Amarin Corporation PLC (AMRN) 2006 Q2 法說會逐字稿

Good morning, my name is Luana, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter earnings 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] Miss Fields, you may begin your conference.

Good morning. 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, 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'll open up the call for questions.

Earlier today, Amarin announced financial results for the second quarter of fiscal 2006. 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 [Nidia 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 with the Securities and Exchange Commission 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, August 3, 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. The second quarter of 2006 was exciting with the achievement of several key objectives and milestones, which will advance both our clinical and overall corporate development.

During the quarter significant advances have been made with the ongoing Phase III clinical trial program in Huntington's disease. In late June, on schedule, we achieved target enrollment of our U.S. 300-patient Phase III trial of Miraxion to treat the symptoms of Huntington's disease. And last week, nearly two months ahead of schedule, we announced the completion of target enrollment of our European 240-patient Phase III trial. We also expanded our clinical development pipeline with the acquisition of a novel oral formulation apomorphine for the treatment of advanced Parkinson's disease patients experiencing off periods of semi-paralysis, and also established a world-class Scientific Advisory Board, which held its inaugural meeting to coincide with the American Academy of Neurology meeting in San Diego. The Scientific Advisory Board gives practical advice on scientific advances in central nervous system disorders and the evaluation of specific in-licensing opportunities.

Miraxion pre-clinical data was presented at the American Academy of Neurology. These demonstrated that Miraxion improved learning and memory and multiple neuroprotective effects and improved cell viability, thereby slowing the neuronal cell death, which is often associated with a number of neurodegenerative disorders including Huntington's, Parkinson's, and Alzheimer's diseases.

Three further advances were made. Firstly, a Phase IIa trial protocol for Parkinson's disease neuroimaging study was completed. We expect that this will be initiated by year-end, depending on ethics committee approval. Secondly, [prototype] development was completed for the next generation of Miraxion, which will now enter preclinical studies. And, finally, excellent progress has been made on Amarin's combinatorial lipid program.

For commercial reasons, we have decided not to disclose further information on the latter two programs until further progress is made related to the associated intellectual property. I'll elaborate on each of these later 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. The net loss for the second quarter was $6.8 million or $0.08 per share compared to $6.1 million, or $0.14 per share in the second quarter of last year. The main driver for the increase in the net loss is the significant increase in our investment in research and development from $2.9 million last year to $3.8 million this quarter. This reflects the cost of the two ongoing Phase III trials in Huntington's disease and the up-front payment and development costs of our recently acquired novel oral formulation of apomorphine.

Selling, general, and administrative costs of $3.2 million include in addition to general corporate overhead, our substantial investment in intellectual property and the business and corporate development costs of pursuing our growth strategy, including a significant level of professional fees and the cost of evaluating acquisitions and in-licensing opportunities.

Total operating cash flows are running in line with our expectations.

With respect to Amarin's capitalization, in the past 15 months we have raised gross proceeds and approximately $50 million including 9 million invested by directors and officers of Amarin and adding several large U.S. institutional investors to our shareholder base. This funding activity puts Amarin in a strong financial position with sufficient funding to complete the two ongoing Phase III trials in Huntington's disease to file Miraxion for regulatory approval in the U.S. and Europe and to progress the rest of our development pipeline including apomorphine.

At June 30th, Amarin had cash of approximately $29 million and no debt. Amarin currently has approximately 82 million shares in issue and 15 million warrant and auction outstanding. Let me now pass it back to Rick.

Thank you, Alan. As discussed earlier, this has been a good quarter for furthering those key projects related to our development pipeline. I'll highlight several of the key milestones achieved during the quarter but, clearly, progress on the Huntington's disease trials are the most important. The represent and focus at Amarin remains the successful conclusion and ultimate regulatory filing of the two Huntington's disease Phase III clinical trials of Miraxion. As mentioned earlier, we have recently announced achievement of target enrollment in both the U.S. and the European Phase III trials.

Clearly, the credit for the efficient screening, enrollment, and management of these trials goes to the Huntington Study Group, Euro HD, [Icon], who is our CRO, and all staff of Amarin involved in the conduct and monitoring of the trials. My thanks to all those who have been involved in the trials who have shown tremendous dedication in achieving these remarkable milestones.

