I have a love/hate relationship with biotechnology companies and investing in them would rarely be considered a "safe bet."
Just the hint of news can lead to rather dramatic, and often unexpected, swings. This is particularly true when the company's focus is very narrow. The momentum that can accompany such a move can create nearly unprecedented returns for investors who are positioned from the ground level. But drug studies, approvals, and patents are just a few of the potential catalysts for disaster.
As ominous as it may sound because of the threat of poorly-received news lurking around the corner, with the population growing and aging, biotechs will never "go out of style." I've taken a few hits along the way, but this industry group has also produced some of my greatest gains over the past couple of years. As I was doing some of my own research over the weekend, there was one company in particular that caught my eye: Amarin (AMRN).
Amarin Corp. is a biopharmaceutical company that focuses on treatments for cardiovascular disease. It recently launched a product called Vascepa, which is an omega-3 fatty acid eicosapentaenoic. This is the type found in fish and fish oil. Vascepa was approved by the FDA for the treatment of patients with severely high triglycerides, but the launch has not yet had much impact on the company's share value.
One reason cited for the lack of buyers at this point in Amarin is a delay in receiving new chemical entity status on Vascepa. NCE status offers greater patent protection. Without it, the perception of vulnerability is greater, which could scare away larger companies that might otherwise consider making an offer to purchase the rights to the drug -- or the company as well.
While Amarin waits, investors have done the same. The company has pulled back steadily off the highs made last July. The pace of that selling slowed throughout this year as Amarin pulled hesitantly into lows made in December 2011. The "V" and inverted "V" formations that are clearly seen on the weekly time frame since the 2011 highs will make it difficult for shares to break the lows established at the end of that year.
The intraday momentum shift that is taking place recently confirms it. Each of the smaller 60-minute waves that moved higher within the daily channel over the past month has been stronger than the selloffs taking place recently within this channel.
I will be watching for opportunities over the next several weeks to build a long position in Amarin. My initial daily target is $8.40, followed by $9.80 and then $11.50. $6.00 is the current monthly support zone.