Amarin Corporation plc (AMRN) Q2 2012 Earnings Report, Transcript and Summary

Greetings and welcome to the Amarin Corp. Second Quarter 2012 Financial and Operating Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Schultz, Senior Director of Investor Relations for Amarin Corp. Thank you, Mr. Schultz. You may begin.

Welcome, and thank you for joining us today. Please be aware that this conference call will contain will contain forward-looking statements that are intended to be covered under the safe harbor provided by the Private Securities Litigation Reform Act. Examples of such statements include, but are not limited to, our current expectations regarding regulatory filings, regulatory approvals, potential indications and commercial success of our product candidates and approved product, our current expectations regarding the cardiovascular outcome study and the potential implications of any such study on our regulatory process, plans to protect the commercial potential of our product candidates and approved product by obtaining patents and regulatory exclusivity, maintaining trade secrets and taking advantage of manufacturing barriers to entry, our current expectations regarding a potential strategic collaboration, manufacturing efforts and preparations for commercialization of our product candidates and approved products and our expectations for future publication and presentation of our study data and our future expenses and the adequacy of our financial resources. These statements are based on information available to us today August 8, 2012. We may not actually achieve our goals, carry out our plans or intentions or meet the expectations disclosed in our forward-looking statements and you should not place undue reliance on these statements. Actual results or events could differ materially. We assume no obligation to update these statements as circumstances change. Our forward-looking statements do not reflect the potential impact of significant transactions that we may enter into such as mergers, acquisitions, dispositions, joint ventures or any material agreement that we may enter into or terminate. For additional information regarding the factors that could cause actual results to differ materially, please see the forward-looking statements section in today’s press release and the risk factors section of our most recent Form 10-Q, each of which were filed today with the SEC and are available on our website www.amarincorp.com. We encourage everyone to read these documents. In addition, please note that these remarks will contain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found within our second quarter financial results press release. Finally, an archive of this call will be posted to the Amarin website in the Investor Relations section. I’ll now turn the call over to Joe Zakrzewski, Chairman and Chief Executive Officer of Amarin.

