Amarin Corporation plc — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021; filed August 5, 2021. Amarin is a pharmaceutical company focused on VASCEPA (icosapent ethyl), marketed in the United States and through partners in select international markets. Amounts below are U.S. dollars; financial statement amounts are in millions unless otherwise noted.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue, net | $154.5 | $135.3 | $296.7 | $290.3 |
| Product revenue, net | $153.8 | $133.7 | $295.2 | $285.9 |
| Gross margin dollars | $122.3 | $106.5 | $236.2 | $226.7 |
| Operating income (loss) | $8.8 | $4.2 | $7.4 | $(19.9) |
| Net income (loss) | $7.8 | $4.4 | $6.2 | $(16.1) |
| Diluted earnings (loss) per share | $0.02 | $0.01 | $0.02 | $(0.04) |
- Product gross margin was 79% in Q2 2021 versus 78% in Q2 2020, and 80% for the first half versus 78% a year earlier.
- Operating expenses were $113.6 million in Q2, up 11% year over year; first-half expenses were $228.7 million, down 7%. Q2 SG&A rose 16% to $107.2 million, while first-half SG&A fell 6% to $213.0 million. R&D declined 36% in Q2 to $6.4 million and 22% in the first half to $15.7 million.
- First-half operating cash flow was negative $33.8 million, compared with positive $5.7 million in 2020. The company attributed the change mainly to inventory purchases and European launch preparation. Investing activities provided $178.6 million, largely reflecting investment maturities; financing used $4.8 million.
- At June 30, cash and cash equivalents were $327.0 million, restricted cash $3.9 million, short-term investments $181.9 million and long-term investments $14.2 million. Amarin reported aggregate liquidity sources of approximately $527 million and no debt outstanding. Current assets were $996.0 million and current liabilities $370.4 million.
- Inventory increased to $272.5 million from $188.9 million at December 31, 2020; net accounts receivable rose to $182.3 million from $154.6 million. The company had an accumulated deficit of $1.423 billion.
Material changes versus the prior comparable period
- Q2 revenue increased 14% year over year, primarily from higher U.S. product sales. First-half revenue increased 2%; the company said growth was constrained by generic availability, COVID-related disruption, fewer shipment weeks and lower international product revenue.
- For the first half, U.S. net product revenue increased $16.9 million, but reported international product revenue fell to $0.8 million from $8.5 million, partly because the prior-year period included an initial Canadian supply order. Licensing and royalty revenue declined to $1.5 million from $4.4 million.
- U.S. generic competition expanded: Hikma had launched in November 2020, Dr. Reddy’s launched in June 2021, and Teva and Apotex had FDA approvals by quarter-end. Amarin’s Supreme Court petition in the earlier patent case was denied June 18, 2021.
- European Commission approval for VAZKEPA was granted in March 2021, with UK authorization in April. A £7.5 million Laxdale milestone was triggered by European approval and recorded as a $12.0 million current liability and intangible-asset addition.
Outlook, commentary, risks and unusual items
- Amarin provided no quantified revenue guidance, citing uncertainty from COVID-19, U.S. generic competition and European market access. It said sales growth may be inconsistent and that prescription estimates from third parties should be treated cautiously.
- The company anticipated higher SG&A during 2021 as it prepared for European commercialization, and R&D expense to remain consistent with the prior year. A VAZKEPA launch in Germany was planned near the end of Q3 2021, subject to market access and reimbursement; reimbursement timing and commercial outcomes remain uncertain.
- Amarin expected decisions on VASCEPA regulatory reviews in Mainland China and Hong Kong near the end of 2021. It stated that cash and short-term investments should fund projected operations for at least 12 months and support its current plans, while cautioning that assumptions may prove incorrect.
- Principal business risks include dependence on a single lead product, further generic entry and possible use of generics beyond their approved indication, European reimbursement and launch execution, COVID-related effects on patient visits and promotion, and reliance on third-party suppliers. The company disclosed approximately $213 million of potential minimum supply-purchase obligations over the terms of relevant agreements.
- Material legal matters include Amarin’s patent-infringement litigation concerning generic use for cardiovascular-risk reduction; Dr. Reddy’s antitrust lawsuit alleging improper restrictions on API supply; five related antitrust class actions; and FTC and New York Attorney General inquiries on the same general topic. Amarin said it believes it has defenses and intends to defend the matters, but cannot predict outcomes. A separate securities class action was dismissed without prejudice; plaintiffs appealed.
- Management changes took effect August 1, 2021: Karim Mikhail succeeded John Thero as CEO, and Joseph Kennedy retired as General Counsel. The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Track branded and generic icosapent ethyl prescriptions, net pricing, wholesaler shipments and the extent to which generic supply and pharmacy fulfillment affect Amarin’s U.S. sales.
- Monitor VAZKEPA country-by-country reimbursement, timing and economics of European launches, and the expected China and Hong Kong regulatory decisions.
- Assess operating cash burn, inventory levels and purchase commitments against the company’s stated liquidity runway and its assumptions for reaching positive cash flow.
- Follow the outcomes and potential costs of patent litigation, antitrust claims and government investigations, including any effects on supply, promotion or commercial practices.
- Consider customer concentration: three wholesalers accounted for 93% of gross product sales in the first half of 2021, and 95% of gross accounts receivable at June 30, based on the disclosed customer percentages.