Amarin Corporation PLC (AMRN) 2007 Q1 法說會逐字稿

Good morning. My name is [DaShanta], and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2007 earnings conference call.

[OPERATOR INSTRUCTIONS]

Ms. Fields, you may begin your conference.

Thank you.

Good morning. This is Anne Marie Fields, with Lippert/Heilshorn & Associates. Thank you all for participating in today's call.

Joining me from Amarin are Rick Stewart, Chief Executive Officer; Alan Cooke, President and Chief Financial Officer; and Declan Doogan, President, Research & Development.

Earlier this morning Amarin announced its financial results for the first quarter ended March 31, 2007. 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 Veronica [Green].

Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that include risks and uncertainties regarding the operations and future results of Amarin. I encourage you to review the Company's past and future filings with the Securities and Exchange Commission, including, without limitation, the Company's Form 20-F and 6-K, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, May 10, 2007. Amarin undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

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

Rick?

Thanks, Anne Marie.

Good morning, everyone, and thank you for joining us.

This morning, my initial remarks will focus on the results of the two Phase III clinical trials in Huntington's disease which were announced on the 24th of April. I will then focus on Amarin's strategy to unlock the substantial value in our existing development pipeline. And, finally, I will also elaborate on Amarin's future strategy for increasing shareholder value.

Clearly, the results of the Huntington's disease trial were a disappointment to all involved, including Amarin's investors, Amarin's Board and management, many of whom have a substantial equity interest in the Company, the Huntington Study Group, the European HD Network and, most importantly, the Huntington's disease patient community.

The nature of neuroscience drug development is challenging, and Huntington's disease is among the most challenging in this category. Recapping the results of the two six-month trials, the top-line data showed no statistically significant difference in response between Miraxion and placebo in the primary endpoint, which was change in Total Motor Score 4, or in the secondary endpoints. These data were not consistent with results from the earlier trial, which showed statistical significance in a subset of Huntington's disease patients with CAG scores of less than or equal to 44.

The two recently completed studies show that the degree of improvement in TMS-4 versus placebo was neither statistically significant nor clinically meaningful. However, a number of patients taking Miraxion did actually show a meaningful improvement in Total Motor Score 4, the primary endpoint.

The trials were well designed and executed, with a correct target patient population recruited. A total of 606 patients were recruited in the two trials combined. There were 316 patients in the North American trial conducted by the Huntington Study Group and 290 patients in the European trial, conducted in collaboration with the European HD Network.

There was a high level of uniformity in the target population of Huntington's disease patients in the two separate trials, with 69% of the patients in the North American trial having CAG scores less than or equal to 44 and 65% in the European trial. Approximately 76% of patients in the North American trial adhered to the trial protocol, and 77% in the European trial. So there was a remarkable symmetry in the two patient populations.

Compliance was confirmed, showing that patients taking Miraxion had high levels of EPA in the bloodstream, whilst those on placebo did not. Biological activity was demonstrated by the lowering of triglyceride levels in patients with raised triglycerides on entry. This simply demonstrates that for those patient samples, those that were supposed to be on Miraxion during the trial were in fact on Miraxion, and those supposed to be on placebo were on placebo. All the right elements were in place to replicate the encouraging results from the initial 135-patient trial.

We continue to investigate the reasons behind these disappointing results. We will analyze the results of the open label study at 12 months, when these results become available, to see if we can obtain any valuable information from this longer treatment period. For the moment, we do not have any straightforward answers, which means that the underlying lack of response may have a more complicated rationale. We will continue to analyze the substantial amounts of data from the trials as the open label data comes in.

Before I turn to the rest of our pipeline, let me pass the call over to Alan, who will review the first quarter financial results.

Thank you, Rick.

Amarin has adopted International Financial Reporting Standards, or IFRS, effective January 1, 2007. Figures for comparative periods have been restated to IFRS. For further information with respect to the application of IFRS to our accounts, may I refer you to our transition documents available on our Web site and furnished to the SEC on Form 6-K yesterday, May 9.

