Amarin Corporation PLC (AMRN) 2005 Q4 法說會逐字稿

Good morning. My name is Melanie and I will be your conference operator today. At this time I would like to welcome everyone to the Amarin fiscal fourth-quarter and fiscal year-end 2005 earnings 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 session. (OPERATOR INSTRUCTIONS) Thank you.

Ms. Fields, you may begin your conference.

Thank you. This is Anne Marie Fields with Lippert/Heilshorn & Associates. Thank you all for participating in today's call. Joining me this morning from Amarin are Rick Stewart, President and Chief Executive Officer, and Alan Cooke, Chief Financial Officer.

This call will follow the standard format, beginning with prepared remarks by management and then we will open up the call for questions. In order to allow as many participants as possible to ask questions in our allotted time, we ask that you limit your questions to one, with one follow-up, before rejoining the queue.

Earlier today, Amarin announced financial results for the fourth quarter and fiscal year ended 2005. If you have not received this news release or if you would like to be added to the Company's distribution list, please call Lippert/Heilshorn in New York at 212-838-3777 and speak with [Lydia Portea].

Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of Amarin. I encourage you to review the Company's filings including, without limitation, the Company's annual report on Form 20-F.

The content of this conference call contains time sensitive information that is accurate only as of the date of the live broadcast, February 9th, 2006. Amarin undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. This call is the property of Amarin Corp. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Amarin is strictly prohibited.

With that said, I would like to turn the call over to Rick Stewart. Rick?

Thanks, Anne Marie. Welcome, everyone, and thank you for joining us today. 2005 was a watershed year for Amarin Corp. which was marked by significant advances in all areas of corporate activity. We've made substantial progress in five key areas. With our clinical programs in Huntington's disease, which is in Phase III clinical trials and in melancholy depression, which has completed IIa clinical trials; with our research activities in optimizing the Miraxion molecule and identifying the mechanism of action and additional neurodegenerative diseases in which the drug may work; in out-licensing, where we successfully out-licensed our multiple sclerosis fatigue drug to Multicell, allowing Amarin to focus core resources.

We also enhanced our management team with key hires in critically important positions. And finally, but by no means least, considerably strengthened our balance sheet through a number of equity financings generating gross proceeds of $46.3 million. I look forward to going into each of these in greater detail. But for now, I'd like to turn the call over to Alan Cooke, our CFO, to discuss our financial results and position. Alan.

Thank you, Rick. As Rick has mentioned, 2005 was a very successful year for Amarin, with our key objectives achieved, including the completion of a round of financing that ensures the Company is fully funded through its ongoing Phase III trials with Miraxion in Huntington's disease.

I will now address the key highlights of our financial results for the fourth quarter and for the full year 2005, which are set out in more detail in today's press release.

The results of the comparative periods reflect continuing and [discontinuing] activities. However, the results for Q4 in 2005 entirely represent continuing activities. For that reason, my commentary will now focus only on continuing activities and I refer you to the press release for details of the discontinued activities.

The operating loss for the fourth quarter was $5.3 million compared to $5.3 million in the fourth quarter of 2004. The operating loss reflects a significant increase in our investment in Research and Development from less than $1 million to approximately $2.4 million. The key driver of our Research and Development cost during this quarter was the significant cost of the two Phase III trials in Huntington's disease.

This increase in Research and Development was offset by the license fee of $0.5 million we received from Multicell for the exclusive worldwide rights to LAX-202 and the reduction in SG&A expenditure of approximately $700,000.

The reduction in SG&A expenditure reflects our objective of managing SG&A to a minimum in order to maximize resources for investment in Research and Development. This will continue to be an objective of ours for the immediate future.

In addition, we have made a provision of $650,000 to cover specific and identified costs associated with the relocation of our Research and Development function from Scotland to the southeast of England, and our General and Administrative function to Dublin, Ireland. This restructuring, in addition to generating significant cost savings, also provides substantial operating benefits and efficiencies for the Group.

