Company Update (NASDAQ:AMRN): Amarin Corporation plc (ADR) Shares Surge 3% Following 4Q Results


Amarin Corporation plc (ADR) (NASDAQ:AMRN) announced financial results for the quarter and year ended December 31, 2016, and provided an update on company operations.

Key Amarin achievements in 2016 include:

  • Revenue growth: Recognized total revenue of $130.1 million for 2016 comprised of $129.0 million in net product revenue from U.S. sales of Vascepa (icosapent ethyl) and $1.1 million in licensing revenue in connection with collaborations for the commercialization of Vascepa outside the United States. Both the total revenue and net product revenue for 2016 represent increases of 59% over 2015. Included in annual revenue was $38.7 million in total revenue recognized in the fourth quarter of 2016, comprised of $38.4 million in net product revenue and $0.3 million in licensing revenue.  Both the total revenue and net product revenue in the fourth quarter of 2016 increased 45% over corresponding amounts recognized in the fourth quarter of 2015. As previously reported, Amarin has guided that 2017 net product revenue from sales of Vascepa in the United States are anticipated to be between $155 million and $165 million.
  • Prescription growth: Increased normalized prescriptions, based on data from Symphony Health Solutions and IMS Health, by approximately 50% or more for 2016 and for each of its quarters. Additionally, there are now more than 100,000 patients using Vascepa.
  • Gross margins: Increased gross margin on product sales to 73% in 2016, versus 66% in 2015, driven by improvements in product related costs.
  • R&D progress: REDUCE-IT cardiovascular outcomes study continues to track towards achieving, near the end of 2017, the onset of the targeted 1,612 aggregate primary cardiovascular events for completion of the study. The previously described pre-specified interim efficacy and safety analysis to be completed by the independent data monitoring committee (DMC) at approximately 80% of the total primary cardiovascular events is on schedule to be completed in or about the end of Q3 2017. Amarin remains blinded to the results of this study and anticipates that the recommendation of the DMC based on this interim analysis will be to continue the study to completion, in which scenario final REDUCE-IT results are expected to be available to report in 2018.
  • Strengthened balance sheet: Through transactions in 2016 and early 2017, reduced Amarin’s debt burden from face value in exchangeable debt of $165 million to $30 million and moved the earliest scheduled put date for the remaining debt to 2022.  Amarin’s cash balance at December 31, 2016 was $98.3 million. On a pro forma basis, reflecting the aforementioned debt transaction in January 2017, Amarin began 2017 with a cash balance of approximately $112 million.
  • Cash flow improving: Over the last nine months of 2016, Amarin was cash flow neutral, excluding financing, interest, royalty and research and development costs. On a similar basis, as previously guided, Amarin anticipates being cash flow positive in 2017.  In 2017, Amarin anticipates spending approximately $50 million to $60 million for research and development, with the majority of this spending for the REDUCE-IT trial, and also increasing purchases of supply for Vascepa both to support anticipated growth in 2017 and to prepare for REDUCE-IT success.

“2016 was another exceptional year of progress for Amarin both commercially and operationally,” commented John F. Thero, president and chief executive officer. “We begin 2017 with a strong team of motivated people, a product in Vascepa that has a positively differentiated efficacy and safety profile, and managed care coverage for Vascepa that was broad at the start of 2016 and expanded further over the past year. We are pleased to observe key opinion leaders increasing their attention to the potential impacts on public health and the practice of medicine if REDUCE-IT achieves the results we seek and we, of course, look forward to learning the results of this landmark study.”

Commercial Update

During the fourth quarter, Amarin continued to see substantial prescription growth and steady increases in prescription omega-3 and non-statin market share, particularly among detailed physicians. Vascepa growth continues to be driven by focused message delivery, compelling supportive data and improved managed care coverage.

Amarin reported a 45% increase in net product revenue during Q4 2016 compared to Q4 2015, which was mostly driven by prescription growth as the net price of Vascepa has remained relatively flat.  The majority of this prescription growth has come from physicians called upon and educated about Vascepa by our sales force. Based on data provided by Symphony Health Solutions and IMS Health, estimated normalized Vascepa prescriptions totaled approximately 286,000 and 312,000, respectively, for the three months ended December 31, 2016. These prescription levels represent growth of approximately 50% and 54%, respectively, from levels in the corresponding prior year periods.

