Amarin Corporation plc — Form 10-Q summary
Reporting period: Three and nine months ended September 30, 2020. Financial statements are unaudited; amounts below are in U.S. dollars. Amarin is a pharmaceutical company focused on VASCEPA (icosapent ethyl), its lead product for cardiovascular risk reduction and severe hypertriglyceridemia.
Financial performance
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Total revenue | $156.5 million | $112.4 million | $446.8 million | $286.5 million |
| Net product revenue | $155.2 million | $112.3 million | $441.1 million | $285.3 million |
| Gross profit | $123.4 million | $87.0 million | $350.1 million | $221.1 million |
| Product gross margin | 79% | 77% | 78% | 77% |
| Operating expenses | $130.4 million | $91.5 million | $376.9 million | $250.9 million |
| Operating loss | $6.9 million | $4.5 million | $26.8 million | $29.8 million |
| Net loss | $6.8 million | $3.5 million | $22.9 million | $29.7 million |
| Loss per share, basic and diluted | $0.02 | $0.01 | $0.06 | $0.09 |
Q3 product revenue rose 38% year over year; nine-month product revenue rose 55%. Management attributed growth primarily to higher U.S. sales volume, with a modest U.S. net-price increase and additional international partner sales. Q3 operating expenses increased 43%, led by higher selling costs tied to the expanded U.S. sales force and promotion. Nine-month SG&A was $346.5 million, up 52%; R&D was $30.5 million, up 31%.
- Cash flow, nine months: Operating cash provided was $16.6 million, versus $0.4 million used in 2019. Investing used $400.6 million, mainly reflecting purchases of investment securities; financing used $53.3 million, including debt repayments. Cash, cash equivalents and restricted cash declined $437.4 million to $211.1 million.
- Liquidity at September 30: Cash and cash equivalents were $207.2 million, restricted cash $3.9 million, short-term investments $354.7 million and long-term investments $46.1 million. The company described cash and liquid investments as approximately $608 million, excluding restricted cash.
- Balance sheet and debt: Current assets were $888.5 million and current liabilities $326.2 million. Accounts receivable was $147.3 million and inventory $148.5 million, up from $116.4 million and $76.8 million, respectively, at year-end 2019. The royalty-bearing instrument had a $9.5 million current liability; management said the final payment was scheduled for November 2020. The company reported no other debt.
- Capitalization: Stockholders’ equity was $607.3 million and accumulated deficit $1.434 billion. Approximately 388.8 million common shares were outstanding at September 30; additional preferred-share equivalents remained convertible.
Material changes and business developments
- Sales-force expansion and promotion followed FDA’s December 2019 approval of VASCEPA’s cardiovascular risk-reduction label. The U.S. sales organization grew to approximately 900 sales professionals, including about 800 representatives.
- Reported U.S. normalized prescription estimates for Q3 increased 36%–37% year over year, depending on data provider. The company cautioned that these third-party estimates can be inaccurate and are not definitive measures of sales trends.
- COVID-19 restrictions interrupted in-person promotion and reduced patient visits and testing; Amarin said growth slowed, while weekly prescriptions had returned to around or slightly above pre-pandemic levels by September. It resumed field interactions beginning in June and launched television promotion in 2020.
- VASCEPA was approved and launched in Canada, with commercialization and reimbursement efforts continuing. Amarin was preparing for a potential European launch, subject to regulatory approval and country-level reimbursement.
- The U.S. patent litigation outcome shifted materially against Amarin: the district court ruled for generic challengers, and the Federal Circuit affirmed on September 3. Hikma and Dr. Reddy’s had FDA approval for generic versions of the original indication but had not launched as of the filing. After rehearing was denied on November 4, Amarin said it planned to seek U.S. Supreme Court review.
Outlook, risks and contingencies
- Management expected the EMA review to conclude in early 2021, later than its previous late-2020 estimate; European launch timing would also depend on reimbursement decisions. The China partner’s clinical-trial results were expected before the end of 2020. These were expectations, not guarantees.
- Amarin said its cash and cash equivalents plus short-term investments were expected to fund projected operations for at least 12 months and, under current plans, be adequate to reach positive cash flow. It cautioned that assumptions may prove incorrect and that it could use capital sooner or fail to achieve positive cash flow. The filing does not provide a clear current quantified full-year revenue or earnings guidance figure.
- Potential U.S. generic entry is a major risk to revenue and results. Amarin stated it could not predict the litigation outcome or the timing and scale of generic launches; it also warned that generic competition could materially adversely affect its business.
- The DOJ issued a civil investigative demand in June 2020 concerning certain VASCEPA speaker programs and copayment-waiver practices from 2015 onward, including possible Anti-Kickback Statute and False Claims Act issues. Amarin said it was cooperating and could not predict the outcome or impact.
- Other key risks include the ongoing effects of COVID-19 on promotion, demand and healthcare access; reimbursement and pricing uncertainty outside the U.S.; reliance on third-party manufacturers and distributors; and concentration in three wholesalers, which together represented 92% of nine-month 2020 gross product sales.
- Supply agreements included approximately $164.7 million of potential minimum purchase obligations over their terms. The company reported no provision for certain contingent European approval milestone payments because they were not yet payable.
Most important facts for investors to verify
- Whether and when Hikma, Dr. Reddy’s, Teva or other generic competitors launch, and the commercial supply and sales impact.
- The status and outcome of Amarin’s planned Supreme Court petition and any related patent or regulatory proceedings.
- Subsequent U.S. prescription trends, net pricing, rebates and chargebacks, and whether COVID-related access constraints or promotion changes affect growth.
- European regulatory timing, reimbursement terms and launch investment, as well as China trial results and partner progress.
- The DOJ investigation’s scope, potential resolution and any financial, operational or promotional consequences.
- Inventory and receivables growth, cash conversion, and the final repayment of the royalty-bearing instrument.
- Whether management’s liquidity assumptions and expectation of reaching positive cash flow remain supportable under generic competition and current operating plans.