Amarin Corporation plc — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unaudited consolidated financial statements; amounts below are in U.S. dollars.
Business context
Amarin is a pharmaceutical company substantially dependent on VASCEPA (icosapent ethyl), marketed in the U.S. and in selected international markets. VAZKEPA, the European brand, launched in Germany in September 2021. The company operates as one business segment.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue, net | $142.0m | $156.5m | $438.7m | $446.8m |
| Product revenue, net | $141.4m | $155.2m | $436.6m | $441.1m |
| Gross margin | $111.8m | $123.4m | $348.0m | $350.1m |
| Operating expenses | $124.9m | $130.4m | $353.6m | $376.9m |
| Operating loss | $(13.1)m | $(6.9)m | $(5.6)m | $(26.8)m |
| Net loss | $(13.2)m | $(6.8)m | $(7.0)m | $(22.9)m |
| Operating cash flow | Not separately presented for the quarter | $(38.3)m | $16.6m |
- Product gross margin was 79% in both Q3 periods; for the nine months it was 79% in 2021 versus 78% in 2020.
- At September 30, cash and cash equivalents were $222.9m, restricted cash $3.9m, short-term investments $256.3m, and long-term investments $38.8m. Management reported $517.9m of cash and liquid short- and long-term investments. No debt was outstanding.
- Total assets were $1,035.8m; current assets $963.0m; inventory $309.3m; accounts receivable, net, $149.4m; current liabilities $364.7m; and stockholders’ equity $642.5m. Inventory rose from $188.9m at year-end 2020.
- Nine-month investing cash flow was $79.1m, largely reflecting net maturities and purchases of investment securities; financing cash flow was $(4.9)m. Cash, cash equivalents and restricted cash increased $35.9m.
Changes versus prior comparable periods
- Q3 revenue declined 9% year over year, primarily from lower U.S. branded product sales; licensing and royalty revenue also fell. Management attributed U.S. pressure to generic competition and disruption in prescription fulfillment. Symphony Health estimates put generics at approximately 17% of U.S. icosapent ethyl prescriptions in Q3, while the total market was estimated to have grown 11%.
- Nine-month revenue declined 2%. Management said U.S. net product revenue increased 2.9% excluding approximately $10.8m of revenue associated with one additional shipment week in the 2020 comparison period. International product revenue was $1.5m versus $9.0m, largely reflecting timing of the prior-year Canadian launch order.
- Q3 SG&A fell 14% to $103.0m, mainly due to lower selling and promotional costs; G&A rose with European expansion and legal costs. Nine-month SG&A fell 9% to $316.0m, as lower selling costs more than offset higher G&A.
- R&D declined 23% in both the quarter and nine-month period, primarily reflecting completion of certain REDUCE-IT analyses. Restructuring expense of $14.1m was recorded in Q3 and the nine-month period; no comparable expense was recorded in 2020.
- Nine-month operating cash flow turned negative, principally due to a $120.4m inventory-related cash use and costs associated with European commercialization. The company had positive operating cash flow in the prior-year period.
Outlook, management commentary and risks
- Amarin provided no revenue guidance, citing uncertainty around COVID-19, U.S. generic competition and European market access. Management said it may resume guidance when there is greater clarity.
- The September Go-to-Market plan aims to expand healthcare-professional engagement through an omnichannel platform, improve managed-care access and support correct fulfillment for cardiovascular-risk reduction. The U.S. field force was reduced to approximately 300 representatives; associated restructuring charges were estimated at about $14.1m, substantially cash costs.
- Germany was the first European VAZKEPA launch. Further launches depend on country-by-country pricing and reimbursement, whose timing and commercial terms are uncertain. Management anticipated higher SG&A during 2021 for European launch and staffing activities.
- Management stated that cash and cash equivalents plus short-term investments at September 30 were expected to fund projected operations for at least 12 months and support plans aimed at positive cash flow. This assessment depends on assumptions that may not hold; the filing also describes possible variable future cash outflows.
- PREPARE-IT 1, a VASCEPA study in COVID-19 outpatients, did not meet its primary and/or other endpoints studied. Management reported that COVID-19 continued to limit some physician access and patient visits, while supply-delivery challenges had been manageable to date.
- Material risks include generic entry and patent disputes in the U.S.; uncertain European reimbursement and launch execution; reliance on third-party manufacturers and suppliers; and customer concentration. Three wholesalers each accounted for at least 10% of gross product sales. Supply agreements include approximately $213m of potential minimum purchase obligations over their terms.
- Legal matters include the company’s patent-infringement action concerning cardiovascular-risk patents, antitrust litigation and class actions alleging anticompetitive conduct, and FTC and New York Attorney General inquiries regarding API supply. Amarin said it believes it has defenses and is cooperating with the agencies, but cannot predict outcomes. The filing also describes a DOJ inquiry into promotional speaker and copayment programs. A securities class action was filed October 21, 2021, after quarter-end.
- Following EU marketing authorization, a £7.5m Laxdale milestone was recorded as a $12.0m current liability. A further £5.0m milestone may become payable upon approval of an additional European indication.
Most important facts for investors to verify
- U.S. branded prescription, revenue and net-pricing trends, and the extent to which generic supply and substitution affect VASCEPA sales.
- European reimbursement decisions, launch timing and commercial uptake beyond Germany, alongside the costs of building the European business.
- Inventory levels, supplier capacity and minimum-purchase commitments, including whether inventory converts to sales without impairment or excess supply.
- Cash burn and management’s stated liquidity runway, especially as commercialization spending, legal costs and working-capital needs change.
- Developments and potential financial exposure in patent, antitrust, government-investigation and securities-litigation matters, as well as the contingent Laxdale milestone.