The net loss for the first quarter was $8.8 million, or $0.10 per share, compared to $9 million, or $0.11 per share, in the first quarter of last year. While the net loss was approximately the same as last year, the operating loss of $9.6 million was about $3 million higher. The increase is primarily caused by a significant increase in our investment in research and development and also the non-cash charge related to options granted over the last 12 months. The main driver of the increase in research and development expense here of $1.6 million to $4.4 million during the quarter was the Phase III trials of Miraxion in Huntington's disease.

Selling, general and administrative costs of $4 million included over half million of costs associated with the acquisition of the global rights to the nasal formulation of lorazepam, which is in development for treating epilepsy seizures. SG&A costs were also particularly high in the first quarter due to an unusually high level of financial and accounting activity around the year end. For example, the costs of transitioning our accounting to IFRS included professional fees in excess of $100,000.

Also included in SG&A are the costs associated with pursuing our growth strategy, including the costs of evaluating acquisition and in-licensing opportunities, which included professional fees and [inaudible] costs of over $300,000 in the first quarter. Over the rest of this year, I expect that Amarin's expenditure levels will decrease significantly from the levels in Q1. This will most noticeably start in Q3 and continue into Q4 and is mainly due to completion of the HD trials but also to careful cost management.

Finally, let me address Amarin's capitalization and cash position. Amarin is in a strong financial position, with approximately $29 million of cash at the end of the quarter. Amarin has no debt. Amarin [now] forecasts having sufficient cash to fund operations for at least the next 12 months, and potentially beyond, depending on the outcome of possible partnering activities with our development pipeline.

At March 31, Amarin had 90.7 million shares outstanding and approximately 19 million options and warrants. Approximately 28% of the Company is held by directors and officers of Amarin, who have invested approximately $22 million in recent years, some as recently as the first quarter of this year.

With that, I'll turn the call back over to Rick.

Thank you, Alan.

We've conducted a comprehensive review of Amarin's product development strategy in order to diversify the inherent risks which are commonly associated with drug development and which are magnified in neuroscience. Our review of Amarin's existing drug development portfolio has highlighted the substantial value of our existing assets.

In the future, we will adopt a strategy which reduces risk by, firstly, internally developing improved outcome versions of existing drugs where unmet medical needs can be addressed. Our oral apomorphine and a new program based on the targeted transport of levadopa to the brain, which I'll cover in more detail later, are examples of this strategy. Secondly, we will continue to identify in-licensing opportunities from third parties, such as our oral -- our nasal lorazepam. We will also expand the pipeline by very selective internal development or in-licensing of new chemical entities.

Our mid-term goal is to focus our development resources on four key programs where we will accelerate the development of lower risk, lower cost, improved outcome opportunities to address unmet medical needs. These four programs are an oral formulation of apomorphine for advanced Parkinson's disease, which we plan to advance into a Phase II trial late this year or early next year; a nasal formulation of lorazepam for epilepsy seizures, which we are targeting to be in a Phase II trial next year; a combinatorial lipid formulation for the targeted transport of levadopa for Parkinson's disease, which has not previously been disclosed but is planned to enter human studies in early 2008; and a previously undisclosed product, AMR-109, targeted to begin human evaluation in memory and cognition by the end of this year.

Turning to each program individually -- first, our novel oral formulation of apomorphine for the treatment of advanced Parkinson's disease patients. This oral formulation potentially provides rapid absorption of apomorphine directly into the bloodstream after sublingual, or under the tongue, administration, and would offer patients a much needed alternative to the currently available injectable formulation of apomorphine.

In the later stages of Parkinson's disease, many patients develop severe "off" episodes, where, despite continuing to take their medication, they experience periods when they lose the ability to move. This is termed bradykinesia, or slowed movement, or akinesia, which is an inability to move. These "off" episodes, which typically occur three to four times a day, can also be associated with other symptoms such as muscle pain, anxiety and panic. This condition is estimated to affect in excess of 100,000 late stage Parkinson's disease patients in the U.S., with a similar number in Europe.

Research conducted suggests that the current use of apomorphine as a rescue therapy to treat "off" episodes is limited by the current form of delivery, and that a more user-friendly oral form would lead to a greater level of prescribing and use by patients. We estimate that the market opportunity for an oral apomorphine will be in excess of $100 million.

