Updated: Roth Capital’s Says Amarin's Approval Provides Visibility for Neptune reiterates Buy rating and $10.30 price target

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By M.E.Garza   
Friday, 27 July 2012 07:42
icon_tradedispatchIn a flash note to clients on Friday, Roth Capital Partners’ analyst Joseph Pantginis, Ph.D.,says that Thursday’s FDA approval for Amarin Corporation’s (NASDAQ:AMRN) Vascepa bodes well for Neptune Technologies & Bioressources’ (Nasdaq:NEPT) (TSX:NTB) underlying and growing core NKO business as well as the pharmaceutical opportunity with Acasti's CaPre.

“We believe this is an important win for the Omega-3 space and also bodes well for Neptune which has a potentially differentiated product,” wrote Pantginis

“We believe that all the pieces are starting to come together in a significant way. Bolstered by the recent strong QoQ growth for the core NKO business and our expectation for continued growth, we believe that Amarin's approval for Vascepa is an important win for the Omega-3 space. The visibility on what transpires with Amarin should positively affect Neptune, in our belief, based on our continuing thesis that NKO® (Neptune Krill Oil) and CaPre® (pharmaceutical grade) > Vascepa > Lovaza with regard to potential clinical benefit.

“This differentiation is based on an anticipated "trifecta" of clinical benefit: 1) significant lowering of triglycerides, 2) lowering of LDL cholesterol and 3) raising of HDL cholesterol. We anticipate that CaPre is poised for a solid entrance into the pharmaceutical Omega-3 space. Results of an open label study of CaPre are anticipated by year end 2012, while a randomized Canadian Phase II study of CaPre could read out in 1H13.”

As reported previously, Neptune has filed the regulatory paperwork for a spin-out of its second major subsidiary, NeuroBioPharm. NEPT investors continue to anticipate an announcement about a proposed stock and warrant dividend for their 99% owned subsidiary NeuroBioPharm Inc which should be announced any day. NeuroBioPharm is developing krill oil formulations for neurological disorders.

Pantginis believes Neptune warrants a higher valuation. Roth Capital reiterates their Buy rating and $10.30 price target.

Neptune has been showing continuous growth and strong results for its core business and recently confirmed firm orders from Asia amounting to US$25M for calendar year 2013. Krill oil awareness in Asia, being greatly associated to Neptune's NKO® as a premium reference of Omega‐3, clearly confirms Neptune's brand's initial recognition in the Asian nutraceutical market. They have reinforced patent positioning and are also expecting to initiate and earlier than planned third phase of its Sherbrooke plant expansion (which was originally scheduled for 2014). The goal here is to take the current capacityof 130,000 kg per year to >400,000 kg per year in 2014. Important executive and management changes have been made in anticipation of this significant growth which also sets expectations for increased revenue growth.

A number of funds and institutions are said to be initiating positions in the company following Amarin's approval for Vascepa. If those reports are accurate, the next few weeks should be very telling for shares of NEPT. Already, shares have more than doubled since we first recommended the stock at around the $2 mark.

UPDATE: The following chart has been posted to reflect Friday's 7% price rise in the stock:

Disclosure: LONG NEPT



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