AMRN

Business Context and Reporting Period

Company: Amarin Corporation plc
Filing Type: Form 10-Q
Reporting Period: Three months ended March 31, 2011
Business Overview: Amarin is a clinical-stage biopharmaceutical company focused on developing AMR101 (icosapent ethyl), a prescription omega-3 fatty acid for cardiovascular disease. The company has no commercial product revenue and is preparing to submit a New Drug Application (NDA) to the FDA in the third quarter of 2011.

Key Financial Metrics

Note: The Net Income for Q1 2011 is primarily driven by a non-cash gain of $25.3 million on the change in fair value of the warrant derivative liability.

Material Changes vs. Prior Period

• Capital Raise: In January 2011, the company completed an offering of 13.8 million shares at $7.60 per share, generating net proceeds of $98.7 million. This significantly increased cash reserves from $31.4 million (Dec 31, 2010) to $129.5 million (Mar 31, 2011).
• Derivative Liability Volatility: The warrant derivative liability decreased from $230.1 million to $174.8 million. This reduction resulted in a $25.3 million non-cash gain, turning a net loss in the prior year into a net profit for the current quarter.
• Operating Expenses: Research and development expenses decreased by 15.4% ($0.8 million) due to lower costs associated with the completion of enrollment in Phase III trials. SG&A expenses increased by 17.4% ($0.4 million) primarily due to increased staffing for commercial preparation.
• Warrant Exercises: Approximately 3.9 million warrants were exercised in Q1 2011, generating $5.9 million in gross proceeds, compared to no exercises in Q1 2010.

Guidance, Outlook, and Risks

• NDA Submission: Management expects to submit an NDA to the FDA in Q3 2011 for the MARINE trial indication (very high triglycerides). The company is evaluating whether to include ANCHOR trial results for a broader indication.
• Outcomes Study: To secure a separate indication based on the ANCHOR trial, the FDA requires a clinical outcomes study to be substantially underway at the time of NDA submission. The company is in the late stages of designing this study but does not expect it to be underway by Q3 2011.
• Liquidity: Management believes current cash ($129.5 million) is sufficient to fund operations for the next 12 months, covering the NDA filing and commercial preparation. However, additional capital will be required if the company commercializes AMR101 independently or commences the outcomes study.
• Internal Controls: The company disclosed a material weakness in internal control over financial reporting regarding the accounting for complex, non-routine transactions. Management is implementing new controls and hiring personnel to address this.
• Market Risk: The company is exposed to significant volatility in its reported earnings due to the fair value accounting of warrant derivative liabilities, which fluctuate with the company's stock price.

Investor Verification Checklist

• Non-Cash Earnings: Verify that the reported net income of $18.3 million is largely non-cash and driven by the revaluation of warrant liabilities, not operational profitability.
• Cash Runway: Confirm the sufficiency of the $129.5 million cash balance against the projected costs of the NDA submission and potential outcomes study.
• Regulatory Path: Monitor the FDA's acceptance of the NDA, specifically regarding the inclusion of ANCHOR trial data without a concurrent outcomes study.
• Commercialization Strategy: Assess the progress of discussions with strategic partners for marketing and sales, as independent commercialization will require significant additional funding.
• Internal Controls: Review future filings for updates on the remediation of the material weakness in internal controls over financial reporting.