Amarin Corporation plc — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Amarin is a pharmaceutical company focused on VASCEPA/VAZKEPA (icosapent ethyl), its cardiovascular-risk-reduction product. Results are compared with Q1 2021.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparator |
|---|---|---|
| Total revenue, net | $94.6 million | $142.2 million; down 33% |
| Product revenue, net | $94.0 million | $141.4 million; down 34% |
| Licensing and royalty revenue | $0.6 million | $0.8 million |
| Gross margin | $72.4 million; approximately 76% of revenue | $113.8 million; approximately 80% |
| Operating expenses | $100.7 million | $115.2 million |
| Operating loss | $28.3 million | $1.3 million |
| Net loss | $31.6 million; $0.08 per share | $1.6 million; reported loss per share rounded to $0.00 |
| Operating cash flow | $(98.8) million | $(18.7) million |
| Cash, cash equivalents and restricted cash | $223.1 million | $223.4 million at December 31, 2021 |
| Short- and long-term investments | $170.1 million | $269.7 million at December 31, 2021 |
| Debt | None | None reported |
At March 31, 2022, total assets were $973.7 million, current assets $772.6 million, current liabilities $300.6 million, total liabilities $332.6 million, and stockholders’ equity $641.1 million. Inventory was $408.9 million in total, including $141.1 million classified as long-term. Management reported $389.3 million in cash and liquid short- and long-term investments, excluding restricted cash.
Material changes versus Q1 2021
- Revenue fell by $47.5 million, primarily from a 34% decline in U.S. net product revenue. Management attributed the U.S. decline approximately half to lower volume associated with generic competition and the remainder to selling initiatives focused on certain customers.
- Three generic products were in the U.S. market during Q1 2022, versus one in Q1 2021; a third generic launched in January 2022. Amarin’s estimated U.S. icosapent ethyl market share fell to approximately 72% from 91%. These prescription-market figures rely on third-party estimates, which the company cautions may be inaccurate.
- Gross margin declined to approximately 76% from 80%, which management attributed to lower net selling price.
- SG&A decreased 14% to $90.6 million, including lower selling, legal and stock-based compensation expenses. R&D increased 7% to $10.1 million.
- Operating cash outflow increased substantially. Management cited higher inventory purchases and costs related to German commercial operations and preparation for additional European launches. Receivables and accounts payable/other current liabilities also contributed materially to operating cash-flow movements.
- Investing activities provided $99.0 million, mainly from maturities of investment securities; total cash and restricted cash decreased by $0.3 million during the quarter.
Outlook, management commentary and risks
- Amarin did not provide revenue guidance, citing uncertainty from U.S. generic competition, COVID-19 and European market access. Management said it would consider resuming guidance when there is greater clarity.
- Management stated that cash and cash equivalents of $219.2 million plus short-term investments of $143.4 million were expected to fund projected operations for at least 12 months from the financial-statement issuance date. This assessment depends on assumptions that may prove incorrect; management warned cash use could exceed expectations.
- Commercial priorities include an U.S. omnichannel engagement strategy, improved payer access and appropriate prescription fulfillment; expanding VAZKEPA in Europe; and pursuing international regulatory approvals. Sweden approved national reimbursement in March 2022, Germany remained the company’s first European launch, and Hong Kong approved VASCEPA under the REDUCE-IT indication in February 2022. Amarin expected a Mainland China regulatory decision in the second half of 2022.
- Principal business risks include ongoing U.S. generic competition and related prescription, pricing and fulfillment disruption; difficulty securing European reimbursement and achieving commercial uptake; reliance on third-party manufacturers and suppliers; and significant customer concentration. Three wholesalers represented 21%, 39% and 31% of Q1 2022 gross product sales.
- Legal and regulatory exposures include the January 2022 dismissal of Hikma from Amarin’s cardiovascular-patent case (Amarin intended to appeal when permitted), ongoing litigation involving Health Net, antitrust litigation and government inquiries concerning supply and promotional practices, and securities-related litigation. Outcomes and potential financial effects were not predictable; the company could not reasonably estimate certain litigation loss exposures.
- Supply agreements included approximately $49.3 million of potential minimum-purchase obligations over their terms. A £7.5 million Laxdale milestone liability, recorded at $12.0 million, was included in accrued current liabilities; a further £5 million payment may be due upon approval of a further European indication.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether U.S. branded sales, net pricing and market share stabilize or continue to decline as generic supply and prescription fulfillment evolve.
- Whether European reimbursement, especially beyond Sweden and Germany, supports launches and meaningful revenue growth.
- Actual operating cash burn, inventory utilization and purchasing commitments relative to the company’s stated liquidity runway.
- Developments and potential financial consequences of patent, antitrust, securities and government-investigation matters.
- Whether management’s expected Mainland China regulatory timing and international commercialization plans are achieved.