Amarin Corporation plc — Form 10-Q summary
Reporting period: Quarter and six months ended June 30, 2013. Amounts below are U.S. dollars; financial statement figures are unaudited. Amarin is a biopharmaceutical company focused on Vascepa (icosapent ethyl), which began U.S. sales in January 2013.
Financial performance
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Product revenue | $5.5m | $0 | $7.8m | $0 |
| Cost of goods sold | $2.8m | $0 | $4.1m | $0 |
| Gross profit / margin | $2.7m / 48.3% | — | $3.7m / 47.1% | — |
| Research and development | $17.5m | $14.1m | $39.3m | $18.8m |
| Selling, general and administrative | $34.0m | $13.6m | $73.2m | $27.7m |
| Operating loss | $48.8m | $27.7m | $108.8m | $46.5m |
| Net loss | $39.8m | $53.9m | $101.9m | $142.2m |
| Loss per share, basic and diluted | $0.26 | $0.38 | $0.68 | $1.03 |
| Operating cash used | Not provided by quarter | Not provided by quarter | $112.4m | $39.1m |
Gross margin is calculated from reported revenue less cost of goods sold. Revenue recognition was limited to product substantiated as resold to fill prescriptions; distributor shipments not yet qualifying were deferred. Six-month deferred revenue was $1.8m, and the company reported no product returns to date.
Financial position and material changes
- At June 30, cash and cash equivalents were $149.4m, down from $260.2m at December 31, 2012. Current assets were $184.7m and current liabilities $35.4m; total liabilities were $309.0m and stockholders’ deficit was $94.3m.
- Debt included $141.5m carrying value of exchangeable senior notes and $86.7m long-term debt. The notes have $150m principal, a 3.5% coupon and 2032 maturity, with holder repurchase options beginning in 2017. The December 2012 BioPharma financing provides up to $150m repayment from future product revenues; the agreement is secured by Vascepa-related rights and has change-of-control payment provisions.
- Operating cash use rose to $112.4m from $39.1m in the first half of 2012; financing provided $1.6m versus $173.9m in the prior period, when the company issued exchangeable debt. Cash declined by $110.8m in the first half of 2013.
- Net loss improved year over year, mainly alongside a $22.5m gain on derivative fair-value changes, versus an $85.1m loss in 2012. These noncash, stock-price-sensitive valuations materially affect reported results. Operating loss worsened as commercialization and development expenses increased.
- After quarter-end, a July 12 offering of 21.7m ADSs generated approximately $121.1m net proceeds; underwriters also received a 30-day option for 3.255m additional ADSs. The company said cash at June 30 plus offering proceeds should fund projected operations for at least 12 months.
Outlook, risks and unusual items
- Vascepa’s MARINE indication was FDA-approved in 2012; the U.S. commercial launch began in January 2013. Management reported monthly estimated normalized prescriptions rising from 3,224 in February to 18,945 in June, but warned the short history and third-party estimates are not definitive or predictive. It gave no prescription or revenue guidance.
- The ANCHOR supplemental application was accepted for review. The FDA planned an advisory committee meeting for October 16, 2013 and set a December 20, 2013 target action date. Approval, timing, labeling and any need for additional evidence remained uncertain.
- Management expected second-half 2013 operating cash use to be below the first-half rate, but expected 2013 gross margin to be lower than in later years due to initial API pricing, launch discounts and patient copay assistance. It also expected 2013 SG&A and R&D spending to remain elevated, including commercial-launch and REDUCE-IT trial costs.
- As of August 1, approximately 72m insured lives were in plans listing Vascepa on tier 2; customary payor rebates apply. Management said it could not reliably forecast revenue given limited sales history.
- Principal risks include dependence on a single recently launched product; uncertain market acceptance, reimbursement and competitive response; ANCHOR regulatory outcome; REDUCE-IT results; reliance on contract API and capsule manufacturers; patent and FDA exclusivity uncertainty; and continued operating losses and cash consumption.
- Potential obligations include up to approximately $26.6m in Laxdale payments tied to future European first-indication and additional U.S./European approvals; none was provided for because the obligations were not considered probable or estimable. The company also disclosed an unresolved dispute with former Ester shareholders, while reporting no legal proceeding expected to have a significant financial effect as of June 30.
Important facts for investors to verify
- Subsequent Vascepa prescriptions, net sales, distributor inventory, returns and the accuracy of third-party prescription estimates.
- FDA advisory committee proceedings and the decision, timing and labeling for the ANCHOR application.
- REDUCE-IT enrollment, costs, funding needs and eventual clinical results.
- Cash burn and runway after the July equity offering, including any exercise of the underwriters’ option and resulting dilution.
- BioPharma repayment thresholds, revenue-linked payments, covenants and change-of-control consequences.
- API supplier qualification, capacity and actual unit costs, along with patent protections and FDA determination of Vascepa exclusivity.