Shorts Creep Back Into Amarin as Deal Speculation Quiets Down

(Bloomberg) -- Investors slowly raised bets against small-cap drugmaker Amarin Corp. as speculation around a possible deal has calmed in recent weeks. Shares have maintained their gains after the company submitted a filing to U.S. regulators at the end of March to broaden the indication for its heart capsules.

There are more than 21.7 million shares of the Dublin-based company sold short, up from the approximately 12 million short in mid-September, according to financial analytics firm S3 Partners. The stock surged later that month when its fish-oil-based medication showed promise in a long-term study. Short selling increased over the last three weeks as speculation of a multibillion-dollar deal quieted and investors shifted their focus to first-quarter prescription numbers.

Roughly 6.6 percent of Amarin shares available for trading are sold short, the highest in more than a year, with 2.1 days to cover, according to data compiled by S3. The company’s American depositary receipts remain more than 500 percent higher since the initial “Reduce-It” trial announcement on September 24, bringing its market value to about $6.3 billion.

Shorts Creep Back Into Amarin as Deal Speculation Quiets Down

One thing is clear. Amarin options appear to be maintaining the bullish theme with total call open interest exceeding put open interest by more than 3 to 1. Over 33 percent of those calls are set to expire on April 18 and the at-the-money straddle is expecting a 5 percent move in shares between today and expiration.

Those option bets could be used by investors as a hedge against shorts. A key catalyst for the drugmaker will come in the few weeks, when management reports first-quarter results. Amarin expects revenue to increase more than 50 percent to about $350 million in 2019, driven by sales of Vascepa. The average analyst estimate calls for 2019 revenue to reach $365.5 million, data compiled by Bloomberg show.

Wall Street analysts have pounded the table for a larger company to make an offer for Amarin and help accelerate uptake of its potential blockbuster. The company on March 28 said it submitted a supplemental filing to the Food and Drug Administration for Vascepa to reduce the risk of major adverse cardiovascular events, the same week as the drug won a notable endorsement from the American Diabetes Association.

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