Amarin Corporation - Q4 2023

Transcript

Mark Marmur (VP of of Global Corporate Communications and Investor Relations)

Good morning, everyone, and thank you for joining us. Turning to our forward-looking statements. Please be aware that this conference call will contain forward-looking statements that are intended to be covered under the safe harbor provided under federal securities law. We may not achieve our goals, carry out our plans, or intentions, or meet the expectations disclosed in our forward-looking statements. Actual results or events could differ materially, so you should not place undue reliance on these statements. We assume no obligation to update these statements as circumstances change. Our forward-looking statements do not reflect the potential impact of significant transactions we may enter into, such as mergers, acquisitions, dispositions, joint ventures, or any material agreements that we may enter into, amend, or terminate.

For additional information concerning the risk factors that could cause actual results to differ materially, please see the risk factors section of our annual report on Form 10-K for the year ended December 31st, 2023, which has been filed with the SEC and is available through the investor relations section of our website at www.amarincorp.com. We encourage everyone to read these documents. An archive of this call will be posted on Amarin's website in the investor relations section. Turning to today's agenda. Patrick Holt, Amarin's President and Chief Executive Officer, will provide a brief overview of 2023 highlights and 2024 priorities, and Tom Reilly, Amarin's Chief Financial Officer, will provide a review of our fourth quarter and full year 2023 financial results. Following prepared remarks, we will open the call to your questions. I will now turn the call over to Patrick Holt, President and Chief Executive Officer of Amarin.

Pat?

Patrick Holt (President and CEO)

Thank you, Mark. Good morning, everyone, and thank you for joining us today. Before we review our 2023 highlights and our 2024 priorities, I want to take a moment to reflect on our strategy at Amarin. Every day, our team is focused on driving operational momentum to maximize the patient uptake of VASCEPA/VAZKEPA. To enhance the value of Amarin and deliver shareholder value, we must drive operational momentum across our three key regions. In Europe, where we have a potential IP runway out to 2039, we are focusing efforts and investment to accelerate prescription growth and revenue, as well as secure pricing and reimbursement in those key markets. In the U.S., we're maintaining and extending our IPE market leadership, and in the rest of the world, we're enabling our partners to get our product into the hands of as many patients as possible.

We firmly believe this focus on operational momentum is the best path forward for Amarin and will more strongly position us for potential future options. Turning to slide six. While we believe this strategy is the best way to deliver shareholder value today, the only way to gain shareholder confidence is to deliver against it. We have made meaningful progress in 2023, and we have clear priorities in place for 2024. For Europe in 2023, with new leadership and a more focused strategy in place, our teams made launch progress and have advanced pricing and reimbursement goals. In Spain, our team is focusing on healthcare practitioners who are early adopters of cardiovascular products. We are continuing to deliver strong launch progress such that we now have approximately 2,500 patients on therapy. In the United Kingdom, we have a more focused strategy in place, including driving uptake in key accounts.

Currently, we have at least 1,500 patients on therapy. Turning to pricing and reimbursement, we've secured pricing and reimbursement across nine countries in Europe. As I have shared previously, we have strengthened our focus to advance our opportunities in key EU5 markets. I'm pleased to share in Italy, we have now resubmitted our dossier and will advance this process with the authorities to potentially achieve market access for VAZKEPA by the end of 2024. In France and Germany, we are sharpening our scientific arguments and have strategies and plans in place to advance submissions for VAZKEPA in these markets. We do not expect these processes to conclude in 2024. We'll continue to communicate progress on France and Germany as additional steps are achieved. Importantly, we are also aiming to successfully conclude pricing and reimbursement decisions in at least five additional markets in 2024.

We remain confident in our path forward in Europe. We have patents and applications that have the potential to extend our IP up to 2039. As a testament of this progress, we successfully defended our 2033 patent from opposition. We expect to share more on this topic in the coming months. Turning to the United States. In 2023, we continue to extend IPE market leadership, closing the year with a 57% market share. We achieved this through focused investment in managed care, trade, and medical capabilities to extend the VASCEPA's lifecycle despite the elimination of our sales force and reduced marketing spend in July. As we turn to 2024, we have begun the year in a slightly improved position compared to last year. Based on what we currently know with our exclusive accounts, these represent at least 50% of the total IPE market volume.

