Amarin Corporation plc (NASDAQ:AMRN) managed to rope in revenues totaling $55.4M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 16.3%, as compared to year-ago data in comparable terms.
In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($82.5M against $151.6M, respectively).