Business context and reporting period
Amarin Corporation plc is a pharmaceutical company focused on VASCEPA (icosapent ethyl), marketed in the U.S. and selected international markets, and VAZKEPA in Europe. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2022. Unless stated otherwise, amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue, net | $94.4 million | $154.5 million | $189.1 million | $296.7 million |
| Net product revenue | $93.8 million | $153.8 million | $187.8 million | $295.2 million |
| Operating income (loss) | $(62.8) million | $8.8 million | $(91.1) million | $7.4 million |
| Net income (loss) | $(70.0) million | $7.8 million | $(101.5) million | $6.2 million |
| Diluted earnings (loss) per share | $(0.18) | $0.02 | $(0.26) | $0.02 |
- Q2 gross margin was $43.6 million, including $15.0 million of restructuring-related inventory costs. Management reported product gross margin of 46%, or 72% excluding the $15.0 million charge and a separate $9.6 million write-off of unsellable inventory. For the six-month period, product gross margin was 61%, or 74% excluding those charges.
- Q2 SG&A was $86.9 million, down 19%; R&D was $9.4 million, up 47%; and restructuring expense was $10.2 million. The six-month figures were $177.5 million for SG&A, $19.4 million for R&D and $10.2 million for restructuring.
- Cash used in operating activities was $163.4 million in the first half of 2022, compared with $33.8 million in the prior-year period. Investing activities provided $172.2 million, principally from investment maturities; cash and restricted cash increased $8.5 million.
- At June 30, cash and cash equivalents were $228.0 million, restricted cash $3.9 million, short-term investments $85.2 million and long-term investments $11.4 million. The company reported no debt. Current assets were $719.1 million and current liabilities $361.6 million. Inventory totaled $436.0 million, including $210.3 million classified as long-term.
- Management stated that cash and cash equivalents plus short-term investments were expected to fund projected operations for at least 12 months from issuance of the financial statements, based on assumptions that may not prove accurate.
Material changes versus the prior comparable period
- Q2 revenue fell 39%; first-half revenue fell 36%. Management attributed the decline primarily to lower U.S. VASCEPA volume and net selling price as generic competition increased. Three generics were in the U.S. market in Q2 2022, versus one in Q2 2021. Symphony Health estimates put branded prescription market share at approximately 65% in Q2 2022 versus 89% a year earlier.
- U.S. generic competition also contributed to lower selling and administrative costs. SG&A reductions reflected the prior go-to-market changes, lower promotional activity and a smaller U.S. sales force.
- The June 2022 cost-reduction plan reduced the U.S. field force from approximately 300 to approximately 75 representatives. The company recorded $10.2 million of restructuring expense and a $15.0 million cost-of-goods-sold charge related to supplier arrangements.
- International product revenue increased from a low base, but European launch growth was slower than expected, which management linked to COVID-19 and political unrest in Eastern Europe.
Outlook, commentary and risks
- Amarin is not providing revenue guidance, citing uncertainty from U.S. generic competition, COVID-19 and European market access. It expects the cost-reduction plan to generate $100 million of savings over 12 months compared with 2021 operating expenses.
- Management expected UK commercial operations to begin in October 2022, with launches in up to five additional European countries in the second half of 2022 and up to eight reimbursement decisions during 2022. It also expected a Mainland China regulatory decision in the second half of 2022. These are forward-looking expectations, not reported outcomes.
- Key commercial risks include further generic entry and price pressure in the U.S.; uncertain reimbursement, pricing and launch timing in Europe; dependence on third-party manufacturers and suppliers; and substantial inventory and purchase commitments. Future contractual purchase obligations were approximately $81.5 million, excluding ongoing supplier discussions.
- Legal and regulatory exposures include generic-related patent litigation, antitrust claims and government inquiries into supply practices and promotional and copayment programs. The company stated it could not predict outcomes or potential impacts. It also faces securities litigation; a separate securities-related derivative action was voluntarily dismissed in July 2022.
- Subsequent to quarter-end, NICE issued UK reimbursement guidance. This triggered a £7.5 million Laxdale milestone obligation; one former shareholder elected stock, and 5,817,942 shares were issued in July 2022 at $1.41 per share.
- Customer concentration is high: three wholesalers accounted for 94% of gross product sales in the first half of 2022 and 95% of gross receivables at June 30, based on the customer percentages disclosed in the filing.
Important facts for investors to verify
- Whether U.S. prescription trends, branded share and net selling prices stabilize amid generic competition.
- Whether the stated $100 million cost savings are achieved, and whether reduced commercial staffing affects sales or international execution.
- Progress on European reimbursement, launch plans and pricing, as well as the Mainland China regulatory review.
- Cash burn, inventory utilization and any additional supplier-related charges or purchase commitments.
- Developments in the pending litigation and government inquiries, including potential financial or operational consequences.
- The share impact of the July 2022 Laxdale milestone issuance and any further equity settlements or dilution.