Thank you, Steve, and welcome to everyone. I’m joined on this call today by Fred Ahlholm, our VP of Finance; Joe Kennedy, our General Counsel; and Steve Ketchum, Amarin’s President of R&D. On July 26, Amarin held a conference call regarding approval by FDA of our NDA for Vascepa. I hope that each of you had the opportunity to listen to that call. Because that call was so recent and included comments on a variety of topics beyond the NDA approval, I will keep today’s comments brief. Fred will then provide a financial results update and we’ll then take a few questions. There have been numerous highlights for Amarin since our last quarterly report, most significantly, the recent approval of Vascepa as an adjunct to diet for the treatment of patients with severe hypertriglyceridemia. In addition, Amarin has made significant progress towards supporting the commercial exclusivity of Vascepa with 7 patents in play, either issued, allowed or in progress states of prosecution with the USPTO. This in addition to the 25 patent applications that are currently on file with the USPTO. We received an Intention to Grant letter for the MARINE method of use patent application in Europe as well. We continue to communicate the exciting Phase 3 clinical data from MARINE and ANCHOR trial to the scientific community and, this past quarter, presented at the National Lipid Association, the American Diabetes Association Scientific Sessions and had the ANCHOR trial data published in the American Journal of Cardiology. And, through effective cash management in Q2 and prior quarters, ended June 30, 2012, with $250 million cash on hand. Looking ahead, now that Vascepa is approved for the initial indication, Amarin is preparing to file a supplementary NDA, an sNDA for the high triglycerides mixed dyslipidemia indication studies in the ANCHOR Phase 3 trial. The sNDA can be filed when the Amarin’s cardiovascular outcomes study REDUCE-IT that’s substantially underway, which as previously stated, we expect to achieve in 2012. Amarin continues to consider 3 potential paths for the marketing and sales of Vascepa: an acquisition of Amarin, a strategic collaboration, or self-commercialization, the latter of which could include third-party support. Until we enter into potential strategic transaction, Vascepa commercialization plans will continue to evolve. We believe that each of these paths can lead to success. We plan to continue evaluating the relative of origin-risk of these paths on a basis of what we believe creates the best value for our shareholders. As we have privacy stated, Amarin plans for commercial launch of Vascepa early in the first quarter of 2013. There are various preparatory steps Amarin needs to take as we evaluate our future launch options and we are taking these steps. For example, now that Vascepa is approved and our lead suppliers have passed regulatory inspection, we’re building up inventory of Vascepa prior to launch. Based upon feedback from key opinion leaders and other research, we’re confident that Vascepa will be viewed as a unique and differentiated product when compared to current and potential future competition. Key elements of the Vascepa label include significant triglyceride lowering, LDLc neutrality, favorable safety profile and significant reductions and other lipid biomarkers, such as Apo-B and non-HDL-C. We believe that this profile will make Vascepa an important new treatment option for caregivers and patients with severe hypertriglyceridemia and a leading product in lipid management. Looking at Vascepa exclusivity, Ameren strategy consists of patents, seeking regulatory exclusivity, maintaining trade secrets and taking advantage of manufacturing barriers to entry with a goal of Vascepa exclusivity to 2030 and beyond. As I mentioned earlier, Amarin has made significant progress on the patent front with 7 patents now in play, including the issuance of 1 patent, notice of allowance for 1 application and 5 reasons for allowance published with the USPTO. With respect to new chemical entity NCE regulatory exclusivity, Amarin is still on active dialogue with FDA. Since approval, Amarin has had continue discussions with FDA regarding NCE. We are hopeful for a decision and timeframe inclusion in the Orange Book supplement in August, however, due to the uniqueness of the situation, it’s also possible that decision may go longer. At this time, FDA has not advised Amarin of a delay or a decision. In the meantime, given the active dialogue, we will not be making further additional comments on NCE, nor taking questions on it. Finally, regarding near-term potential news flow over the next 12 months, separate from any news from partnering discussions, activities which may be publicly visible in upcoming weeks or months includes: NCE status determination; the addition of a fourth supplier; a reduce of cardiovascular outcome study, substantially underway; Vascepa sNDA submission for high triglyceride indication that includes mixed dyslipidemia that in the ANCHOR trial; sNDA submission for our expanded supply chain; additional news on patents; continued publication of Vascepa data, including presentation of MARINE data at the upcoming ESC Conference in Munich, Germany; commencement of a combination product comprised of Vascepa and a leading statin; and of course, the Vascepa commercial launch by third-party or ourselves. I’ll now let Fred Ahlholm, Amarin’s Vice President of Finance, to comment on Amarin’s second quarter 2012 financial results.

Thank you, Joe. As noted, earlier today Amarin filed its quarterly report on Form 10-Q with the SEC for the 3 and 6 months ended June 30, 2012. While I will provide some commentary regarding our financial results, you will find a more detailed discussion of our results in the 10-Q. Amarin reported cash and cash equivalence of approximately $250.3 million at June 30, an increase of $4.5 million from our reported $245.8 million in cash and cash equivalents at March 31, 2012. This increase was due primarily to the exercise of warrants and stock options during the 3 months ended June 30, 2012, offset by cash outflows for operating activities of approximately $18.6 million, as compared to $10.8 million in the same period of the prior year. This increase in cash outflows reflect the increased activities related to our commercial preparations for the launch of Vascepa, including costs associated with the qualification and extension of suppliers, as well as costs associated with our REDUCE-IT cardiovascular outcomes study, which commenced at the end of 2011 and has been accelerating in 2012. The company’s liabilities as of June 30th, 2012, excluding the value of the non-cash financial derivatives, totaled approximately $145.6 million, which includes $127.4 million for the carrying value of the exchangeable debt. Our research and development expenses for Q2 were approximately $12.9 million, excluding non-cash costs associated with stocks and warrant-based compensation, compared to $5 million for the same period of 2011. Our marketing and general and administrative expenses for Q2 were approximately $8.1 million, excluding non-cash costs associated with stock and warrant-based compensation, as compared to $3.4 million for the same period of 2011. Prior to NDA approval, costs associated with the qualification of our suppliers and supply purchases were expensed as part of our R&D costs. After NDA approval, supply purchases will be capitalized as inventory. In preparation for the commercial launch of Vascepa, we anticipate spending approximately $25 million to $35 million to build up our inventory levels. That concludes my prepared comments, and I’ll now turn the call back to Joe. Joe?

