Despite the political headwinds over prescription drug prices in the United States, the biotech industry has still managed to post some rather respectable gains so far this year. This rising tide, in turn, has caused valuations across the space to blossom in 2019.
Nevertheless, there are a handful of names that have yet to truly push the envelope from a valuation standpoint…
Amarin Corporation (NASDAQ:AMRN) and Heron Therapeutics (NASDAQ:HRTX), for instance, are both trading at steep discounts relative to their long-term value propositions. Should bargain-hunters pounce on these two comparatively cheap biotech stocks? Let’s dig deeper to find out.
The stage is set
At first glance, Amarin may not come across as a particularly cheap healthcare stock. After all, the company’s shares are up by a breathtaking 617% over the prior 12 months, pushing the biopharma’s valuation into nosebleed territory. Amarin’s stock, in fact, is now trading at approximately 11 times next year’s projected revenue haul. That’s an exceedingly rich valuation — especially for a company with just one product on the market and no clinical pipeline to speak of.
However, the market bid up this mid-cap biopharma stock for a very good reason. Namely, Amarin’s prescription omega-3 treatment Vascepa appears to be on the cusp of becoming part of the standard-of-care for patients with cardiovascular disease who are unable to adequately control their triglyceride levels, despite being on statin therapy. Keeping with this theme, Wall Street’s initial forecast calls for Vascepa’s sales to reach a staggering $2 billion early in the next decade if the Food and Drug Administration (FDA) approves this lucrative label expansion this upcoming September.
Amarin, though, has laid a convincing case — during its various investor presentations over the past few months — that even this stately sales estimate might be missing the mark by a wide margin. Point blank, Vascepa may break into the top five best-selling drugs in the world by 2024 — outpacing the likes of AbbVie and Johnson & Johnson‘s megablockbuster blood cancer drug Imbruvica in the process.
That might sound like a tall tale based on Vascepa’s humble beginnings as a niche treatment for patients with severely elevated triglycerides. But the drug’s sales have started to rise higher in the first half of 2019, suggesting that a fair number of caregivers are already prescribing Vascepa as an add-on to statin therapy. The floodgates, in turn, could open if the FDA OKs the drug’s cardioprotective indication this fall…
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