REDUCE-IT Trial Progressing on Schedule

The REDUCE-IT cardiovascular outcomes trial continues to progress on schedule. Amarin expects the onset of the final primary cardiovascular event to occur near the end of 2017 with report of top-line results and publications anticipated in 2018. The projected timing of available data from which we can report top-line results should be easier to estimate after the interim look which, as discussed below, is scheduled for Q3 2017. Currently we estimate that results of the trial will become available to Amarin and be publicly communicated in mid-2018. This estimated timing reflects our assumptions of the time necessary to collect vital data from all patients in the study, compile the results, and subject the results to scrutiny of the independent review committees and the REDUCE-IT operational team.

The 8,175-patient outcomes study is evaluating whether treatment with Vascepa reduces cardiovascular events in patients who despite stabilized statin therapy have elevated triglyceride levels and other cardiovascular risk factors. The results of this important trial, if successful, could lead to improved medical care for tens of millions of patients.  Amarin is positioned to be the first company to complete an outcomes study in the population of patients being studied in REDUCE-IT.

The primary endpoint of this global, double-blind study is the time to the first occurrence of a composite of major adverse cardiovascular events (MACE).  Results will be compared between the Vascepa and placebo groups.  The study is being conducted under a Special Protocol Assessment (SPA) agreement with the FDA.

A second pre-specified interim efficacy and safety analysis of REDUCE-IT is scheduled to be conducted by the independent DMC at approximately 80% of the total 1,612 primary cardiovascular events targeted for completion of the study. Amarin anticipates that the onset of 80% of the target primary events will be reached in the first half of 2017 and that the interim analysis will be conducted before the end of Q3 2017.  Consistent with the trial design, Amarin continues to believe that the REDUCE-IT study is most likely to continue to completion of 100% of the target events.  This is the case because the efficacy requirements detailed to the DMC for early study stoppage after the 80% interim assessment are high and include robustness thresholds for underlying data that go beyond the assessment for statistical significance on the analysis of the primary endpoint after the expected completion of the study at 100% of planned events.

Amarin will remain blinded to results of the REDUCE-IT study until after the study is stopped and the database is locked at either the 80% interim analysis or at the final analysis.

Financial Update

Net product revenue for the three months ended December 31, 2016 and 2015 was $38.4 million and $26.4 million, respectively.  Net product revenue for the years ended December 31, 2016 and 2015 was $129.0 million and $81.0 million, respectively.  These increases in net product revenue were primarily attributable to increases both in new and recurring prescriptions of Vascepa driven by increased sales productivity.

In addition, Amarin recognized licensing revenue of $1.1 million and $0.8 million for the years ended December 31, 2016 and 2015, respectively, related to agreements for the commercialization of Vascepa outside the United States. Amarin’s partners for China and for the Middle East and North Africa are working towards regulatory approval of Vascepa in their respective territories.

Cost of goods sold for the three months ended December 31, 2016 and 2015 was $10.2 million and $8.4 million, respectively.  Cost of goods sold for the years ended December 31, 2016 and 2015 was $34.4 million and $27.9 million, respectively.  Gross margin on product sales improved to 74% and 73% in the quarter and year ended December 31, 2016, respectively, as compared to 68% and 66% in the quarter and year ended December 31, 2015, respectively. The improvement in gross margin on product sales was primarily driven by lower active pharmaceutical ingredient cost.

Selling, general and administrative (SG&A) expenses for the three months ended December 31, 2016 and 2015 were $31.2 million and $23.5 million, respectively. SG&A expenses in the years ended December 31, 2016 and 2015 were $111.4 million and $101.0 million, respectively.  The increase in SG&A expenses primarily reflects an increase in sales and marketing expenses and co-promotion fees payable to Kowa Pharmaceuticals America, Inc.

Research and development expenses for the three months ended December 31, 2016 and 2015 were $10.2 million and $13.3 million, respectively. Research and development expenses in the years ended December 31, 2016 and 2015 were $50.0 million and $51.1 million, respectively. This slight decrease was primarily driven by a decrease in overhead costs and non-cash stock based compensation.

