Amarin Corp. (NASDAQ: AMRN) is currently stuck in a tough predicament, and not just as a function of the stock market as a whole. Amarin stock was absolutely crushed at the tail end of March, and now the company is dealing with the fallout. Investors will be asking a lot of tough questions. Namely, is Amarin viable going forward?

As we’ve seen over the past couple of months, the Dow Jones industrial average, S&P 500 and Nasdaq have largely sold off, but a turnaround could be in the works. While it’s said that a rising tide lifts all ships, Amarin may be sunk and taking on more water.

Amarin has been known for its Vascepa drug, which seeks to improve cardiovascular outcomes. After coming under fire in court, the fate of this company may be uncertain.

Bang the Gavel

Amarin shed a few billion dollars worth of market cap as the result of a recent court ruling. The long and the short of it is that Amarin’s stock took a dive when a Nevada federal district court ruled in favor of two companies that had challenged Amarin’s patent on Vascepa.

The plaintiffs in the Nevada case were generic drugmakers Dr. Reddy’s Laboratories Inc. (NYSE: RDY) and Hikma Pharmaceuticals. The firms had previously argued that Amarin’s patent claims were “obvious.” GlaxoSmithKline PLC (NYSE: GSK) already had received FDA approval for a similar product, Lovaza, as a treatment for high triglyceride levels.

The ruling in Nevada ultimately calls into question the safety of Vascepa’s patent, declaring that even though generic versions of Vascepa would infringe on claims in Amarin’s patent, those claims were “obvious” and invalid. Amarin holds six patents on Vascepa, a synthetic formulation of fish oil.

Amarin “strongly disagrees” with the ruling and has decided to go through the appeal process.

Competition?

Now that there’s blood in the water, and the patent is not being upheld, the valuation of Amarin is a very real question for investors. So is what the competition looks like. As the stock price sold off 70% on the ruling, that is a reasonable place to start.

It’s also worth pointing out that just because Amarin lost its patent ruling on Vascepa doesn’t mean the firm has to stop selling it. It only means that there will be increased competition and that these generic drugs will be cheaper. However, no generics for Vascepa are currently FDA-approved.

Granted that the current stock price values the company based on future projections, and any generic drug could easily upset Vascepa sales. Yet, some high hurdles remain for the competition to get into this market. One such hurdle would be developing manufacturing facilities for pure eicosapentaenoic acid (EPA), the omega-3 fatty acid on which Vascepa is based.

Amarin currently has three facilities, and it is unclear if any of the competition has access to even one. Jefferies estimates that it would take roughly six months to outfit a manufacturing facility to produce a copycat version.

Another thought that might be counterintuitive is that generics makers also might consider waiting to enter this market. As Amarin is spending money on advertising and growing awareness, essentially expanding the market, the firm is doing all the legwork. Generics makers could wait as the market expands and then jump in and capitalize when it is ripe for the picking.

What’s Next?

Other than waiting for its appeal to go through, Amarin has nothing better to do than lean heavily into its pipeline. Amarin has several treatments in trial and study phases.

The main focus is on the science associated with omega-3 fatty acid, fish oil and lipid disorders. The goal is to help improve patient care by evolving the science regarding management of lipids, lipoproteins and other cardioprotective factors. In terms of the specifics, Amarin’s therapeutic focus is on lipid disorders, currently hypertriglyceridemia and mixed dyslipidemia. So what is Amarin doing with all this tech?

The firm only has one ongoing clinical trial, which is for another indication for Vascepa. Amarin does not have a pipeline so much as just one blockbuster drug.

Here’s the thing. Amarin has more or less put all its eggs in one basket, and that basket is Vascepa. Anything that threatens Vascepa, like this court ruling, would be incredibly detrimental for the brand. By not diversifying outside of Vascepa, or licensing any other drugs, Amarin has effectively cornered itself, and its destiny may not be within its own control.

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