We have completed two pharmacokinetic studies with our oral apomorphine, and since we last updated on this program we have now selected a lead formulation, which we are currently optimizing. We expect this to undergo another pharmacokinetic study with a view to initiating a Phase II trial either late this year or early next year. We don't expect that this will be a long study, as it involves a small number of patients. Thereafter, we hope to initiate the remainder of the clinical program later in 2008.

In February, we licensed a novel nasal lorazepam formulation for the outpatient treatment of emergency seizures in epilepsy patients, specifically status epilepticus and acute repetitive seizures. Status epilepticus has an estimated annual incidence in the United States of 150,000 cases. There are up to 400,000 patients who suffer from acute repetitive seizures. There are approximately 40,000 deaths in the U.S. each year associated with such emergency seizures.

A nasal product for seizure emergencies in the outpatient setting for epilepsy patients would represent an important treatment alternative to the current IV treatment with lorazepam in the emergency room. We estimate the potential sales of such a product could be up to $300 million in the United States.

Our nasal lorazepam formulation will undergo preclinical pharmacokinetic studies this summer. Thereafter, we plan to optimize the formulation, followed by a human pharmacokinetic study. We target initiating a Phase II study in 2008.

As previously mentioned, our targeted transport program utilizing our combinatorial lipid technology has two preclinical candidates that we are aggressively moving towards human trials. Our targeted transport technology chemically conjugates bioactive lipids with either other lipids or existing drugs to improve bioavailability, blood-brain barrier penetration, and potentially increase efficacy whilst reducing side effects. This is very exciting, as each conjugate will be a new chemical entity with a potential for new intellectual property. The application of this platform is not limited to neurology, having applicability across a range of indications, from cardiovascular to oncology.

To date, we have not disclosed any specific details relating to these combinatorial lipid programs. Our first program is for the targeted transport of levadopa to the brain for the treatment of Parkinson's patients. Levadopa is the gold standard for the alleviation of Parkinson's disease symptoms, accounting for 70% of the Parkinson's prescription market. We have advanced this program to the point where we are now planning to commence a Phase I study early next year. Our second targeted transport program also addresses Parkinson's disease and is in preclinical development. As it progresses, we will provide you with more specific details.

Finally, our fourth key program is new, and one we have not discussed publicly before. We intend to conduct a study using AMR-109 to investigate the enhancement of memory and, potentially, cognition. This study will capitalize on Amarin's experience of lipid technology and reflects a substantial body of knowledge using Omega-3 fatty acids to enhance memory. We are hoping to initiate a proof of concept study before year end, specifically evaluating potential effects on memory and cognition.

We also have a number of other programs from our internal pipeline which we are progressing towards the clinic for which we may provide further disclosure in the next six to 12 months.

So, to summarize, our disclosed development pipeline now includes two compounds for Parkinson's disease, one for epilepsy seizures and one for memory and cognition. Two of these programs have not been previously disclosed.

Again, our four key programs are now an oral formulation of apomorphine for advanced Parkinson's disease, which we plan to advance into Phase II trials later this year or early next year; a nasal formulation of lorazepam for epilepsy seizures, which we're targeting to be in Phase II next year; a combinatorial lipid formulation for the targeted transport of levadopa for Parkinson's disease, which has not previously been disclosed but is planned to enter human studies in early 2008; and a previously undisclosed product, AMR-109, targeted to begin human evaluation for memory and cognition by the end of this year.

We are very excited at the prospects of these programs and remain committed to neuroscience research and development. We have a promising pipeline of CNS product candidates, a management team with the experience and know-how to advance those products through the clinic towards commercialization and the financial resources to achieve these objectives.

Let me now briefly address our strategy for growth.

Our future growth strategy focuses on balancing the risk-reward profile of the Company. Specifically, we intend to accelerate growth by three key strategies. Firstly, we plan to accelerate the progress of our four key programs as rapidly as possible through the clinical trials. We plan to add to those programs from our internal pipeline and through selectively in-licensing new chemical entities and improved outcome products. Secondly, we plan to establish collaborations around our existing drug development pipeline and our areas of core competency in neuroscience and lipid technology. And, finally, we plan to selectively embark on merger and acquisition activity where substantial shareholder value can be unlocked by such transactions.