Turning to the full-year numbers for continuing activities, the operating loss for the full year was $18.9 million compared with an operating loss for 2004 of $9.9 million. The increase is primarily due to the significant investment in Research and Development activities and intellectual property in 2005.

Finally, let me briefly address Amarin's capitalization. In the past nine months, we have raised gross proceeds of $46.3 million, including directors and officers of Amarin investing 7.7 million and many large U.S. institutional investors. This provides Amarin with sufficient funding to complete the two ongoing Phase III trials in Huntington's disease and to make a filing of Miraxion to NDA.

Amarin is now forecast to have sufficient cash to fund Group operations into the second half of 2007, and with possible revenue from partnering activities potentially beyond. At December 21, 2005, Amarin had cash of approximately $34 million and no debt. Amarin currently has approximately 78 million shares in issue and approximately 15 million warrants and options outstanding.

I will now pass it back to Rick.

Thanks, Alan. I will keep the research, development and corporate progress review brief. We made substantial progress in all areas, furthering our corporate ambition of becoming a leader in neurology. I'll review progress in clinical development, research, and finally the achievement of our corporate goals.

Firstly, turning to clinical development, where progress of real significance has been made. The priority during 2005 was to get the Huntington's disease Phase III clinical trials up and running. In the early part of the year, a substantial investment was made in time and resources to ensure that the protocol design would maximize the probability of a successful outcome in these trials. The involvement of the Huntington's Study Group and EURO-HD, combined with input from the FDA, plus our experience from the earlier Phase III trial in Huntington's contributed to the agreement with the FDA on a Special Protocol Assessment. The SPA is important because it effectively ensures that the FDA has already agreed to the clinical trial design ahead of commencement.

In September, once agreements on the SPA had been reached with the FDA, we commenced enrollment and dosing in the U.S. trial, which consists of 300 Huntington's disease patients at 43 Huntington's Study Group clinical trial sites. The inclusion criteria for the trials are specifically concentrating on the genetic subgroup of Huntington's disease patients with a CAG score of less than 45.

We remain on schedule for a nine-month timeframe to full enrollment in the U.S. trial, meaning the last U.S. patient will be enrolled to the trial in late June. This last patient will complete the trial in late December, 2006, and we expect to have data in early 2007. Our expectation is that if the data is positive, the NDA will be filed in the second quarter of 2007. As Miraxion has fast-track designation from FDA, we would expect a response within six months of NDA filing.

In December, we commenced a second Huntington's disease trial in Europe, where we will recruit 240 patients for the trial at up to 28 sites. We are working in conjunction with EURO-HD and Icon, who is our contract research organization, to conduct the European trials.

The importance of Huntington's Study Group and EURO-HD to the success of these trials cannot be underestimated. These nonprofit organizations consist of the leading neurologists in the field of Huntington's disease, and their involvement and counsel have been instrumental in the progress made.

Turning to our second clinical program, which is in melancholy depression. Early in 2005, we announced the results of a data analysis from the Phase IIa clinical trials in a variety of depressive disorders. This analysis specifically identified that those patients with melancholy depression benefited from the drug.

Melancholy depression patients are the most severely ill patients who are often hospitalized and who do not respond to typical depression treatments. In the extreme, melancholy depression patients oftentimes will only respond to electro-convulsive shock therapy. Miraxion would therefore be potentially first-in-class treatment for melancholy depression patients.

As we've already stated, Amarin intends to partner in the melancholy depression indication for Miraxion, as we need to focus our own resources on progressing Miraxion in neurodegenerative diseases. Discussions with potential partners have accelerated with the raised profile of Amarin and are now entering more substantive discussions and detailed due diligence.

As you are aware, the negotiation of such collaboration agreements can be time-consuming and a successful outcome is not guaranteed. However, the level of interest in this indication, which could have U.S. revenues alone of $2 billion to $3 billion, is substantial, given the unique mechanism of action and the strong safety profile. We will keep you updated as these discussions progress.

