Amarin Corporation plc — Q2 2011 Form 10-Q
Reporting period: Three and six months ended June 30, 2011. Amarin was a clinical-stage biopharmaceutical company focused on AMR101 (icosapent ethyl); the product was not yet approved or generating revenue.
Financial performance and liquidity
| Metric | Q2 2011 | Six months 2011 | Comparable 2010 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Research and development expense | $5.2 million | $9.6 million | $7.8 million Q2; $12.9 million six months |
| Marketing, general and administrative expense | $10.0 million | $12.8 million | $2.8 million Q2; $5.1 million six months |
| Operating loss | $15.2 million | $22.4 million | $10.6 million Q2; $18.0 million six months |
| Loss on derivative fair-value changes | $185.4 million | $160.0 million | $29.9 million Q2; $32.0 million six months |
| Net loss | $202.1 million | $183.8 million | $41.4 million Q2; $50.6 million six months |
| Basic and diluted loss per share | $1.58 | $1.46 | $0.42 Q2; $0.51 six months |
| Operating cash used | Not stated separately for Q2 | $19.6 million | $16.0 million used |
Gross and operating margins are not meaningful because the company reported no revenue. At June 30, cash and cash equivalents were $131.4 million, versus $31.4 million at December 31, 2010; current assets were $132.6 million and current liabilities $3.8 million. Financing activities provided $119.6 million in the first half, including $98.7 million net proceeds from a January share offering. The company reported no debt obligations. Total liabilities included a $286.0 million warrant derivative liability, which management said is settled in shares and does not represent a cash claim on liquid assets.
Changes versus the prior comparable period
- First-half net loss increased to $183.8 million from $50.6 million, primarily because the warrant derivative revaluation loss rose to $160.0 million from $32.0 million. This is a non-cash charge tied to the warrant valuation and share price.
- Q2 net loss rose to $202.1 million from $41.4 million, likewise driven mainly by the derivative revaluation loss.
- First-half R&D expense declined 25.6% as spending on the completed MARINE and ANCHOR Phase 3 trials decreased.
- First-half G&A expense increased to $12.8 million from $5.1 million, reflecting commercialization preparation, higher staffing and stock-based compensation, and warrant-related compensation.
- The January offering and warrant and option exercises increased cash and the share count. The company had 133.1 million shares outstanding at June 30; 132.9 million ADS and ordinary shares were reported outstanding as of August 3.
Outlook, risks and notable items
- Management expected to submit an NDA in Q3 2011 for the very-high-triglyceride indication studied in MARINE, with ANCHOR results included as supporting clinical experience. Both Phase 3 trials reported positive top-line results; the filing does not report an FDA approval.
- For a separate indication based on ANCHOR, the company planned a cardiovascular outcomes study and anticipated submitting a supplemental NDA after the initial NDA approval and once the outcomes study was substantially underway. Management expected to engage a CRO in Q3 2011, sought at least half enrollment by the end of 2012, and projected study costs of $100–$125 million over an anticipated six years.
- Management believed cash would fund projected operations for the next 12 months, including NDA filing, study initiation, and commercial preparation. It also stated that additional capital would be needed for commercialization if no strategic collaboration provided funding; financing may be unavailable or dilutive, potentially delaying commercialization or the outcomes study.
- Commercial supply agreements were signed with Equateq and Chemport in Q2 to supplement the Japan-based supplier. The filing disclosed purchase, qualification, development, and potential investment commitments, some contingent on FDA approval or supplier performance. Contractual cash obligations reported in the table totaled $14.8 million, excluding certain future supplier commitments and clinical-trial costs.
- Potential Laxdale milestone payments and royalties depend on marketing approvals and sales; no provision was recorded because the obligations were not considered probable or estimable. Management reported no asserted litigation claims expected to materially affect the financial statements, but disclosed a dispute with former Ester shareholders concerning EN101-related assets and shares.
- Disclosure controls were reported ineffective as of June 30 due to a previously identified material weakness involving technical expertise and review of complex, non-routine transactions. Management described remediation steps, including accounting papers and outside advice where appropriate.
Important facts for investors to verify
- Whether and when the FDA accepted and acted on the planned MARINE-based NDA, and the eventual label and approval status.
- Whether the outcomes study began, its final design, enrollment timetable, and financing plan, given the projected $100–$125 million cost.
- Cash use, future financing needs, and whether a commercialization collaboration was secured; also assess potential dilution from equity issuance and warrant exercises.
- The warrant derivative liability’s valuation assumptions and impact on reported earnings, distinguishing non-cash remeasurement losses from cash operating needs.
- Progress in qualifying alternate API suppliers and the related contingent purchase, penalty, milestone, and investment obligations.
- Remediation of the material weakness and developments in the Ester shareholder dispute and other disclosed contingencies.