Combined, the two ongoing Huntington's disease trials are the largest therapeutic program ever conducted with a combined patient population in excess of 540 patients. The intention of these trials is to replicate as far as possible the improvement in motor dysfunction seen in a genetic subgroup with a CAG less than or equals at 44 and the initial Phase III clinical trial. The primary endpoint is an improvement in TMS score, the most accurate measure of motor dysfunction in Huntington's disease patients.

To put this into context, in the initial Phase III trial, the CAG less than or equal to 44 per protocol group showed a 5.1 improvement. In the current U.S. trial, we are looking for a 3.2 improvement, and in the current EU trial, a 3.5 improvement. The clinical relevance is that an improvement of this magnitude typically improves the quality of life of Huntington's disease patients and enables them to perform certain tasks, which they could not previously.

We expect to complete the six-month trial in both the U.S. and EU trials early in the first quarter of 2007 with regulatory filings to follow in the second quarter. Subsequent to that, additional data will be collated from an ongoing extension -- an open label trial.

The acquisition of a novel oral formulation of apomorphine was announced in May. Apomorphine is perhaps the most potent dopamine agonist for the treatment of frozen or off periods of semiparalysis in advanced Parkinson's patients, which represent approximately a third of the entire Parkinson's patient population. These off episodes, which can occur between three and five times a day, as frequently as 10 times a day in severe cases, are often considered more debilitating than other symptoms of the disease itself due to the inability to control the body while commission remains intact.

We believe the acquisition of this new formulation offers a very exciting opportunity for Amarin as it expands our development portfolio and underscores our commitment to the development of novel therapeutics to treat neurodegenerative diseases. The response from physicians has been enthusiastic, as they believe an oral formulation will enhance the utility of apomorphine because its current administration is by frequent and often painful subcutaneous injections. The advantages of Amarin's sublingual formulation of apomorphine are therefore immediately apparent. It is intended that the therapy will be administered using a single-dose presentation placed under the tongue. Apomorphine is absorbed directly into the bloodstream via the buccal cavity. There are several drugs which use this route of administration into the bloodstream because it can provide an increase in bioavailability by avoiding the first pass effect through the liver.

The proof of concept study performed in human volunteers demonstrated blood plasma levels of apomorphine confirming buccal absorption. An unoptimized prototype was used in this initial study, and the results gave us confidence to proceed with optimizing the formulation, which is planned for completion in the fourth quarter. This involves somewhat complex but recognized chemistry to enhance absorption of apomorphine. We anticipate initiating a pilot clinical trial in this indication by the second quarter of next year for a pivotal trial for this program.

Our conservative estimate is that oral apomorphine has revenue potential of between 50 million and 100 million for Parkinson's in the U.S. alone. As a result of the improved utility of all apomorphine, the numbers of patients using it could potentially exceed our estimates. It is therefore easy to see how sales could surpass $100 million. Products for achieving these revenue levels would have a significant impact for a company like Amarin.

With respect to Miraxion in depression, partnering activities have progressed, and discussions with interested parties continue. The value of this asset is crystallizing, as those discussions proceed, and we will ultimately decide whether value maximization is achieved by partnering in the short term or whether to complete a Phase IIb study ourselves to increase the value of this asset multiplefold.

We have also made significant progress on Amarin's preclinical program during the quarter. The objective of this program is to expand our understanding of how Miraxion actually works in neurodegenerative diseases. Impressive data was published and presented covering our understanding of mechanism of action in Parkinson's disease models and in melancholic depression, which has encouraged us to pursue clearly the clinical trials of Miraxion in these indications, both of which are for large market opportunities.

The preclinical data published by the University of Prince Edward Island on Miraxion's neuroantiinflammatory and neuroprotective effects in Parkinson's disease models plus the University of Valencia's preclinical data on Miraxion's impact on down regulation of the HPA axis and cortisol levels have been instrumental in building confidence to further progress the clinical development of these two programs.

