Business Context and Reporting Period
Company: Amarin Corporation plc (NASDAQ: AMRN)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2009
Accounting Basis: International Financial Reporting Standards (IFRS) as adopted by the EU
Amarin is a clinical-stage biopharmaceutical company focused on developing treatments for cardiovascular disease. Its lead product candidate is AMR101, a prescription-grade Omega-3 fatty acid (ethyl-EPA). In 2009, the company underwent a significant strategic pivot, ceasing development of central nervous system (CNS) disorders (including Huntington's disease) to focus exclusively on cardiovascular indications. This shift resulted in a major impairment charge and a reorganization of operations, consolidating functions from Dublin, Ireland, to Mystic, Connecticut, USA.
Key Financial Metrics
| Metric (in US$ thousands) | 2009 | 2008 |
|---|---|---|
| Net Sales Revenues | 0 | 0 |
| Total Operating Expenses | (52,303) | (28,180) |
| Net Loss | (59,317) | (20,021) |
| Net Loss Per Share (Basic & Diluted) | (1.40) | (0.91) |
| Cash and Cash Equivalents (Year End) | 52,258 | 14,239 |
| Total Assets | 56,197 | 38,115 |
| Total Shareholders' Equity | 48,602 | 30,356 |
| Long-term Obligations | (902) | (651) |
Note: The company had no debt outstanding as of December 31, 2009. The increase in cash was driven by a $70.0 million private placement completed in October 2009.
Material Changes vs. Prior Period
- Net Loss Increase: Net loss increased by approximately $39.3 million (nearly 3x) compared to 2008. This was primarily driven by a one-time impairment charge of $21.4 million related to the write-off of the EN101 intangible asset (CNS program) and increased R&D costs for the new cardiovascular trials.
- Revenue: The company generated no revenue in 2009 or 2008. The only revenue in the prior five-year history was a $500,000 milestone payment in 2006.
- Operating Expenses: Research and development expenses increased by 36.9% to $17.8 million due to the initiation of Phase III trials (MARINE and ANCHOR). General and administrative expenses remained relatively flat at $15.3 million, despite restructuring costs, due to reduced headcount and facility consolidation.
- Capital Structure: The company issued 66.4 million ADSs and warrants in October 2009, significantly increasing share capital and cash reserves.
Guidance, Outlook, and Risks
Outlook and Guidance:
- Clinical Trials: The company is conducting two Phase III registration trials for AMR101: the MARINE trial (very high triglycerides) and the ANCHOR trial (mixed dyslipidemia). Top-line results are anticipated in 2011, with a potential New Drug Application (NDA) filing in 2012.
- Liquidity: As of March 31, 2010, cash balances were approximately $44.4 million. Management forecasts sufficient cash to fund operations for at least 12 months from the report date.
- Future Funding Needs: While current resources are sufficient for the NDA filing for the MARINE indication, the company will require additional financing (via commercial partners or capital markets) to fund a required "Outcomes Study" if it seeks a broader indication based on the ANCHOR trial results.
Key Risks and Contingencies:
- History of Losses: The company has never been profitable and expects to incur continued losses for the foreseeable future.
- Regulatory Approval: Success depends entirely on obtaining FDA/EMEA approval for AMR101. Failure in Phase III trials would be catastrophic.
- Internal Controls: Management identified a material weakness in internal control over financial reporting regarding the accounting for complex, non-ordinary course transactions (specifically convertible bridge loans).
- Legal Proceedings: The company is named as a defendant in pending lawsuits related to cardiac valvulopathy and the former product Permax. Management considers the risk of significant liability to be remote, and no provision has been booked.
- Foreign Private Issuer Status: The company expects to lose its "foreign private issuer" status effective January 1, 2011, which will increase compliance costs and reporting requirements.
Important Facts for Investor Verification
- Impairment Charge: Verify the $21.4 million write-off of the EN101 asset and the associated release of the $1.458 million financial liability related to the Ester Neurosciences acquisition.
- Cash Runway: Confirm the current cash balance and burn rate to validate the 12-month liquidity forecast, especially given the high costs of Phase III trials.
- Internal Control Remediation: Review the specific steps taken to remediate the material weakness in internal controls identified in 2009.
- Share Dilution: Note the significant number of outstanding warrants (approx. 41.2 million) and options (approx. 8.9 million) which could lead to substantial dilution upon exercise.
- Permax Litigation: Monitor the status of pending lawsuits regarding Permax, even though management deems the risk remote.