Amarin Corporation plc — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed March 1, 2022. The filing reports annual results, not a standalone fourth-quarter income statement. Amarin is a pharmaceutical company primarily dependent on VASCEPA (icosapent ethyl), marketed as VAZKEPA in Europe.
Business context
VASCEPA is approved in the U.S. to reduce cardiovascular risk in certain statin-treated high-risk patients and to lower triglycerides in patients with severe hypertriglyceridemia. The European Commission approved VAZKEPA in March 2021, and Amarin launched it in Germany in September. U.S. sales face generic competition; the company is pursuing international expansion and reimbursement access.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Total revenue, net | $583.2 million | $614.1 million | Down 5% |
| Product revenue, net | $580.3 million | $607.0 million | Down 4% |
| Gross margin | $461.9 million | $482.6 million | Product gross margin: 79% vs. 78% |
| Operating income (loss) | $10.5 million | ($19.7 million) | Improved |
| Net income (loss) | $7.7 million | ($18.0 million) | Improved |
| Operating cash flow | ($66.5 million) | ($21.7 million) | Higher cash use |
- Net income was $0.02 per diluted share, compared with a $0.05 loss per share in 2020. Accumulated deficit was $1.42 billion.
- Cash and cash equivalents were $219.5 million; short-term investments, $234.7 million; and long-term investments, $35.0 million. Amarin reported no debt and approximately $490 million of aggregate liquidity, including restricted cash.
- Management said cash and cash equivalents plus short-term investments—approximately $454 million—were expected to fund operations for at least 12 months, subject to assumptions and business risks.
- Inventory rose to $355.9 million from $188.9 million, including $121.3 million classified as long-term. The increase was a significant contributor to operating cash use. Net accounts receivable was $163.7 million.
- Three U.S. wholesalers each accounted for at least 10% of gross product sales; together they represented 92% of gross product sales in 2021. The filing does not identify them by name.
Material changes versus 2020
- U.S. generic competition contributed to lower branded product revenue. Amarin reported that generic icosapent ethyl represented approximately 15% of U.S. prescriptions in 2021, based on Symphony Health estimates; the total icosapent ethyl market reportedly grew 11%.
- Revenue outside the U.S. was limited: approximately $2.4 million of net product revenue, plus $0.7 million from the initial VAZKEPA European launch. Licensing and royalty revenue decreased 59% to $2.9 million.
- Selling, general and administrative expense fell 12% to $408.3 million, principally as U.S. promotion and direct-to-consumer activity declined. General and administrative expense increased with European expansion costs.
- Research and development expense declined 25% to $29.3 million. Restructuring expense was $13.7 million, primarily for reducing the U.S. sales force to approximately 300 representatives.
- Amarin generated positive operating income and net income for the year, but operating cash flow remained negative. The company completed repayment of its royalty-bearing financing in 2020.
Outlook, commentary and risks
- Amarin suspended revenue guidance, citing uncertainty from U.S. generic competition, COVID-19 and European market-access timing. It said it would consider resuming guidance when there is greater clarity.
- Management said the U.S. go-to-market strategy—omnichannel provider engagement, improved payer access and efforts to support appropriate branded prescriptions—showed early positive signs in the fourth quarter. It also noted fourth-quarter product revenue was flat versus the third quarter.
- European launches depend on country-by-country pricing and reimbursement decisions. Amarin had filed ten European reimbursement dossiers and expected to pursue additional filings; timing and commercial terms remained uncertain.
- China marketing applications were under review, with decisions in Mainland China and Hong Kong expected in the second half of 2022. The company also initiated regulatory filings in additional countries and reported 2022 review acceptances in Australia and Israel.
- Management anticipated significantly higher R&D expense in 2022, primarily to develop a fixed-dose combination of icosapent ethyl and a statin. That development is subject to clinical, manufacturing, regulatory, reimbursement and market-acceptance risks.
- COVID-19 restrictions and reduced patient visits affected promotion and prescription growth. The company said supply deliveries had faced manageable logistical challenges and that it had not seen a material supply impact to date.
- Key legal matters include the loss of U.S. litigation over patents covering the severe-triglyceride indication; generic launches by Hikma, Dr. Reddy’s and Apotex; and an ongoing cardiovascular-risk patent case in which a court dismissed Hikma in January 2022, with Amarin intending to appeal. Amarin also disclosed antitrust litigation and government inquiries, including DOJ scrutiny of promotional and copayment programs and FTC and New York inquiries concerning competition and supply practices. Outcomes and potential financial impacts were not predictable.
- REDUCE-IT showed a 25% relative risk reduction in its primary cardiovascular endpoint, but the filing describes safety signals including higher reported atrial fibrillation or flutter requiring hospitalization and bleeding versus placebo. COVID-19 studies PREPARE-IT-1 and PREPARE-IT-2 did not meet their primary and/or other endpoints; further MITIGATE results were pending.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting. The auditor identified the product-return reserve as a critical audit matter; the reserve was $8.1 million at year-end.
Important facts for investors to verify
- Track branded and generic prescription volumes, pricing, payer coverage and the reliability of third-party prescription estimates; the company cautions that those estimates can be revised or inaccurate.
- Review future gross-to-net deductions, channel inventory and the $8.1 million product-return reserve, particularly given the large inventory build and the auditor’s focus on return estimates.
- Assess whether European reimbursement approvals and launches generate meaningful sales relative to expansion costs, and whether China approvals arrive on the anticipated timetable.
- Monitor cash burn, inventory purchasing commitments and liquidity. Supply agreements include approximately $196.1 million of potential minimum-purchase obligations over their terms.
- Follow U.S. patent appeals, generic entry, antitrust claims and government investigations for developments that could affect sales, costs or liabilities; the filing provides no clear estimate of potential losses for several matters.
- Evaluate progress and spending on the fixed-dose combination and other development programs against the company’s stated commercial and financial constraints.