Amarin Corporation plc (ADR) (NASDAQ:AMRN) announced financial results for the three and nine months ended September 30, 2017, and provided an update on company operations.
Key Amarin achievements since June 30, 2017 include:
- Product revenue growth: Recognized $47.1 million in U.S. net product revenue from Vascepa® (icosapent ethyl) sales in Q3 2017 compared to $32.4 million in Q3 2016, an increase of 45%.
- U.S. prescription growth: Increased normalized prescriptions for Vascepa by 44% compared to Q3 2016 based on data from both Symphony Health Solutions and QuintilesIMS.
- R&D progress: REDUCE-IT, Amarin’s potential landmark long-term cardiovascular outcomes study, progressing towards completion with results expected to be reported in less than a year (before the end of Q3 2018).
- International: Partnered with HLS Therapeutics to commercialize and distribute Vascepa capsules in Canada.
- Management: Appointed Mark W. Salyer to new position of Chief Commercial Officer to build on the company’s recent revenue growth and lead future global commercial expansion plans and execution.
“Interest in the results of the REDUCE-IT study continues to grow amongst key opinion leaders and others with knowledge of the study due to multiple factors, including the large unmet need for improved patient care, continued evidence from other studies which suggest support for the hypothesis being evaluated in REDUCE-IT and the proximity of REDUCE-IT results which are less than a year away,” stated John F. Thero, president and chief executive officer. “The excitement over the vast potential of the REDUCE-IT study is supplemented by the continued growth we have experienced, and which we anticipate continuing to experience, from our current promotion of Vascepa based on its relatively narrow current label.” He added, “We are preparing for anticipated REDUCE-IT success while continuing to focus on positive execution.”
Commercial business growth continues
Net product revenue in the third quarter of 2017 achieved record levels. Net cash flow from Amarin’s commercial business, which had been modestly positive year-to-date coming into Q3 2017, excluding R&D and finance related cash flow (e.g. cash inflows/outflows from debt-related transaction reported in Q1 2017, interest and royalty), was again positive in Q3 2017. During Q4 2017 and leading into 2018, the company anticipates increasing its sales force size by 10 to 20 sales representatives. While this planned sales force expansion is relatively small it is notable in context that for the past several years Amarin has witnessed Vascepa revenue growth through increased productivity without expanding its sales force. These sales representatives will be methodically added to areas currently uncovered by Amarin sales representatives. However, the company is not planning to extensively expand its sales force for Vascepa until after it sees positive REDUCE-IT results.
Estimated normalized total Vascepa prescriptions, based on data from Symphony Health Solutions and QuintilesIMS, totaled approximately 374,000 and 372,000, respectively, for the three months ended September 30, 2017. These prescription levels represent growth of approximately 44% compared to the respective prior year levels.
REDUCE-IT trial status
The REDUCE-IT cardiovascular outcomes trial, which commenced in 2011, is progressing towards reporting results before the end of Q3 2018. Amarin anticipates the study reaching the onset of 100% of the targeted cumulative total of 1,612 primary major adverse cardiovascular events (MACE) before the end of Q1 2018. Reaching this events target will be followed by final patient visits to clinical sites, accumulation of final data, including on any primary or other categories of MACE that have been documented and adjudicated, and final efficacy and safety data review by the independent review committees and the REDUCE-IT operational team. After Amarin is unblinded and learns the results of the study, the results will be publicly communicated. Amarin believes that the results of this potential landmark trial, if successful, could lead to improved preventative medical care for tens of millions of patients and could contribute to significantly lower costs for treating these patients.
REDUCE-IT is the first prospectively conducted, multi-national, double-blinded study to evaluate the effects of treating patients who despite well-controlled LDL-cholesterol have high triglycerides and other risk factors associated with cardiovascular disease. This 8,175-patient study, which commenced in late 2011, has accumulated over 30,000 years of study of treated patients. Amarin seeks to determine whether the potentially broad clinical effects of an intentionally high daily dose (4 grams per day) of Vascepa translate into fewer cardiovascular events for at-risk patients. If successful in demonstrating positive cardiovascular outcomes results, Amarin believes that Vascepa is well-positioned to be prescribed for treatment of at-risk patients due to the efficacy, tolerability, ease of administration and affordable price of Vascepa.
