Amarin Corporation plc — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing; the supplied filing text does not provide a complete Q4 income statement.
Business context
Amarin is a pharmaceutical company whose business is substantially dependent on VASCEPA (icosapent ethyl), its prescription cardiovascular-risk-reduction and triglyceride-lowering product. U.S. sales are primarily direct to wholesalers; international sales are largely through partners. The FDA-approved cardiovascular-risk indication is based on the REDUCE-IT trial.
Key financial metrics
| Metric ($ millions, except per-share data) | 2020 | 2019 | Change |
|---|---|---|---|
| Total revenue, net | 614.1 | 429.8 | +43% |
| Product revenue, net | 607.0 | 427.4 | +42% |
| Gross profit | 482.6 | 333.7 | +45% |
| Gross margin on product sales | 78% | 78% | Unchanged |
| Selling, general and administrative expense | 463.3 | 323.6 | +43% |
| Research and development expense | 39.0 | 34.4 | +13% |
| Operating loss | (19.7) | (24.3) | Loss narrowed |
| Net loss | (18.0) | (22.6) | Loss narrowed |
| Net loss per share, basic and diluted | $(0.05) | $(0.07) | |
| Net cash used in operating activities | (21.7) | (9.4) | Use increased |
- Liquidity: At year-end, cash and cash equivalents were $187.0 million, short-term investments $314.0 million, and long-term investments $62.5 million. The company reported aggregate liquidity above $550 million and no outstanding debt.
- Cash flow and working capital: Cash, cash equivalents and restricted cash declined $457.6 million during 2020. Investing cash outflow was $377.0 million, mainly reflecting purchases of investment securities. Operating cash use included a $112.1 million inventory increase; year-end inventory was $188.9 million versus $76.8 million in 2019. Net accounts receivable was $154.6 million versus $116.4 million.
- Debt: The company repaid its royalty-bearing instrument in full in November 2020; the original repayment obligation was up to $150 million.
Material changes versus the prior comparable period
- Revenue growth was driven mainly by higher U.S. VASCEPA sales; the company reported estimated U.S. prescription growth of 39%–41% for 2020, depending on the third-party data source.
- Higher selling and marketing costs—particularly the expanded U.S. sales force and promotion—absorbed much of the increase in gross profit. The company remained loss-making despite narrower operating and net losses.
- Operating cash use rose, while cash and equivalents fell substantially. The company also shifted significant funds into short- and long-term investments and completed repayment of its royalty-bearing debt.
- Estimated normalized prescriptions for Q4 2020 were 1.159 million according to Symphony Health and 1.076 million according to IQVIA, versus 0.991 million and 0.909 million, respectively, in Q4 2019. Both estimates were slightly below Q3 2020; the company cautions that these third-party estimates may be imprecise and do not establish revenue trends.
Outlook, commentary and key risks
- Revenue outlook: Amarin suspended net-revenue guidance, citing uncertainty from COVID-19, U.S. generic competition and European approval and market access. The filing references January 2021 guidance on business and expenses but does not provide clear numerical guidance values in the supplied text.
- Costs and expansion: Management expected 2021 selling, general and administrative expense to increase as it prepared for a potential European launch; it planned to grow its European team from about 50 professionals to about 200 by year-end. Research and development expense was expected to remain broadly consistent. Management expected 2021 API average cost to be similar to or modestly below 2020.
- COVID-19: Restrictions on physician access, patient visits and routine blood testing slowed prescription and revenue growth. The company said supply had not been materially disrupted, but future demand and promotional access remained uncertain. It suspended U.S. television promotion in Q4 2020 because management judged the cost was not justified.
- Generic competition and litigation: Hikma launched a generic version on a limited scale in November 2020 after adverse U.S. patent rulings; Hikma and Dr. Reddy’s had FDA approvals, Teva’s application was approved, and Apotex had an application pending. Amarin sought U.S. Supreme Court review and separately sued Hikma over alleged inducement of infringement of cardiovascular-use patents. Outcomes and commercial effects are uncertain. The company said generic competition reduced its normalized prescriptions by approximately 6.7% for the remainder of 2020.
- International prospects: On January 28, 2021, the EMA’s CHMP recommended EU marketing authorization for VAZKEPA; European Commission review was expected within 67 days. Launch timing depends in part on country-by-country reimbursement. China and Hong Kong reviews had commenced by February 2021, with decisions expected near year-end 2021.
- Contingencies: The DOJ issued a civil investigative demand in June 2020 concerning past speaker programs and copayment-waiver practices and possible Anti-Kickback Statute and False Claims Act issues. Amarin said it was cooperating and could not predict the outcome. A securities class action alleging omissions related to REDUCE-IT and its mineral-oil placebo remained pending; the company said it could not reasonably estimate any loss exposure.
- Other exposures: Supply agreements included approximately $326.1 million of potential minimum purchase obligations over their terms. The year-end product-return liability was $7.8 million, an estimate identified by the auditor as a critical audit matter. Concentration is material: three customers accounted for 38%, 29% and 25% of 2020 gross product sales.
- Clinical and safety context: REDUCE-IT showed a 25% relative risk reduction in its primary cardiovascular endpoint. The filing reports higher observed rates of hospitalization for atrial fibrillation or flutter (3% versus 2%) and bleeding (12% versus 10%) in the trial; patients using antithrombotic medicines are to be monitored.
Most important facts for investors to verify
- Whether prescription growth converts into net sales and cash generation, considering wholesaler purchasing, gross-to-net deductions, channel inventory and the limitations of third-party prescription estimates.
- The pace and commercial impact of generic entry, including the status and outcome of patent litigation and any further launches.
- European authorization, reimbursement timing and launch costs, alongside progress and economics of partner-led markets such as China.
- Cash use, inventory levels and obligations under supply agreements, particularly as promotional spending and international launch preparations change.
- Developments in the DOJ investigation, the securities litigation and the product-return reserve estimate.