Turning briefly to the progress on the combinatorial lipid platform, which I am pleased to report has made excellent progress. For the commercial reasons outlined earlier, I cannot say too much but, suffice to say, that we are using existing central nervous system drugs with complex chemical linkages to bioactive lipids potentially creating new chemical entities and composition of matter patents. I should stress that we are not using lipids as drug-delivery mechanism but developing entirely new drugs, which combined a therapeutic benefit from each of the components of the linkage. The resulting new drug could substantially improve blood brain barrier penetration, improve bioavailability and potentially reduce side effects.

The potential revenue opportunity for Amarin from its development pipeline is substantial. In Huntington's disease, we estimate that the potential market opportunity is in excess of $500 million, in melancholic depression, between $2 billion and $4 billion and, finally, apomorphine in Parkinson's disease in excess of $100 million.

Looking at our growth strategy, moving forward, in addition to all the activities just outlined, we will continue to build our development pipeline by three strategies. Firstly, in-licensing or forming collaborative partnerships to further develop later-stage compounds; secondly, very selectively and very cautiously we will consider synergistic company acquisitions where it would broaden our product offering and accelerate development timelines; and, thirdly, continue to build on the progress from our internal development pipeline as compounds proceed from preclinical to clinical development.

We are building on the momentum established in the first half of 2006 and look forward to demonstrating equally exciting results during the second half of the year.

That ends our formal results. Luana, we are ready to take questions.

[OPERATOR INSTRUCTIONS] Ian Hunter, Goodbody Stockbrokers.

I'm just wondering if you can give us a sense again, maybe you had it in the press release, the progress you're having with Miraxion against Parkinson's, and you're saying you're doing your Phase IIa trial is now in a position to get it up and running. I was wondering if you can give us a few more details on that.

It's a relatively small Phase IIa. What we're looking to do is to examine the actual activity of Miraxion in the brain. We're looking at the [indiscernible] pathway, and we are currently in the process of just -- we understand the fairly advanced scanning technologies that are going to be used, so we just are looking at which sensor we're going to actually do the work. So we expect it to be towards the end of the year before we get ethics committee approval. So realistically it's going to be that kind of timeframe. I think, increasingly you've probably had the experience that many companies are now looking at investigating the activity of the compound -- the body scanning techniques.

I think it's prudent to do that before you engage in full-blown Phase IIb and Phase III studies, because it really enhances your understanding of the mechanism of action. And I think the key here is we -- as you might remember, in the preclinical work, we saw an increase in the BDMF levels as a precursor for dopamine. We are actually doing some further work exploring that in preclinical models, but we also move it along [indiscernible] into the clinic.

Okay, thanks. Maybe just one follow-up very quickly -- I'm just wondering on the partnering progress -- you made some mention there on the melancholic depression, and that is progressing. But you're looking on maybe doing a Phase IIb, and I'm just wondering if you could give us a few details on that. And also whether you're still looking for a partner for the LAX 201 program?

Okay. On melancholic depression, those discussions are ongoing, and what we're doing is we are looking at the quality of the earlier data, and I think in terms of -- we actually did see a response in the melancholic depression patients. As you look at the overall terms of what we would be able to get in those partnering discussions today, this is a potential for enhancing the value of that asset by actually conducting the Phase IIb ourselves. That's the balance that we're taking. I mean, every pharmaceutical company does this as they go through a partnering activity where, once you crystallize the overall value of the asset, you then determine could you enhance it by doing something else yourselves? So that's exactly where we are, and that decision process will continue -- we'll have made that, certainly, by year-end.

In terms of -- the second part of your question, can you repeat that?

LAX 201, yes.

Again, we're getting interest on that one. I think the majority of our activities have been involved in the melancholic depression focus, but I think that we'll put more effort behind that. We've had inquiries about it, but we're really focusing on melancholic depression. It will come through, and just so those listening understand what LAX 201 is, it's a combination product for depression primarily focused at females.

Jack Gorman, Davy Stockbrokers.

