Here's Why I Wouldn't Touch Amarin With a 10‑Foot Pole Given Its Patent and Competition Risks

Amarin (NASDAQ: AMRN) is a drug company that is in a particularly precarious position. This fact is highlighted by the company's recent move to restructure its operations in an effort to cut costs. And Vascepa, the one drug it has to sell, is already facing generic competition in the United States. Most investors would be better off with a larger drug company.

Amarin has some positives to offer

Perhaps the most positive thing about Amarin is its balance sheet. The company is carrying no long-term debt, has a cash balance of nearly $135 million, and owns short-term investments worth just under $168 million. In short, it is in a very strong financial position and can likely sustain its business for years to come.

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Meanwhile, despite the headwinds Vascepa faces in the U.S. market, it is a revenue-generating product. In 2025, Amarin had product sales of nearly $183 million. And a restructuring effort in 2025 has helped the company reduce costs. Management believes the restructuring will help it to generate positive free cash flow in 2026. A pharmaceutical company with no debt and positive free cash flow would normally be hard to complain about.

I still wouldn't touch Amarin with a 10-foot pole

For the most part, the good news ends there. The big risk is that the company's sales stood at $285 million two years ago. So there's been a material decline on the top line. The fact that its only drug has faced generic competition in the U.S. market has a lot to do with the revenue decline. With no other product to lean on, Amarin has little choice but to pull back on spending or its strong financial situation could quickly start to deteriorate.

Essentially, the company is doing the right thing by trying to milk every dollar out of the only drug it has to sell. But it isn't working from a position of operational strength. The big risk is that the company's revenue declines continue, with the company simply shrinking its business along the way to sustain itself. That's not likely to lead to a good outcome for shareholders.

Go with a bigger drug company

To be fair, the drug cycle that Amarin is dealing with is completely normal in the pharma sector. The problem is that the company has just one drug to sell. If it were a larger company with a broader drug portfolio, it would have a stronger foundation from which to work. If you are willing to take on the risk associated with Amarin, you'd likely be better off buying an out-of-favor drug maker like Pfizer (NYSE: PFE) instead.

Pfizer has patent expirations coming up and had a material GLP-1 drug setback. However, it has a broad portfolio of drugs, and management was able to quickly pivot and acquire a new GLP-1 drug candidate. Pfizer has proven, once again, that it can pivot as needed. Essentially, unlike Amarin, Pfizer is working from a position of strength.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.