Net product revenue for the three months ended September 30, 2017 and 2016 was $47.1 million and $32.4 million, respectively. Net product revenue for the nine months ended September 30, 2017 and 2016 was $126.3 million and $90.6 million, respectively. Increased revenue is mainly attributed to increased Vascepa prescriptions.
Licensing revenue associated with agreements for the commercialization of Vascepa outside the United States during the nine months ended September 30, 2017and 2016 was $0.9 million and $0.8 million, respectively.
Gross margin on product sales improved to 75% in the three and nine months ended September 30, 2017, as compared to 74% and 73%, in the three and nine months ended September 30, 2016, respectively. This improvement was primarily driven by lower unit cost API purchases.
Selling, general and administrative expense for the nine months ended September 30, 2017 and 2016 was $98.9 million and $80.1 million, respectively. This increase is due primarily to increased promotional activities, including costs to support anticipated expansion following successful REDUCE-IT results, increased legal costs and increased co-promotion fees resulting from increased sales.
Research and development expense for the nine months ended September 30, 2017 and 2016 was $35.2 million and $39.8 million, respectively. This decrease is primarily due to timing of REDUCE-IT and related costs.
Under GAAP, Amarin reported a net loss of $10.8 million in the three months ended September 30, 2017, or basic and diluted loss per share of $0.04. This net loss included $3.5 million in non-cash stock-based compensation expense. For the three months ended September 30, 2016, Amarin reported a net loss of $15.8 million, or basic and diluted loss per share of $0.08. This net loss included $3.4 million in non-cash stock-based compensation expense and a $3.6 million non-cash gain on the change in fair value of derivatives.
Under GAAP, Amarin reported a net loss of $45.4 million in the nine months ended September 30, 2017, or basic and diluted loss per share of $0.17. This net loss included $10.5 million in non-cash stock-based compensation expense. For the nine months ended September 30, 2016, Amarin reported a net loss of $58.9 million, or basic and diluted loss per share of $0.31. This net loss included $10.4 million in non-cash stock-based compensation expense and an $8.2 million non-cash gain on the change in fair value of derivatives.
Amarin reported cash and cash equivalents of $79.1 million at September 30, 2017. Net cash flow from operations, excluding debt restructuring, interest and royalties, and R&D costs, in the three and nine months ended September 30, 2017 was modestly positive. On this basis, the company anticipates that net cash flow for 2017 will be positive. For the nine months ended September 30, 2017, cash outflows relating to research and development were approximately $31.7 million and cash paid for interest and royalties, in aggregate, was approximately $12.5 million.
As of September 30, 2017, the company had $34.6 million in net accounts receivable ($49.1 million in gross accounts receivable before allowances and reserves), which are current and $28.6 million in inventory. As of September 30, 2017, the company had accounts payable and accrued expenses of $67.4 million which increased from $43.8 million at December 31, 2016 primarily due to the timing of rebate and certain supplier payments.
As of September 30, 2017, Amarin had approximately 270.9 million American Depository Shares (ADSs) and ordinary shares outstanding, 32.8 million common share equivalents of Series A Convertible Preferred Shares outstanding and approximately 23.6 million equivalent shares underlying stock options at a weighted-average exercise price of $3.26, as well as 11.9 million equivalent shares underlying restricted or deferred stock units.
Shares of Amarin are up nearly 6% to $3.60 in pre-market trading Wednesday. AMRN has a 1-year high of $4.47 and a 1-year low of $2.75. The stock’s 50-day moving average is $3.38 and its 200-day moving average is $3.35.
On the ratings front, Amarin has been the subject of a number of recent research reports. In a report issued on October 9, Jefferies analyst Michael Yee reiterated a Buy rating on AMRN, with a price target of $7, which implies an upside of 106% from current levels. Separately, on September 26, Cantor’s Louise Chen assigned a Buy rating to the stock and has a price target of $10.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Michael Yee and Louise Chen have a yearly average return of 7.2% and a loss of -10.5% respectively. Yee has a success rate of 56% and is ranked #651 out of 4699 analysts, while Chen has a success rate of 35% and is ranked #4616.
Overall, 4 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $8.25 which is 142.6% above where the stock closed yesterday.
Amarin is a biopharmaceutical company, which focuses on the commercialization and development of therapeutics for cardiovascular health. The company’s product development program leverages its extensive experience in lipid science and the potential therapeutic benefits of polyunsaturated fatty acids. It has developed and markets Vascepa capsules through wholesale.