Our research activities to optimize the Miraxion molecule and expand the indications for Miraxion achieved several successes in 2005. Amarin currently has three centers of research excellence, which have all been involved in preclinical achievements for the Company this year. Determining exactly how Miraxion functions in the brain by establishing Miraxion's neuroprotective effects is fundamental to our understanding of its mechanism of action in neurodegenerative diseases and depressive disorders.

During 2005, impressive data was published and presented from two separate preclinical programs that shed further light on Miraxion's neuroprotective effects and encouraged us to pursue further clinical studies of Miraxion in these neurodegenerative diseases with large market opportunities.

The results from the Institute of Neuroscience at Trinity College in Dublin showed that in aging brains, Miraxion demonstrated neuro anti-inflammatory effects, consequently protecting the brain from inflammation, which is often associated with a number of neurodegenerative diseases, such as Alzheimer's, Parkinson's and Huntington's disease.

In addition, the preliminary results of preclinical work at the University of Prince Edward Island in Canada are equally important, as they identified the same neuroprotective effects in Parkinson's disease models.

We are very encouraged by these data and look forward to progressing Miraxion into clinical studies in patients with Parkinson's disease later this year. The opportunity to transform the treatment paradigm for patients diagnosed with Parkinson's and other neurodegenerative diseases is very exciting and we remain at the forefront of these changes.

The potential revenue opportunity for Amarin from these indications is enormous. We've publicly stated that the estimated global revenues for Miraxion in Huntington's disease exceeds $500 million. If we are able to demonstrate similar neuro protection in Parkinson's disease, this number could be significantly higher. And as you expand into other neurodegenerative diseases, the revenue potential increases. Adding in a global opportunity in melancholy depression, the overall revenue potential is considerable.

Finally, our out-licensing success came late in the year with the out-licensing of LAX-202 for the treatment of fatigue in patients with multiple sclerosis to Multicell Technologies. The results of the Phase IIb clinical trial in multiple sclerosis patients showed that LAX-202 significantly reduced the levels of fatigue. This is a good example of how Amarin tends to focus our resources on key development programs that exploit the potential of other pipeline developments by out-licensing.

Now looking at our growth strategy moving forward. First and foremost, we are committed to the successful completion of our Phase III trials for Miraxion to treat Huntington's disease. And as we previously reported, we expect to have the trials enrolled midyear. Our discussions with partners in melancholy depression are accelerating, and we expect to conclude a collaboration later in the year.

We will continue to build preclinical data that further validates Miraxion's neuroprotective effects and potential disease modulating effects in other neurodegenerative diseases. We expect to move forward in the clinic with our Parkinson's disease program for Miraxion, as we believe it holds great promise in this debilitating disease.

In addition, we are actively reviewing a number up potential in-licensing opportunities with products and companies that are synergistic with our core market in neurology.

With only 7000 neurologists in the U.S., we feel that we can develop an effective neurology sales force. It is our goal to establish a small, focused neurology sales force in the U.S., and plans are under development to establish a commercial infrastructure at the appropriate time.

As I mentioned, the revenue and profit opportunity for Miraxion in Huntington's, Parkinson's, other neurodegenerative diseases plus depression is very substantial. The gross margin on Miraxion is estimated at this stage to be 90%, and we expect an operating margin of approximately 60 to 70% after deploying a small neurology-focused sales force in the U.S.

In the rest of the world and in melancholy depression, we will receive royalties on net sales in the order of 10 to 20%. Therefore, from an earnings multiple basis, the impact of success with Miraxion on Amarin's stock price could be significant.

So to summarize, Amarin has ongoing Phase III clinical trials in Huntington's disease, which should have data available as a relatively near-term event. As an untreated disease, the opportunity is clear, with estimated global revenues in excess of $500 million.

We have Phase II data supporting the effect of Miraxion in melancholy depression, an untreated but very severe form of the disease, again, with a large market potential of $2 billion to $3 billion in the U.S. alone.

We have strong preclinical data supporting the use of Miraxion in Parkinson's disease and subsequently other neurodegenerative diseases; again, conditions where opportunities exist for new treatments.

