Amarin Patent Appeal Is a Coin Toss With Billions on the Line

(Bloomberg) -- Amarin Corp. analysts say investors should bet on the drugmaker’s ability to overturn a devastating patent ruling despite odds that resemble a coin flip.

Analysts expect large gains for the shares if Amarin prevails in the Federal Circuit Court of Appeals, where oral arguments begin Wednesday. The company is challenging a U.S. judge’s decision in March to invalidate patents for its heart pill Vascepa, which wiped out $3.5 billion in market .

The stock could surge toward $30 to $35 if Amarin prevails, while a loss would send the shares to the $2 to $4 range, Cantor Fitzgerald analyst Louise Chen wrote. The stock closed Monday at $7.76. That potential gain is worth the risk, according to analysts, with Chen advising clients to not “let this opportunity evaporate.”

Options set to expire Sept. 4 suggest the shares could move 20% between now and Friday. Of the contracts expiring Friday, calls outweigh puts at a rate of 3.9-to-1, which on the surface is a bullish indicator. Implied volatility is 276%, compared with the three-month realized volatility of 47%.

The selection of who will serve on the three-judge panel is expected to have huge implications for investors trying to get a better read on the outcome. The identity of the three judges will be available Wednesday morning. A group of procedural or “pro-pharma” judges would be the most favorable outcome for Amarin, with 10 of the 18 eligible judges likely straddling that line, Piper Sandler analyst Yasmeen Rahimi wrote. Two judges are “pro-generic,” according to Rahimi: Circuit Court Judge Sharon Prost and Circuit Court Judge Jimmie V. Reyna. The remaining six are wild cards, she wrote.

Amarin has a “50/50 shot” of winning the appeal, according to two patent specialists that Stifel consulted. Those odds could swing between zero and 70% depending on who is on the panel, they said. There are a number of factors that make the case “very difficult to handicap,” Stifel analyst Derek Archila wrote.

Analysts expect a decision on the appeal later this year or in the first quarter of 2021.

Read more: Amarin Slides After Hikma Snags Generic Vascepa Approval

©2020 Bloomberg L.P.