Amarin Corporation plc — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Unaudited financial statements; amounts below are in U.S. dollars, generally millions except per-share data. Amarin is a pharmaceutical company focused on VASCEPA/VAZKEPA (icosapent ethyl), its lead product for cardiovascular risk reduction and triglyceride management.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue, net | $89.9 | $142.0 | $278.9 | $438.7 |
| Product revenue, net | $89.2 | $141.4 | $277.0 | $436.6 |
| Gross margin | $62.9 | $111.8 | $178.9 | $348.0 |
| Operating loss | $(5.1) | $(13.1) | $(96.3) | $(5.6) |
| Net loss | $(5.1) | $(13.2) | $(106.7) | $(7.0) |
| Loss per share, basic and diluted | $(0.01) | $(0.03) | $(0.27) | $(0.02) |
| Cash used in operating activities | — | $(181.6) | $(38.3) |
- Revenue fell 37% in both the quarter and nine-month period, primarily reflecting lower U.S. sales amid generic competition.
- Reported gross margin was 70% for Q3 and 64% for the nine-month period, versus 79% in each prior-year comparable period. Excluding restructuring inventory charges, management reported margins of 73% and 74%, respectively; the nine-month adjusted figure also excludes an inventory write-off.
- At September 30, cash and cash equivalents were $240.5, short-term investments $63.2, and long-term investments $2.3; restricted cash was $3.9. The company reported no debt. Current assets were $686.5 and current liabilities $287.4. Total inventory was $415.6, including $188.0 classified as long-term.
- Operating cash outflow increased substantially year over year. Investing activities provided $203.1, mainly from investment maturities; financing activities used $0.4. Cash, cash equivalents and restricted cash increased $21.0 over the nine months.
Material changes versus the prior period
- U.S. product revenue declined 38% in both the quarter and nine-month period. Management attributed the decline to lower volume and, over nine months, lower net selling price as generic competition expanded. Symphony Health estimates indicated U.S. market share fell to approximately 62% in Q3 from 83% a year earlier, and to 66% for the nine months from 87%.
- SG&A declined 43% in Q3 and 25% year to date, reflecting lower sales and promotional spending, reduced headcount, and lower stock-based compensation. The U.S. field force was reduced from approximately 300 representatives to approximately 75 under the June 2022 cost-reduction plan.
- Nine-month cost of goods sold included $18.1 of restructuring-related inventory charges and approximately $9.6 of write-offs for unsellable inventory unrelated to product dating. Restructuring expense included $9.4 of employee-related charges and $4.4 related to closing German operations; the company also recorded vendor-related charges.
- European commercial progress remained limited: VAZKEPA was available in Sweden, while the UK launch began in October 2022. After reimbursement negotiations in Germany failed to produce an agreement, Amarin discontinued German operations effective September 1, 2022.
Outlook, commentary and risks
- Amarin is not providing revenue guidance, citing U.S. generic competition and uncertainty around European market access and launches. Management said the June cost-reduction plan is expected to save $100.0 over 12 months compared with 2021 operating expenses; actual savings and commercial effects remain uncertain.
- Management stated that available cash and short-term investments were expected to fund projected operations for at least one year from issuance of the financial statements, based on current plans and assumptions. The company reported an accumulated deficit of $1.5 billion and expects future quarterly cash outflows to vary.
- Future European growth depends on country-level pricing and reimbursement decisions. Amarin reported up to five additional European commercial launches and up to eight reimbursement decisions as expectations for 2022; outcomes and timing are uncertain.
- Key risks include continued generic erosion in the U.S.; whether the smaller sales force and cost plan can sustain branded demand; uncertain European reimbursement and commercialization; reliance on third-party suppliers and potential supply-agreement costs; and dependence on a limited number of wholesalers. Three customers accounted for 93% of nine-month gross product sales.
- Legal and regulatory matters include U.S. patent litigation, antitrust litigation and class actions, and government inquiries concerning promotional programs, copay assistance and supply practices. The company said it is cooperating with investigations and cannot predict outcomes or potential effects. It also intends to appeal the Hikma patent-case judgment and continue its Health Net litigation.
- Future contractual supply purchase obligations were approximately $81.5 at September 30, excluding ongoing supplier discussions that may result in additional costs. The £7.5 million Laxdale milestone was settled through stock or cash elections; one shareholder received 5,817,942 shares issued at $1.41 per share.
Important facts for investors to verify
- Subsequent U.S. prescription, net-price and market-share trends, including the effect of generic entrants on branded VASCEPA revenue and margins.
- Cash burn, inventory levels and usability, supplier commitments, and whether cost reductions offset lower sales and European launch spending.
- Progress and economics of European reimbursement and commercialization, including any change in the German arbitration or resubmission process.
- Developments and potential financial exposure in patent, antitrust and government investigations; the filing does not provide a clear estimate of potential losses for these matters.
- Whether cash resources remain sufficient under actual operating results and the company’s stated assumptions; no revenue guidance is provided.