While we are encouraged to start the year in a solid managed care position, the market remains highly dynamic, and we continue to monitor this closely. We do expect Q1 2024 results to be impacted by typical first quarter payroll dynamics. We continue to stand ready to execute aggressive approaches, including the potential future launch of an authorized generic bolstered by our strong supply position to retain market leadership within the IPE market. In the rest of the world, in 2023, we made progress on regulatory, market access, and commercial fronts, as well as new partnerships. In China, the second largest cardiovascular market globally, Amarin's partner Edding launched VASCEPA in October for the very high triglyceride indication. Additionally, the NMPA has accepted the regulatory filing for the cardiovascular risk reduction indication, which opens up the potential for future national reimbursement and drug listing.

In 2023, Amarin also entered into three new partnerships across 15 countries. In 2024, our focus for the rest of the world shifts toward enabling our partners to obtain market access and commercial uptake across key markets. Finally, in research and development and medical, our teams delivered important progress with data publications and medical education supporting our brand globally to build confidence in our science. In 2024, we will continue to build on this momentum, including additional data on reduced risk and EPA. Indeed, we have seven abstracts of the upcoming American College of Cardiology meeting in April. We'll be sharing more on this in coming weeks. This important operational progress has supported our financial position with $321 million in cash and no debt. As you're aware, due to our recent progress in our financial position, we announced plans for a share repurchase program of up to $50 million.

I'm pleased to share that we are on track to complete the necessary shareholder and U.K. High Court approvals. We continue to anticipate completing these steps in the second quarter of 2024 and that share repurchases would commence shortly thereafter. In summary, 2023 was a meaningful year for operational momentum, and we are well positioned to continue to build on this in 2024. Now, I'd like to hand over the call to Tom Reilly to review our fourth quarter and year-end 2023 financial performance. Tom?

Tom Reilly (EVP and CFO)

Thank you, Pat. Good morning, everyone. I'm pleased to report details on our financial performance for the fourth quarter of 2023. In the fourth quarter of 2023, Amarin reported total net revenue of $74.7 million, including net product revenue of $70.6 million versus $66.1 million in the third quarter of 2023 and $4.2 million in licensing and royalty revenue. U.S. product revenue was $64.9 million, with stable performance in the U.S. despite multiple competing generics on the market. The U.S. business continues to provide profits supporting our expansion into Europe. The revenue results include Europe PM product revenue of $1.5 million, a 65% increase versus the third quarter of 2023, reflecting early revenues from European markets, including Spain and the United Kingdom.

We recognized $8.4 million in the rest of the world revenue in the fourth quarter of 2023, including product revenue of $4.2 million related to commercial sales to our partners in Canada, China, and the Middle East, and licensing and royalty revenue of $4.2 million, resulting primarily from the achievement of the Edding CVRR milestone. Costs of goods sold in the fourth quarter of 2023 were $29.6 million compared to $23.6 million, excluding restructuring in the third quarter in 2023. Amarin's overall gross margin on net product revenue in the fourth quarter was 58% compared with 64% in the third quarter of 2023. This was primarily due to an increase in launch supply sales to our partner Edding. Moving on to operating expenses.

Operating expenses were $49.7 million in the fourth quarter, comprised of $43.9 million in selling, general and administrative expenses and $5.8 million in research and development expenses. In the second half of 2023, Amarin reported operating expenses of $101.2 million. This represents a $21 million reduction in operating expenses versus the first half of 2023. We are on track to deliver the previously announced $40 million reduction in operating expenses by July 2024. Amarin reported a net loss of $5.8 million for the fourth quarter of 2023, or basic and diluted loss per share of $0.01. Let me now turn to our efforts and results in controlling costs and effectively managing our cash. As of December 31st, 2023, Amarin reported aggregate cash and investments of $321 million.

Importantly, this is the sixth consecutive quarter of positive or neutral cash flow generation for Amarin, and our cash balance is now $10 million higher when compared to December 31st, 2022. In 2023, we made progress in controlling our costs and managing our cash position through our cost reduction programs and renegotiating supply agreements. In 2024, we will continue to focus on cash preservation, prudently invest in right opportunities, particularly in Europe based on pricing and reimbursement decisions, and pending shareholder and U.K. High Court approvals will initiate our shareholder repurchase program. With that, I will now turn the call back over to Pat for closing remarks and to begin the Q&A portion of our call. Pat.

Patrick Holt (President and CEO)

Thank you, Tom, for the financial overview of our results. Our team is focused on operational momentum to maximize shareholder value across all three areas of our business. We believe we have the right plan focused on operational momentum to drive shareholder value. We have a strong future because of our fundamentals: best-in-class science supporting the VASCEPA, VAZKEPA, a large global opportunity to impact cardiovascular patients, a team that is dedicated to delivering results, and a strong balance sheet. Finally, thank you to our colleagues for their commitment and dedication. I look forward to driving shareholder value together. With that, Mark, let's begin the Q&A portion of the call.

Mark Marmur (VP of of Global Corporate Communications and Investor Relations)

Thank you, Pat. As we announced last year to enhance engagement with the company's shareholder base and facilitate connections with its investors, Amarin is partnering with Say Technologies to allow retail and institutional shareholders to submit and upvote questions, a selection of which will be answered by Amarin management during today's earnings call. Let's begin the Q&A. So Pat, we've received a number of questions on the company's long-term strategy and ways that we plan to maximize shareholder value. What would you say to these investors?

Patrick Holt (President and CEO)

Thanks for the question. I get this question a lot. It's a really important question, and we believe the best path forward for us to both increase our value and put us in the best possible place for future strategic options is today to focus on our current efforts around operational momentum, whether that be in Europe, in the U.S., or in the rest of the world. As we shared earlier in the call, we really are making progress on all three fronts, which provides us greater optimism and optionality for the future.

Mark Marmur (VP of of Global Corporate Communications and Investor Relations)

Great. Thanks, Pat. Our second set of questions focuses on China and Asia Pacific. What can you tell us on progress around the commercial launch in China, and what is the status of the cardiovascular risk reduction regulatory filing in China? Also, more broadly in Asia Pacific, can you share any updates on efforts with our partners?

Patrick Holt (President and CEO)

Well, there's a lot in that. And for some of you who know, I know this region pretty well. So let me break that down into some parts. Firstly, to the China launch. So Amarin's partner Edding is really making important progress in China, which I'll remind everybody is the second largest cardiovascular market globally. Edding have launched VASCEPA for very high triglycerides in Q4 2023. To give you a flavor, the Edding sales force is covering 200 hospitals, which includes around 500 key opinion leaders, the majority of which are cardiologists in the three largest cities of Beijing, Shanghai, and Guangzhou. So in summary, the launch is progressing well, and the structure of the agreement provides immediate profitability to Amarin. So let's move from today and also think about the future in China as we reflect upon the cardiovascular risk reduction indication.

The NMPA has accepted the regulatory filing for cardiovascular risk reduction, which opens up the potential for National Reimbursement Drug Listing. The submission was accepted with a clinical trial waiver, meaning a separate clinical trial will not be required in order to be reviewed for approval. The teams in our focus on advancing that submission together with the authorities, and we expect the regulatory review process to conclude in 2025. Asia Pacific's a large region, so let me just touch on some other areas within the region. As you know, last year, we entered into partnerships in Australia and New Zealand with CSL Seqirus and also 11 Asian markets, including South Korea, with Lotus Pharmaceuticals. I'm pleased to share that CSL is advancing pricing and reimbursement processes in Australia with the authorities.

In other markets, our partner Lotus is advancing regulatory discussions and filings with the various authorities across the region.

Mark Marmur (VP of of Global Corporate Communications and Investor Relations)

Great. Thanks, Pat, for that information on China and Asia Pacific. Now, turning to the U.S., is there a path toward growth in the market? Could we potentially take market share from other products or classes?

Patrick Holt (President and CEO)

Great question. And naturally, our U.S. revenues and cash flows are incredibly important to our business. When we take a step back and we think about the U.S. market and where it stands today, it's important to remember that the IPE market in the U.S. is highly genericized at this point. Our focus has been and continues to be to maintain IPE market leadership and, as a result of that, not focus on growing the market. We really have achieved a highly atypical performance three years post-LOE to end 2023 with a market-leading share of 57%. We've been able to secure market leadership and continue that success through our exclusive contracts led by our capabilities in payer, managed care, and medical areas. Again, as we mentioned, we've started 2024 in a strong position in terms of our exclusive contracts.

To remind everybody, it's a dynamic market, and we do watch it very closely and continue to assess our optionality for our branded product and beyond that should we consider other strategic alternatives. In terms of taking share from other products or classes, given those generic dynamics, we do not view this as an optimal strategy.

Mark Marmur (VP of of Global Corporate Communications and Investor Relations)

Thank you. Turning to supply, if we see demand increase from Europe or our rest of the world partners, are you confident that we can meet those supply demands?

Patrick Holt (President and CEO)

It's a very important question, and we do have strong relationships with our key supply partners. Over the last several years, we've made really important progress renegotiating our supply agreements to ensure that we can both meet our demands as well as reduce key supply commitments. We feel really confident that we can meet those supply demands moving forward.

Tom Reilly (EVP and CFO)

Great. Now, one last question on the R&D side from the Say Technologies questions. Is Amarin working on advancing any additional indications for the VASCEPA, VAZKEPA?

Patrick Holt (President and CEO)

I was really pleased this question came up. It's such an important question when you think about the core strengths that Amarin has in terms of our R&D team and our IP capabilities and leadership. This is the team that has developed and advanced the molecule from day one and delivered the REDUCE-IT data that really has a global impact that we see today. With our team in place, we do continue to look at opportunities for new indications, and we will update investors based on potential future progress of that work. Before we take additional questions, I'd like to thank those shareholders who submitted questions via the Say Technologies platform. We are committed to continuing open and transparent dialogue with all of our shareholders, and the Say Technologies platform is one way that we are trying to increase engagement and two-way dialogue with you.

We look forward to continuing to hear from you and answering your questions on this platform as well as other opportunities moving forward.

Tom Reilly (EVP and CFO)

Thank you for those updates, Pat. We'll now open the Q&A up for additional questions.

Operator (participant)

Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from Roanna Ruiz with Leerink Partners.

Roanna Ruiz (Senior Research Analyst)

Hi. Morning, everyone. So could you talk a bit more about the ongoing generic competition in the U.S.? What trends are you seeing in the field, and what do you expect in terms of possible pressure on the VASCEPA net price in the next couple of years?

Patrick Holt (President and CEO)

Hi, Roanna. Good morning. Thanks so much for the question. Great to hear from you. As you probably have followed, there are more generics that have got regulatory approval. There are more generics that have also got prices. And with that said, what we see in terms of the market dynamics in the market so far, they remain fairly stable. So as we mentioned, we closed the year and we started the year with a strong position with our exclusive contracts that represents greater than 50% of the IPE volume. So as we end the year and start the year, we are feeling really good about that position. But as I'm sure you've noted, there is more dynamics, and there are more entrants in the market, so we continue to monitor it very closely.

I would say so far, we haven't seen any dynamic changes from what we have seen historically. Obviously, we track it closely, and as you know, we have optionality in the short term as well as the long term to maximize the economics for us in the U.S.

Roanna Ruiz (Senior Research Analyst)

Yep. Makes sense. A quick follow-up on the rest of the world. I notice it's gaining some traction. Could you talk about what regions you expect might contribute the most momentum to future growth in revenues in 2024 and beyond?

Patrick Holt (President and CEO)

Yeah. It's a great question. As I mentioned, it's pleasing to see the progress in 2023. As you think, we signed up some new countries in 2023. But if you take a step back in 2023, the main revenue sources until China came on board was really coming from Canada and then parts of Middle East, North Africa. So what we'll see in 2024 is certainly continued value coming from those existing partnerships such as what I've just mentioned. Also, I do expect that China will have more progress in 2024. And then there is the opportunity, I think, as some of these partnerships start to go from signing through regulatory processes such as Lotus, market access, reimbursement and pricing such as CSL Seqirus in Australia and New Zealand. So you're starting to see a shift from entering partnerships to really more driving through those pre-commercial and commercial outputs.

We're pleased that we're progressing through that life cycle of partnership and alliance management, I would say. We see that shift in the business toward more market access and revenue generation. Internally, that means we're beefing up our capabilities and leadership to support that growth.

Roanna Ruiz (Senior Research Analyst)

Got it. Thanks.

Patrick Holt (President and CEO)

And to add that, it is a key part of our goals and our strategy, that rest of the world business. And it provides immediate profitability for us.

Operator (participant)

Your next question for today is from Jessica Fye with JPMorgan.

Na Sun (VP)

Hi, guys. Good morning. This is Na Sun on for Jessica Fye. I have a question on your progress in launching the VASCEPA there. Can you just talk a little bit about how to accelerate the growth in the U.K.? And then for Germany, have you come up with a plan to re-enter the market there? And then for Italy as well. Thank you.

Patrick Holt (President and CEO)

Thanks, Nassan. Great to hear from you. Look, Europe is obviously critical for us. It's a key focus of our investments and a key focus of the whole organization as we move forward. So as we break that down, we think about those key launch markets. And as we've previously mentioned, the U.K. is quite an individual market, and the uptake in the U.K. is typically slower. We are making progress with a more focused strategy on those key accounts. And as I signalled earlier, we now believe we estimate we have at least 1,500 patients on therapy. Building on that, we did say from that moment of launch last September that we did expect Spain to be a faster uptake market, and that is proving true. So we're pleased with the progress and the uptake we're seeing in Spain on a national base.

Today, we estimate we have around 2,600 patients on therapy, which is important progress for us. They're two key launch markets for us. As we move then to some of the reimbursement markets, we've resubmitted in Italy, building on our previous strong scientific assessment. We do expect Italy pricing reimbursement to conclude in 2024. Then if we think about Germany, to your next question, you know our history in Germany. That's a topic where we've taken a step back, and we are redeveloping a potential new strategy to enter the market. We're working with the authority to assess different ways to consider patient populations that can be relevant for the German market. We're working with the authorities on those plans, and we continue to advance that through 2024. As I mentioned, I don't expect that those processes will conclude in 2024.

Thanks very much for the question.

Operator (participant)

Your next question for today is from Louise Chen with Cantor Fitzgerald.

Wayne Wu (Equity Research Associate)

Hi, team. Hi. This is Wayne for Louise. Thanks for taking our questions. So first, you have reiterated that you're on track to deliver the $40 million annual savings. So how should we think about the operating expense for 2024? Because compared to the second quarter, you save about $7 million in the third quarter and $8 million this quarter. Should we expect a similar number going forward? Then the gross margin has dropped to 58%. So how should we think about this going forward? Thank you.

Tom Reilly (EVP and CFO)

Yeah. Great. This is Tom. Thanks for the question. Related to the operating expense and the $40 million, which we're on track to deliver and our expectation for expenses, as mentioned before, we reduced expenses from the second half to the first half of 2023 by $21 million. Our cost basis is approximately $50 million per quarter. Our expectation is to stay within that range depending on pricing reimbursement decisions. We'll invest in those opportunities, but we'll find other ways to reduce costs. So our overall expectations is to stay within that $50 million operating expense basis. Related to your question on gross margin, very good question. Thanks for picking it up. What you've seen versus Q3 is a deterioration of gross margin. But that's primarily due to launch supply that we provided for our partners, in particular in China.

As the China market is moving forward, we're providing product for revenue there. It's about a 2.5 point-3-point reduction in margin impact this quarter versus the previous quarter. Then the question on how to expect for margins moving forward, I think it all depends on the uptake in China and how much product supply we'll be providing. We'll give updates on the progress of the China market.

Wayne Wu (Equity Research Associate)

Thank you very much.

Operator (participant)

Your next question is from Paul Choi with Goldman Sachs.

Speaker 7

Hi, everyone. Good morning. This is Khalil calling in for Paul. Thank you so much for taking our question. I guess our question is about the exclusive contracts that you've mentioned in the past. As those are renegotiated, have you seen any additional pushback as more generics enter the market? And have you or will you set a threshold for deterioration at those, at which point the company would pivot to your own generic? Thank you.

Patrick Holt (President and CEO)

Khalil, thanks very much for the question. Look, obviously, we track those contracts very carefully. We do see, I would say, on an annual basis to renegotiate our exclusive contracts, we do see annual impact to those pricings in the sort of low double-digit range, typically. That's been something that we are seeing consistently. We don't see necessarily significant changes to that, but that's the sort of range that we see. What's really pleasing is we have had a strong end to the year and a strong start to the year in terms of how we're landing our negotiations. The net-net of that means that we are participating in greater than 50% of the IP market volume. That has enabled us, with our great managed care and trade and medical capabilities, to pull through, as we close 2023, a 57% market share and retain market leadership.

To your second part of your question, of course, we track the economics and the overall profitability incredibly closely. We have specific scenarios in our mind as to when we think those are attractive and when they start to become more marginal, and we have plans in place to react based on how those dynamics change should they change. But as it stands right now, our focus is to extend our branded life cycle as long as we can. Our organization, our U.S. team, from my perspective, has delivered a highly atypical performance for over three years since LOE, which provides incredibly important profits for the business, particularly for our growth in Europe. So we couldn't be happier in terms of how we finish the year and how we start the year. But as you well know, it's highly dynamic. We monitor it very closely.

Speaker 7

Got it. Thank you so much.

Operator (participant)

We have reached the end of the question-and-answer session, and I will now turn the call over to Patrick for closing remarks.

Patrick Holt (President and CEO)

Well, thank you all for your attention, and thanks for all the Q&A. We really appreciate the interest, and we look forward to having additional conversations on these important results in the coming days ahead. So thank you again for your time, and wish you a great day ahead. Thank you.

Operator (participant)

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.