So, with that, I turn the call back over to DaShanta for your questions.

[OPERATOR INSTRUCTIONS]

Your first question comes from Ian Hunter, Goodbody Stockbrokers.

Good afternoon, gentlemen. The first question is just going back over the Miraxion data. I noticed, Rick, there you said in the release that we're continuing to analyze the data across the 600 patients, and I'm just wondering what that involves both in terms of what they're analyzing and of the cost of it.

And then, you've given us a very clear outline of the pipeline that you have coming through. Most it seems to be at the end of '07, beginning of '08, and I'm just wondering, Alan, if you can give us a guide as to how you see the cash burn through the next two quarters. Well, I won't say cash burn, I'll say costs over the next two quarters, so we can get a handle for that and see how you're going to be set at the beginning of '08 when you're bringing all these programs into the Phase II and Phase I.

Ian, I'll deal with your second question on the finances first, and then I think Declan's going to address the question on the Miraxion data.

In terms of our cash forecast, these programs and the studies that Rick has described are not substantial investments. They're not like the $15 to $20 million we spent on the HD trials. These studies are smaller patient groups and are much more reasonable in cost, and we've included them in our forecast [for the quarter].

So in terms of where our burn goes, or our cash expenditure goes, in the next few quarters, I think you'll see both R&D and SG&A fall as we head toward the end of the year, particularly in Q3 and Q4, but starting, possibly, in this quarter. And it will probably track -- cash burn for the quarter will track toward the $5 million level, once the HD trials are completely wound up.

Okay.

So Declan Doogan here to answer your question about the Huntington's analyses. I'm sure that you understand there is a tremendous amount of data generated from each patient during these complex studies, and the protocol calls for certain pre-specified analyses -- the primary and the secondary efficacy variables. On top of that, given that the study results were surprisingly negative, what we're doing is we're investigating relationships and patterns, looking for correlations between outcomes. And that's what is going on. So it's largely analytical work.

However, there are still patient data from longer than six months that require to be assessed and databased and so on, so that's a residual piece of work that we will be doing in the coming weeks, and hopefully in short order after that get some information if there are any different patterns of response at that point.

Okay. Thanks very much.

Your next question comes from Jack Gorman, DavyStockbrokers.

Thank you. I just have some questions, additional questions on Miraxion, please. Firstly, Rick, just on the data that you provided to us, I had three specific questions. Firstly, you mentioned the -- that you had identified some patients that showed meaningful TMS-4 score movement. I'm just wondering if you can give us a sense of how many patients, and was that movement statistically significant?

So maybe if I could answer -- Declan Doogan here again.

Declan, hi.

So small numbers of patients responding, it depends how you judge a response, as well. So Dr. Ira Shoulson considers that a shift of about three points on the score is actually clinically meaningful. Now, also, when you're looking for statistical analyses and statistical significance, the pre-specified analyses allow you to do that kind of analysis. But on subgroups, obviously the numbers are much smaller, and it is highly unlikely that you would get to statistical significance. And, indeed, from a regulatory perspective, it is much less likely to be acceptable, as it is considered data dredging.

Okay, Declan, thanks. And just maybe to follow up on some additional data, then. I think Rick mentioned that 76% of patients in the U.S. trial adhered to protocol, and I think it was 77% in the European trial. Is this as expected or as projected in the original protocol?

So I think it's safe to say -- Declan Doogan here again -- to say that in the course of conducting clinical research, it is virtually impossible to get 100% compliance with all aspects of the protocol. But what we do when we're creating our analytical cohort is to make sure that those patients who are subjected to the analysis actually can supply meaningful data.

A figure of 76%, or over three quarters, is actually extremely high, and there are many trials that I've been associated with that have actually been good trials, but the actual numbers are much lower than that. So I think this attests to the fact that, as I said previously, the conduct of this trial was really very, very good, indeed, and that's a testament to [inaudible] the patients are complying, but it's also the investigators for being able to include the right kind of individual.