First, for Alan, just if, Alan, you could provide maybe some broad sense of where you believe the operating cost line items will trend over the rest of the year? And, secondly, Rick, on the Miraxion HD trials, just to confirm the primary endpoints and the specific figures that were you quoting there for the U.S. and EU trials -- I just wanted to make sure that they were point improvements rather than percentage improvements, and then just as a secondary question to that -- are there secondary endpoints associated with those trials?

I'll just talk a little bit about the cost trends. It is -- the only expenditures, particularly, are quite predictable over next 12 months and over the total duration of the trial plus from quarter to quarter, they are more difficult to forecast, as I know you understand. And I think Q2 saw us potentially reaching the peak of the activity in the trial, and so I can't imagine that the cost of Q3 and Q4 are going to be substantially more than Q2, but they could tend to increase a slight bit.

Once you get into the others here and into the first quarter of next year, you'll certainly see the cost again to trail down and very significantly as you get into the middle part of next year.

That's R&D obviously.

That's R&D. In terms of SG&A, our objective was always to minimize SG&A so we have the resource to invest in our pipeline. And I think we hope to at least maintain or potentially reduce the SG&A costs going forward from here. And this quarter was particularly high on SG&A given we had [indiscernible] professional fees and a lot of activities on the business development fronts in terms of due diligence, and we've used evaluations of in-licensing opportunities. And that's probably all I could give on expenditures. Rick, do you want address the HD question?

Jack, yes, you're correct. The absolute numbers that I gave are actually point improvements in the TMS full scale.

The second part of your question in terms of whether the secondary endpoints that we're looking at -- we're looking at behavioral cognition and total functional capacity scales as key secondary endpoints.

And that's both in the U.S. and in EU, Rick?

Exactly.

[OPERATOR INSTRUCTIONS] Don Gher, Coldstream Capital.

Given the amount of programs you've got going, it seems like you've got a lot on your plate right now, and the fact that you've just gone through another period of raising money -- are you at a point where your internal resources are a bit stretched, or do you think you could be expanding into some other areas at this point?

Absolutely, Don. I think the key here is that we have a core resource, but we are reliant on outsourcing to centers of excellence. Our basic research in terms of the preclinical programs are conducted by the centers of excellence and the Institute of Neuroscience at Trinity College in Dublin and, clearly, Prince Edward Island. So, yes, as we expand the preclinical programs, we are, in fact, increasing our headcount in that particular function. Similarly, in clinical development, once the optimization or the formulation of apomorphine has taken place, the pilot and pivotal trials are ongoing, we're going to increase the number of people, effectively, to project manage the people who are actually conducting the studies.

So, yes, you're right. We will be increasing headcount but, at the moment, the 16 people in the organization -- we'll probably take that up to about 20 to cover the increased resource load.

[OPERATOR INSTRUCTIONS] At this time, there are no further questions, sir.

Thank you. I've just prepared some concluding remarks. Just to summarize, Amarin has completed enrollment in both the Phase III clinical trials in Huntington's disease, which should have data available as a relatively near-term event. As a devastating and never-been-fatal disease with no approved treatment options, and opportunity for Amarin is clear with an estimated global market in excess of $500 million. We've acquired a novel oral formulation of apomorphine to treat the frozen off periods as experienced by Parkinson's patients, broadening the company's pipeline and diversifying risk by adding another late-stage development program with a significant market opportunity.

The Phase II data supporting the effect of Miraxion in melancholic depression, which is an untreated but very severe form of the disease, again with a large market potential of between $2 billion and $4 billion globally. Additionally, we've now got preclinical data showing the mechanisms of action of Miraxion in this indication, which further validates what we've already demonstrated in the clinic. We've got preclinical data to support the use of Miraxioin in Parkinson's disease, again, conditions where opportunity exists and, as we were saying with Ian, the neuroimaging program should be starting towards the end of the year.

We've got a strong balance sheet with $29 million in cash and no debt. We've got a strategy to further reinforce our development pipeline by selectively in-licensing synergistic neurology products, and, finally, we've got a seasoned management team and, again, with Don's comment, we intend to expand that to execute the strategy.

So thank you again for listening, and we look forward to updating you with the Q3 results. Thank you.

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