Amarin Corporation plc — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Amarin is a pharmaceutical company focused on VASCEPA (icosapent ethyl) for cardiovascular risk reduction. Its commercial outlook is shaped by U.S. generic competition and the rollout of VAZKEPA in Europe and other markets.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Total revenue | $86.0 million | $94.6 million; down 9% |
| Net product revenue | $84.7 million | $94.0 million; down 10% |
| U.S. product revenue | $82.3 million | $93.5 million; down 12% |
| Licensing and royalty revenue | $1.3 million | $0.6 million |
| Gross margin | $47.9 million; approximately 56% of revenue | $72.4 million; approximately 76% of revenue |
| Operating expenses | $65.3 million | $100.7 million |
| Operating loss | $17.3 million | $28.3 million |
| Net loss | $16.5 million; $0.04 per share | $31.6 million; $0.08 per share |
| Cash used in operating activities | $7.0 million | $98.8 million |
- Q1 2023 cost of goods sold was $38.0 million, including a $12.3 million restructuring-related inventory charge and approximately $2.3 million for unsellable inventory. Excluding the restructuring charge, management reported gross margin of 70% for the quarter.
- At March 31, cash and cash equivalents were $191.4 million, short-term investments $113.0 million, and long-term investments $0.5 million. Including restricted cash, these liquidity sources totaled approximately $305 million. The company reported no debt.
- Current assets were $683.8 million and current liabilities $244.2 million. Inventory totaled $369.5 million, including $143.7 million classified as long-term. Accumulated deficit was $1.54 billion.
- Cash, cash equivalents and restricted cash declined $26.3 million during the quarter. Investing activities used $19.6 million, primarily reflecting net purchases of investment securities.
Material changes versus the prior-year quarter
- U.S. product revenue fell amid lower volume and net selling price as generic competition increased. Amarin’s U.S. icosapent ethyl market share, based on Symphony Health prescription estimates, was approximately 57%, versus 72% a year earlier; branded VASCEPA prescriptions were down 18%.
- The overall U.S. icosapent ethyl market grew 4% based on those estimates. Four generics were on the market in Q1 2023, compared with three in Q1 2022. Zydus received FDA approval in April 2023, after the quarter.
- Selling, general and administrative expense declined 34% to $59.6 million, mainly reflecting lower selling costs following the U.S. field-force reduction and Germany withdrawal. Research and development expense declined 43% to $5.7 million.
- Interest income rose to $2.2 million from $0.2 million, mainly due to higher interest rates. Despite lower revenue, net loss narrowed, alongside lower operating expenses and higher interest income.
Outlook, risks and unusual items
- Management said its 2023 cash and short-term investments should fund projected operations for at least one year from issuance of the financial statements. It cautioned that assumptions may prove inaccurate and that capital could be used faster than expected. The filing does not provide a clear quantitative net-revenue forecast; the company said it had suspended net-revenue guidance amid uncertainty about U.S. demand and generic competition.
- Management expects to exceed $100 million in savings over the 12 months following its 2022 cost-reduction plan, compared with 2021 operating expenses. The plan included reducing the U.S. field force from approximately 300 representatives to approximately 75.
- European growth depends on securing acceptable country-level pricing and reimbursement. Amarin discontinued German operations in September 2022 after failing to reach a viable reimbursement-price agreement. The company continued European launches and market-access efforts; it also reported a new February 2023 agreement with CSL Seqirus for Australia and New Zealand.
- Amarin had approximately $81.7 million in future contractual supply purchase obligations, plus $39.8 million of obligations contingent on specified European regulatory or reimbursement events. Supplier agreement changes produced the $12.3 million Q1 restructuring charge; further negotiations could result in additional costs. Inventory levels and minimum purchase commitments remain important risks.
- Disclosed legal matters include antitrust lawsuits, including a new Hikma complaint, a securities class action, and a former CEO’s employment-related claim. The company said it could not reasonably estimate loss exposure for certain matters and recorded no accrual where loss was not considered probable or reasonably estimable. The filing also notes a pending IRS audit of 2018 and 2019 U.S. income tax returns.
- Other principal risks include continued generic erosion, reimbursement uncertainty, reliance on third-party suppliers and commercial partners, and dependence on VASCEPA as the principal revenue source. Management reported disclosure controls were effective as of March 31, 2023.
Most important facts for investors to verify
- Whether U.S. prescription trends, market share and net selling prices stabilize or continue to decline as generic competition expands.
- Whether cost reductions and operating cash use support the company’s stated liquidity runway, particularly given the size and aging profile of inventory.
- Progress and economics of European reimbursement and launches, including any renewed German market access.
- How supplier commitments, inventory adjustments and potential further restructuring charges compare with actual global demand.
- Developments and potential financial exposure from antitrust, securities, employment and tax matters; the filing does not quantify potential losses for certain proceedings.