What a way to start the week for the biopharma group.
The sector is up in Monday trading, even as the overall market is down. Amarin Corp. (AMRN) is by far the biggest gainer in the group, with the stock up nearly 300% in afternoon trading.
The shares of this Ireland-based biopharma are "en fuego" after the company released positive top-line data from a Phase 3 trial called REDUCE-IT (Reduction of Cardiovascular Events Outcomes) Monday morning. This study is aimed at using Vascepa for individuals with high triglycerides with mixed dyslipidemia and would increase Vascepa's potential customer base substantially if approved, which now seems likely based on trial results.
Vascepa is a prescription-only omega-3 fatty acid capsule. It is commonly used as an adjunct to diet for reducing triglyceride levels. Vascepa's current market is limited given one approved indication for very high triglycerides.
Amarin recognized $52.5 million worth of net product revenues from Vascepa in the second quarter, which was up approximately 17% year over year.
Trial results were the second piece of good news the company has received recently. In the second quarter, Amarin settled patent litigation issues around Vascepa with drug giant Teva Pharmaceuticals (TEVA) .
With the rally Monday, the stock is hitting or exceeding most analyst price targets on the shares. Some of the huge rise is probably associated to a short squeeze. I have a small Buy-Write position in this name I opened in front of this upcoming trial data.
For straight equity holders in Amarin, I would be evoking the "Jensen Rules" on this name Monday as this is not my favorite part of the biopharma space. These guidelines go like this:
-- If you buy 1,000 shares of a small cap stock:
-- If the equity goes up 50%, sell 100 shares.
-- If the stock doubles, sell another 200 shares.
-- If the shares triple, sell another 200 shares.
You now have locked in a guaranteed profit even if the stock goes to zero. You also have 50% of the original stake riding on the "house's money," one of the best free rides there is.
Bret Jensen is a regular contributor to Real Money Pro, our sister site for active traders. Click here to learn about this dynamic market information and trading ideas service.