Thanks, Fred. Our achievements in the first half of 2012 have positioned Amarin for an exciting remainder of the year and early 2013, underscored by the Vascepa commercial launch in early Q1. We look forward to updating you on our progress as appropriate and thank you for your support and interest in Amarin. I will now open the call for a few questions. Operator?

[Operator Instructions]Our first question comes from the line of Dewey Steadman with JPMorgan Chase.

Congratulations again on the NDA approval couple of weeks ago. I guess my first question would be, since we are in a public forum, Joe can you just opine a little bit on the recent stock sales that came through post approval? And were they part of a previously announced sale plan, and was it possible to back out of the plan prior to execution and how much exposure does senior management have to the stock, post sale?

Dewey I assume you are talking -- I heard you say spot sales, but I think the stock sales from the management team and the board members?

Yes, sir.

So they were all part of 10b5-1 plan and as you know, those are things that are put in place during open windows. They represent a very small position of what everyone holds in the company. So for example, the ones that you saw that were mine, I think were 5% of my holdings, and et cetera. And this was just fiscal fiduciary management. But a very small piece and again, we are all very highly levered and tethered to the strong success of the company.

And in terms of -- I am not going to go into MCEs, but in terms of building the amount of supplies, between the expense that was capitalized in R&D this quarter and then the $25 million to $35 million that you expect to spend, how much of a supply do you anticipate that will be?

We haven’t commented what we expect to do in the norm, yes, once we determine which strategic option we’ll go with, again, whether we sell the company, partner or go along with help. We aren’t prepared to give guidance on that or those numbers or revenues at this time. And in part, giving those numbers out we’d be doing that. So we need to refrain from answering that right now.

Our next question comes from the line of Ritu Baral with Canaccord Genuity.

Joe, can you tell us where you are on the hiring of your commercial organization, or do you have regional managers in place and you’re currently interviewing reps and sort of the general timeline you are looking at for additional hires?

We’re in the process, as I said on the last week -- or 2 weeks ago call, because the industry is contracted from 110,000 down to 65,000, there are people, great people everywhere. I would tell you that where we are really at right now is focusing on doing those things that you do under all 3 of those scenarios, and a lot of that’s primarily in the marketing side of things. That’s the managed care piece, that’s your forecasting arm, things of that nature. It’s really the sales piece in general really cranks up, I would call in October, if and when we get to that point. So right now, it’s really more a lot of cerebral work going on in terms of understanding who might be available for what positions in what area.

Will you have any sort of activity, CME activities, at American Heart Association later this fall?

Steve?

Yes. We will continue to be supporting CME efforts, not just around AHA, but other National Lipid Associations and other forums.

And can you give us an update on the manufacturing sNDAs for your other suppliers that you’ve targeted for later this year?

Sure. Where we’re at right now, Ritu, we expect to have one, hopefully, two filed before the end of the year in the other sNDAs, and then the third one following the first quarter of next year. And again, I think as we mentioned in the pre-scripted notes, we expect to be announcing the fourth supplier very shortly.

Great. And last question, and then I’ll jump back in the queue. Your combination product, have you picked a final formulation for the combination product? And can you confirm that it’s only one statin at a time that you’re going to be moving forward with?

Well, I can’t confirm that we have a final formulation. We have a statin or statins picked out. We have the ability to do many things and we still expect to start that study by the end of the year.

Any color on the formulation that you picked, whether it’s sort of spray coated capsule like you previously said or…?

For competitive reasons, I probably need to lay low on that, Ritu.

[Operator Instructions] Our next question comes from the line of Tommy Nguyen with Jefferies.

Maybe just a general question on business development discussions that you might answer. Can you characterize at all whether there is some particular value creation event like the issuance of IP or filing for a second indication in the potential partners that they’re looking for? Or it’s more the situation that all of the key elements are in place now that you have an approval and it’s more a negotiation? I’m just trying to figure out how active the partnering negotiations are and whether there’s anything that can be done to expedite them?