Okay. Finally, maybe, Declan, the data that you've seen to date and in the weeks since you've announced, is there any inferences you can draw as regards Miraxion in the other indications?

Not at this point. I think what we are doing is we are concentrating on the analysis to completion of the Huntington's study. It's tempting but unwise to speculate at this point in time. But I think what you'll gather from Rick's description of the portfolio, that if we had all our eggs in the Huntington's disease basket, that would [inaudible]. And, as you can see, risk has been diversified by being able to investigate other entities in other disease areas.

And when would you expect the full completion? Would it be this quarter, Declan, full analysis of the data?

I think it really depends on what emerges. All I can say is we are going full tilt to gather the data in, collaborating with the investigators, clean the data up and perform the analyses. So it won't be very soon, but we'll go as rapidly as possible.

Great. Listen, I'll jump off. Thanks very much for that.

Thank you, Jack.

Your next question comes from Nick [Pavlopoulos], with -- private investor.

Yes, thank you for taking my call. My question is if you could provide us with some type of update on your MCT-125 out-licensed product. It seems to address a potentially large market, and, as such, I think it would play a central role in Amarin's reestablishing financial strength. Thank you.

We out-licensed MCT-125 to MultiCell last year. The primary rationale behind that was that multiple sclerosis fatigue was not in our core area of expertise and competency. That, we understand, is going to go into human trials sometime this year. I think it starts Phase II trials towards the middle of the year. But relative to the compounds that we have in our existing portfolio, we believe that MCT-125 was really not a major contributor to our future value.

I think, as you've heard on the call, we've got a substantial number of opportunities from our existing portfolio which, being in control of the development plans, we are able to accelerate those far quicker than we are out-licensed compounds. And if I can put it into context, we will have three compounds in Phase III trials in 2008, and possibly a fourth -- Phase II trials in 2008, and possibly a fourth in the same kind of time period. So you can see that we've got a very deep development pipeline coming forward.

Thank you.

[OPERATOR INSTRUCTIONS]

Your next question comes from [Nickie Snyder], Cantella & Co.

Hi. I was wondering -- from what I understand, some of the drugs in your pipeline, some of the potential products have a very -- they have a much shorter testing period before they could possibly come to market. And I was hoping you could address that, how soon that might be as a potential for the shorter-term item.

Hello, it's Declan Doogan here again. So I think you're right to identify that portfolio that Rick has discussed as being a shorter-term delivery, and that is that we're looking at rather acute events, or symptomatic relief, shall we say. And you could be able to get a read-out on the efficacy of these compounds in a matter of weeks of treatment. Now, it also depends on a number of factors -- being able to formulate, being able to identify the right kind of investigative patients, etc. and also the results. So, as Rick said, three, maybe four, Phase II candidates this year. If you look at the industry norm for Phase II survival, it's only about 20%.

What I would say here is that this type of portfolio I would argue has got a greater -- significantly greater chance of success than that. And that would then help us predict what the Phase III cohort might look as a consequence. So what I would say in summary is that a reasonably good crop of Phase II programs next year, which we'll obviously build on in subsequent years, and I would hope that there would be several Phase III programs in the years after that from this cohort.

I think if I can add to that, the reason that the probability of success is somewhat higher than a normal Phase II program is quite simply that the majority of the compounds that we have going into Phase II trials are new formulations of existing drugs, where we're actually addressing issues which limit the utility of those drugs currently. So what we have are drugs which are all very well known by the physicians, who are, in some regards, frustrated about their ability to use the drugs. Because, for example, with apomorphine, it's currently a very painful and frequent injectable administration, whereas what we have is a very simple administration of a liquid underneath the tongue. So, yes, the risk profile is very different from your standard newly discovered drug.

Thank you very much.

Your next question comes from William [Rodemon], Maxim Group.

Good afternoon, gentlemen. I'm just wondering, are you confident of maintaining your NASDAQ listing with your stock trading below a dollar, and is a reverse split something that's a possibility?

