Amarin Corporation plc — Q1 2012 Form 10-Q
Reporting period: Three months ended March 31, 2012. Dollar amounts are U.S. dollars; financial statement figures are in millions unless noted.
Business context
Amarin was a late-stage biopharmaceutical company focused on developing AMR101 (icosapent ethyl) for cardiovascular and triglyceride-related indications. It had no product revenue. Its NDA for the MARINE indication was under FDA review, with a PDUFA date of July 26, 2012. The company was conducting the REDUCE-IT cardiovascular outcomes study and preparing for possible commercialization.
Key financial metrics
| Metric | Q1 2012 | Q1 2011 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $4.8 | $4.4; up 9% |
| Marketing, general and administrative expense | $14.0 | $2.7; up 419% |
| Operating loss | $(18.8) | $(7.2) |
| Loss (gain) on derivative revaluation | $(66.2) | $25.3 gain |
| Interest expense, net | $(4.0) | $0.0 income |
| Net income (loss) | $(88.3) | $18.3 |
| Basic and diluted earnings (loss) per share | $(0.65) | $0.15 basic; $0.12 diluted |
| Operating cash flow | $(17.7) | $(8.8) |
| Cash and cash equivalents, March 31 | $245.8 | $129.5 at March 31, 2011 |
Liquidity and debt: Current assets were $251.3 million and current liabilities $9.6 million at March 31, 2012. The company raised $150.0 million principal through 3.5% exchangeable senior notes in January, receiving $144.3 million net. Notes are due 2032, with holder repurchase dates beginning in 2017; carrying value at quarter-end was $124.3 million after discounts. Management said cash was sufficient for projected operations for at least 12 months, based on current plans.
Margins: Not meaningful because the company reported no revenue. The filing does not provide a clear operating margin measure.
Material changes and unusual items
- Net loss swung from prior-year income, principally because a $66.2 million non-cash loss from remeasuring warrant derivative liabilities replaced a $25.3 million gain. The warrant liability rose to $191.4 million from $123.1 million at year-end.
- Operating expenses increased as the company added staff and commercial-preparation activities; R&D also reflected REDUCE-IT costs and higher stock compensation, partly offset by reduced costs for completed MARINE and ANCHOR trials.
- Cash increased by $129.2 million during the quarter, primarily due to the January notes financing. Financing cash flow was $147.0 million.
- The warrant liability is measured using Level 3 inputs and is sensitive to Amarin’s share price. A hypothetical 10% share-price increase would have increased the liability by $20.7 million, with a corresponding additional loss.
Outlook, commentary and risks
- Management planned to advance REDUCE-IT, build commercial readiness and, subject to approval, prepare an AMR101 launch. A potential self-commercialized U.S. launch was anticipated in early 2013; collaboration, acquisition and self-commercialization remained under consideration.
- Management expected 2012 R&D spending to reflect REDUCE-IT and AMR101 supply purchases, and SG&A to rise with commercialization preparation. Timing and scale depended partly on FDA approval and the commercialization route.
- Key execution risks include FDA review and approval, successful completion of REDUCE-IT, supplier qualification and manufacturing capacity, and funding needs if the company launches without a strategic partner. The filing says additional capital may be needed for a solo launch.
- Contractual cash obligations were $21.8 million, including $10.1 million of 2012 purchase obligations and $10.6 million of estimated interest payments; this excludes repayment of the $150.0 million notes and certain potential supplier commitments. Approval-triggered payments and royalties to former Laxdale shareholders were not recorded because they were not considered probable or estimable.
- The notes were admitted to the Irish Stock Exchange’s Global Exchange Market on April 24, 2012. The company reported no material legal proceedings, no material change to previously disclosed risk factors, and effective disclosure controls.
Important facts for investors to verify
- FDA action and timing for the MARINE NDA, and the requirements and timing for an ANCHOR NDA.
- REDUCE-IT enrollment, execution, costs and eventual results.
- Whether AMR101 suppliers qualify on schedule and can support expected commercial demand.
- Cash runway against actual operating and launch spending, including any need for further financing.
- Exchangeable-note terms, potential share dilution or cash settlement, and the warrant liability’s sensitivity to share-price movements.