Despite all of Wall Street's conflict and contention, a fortunate few companies enjoy unanimous support among professional analysts. If the market's movers and shakers all believe these companies will beat the long-term averages, well, surely they will -- right?
Not so fast!With help from Motley Fool CAPS, the 180,000-member-driven investor community that translates informed opinion into stock ratings of one to five stars, we'll see whether these highflying favorites deserve analysts' unwavering support.
Today we'll take a look at biotech Amarin (NAS: AMRN) , whose triglyceride-lowering fish oil therapy Vascepa received FDA approval earlier this summer and is now awaiting a decision on whether it should be granted a five-year window of exclusivity. Amongst the analysts that CAPS tracks, five have weighed in on Amarin, and though the investor community isn't unanimously supportive, 88% of the 245 members registering their opinion agree it will go on to outperform the broad market averages.
1-Year Stock Return
Return on Investment
Estimated 5-Year EPS Growth
Dividend and Yield
No. of Analysts
CAPS Rating (out of 5)
Source: FinViz.com. N/A = not available, Amarin doesn't pay a dividend.
But just because Wall Street loves 'em doesn't mean you have to. Analyst sentiment is only just the jumping-off place for your own research.
Aside from sales, the exclusivity question is what's going to drive Amarin for the immediate future -- and will likely play a big role in what those sales become and how it affects the stock. We got a sense of that last week, when the biotech jumped almost 10% after it appeared the National Institutes of Health had indeed determined it was a "new chemical entity." The analysts are PropThink said that an article appearing on the NIH's website identified it as such, giving it the appearance of it having its imprimatur, but in reality was just an informative article published by a third party. The stock ended up pulling back from most of those gains.
More hands pulling the oars
When the biotech announced two weeks ago that it didn't expect an FDA decision anytime soon (which was one reason why the NIH article after the statement moved the needle so much), it also said there was a three-pronged path forward for the treatment: Amarin would be acquired, and there would be a "strategic collaboration," or it would market it itself, but that would still include a third party's participationÂ .
Speculation that Amarin would be acquired has been one of the strongest motivators for an investment. Pfizer (NYS: PFE) could use another successful product on the market now that Lipitor faces generic competition, and it's an added bonus that it would enjoy patent protection. But both Merck (NYS: MRK) and AstraZeneca (NYS: AZN) could be interested as well, since Vascepa is compatible with their cholesterol-fighting drugs.
Bigger fish to fry
The biotech says regardless of the FDA's decision on its five-year exclusivity request, it fully expects to be granted a three-year window that ought to still be an attractive inducement to a buyer. Yet investors should be fully aware that if the regulatory agency hands down a negative decision on Amarin's five-year request, the stock will probably be jolted.
I'd view that as an opportunity, since Vascepa still has a healthy growth trajectory before it, so I'll be maintaining my own previous outperform rating on CAPS as a means of holding myself accountable for these bullish sentiments, but also with the understanding it might pull back should the FDA hand down an adverse decision. Tell me in the comments box below if you think Amarin is just spinning a whale of a tale and Vascepa is really just a small fish in a big pond.
Agree to disagree
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The article Wall Street Loves Amarin. Should You? originally appeared on Fool.com.
Fool contributor Rich Duprey owns shares of Pfizer. The Motley Fool owns shares of AstraZeneca and GlaxoSmithKline. Motley Fool newsletter services recommend GlaxoSmithKline. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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