Amarin Corporation plc — FY2011 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2011; it also provides unaudited fourth-quarter results. Amarin was a late-stage biopharmaceutical company focused on cardiovascular disease, with no marketed products or revenue. Its lead candidate, AMR101 (icosapent ethyl, at least 96% EPA), was under FDA review for very high triglycerides (MARINE indication). The filing was signed February 29, 2012.
Financial performance and liquidity
| Metric | FY2011 | FY2010 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $21.6 million | $28.0 million |
| General and administrative expense | $22.6 million | $17.1 million |
| Operating loss | $44.2 million | $45.1 million |
| Net loss | $69.1 million | $249.6 million |
| Loss per basic and diluted share | $0.53 | $2.49 |
| Cash used in operating activities | $39.4 million | $33.9 million |
| Cash and cash equivalents at year-end | $116.6 million | $31.4 million |
All amounts are U.S. dollars. The company had no debt at December 31, 2011. Current assets were $119.0 million and current liabilities $8.5 million. Total liabilities of $132.3 million included a $123.1 million warrant derivative liability; the filing says this liability is settled in shares and is not a claim on liquid assets. Stockholders’ deficit was $6.0 million. Gross margin and other operating margins are not meaningful because the company had no revenue.
Fourth-quarter 2011 revenue was zero; reported net income was $18.3 million, or $0.14 per diluted share. The filing attributes quarterly income fluctuations primarily to non-cash changes in the fair value of warrant derivatives, rather than product operations.
Material changes versus prior period
- Annual net loss narrowed by $180.5 million, chiefly because the non-cash warrant fair-value loss fell from $205.2 million in 2010 to $22.7 million in 2011. Operating loss was broadly similar year over year.
- R&D expense fell 22.9%, mainly as the MARINE and ANCHOR Phase 3 trials completed; REDUCE-IT and NDA-related costs partly offset the decrease. G&A rose 32.2%, reflecting staffing, facilities, market research and pre-commercial preparation.
- Cash rose by $85.2 million during 2011, supported by $98.7 million net proceeds from a January share offering and proceeds from warrant and option exercises; operating activities used $39.4 million.
Outlook, risks and unusual items
- Regulatory and development: The FDA set a July 26, 2012 PDUFA target for the MARINE NDA; approval and timing were not assured. Amarin intended to seek the ANCHOR indication after MARINE approval and REDUCE-IT was substantially underway. REDUCE-IT began dosing in December 2011, was planned for about 8,000 patients and approximately six years, with substantial enrollment targeted by year-end 2012. Management estimated CRO costs of about $25 million in 2012 and $125 million over the study’s estimated duration.
- Commercialization: Subject to timely FDA approval, Amarin targeted an early-2013 U.S. launch if self-commercializing, which could require approximately 200–300 sales representatives. It was also evaluating collaboration, acquisition and self-commercialization options; no transaction was assured.
- Financing and spending: On January 9, 2012, after year-end, Amarin issued $150 million of 3.50% exchangeable senior notes due 2032, receiving approximately $144.3 million net. Together with year-end cash, management believed resources would fund planned operations for at least 12 months. Management cautioned that additional capital could be needed, particularly for a standalone launch and completion of REDUCE-IT.
- Supply and intellectual property: Nisshin was the only API supplier included in the NDA and the sole current supplier; additional contracted suppliers still required qualification and FDA approval. Amarin had no issued U.S. or European patents directly covering AMR101’s cardiovascular use, and pending applications might not be granted. FDA approval, SPA enforceability and requested new-chemical-entity exclusivity were not assured.
- Other exposures: The filing describes potential Laxdale approval-related payments of up to approximately $23.2 million for initial U.S./European approvals, plus up to approximately $15.5 million for further indications; no provision was recorded because amounts were not considered probable or estimable. Former Ester shareholders alleged breach of an agreement; Amarin disputed the claim. No material legal proceedings were reported as of year-end.
- Controls and audit: Management and Deloitte reported effective internal control over financial reporting as of December 31, 2011; a previously identified material weakness was reported as remediated. The auditor issued unqualified opinions on the financial statements and internal controls.
Most important facts for investors to verify
- FDA decisions and timing for the MARINE NDA, the scope of any label, and the requirements for an ANCHOR filing.
- REDUCE-IT enrollment pace, study costs, duration and eventual results, including whether the study supports broader use.
- Commercial-launch plans, partner discussions, required spending and whether available capital is sufficient beyond management’s 12-month estimate.
- Qualification, capacity and regulatory approval of alternative API suppliers, given reliance on Nisshin for the NDA.
- Potential dilution and cash or share settlement consequences of the exchangeable notes, outstanding warrants and equity awards; also confirm the contingent Laxdale obligations.