Amarin reported a net loss applicable to common shareholders of $27.5 million in the fourth quarter of 2016, or basic and diluted loss per share of $0.10. This net loss included $3.2 million in non-cash stock-based compensation expense and a provision for income taxes of $12.3 million, the majority of which is non-cash.  Amarin reported a net loss applicable to common shareholders of $21.9 million in the fourth quarter of 2015, or basic and diluted loss per share of $0.12.  This net loss included $3.7 million in non-cash stock-based compensation expense, a $0.7 million non-cash loss on the change in fair value of derivatives, a $1.3 million non-cash gain on extinguishment of debt, and a benefit from income taxes of $1.5 million.

Amarin reported a net loss applicable to common shareholders of $86.4 million in the year ended December 31, 2016, or basic and diluted loss per share of $0.41. This net loss included $13.6 million in non-cash stock-based compensation expense, an $8.2 million non-cash gain on the change in fair value of derivatives, and a provision for income taxes of $10.0 million, the majority of which is non-cash.  For the year ended December 31, 2015, Amarin reported a net loss applicable to common shareholders of $149.1 million, or basic and diluted loss per share of $0.83.  This net loss included $13.9 million in non-cash stock-based compensation expense, a $1.1 million non-cash loss on the change in fair value of derivatives, a $1.3 million non-cash gain on extinguishment of debt, $33.9 million in charges for non-cash deemed dividends for accounting purposes, and a benefit from income taxes of $3.1 million.

Amarin reported cash and cash equivalents of $98.3 million at December 31, 2016. The cash balance includes $64.6 million in net proceeds from an equity financing completed in August. The primary purpose of that financing was to fund REDUCE-IT to completion. During the quarter ended December 31, 2016, net cash used in operating activities, including research and development costs, was $19.3 million, or approximately $3.3 million excluding research and development costs, interest and royalties. At December 31, 2016, the company had $20.0 million in net accounts receivable ($24.1 million in gross accounts receivable before allowances and reserves) and $20.5 million in inventory.

In January 2017, Amarin issued $30.0 million in aggregate principal amount of 3.50% Exchangeable Senior Notes due 2047 (the “2017 Notes”), and purchased approximately $15.0 million aggregate principal amount of 3.50% Exchangeable Senior Notes due 2032 that were issued in 2012 (the “2012 Notes”).  Amarin was required by the terms of the indenture governing the 2012 Notes to purchase all 2012 Notes surrendered to it on January 19, 2017. Amarin has initiated the process to redeem the remaining $0.1 million of outstanding principal amount of 2012 Notes not surrendered, which is expected to be completed in the first quarter of 2017. The remainder of the net proceeds from the 2017 Notes will be used for general corporate and working capital purposes. Pursuant to this January 2017 debt restructuring, on a pro forma basis as of December 31, 2016, Amarin had approximately $112 million in cash and cash equivalents and $30.1 million in exchangeable debt outstanding.

As of December 31, 2016, Amarin had approximately 269.4 million American Depositary Shares (ADSs) and ordinary shares outstanding, 32.8 million share equivalents Series A Convertible Preferred Shares outstanding, approximately 21.2 million equivalent shares underlying stock options at a weighted-average exercise price of $3.37, and 10.1 million equivalent shares underlying restricted or deferred stock units.

Shares of Amarin are currently rising 2.92% to $3.53, or up $0.10 in pre-market trading Tuesday. AMRN has a 1-year high of $3.65 and a 1-year low of $1.37. The stock’s 50-day moving average is $3.15 and its 200-day moving average is $3.12.

On the ratings front, Amarin has been the subject of a number of recent research reports. In a report issued on January 23, H.C. Wainwright analyst Andrew Fein reiterated a Buy rating on AMRN, with a price target of $10, which represents a potential upside of 192% from where the stock is currently trading. Separately, on January 10, Cantor Fitzgerald’s Chiara Russo reiterated a Buy rating on the stock and has a price target of $6.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Andrew Fein and Chiara Russo have a yearly average return of 5.5% and 2.3% respectively. Fein has a success rate of 49% and is ranked #830 out of 4504 analysts, while Russo has a success rate of 44% and is ranked #1855.

Amarin Corp. Plc is a biopharmaceutical company, which engages in the commercialization and development of therapeutics for cardiovascular health. It has developed and markets Vascepa capsules through wholesale.