Amarin has a strong balance sheet with $34 million in cash and no debts. We have a strategy to reinforce our development pipeline by selective in-licensing of attractive neurology products. And finally, we have a strong management team to execute on the strategy. We commence 2006 with a strong start and are confident that it will also be a banner year for Amarin.

That ends our formal remarks. Melanie, we're ready to take questions.

(OPERATOR INSTRUCTIONS) Ian Hunter with Goodbody Stockbrokers.

Good afternoon, gentlemen. Unfortunately, prosaically, I am looking at my numbers going forward and I'm just wondering if you can give us an idea of what the cost base is going to be like going out through 2006. I was just thinking particularly of R&D expenditure, whether it's going to be flat on Q$ numbers, lumpy, or are we going to see it kind of ramping up over '06, particularly as it seems to me you're going to be taking on some costs associated with Parkinson's disease Phase I?

Hi, Ian. The R&D costs will probably increase over Q4 as we get into 2006. It will be a little bit lumpy. It will depend upon the timing of certain milestones in the conduct of the Phase III trials; that's how we set up our arrangements with Icon and with HSG. And (indiscernible) there will be a tendency for it to increase in the first quarter -- second quarter and probably peak at that level.

In terms of SG&A expenditure, I think SG&A expenditure, we will continue to examine and hope to maintain if not reduce from Q4 levels.

That is great. Alan, what do you think about Q4, though, for the Parkinson's side of things? Do you anticipate any ramp-up in cost there?

I think the work that's done in Parkinson's will be hugely material in terms of the financial impact in the second half of the year. But clearly, we can continue to update you through the year as our R&D programs develop, both in Parkinson's and for melancholy depression.

Thanks very much.

(OPERATOR INSTRUCTIONS) At this time, we have no further questions. We have one question from Ian Hunter.

Sorry, gentlemen. I'm back in again. I was just wondering, good the see the license fees starting to come in with the LAX-202. What kind of levels of fees do you think we can expect coming through this year? Do you think it's going to come through from LAX-202 or are you going to have other out-licensing opportunities coming through during the year?

Firstly, on LAX-202, we do have further milestones that may come in in 2006, and of the similar levels we have achieved in the fourth quarter of 2005.

And in terms of other out-licensing, we have never really given guidance on [billable] license fees that we would be earnings from our out-licensing activity, frankly because it's built on negotiation and depends upon the objectives we have with the final negotiations we have with the partner in terms of the structure of the deal we would do and regarding royalties, upfront fees, milestones, etc.

Ian, I think the key here is in melancholy depression specifically, there are a number of collaborative structures which we are currently in discussions about. So it's premature at this time to give guidance as to upfronts and subsequent milestones.

But I think it would be safe to say that it is our intention to have some level of upfront for the rights to Miraxion in melancholy depression, and it, again, depends on the territories. I mean our preference, frankly, is to have a global partner for that indication, and therefore the upfronts will be different from, say, just a U.S. or European only partner.

That is great. I think probably you have answered the next question, because I was really looking at the kind of timeline of news flow through maybe the first half of this year. But if you're in discussions, I suppose it's difficult to give a timeline.

Yes, I think the key again, Ian, is that there are multiple discussions which are currently ongoing; some are more advanced than others. But really what it boils down to is ensuring that we maximize the value of this asset going afford.

So again, wouldn't like to put a specific time frame on it. I'm perfectly comfortable saying later in the year, but went exactly that's going to be, it's difficult to call right now.

Okay, thanks very much.

(OPERATOR INSTRUCTIONS) At this time, there are no further questions. Mr. Stewart, are there any closing remarks?

Indeed there are. In summary, 2005 has been an excellent year for Amarin. 2006 has started off very strongly and we expect to build on this momentum throughout the year as we continue to hit our milestones and we're going to build Amarin to a leader in the development of novel treatments for neurodegenerative diseases.

Thank you again for joining us and good day.

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