Yes. What I would tell you Tommy, is that it’s good to hear from you again. Thanks for the question. Look, things are active. They continue to increase in activity. Beyond having said that, I don’t think it would be appropriate for me to comment on any specific things that are out there.

And then if I just ask a second one. On the timing of filing the sNDA for ANCHOR, can you clarify how clear an understanding you have of the requirement to enroll in the outcome study before filing? And again, I’m just trying to understand if there is some risk to delays and perhaps an incomplete understanding of the requirement?

Yes, I don’t think that’s fair, Tommy. What we said, and I think what we will stick by, is that we believe we will have the approval in the second half of next year. And if you back that out to the maximum filing of 10 months sNDA, that means we have to file no later than February 28, 29, if it’s a leap year. And I think we’re well on track to do that and feel very comfortable continuing with that guidance.

That’s very helpful. There is a little curiosity, I guess. I noticed you are listed on the FDA’s list of 40 or so cardiovascular medicines, I thought that was intriguing since Lovaza is not on that list. Should we read anything at all into this? And that’s my last question, I promise.

Steve do you want to comment on that?

You know, Tommy, obviously we were making this same observation ourselves. I think it’s a reflection of the FDA’s enhanced ability technology wise to get that type of information up on to the websites in real time relative to 5 or so years ago. But no, we don’t read anything into it in particular.

Thank you. Our next question comes from the line of Ram Selvaraju with Aegis Capital.

First of all, with respect to the supply situation, can you comment on or give us any color on any discussions you may have had with BASF following their acquisition of Equateq? And what the current status is of your relationship with BASF and their commitment to large scale manufacturing of omega-3 fatty acid based products?

Yes, sure. We saw the BASF thing, Ram, as a real positive. I mean Equateq is a great company, but currently having wherewithal of BASF and its infrastructure and supply chain is a real plus for us. We have had a lot of discussions with them on our supply team, the supply team and recently senior levels and we’re just pleased to have BASF and Equateq working together with us.

Okay. And can you give us an idea as to what the overall context is right now, as you go through the REDUCE- IT outcome study of other clinical studies that are outcomes-based looking at the relative benefit of triglyceride lowering, what are those other studies that are currently running and what their relative timing is currently expected to be? Whatever that is currently in the public domain, relative to REDUCE-IT?

Yes. I’m probably not the right person to comment on other people’s studies, maybe one or two. But more peripherally than that, again, we feel very good with where we’re at with the study, very good with the countries enrolled, the patients enrolled. And it’s moving along as we expected, but in terms of other folks, most of what we are tuned into once the data is presented. Like, as we talked about before, aim high in the quarter, but what’s going on simultaneously is a little trickier to figure out.

Okay. And then last question is, given the fact that the drug is currently approved, can you give us any color on what Amarin’s plans are in the future on testing higher doses of Vascepa than were tested in the ANCHOR and MARINE studies? Because I think it’s clear to all of us that you didn’t get anywhere close to a maximum effective dose. So what are your plans there?

Yes. We’re still kicking a lot of that around. And clearly, as we get towards the back end of the year, we’ll update folks on that, sort of under the same umbrella as the combo study. There’s a lot of reasons we could, should do it. And again, the whole benefit being you don’t see LDL. On the other hand, if you think about the way the market is set up, the doctor has the freedom already to dose it whatever the doctor chooses to dose at. So that, we’re going back and forth on now as we look at that. But we’re spending a lot of time thinking through that as we speak.

Okay. Can you comment at all on pricing relative to what you think might be the situation with the PCSK9 inhibitor, given the fact that they are injectable? And then I will jump back in the queue.

Again just sticking to our pricing without getting into other people’s, I think what we said is that we are, number one, looking to shift share, number two, expand the market and number three, be in a tier in the event that as things evolve over the years, we are in a very preferential state. Our goal is to get to Tier 2 as quickly as possible. Beyond that, we haven’t commented on what our pricing would be.

There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Thank you everyone and really appreciate all the support and I think as we continue to go forward here, we’ve got a lot of exciting times ahead over the next 60 to 90 days. So please, if anyone has questions, as always, contact Steve Schultz and we’ll arrange a call. But again thanks for joining us this afternoon and take care.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation.