Amarin Corporation PLC (AMRN) 2004 Q2 法說會逐字稿

Good afternoon. My name is Shayla and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Amarin second- quarter financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS) I would now like to turn the call over to Rick Stewart, Chief Executive Officer. Please go ahead, sir.

Thank you, Shayla. Good morning. This is Rick Stewart, Chief Executive Officer of Amarin. I'd like to welcome you to our second-quarter 2004 earnings conference call. I'm joined by Alan Cooke, Amarin's Chief Financial Officer. As a reminder, this call may contain forward-looking statements that are subject to inherent risk and uncertainty. For more information, I refer you to the Safe Harbor statement on our website and to Amarin's Form 20F on file with the SEC.

Before Alan reviews the financial results for the quarter in detail, I would like to highlight the significant progress made by Amarin recently. There are 2 key areas to discuss. Firstly, we announced the signing of a definitive agreement to acquire Laxdale, a privately-owned neuroscience development company based in Stirling, Scotland. This transaction consolidates Amarin's position in neuroscience product development. It represents an important initial step in the implementation of our strategy to emerge as a leader in the development and commercialization of novel drugs for the treatment of neurological disorders.

In addition, the acquisition broadens Amarin's development pipeline to include rights to Miraxion for all central nervous system disorders, including Huntington's disease and treatment to unresponsive depression. These rights now include the U.S., EU, and Japan together with existing licensee relationships of the major European markets and Japan. Ownership of our own neuroscience R&D capability significantly strengthens our position when negotiating with potential strategic collaborators, and allows control of the development process for Miraxion.

Secondly, Amarin and Laxdale made substantial progress with Miraxion itself. Recent discussions with the U.S. FDA and with EMEA in Europe have provided valuable information which will be used in finalizing the protocol for the planned Phase III trials in Huntington's disease. In addition, detailed analysis of the clinical data from the initial pivotal study identified a subset of Huntington's disease patients with a specific gene variant that responded to Miraxion with statistical significance at 6 months and at 12 months. A strong correlation has been established between patients with a gene subset and response to Miraxion. This subset of patients represents a significant majority of the Huntington's disease patient population.

The proposed acquisition of Laxdale and the progress made with Miraxion represent significant steps by Amarin towards achieving its goal of reemerging as a leader in the development and commercialization of novel drugs for the treatment of neurological disorders. I will now hand you over to Alan who will review the financial results for the quarter.

Thank you, Rick. I will address the key highlights of our financial results for the second quarter, which are set out in more detail in today's press release. The net loss for the quarter including the discontinued activities was $3.2 million, or 18 cents per American Depositary Share, compared with the net loss of $7 million or 39 cents per ADS in the second quarter of 2003. We have analyzed the results into 2 categories, continuing and discontinued activities. The results for the continuing business reflect head office operating costs, business and corporate development costs, and Miraxion product rights amortization.

The operating loss from continuing activities for the second quarter of this year was $1.6 million, compared with $1.9 million in the second quarter of 2003. The decrease in the loss is due to a reduction in the overall cost incurred at head office, mainly as a result of having sold our U.S. commercial business in Q1. Operating costs during the second quarter of this year would have been lower but for a significant level of professional fees incurred relating to the acquisition of Laxdale and other compensated transactions. The operating loss on discontinued activities for the second quarter of this year was $1.4 million, compared to $4.9 million in the second quarter of 2003. The loss in the second quarter of this year represents the cost of conducting safety studies on Zelapar. Following the sale of the majority of Amarin's U.S. operations to Valeant, Amarin remained responsible for undertaking safety studies on Zelapar and is liable for up to $2.5 million of development costs in total. It is expected that the remaining development cost obligation of $1.1 million will be incurred in the third quarter.

Under the terms of sales volumes, Amarin will be paid a contingent milestone of $3 million if these safety studies are successfully completed. Of the $3 million, Amarin would receive a net amount of $1.6 million after accounting for continued obligations of Amarin that would only arise if this milestone is earned. In addition, Amarin will be paid a further contingent milestone of $5 million if Zelapar is approved by the FDA. If Amarin receives this $5 million approval milestone, (indiscernible) has the option of seeking early repayment of the outstanding $5 million. Neither of these milestones was earned in the second quarter, and will be recognized as income if and when they are earned.

Finally, on Valeant and as discussed in Amarin's 2003 20F and in our Q1 press release, following the sale of the business to Valeant, Amarin and Valeant are disputing the responsibility for incremental inventory of approximately $6 million ahead of the wholesalers. It is our view that the additional inventory should not impact the consideration payable to Amarin. This matter on the closing balance sheet continues to be discussed between the two parties.

Before pointing back to Rick, let me briefly address Amarin's cash position. As of June 30th, we had cash of $7.2 million. This is expected to be sufficient for Amarin until mid 2005, based upon estimated head office operating costs, expected business and corporate development costs, remaining Zelapar development obligations, and working capital movement. As discussed at the time of the announcement of the Laxdale acquisition, we intend raising 15 to $20 million in an equity financing to fund the combined entity through the end of 2005, including the planned Phase III trials for Miraxion in Huntington's disease. I will now turn you back to Rick.

Before moving to questions and answers, I would like to reiterate Amarin's strategy and objectives. Amarin has a late-stage development pipeline currently consisting of products for Huntington's disease and treatment to unresponsive depression. We intend to strengthen this portfolio with additional high-quality, late-stage compounds targeting neuroscience diseases where Amarin has direct capabilities. Effectively, we intend to leverage our development capabilities by supplementing our internal development pipeline through acquiring and/or in-licensing products for direct marketing by Amarin in its core U.S. market and selected field of neuroscience.

Amarin will seek to directly commercialize its neurology products in the U.S. where it already has experience, and out-license or partner them in Europe and Japan. Amarin would also out-license or partner their pipeline globally for indications outside neurology, for example, in depression. Our ultimate objective is to commercialize our products in the U.S., using a small salesforce to target readily identifiable and accessible patient populations. We continue to evaluate exciting product opportunities for in-licensing, and I stated in our recent conference call our objective is to have at least a further 2 exciting product candidates in the clinic by next year. These products will be in addition to Miraxion.

We will now take questions. Could you open the lines, please?

(OPERATOR INSTRUCTIONS) Keith Hilslup (ph), a private investor.

I wonder if you could provide me with a little bit more detail about the Huntington's disease gene variant you mentioned earlier?

Certainly, Keith. Part of this information has not yet been put in the public domain, so what I tell you is relatively limited. But we are hoping that some of this information will be published in the not-too-distant future. But what we are able to determine as part of the, should we say, post-hoc data analysis from the initial study was that a certain subset of Huntington's patients responded better to Miraxion than others. And in identifying -- by doing further detailed work on that, we were able to identify specific characteristics of those patients, which will allow us in future to better determine the patients who will respond to the drug.

Now, the best estimate we currently have is the patients who do respond, i.e. have this gene subset or gene variant, sorry, represent somewhere in the order of 60 to 80 percent of all Huntington's disease patients. So we're rather excited and optimistic. The real benefit, of course, is that because Huntington's disease is genetic and via the diagnostic test that you take for Huntington's disease, we are able to identify at an early stage those patients who will respond to Miraxion going forward.

Thank you.

Does that help you?

It does. If I could ask another follow-up question maybe about some numbers. There's been a turnaround there. I wonder again what you attribute that to, if you could provide a little more color there?

I will hand that one over to Alan.

Well, I think you're referring to the loss for the quarter compared to last year. The loss has narrowed from the loss in the comparable quarter in 2003. You really need to look at it from a perspective of our continuing business and our discontinued business. Firstly, the discontinued activity, the loss is lower really due to last year's numbers, including charges relating to our U.S. business, and also R&D costs in relation to our Swedish drug development business, both of which have since been sold. The loss on our continuing business was mainly due to, as I mentioned earlier, a reduction in the overall cost incurred at head office, and mainly resulting from having sold our U.S. business in Q1. I would also, as I mentioned earlier, the operating costs during the second quarter this year would have been lower, only for the significant level of professional fees that we did incur related to the acquisition of Laxdale and other transactions we were looking at.

Thank you, Alan, appreciate that.

(OPERATOR INSTRUCTIONS) Brian Swift of Security Research.

Could you give us an idea when you expect to close on the Laxdale transaction? I guess you also -- you mentioned that the 7.2 million in cash is sufficient to take you to '05, and you're doing this 15 to 20 million financing. Maybe you can correlate the 2 in terms of that 15 to 20 million is (indiscernible) to take you and to deal with what you had just described as far as what has to be done to get LAX-101 on the market would or what used to be LAX-101, which is now the Miraxion that you call. Could you clarify a little bit those 2 points for me? And if you want to give me a call after the conference call, I would be happy to talk to you then.

Okay. On the timing, well firstly the transaction, Laxdale, the acquisition is subject to Amarin raising 15 to $20 million and also shareholder approval and a few other customary type conditions, but we expect to close the transaction by the end of September. In relation to our cash position, on a stand-alone basis we have sufficient cash to last us until mid next year. And 15 to $20 million we hope to raise by the end of September, it will fund the combined entity of Laxdale and Amarin through the end of 2005. That would include the funding of the Phase III trials for Miraxion in Huntington's disease. We would also expect to incur some expenditure in the '05 period on depression. As you know, we have -- Miraxion is in Phase II development for treatment for this in depression, for which we will be looking for a partner. However, we will be doing some exploratory work, and the $20 million that we talked about in terms of financing would be sufficient to cover both the HD and depression.

I think it's interesting, Brian, because we haven't really spoken terribly much about depression, primarily because it is a somewhat earlier stage than Miraxion where we have concentrated a lot of our focus. But the early-stage work that's being done has actually been published, and I can make that available to you if you would like. What it actually demonstrates is that in a group of patients who have not responded to standard treatment, actually do respond to Miraxion with statistical significance. On the expense that Alan was referring to during 2005, really relates to a small amount of further work prior to eventually out-licensing it. I think, as far as we are concerned, it's outside of our area of expertise. It is a very substantial potential product, but I think there are other companies who have got more experience in the depression area than we have.

Thank you.

At this time, there are no further questions.

Well, I would like to thank you for joining us on our second-quarter earnings call, and we look forward to updating you at the third-quarter earnings call. Thank you.

Thank you. This concludes today's conference call. You may now disconnect.