I'll address that question for you. The -- what'll happen, the process that exists [inaudible] NASDAQ listing is that once 30 days, 30 trading days passes, we will receive notification from NASDAQ, assuming our share price is still under a dollar. We will receive notification from NASDAQ that we are subject to their delisting process.

[Inaudible] is that from that point, then, we have six months to look at our -- getting our share price north of where it is. At the end of that six-month period, if you comply with the initial listing requirements, which means a market cap of $35 million in the capital markets section of the NASDAQ listing, which we are in, then you get a further six months to resolve the issue.

So in our situation we, in think, are forecast to have at least 12 months to resolve the issue and to get our share price over one dollar. One solution clearly [inaudible] reverse split, and we may look at that, but we are also looking at building shareholder value to bring our share price back over a dollar. So we think the risk of being delisted from NASDAQ is very manageable, and we have over a year, or about a year, to deal with it.

Thank you.

If I can add to that, I think if you look at the peer group of companies, biotech companies, that have got a similar development profile, they're all trading at, say, substantially higher valuation than we are currently. So it is up to the management team of Amarin to restore that shareholder value over the short term.

And it's probably worth adding that it is in our very interest to do so, given the management, directors and officers, own 28% of the Company and have invested $22 million in recent years.

Okay. Thank you.

[OPERATOR INSTRUCTIONS]

You have a follow-up question from Jack Gorman, with DavyStockbrokers.

Thank you. Just one follow-up, please, Alan. You may have [this to hand]. Of your R&D spend, let's say, for the full year last year, and indeed for Q1, can you give us a broad sense of what proportion of that spend was on Miraxion and obviously what was on the other pipeline projects?

Jack, it's a good question, but unfortunately we don't have the data. I could give you an estimate, but I'd rather wait and find the exact information and supply it to you after the call, if that's okay.

Perfect. That's no problem. Thanks.

At this time, there are no further questions. Are there any closing remarks?

Indeed, yes. Just to reiterate that Amarin will have three programs in Phase II trials in 2008, with possibly a fourth coming up. There will be two programs in Parkinson's disease, one program for epilepsy seizures and one program for memory and cognition. These programs are in key areas of unmet medical need, clearly Parkinson's and epilepsy. But also they have a lower risk because they are predominantly existing drugs where their utility is limited due to the current route of administration.

If you combine that with our overall strategy for growth, which is to expand the development pipeline by adding additional improved outcome products and new chemical entities, to drive forward with collaborations with other pharmaceutical companies in our core area of competency, both in neuroscience and lipid technology, and, finally, to selectively embark with merger and acquisition activity where we can significantly enhance shareholder value.

So as a package, if you put those components together, we view that the future growth strategy of Amarin is a very sound strategy, is a risk-managed strategy, and we look forward to updating you on the progress of that strategy over the coming quarters.

Thank you very much.

Excuse me, sir?

Yes?

You do have someone in queue.

Okay.

Walter Way, University of California.

Okay. Walter?

Hi, Rick. How are you?

I'm good. Yourself?

Fine. Sorry to hear of your results. One kind of pharmacologic question, why was lorezapam picked as the possible nasal drug [inaudible] studies [inaudible] for seizures? Can someone tell me why that was done?

Well, in the U.S., the first drug of treatment for seizures in the hospital is IV lorazepam.

That varies tremendously, I might add. I think I'm closer to the clinic than that. But I just wanted a better reason than that for it.

Well, we've actually had a number of experiences from actually ER physicians who view that a nasal administration of lorazepam would be a very positive move forward.

Well, I'm not at all, Rick, contesting the formulation. I think that's a great idea, I think, and it's very appropriate, and, as you know, there are many drugs now coming online that are using that. But the only question was about the -- I mean, there are other drugs, other benzodiazepines, that probably are quicker acting and do things better, and I just wondered how they -- how come they hadn't been considered. What am I talking about? Versed, midazolam, for instance.

Yes, I think the key here is that we were, in conjunction with a number of key opinion leaders, and, obviously, Walter, we probably should've added you into the group --

No, no.

-- we did view the -- we had a view that lorazepam was perhaps a longer acting version of the benzos which would be more appropriate for the outpatient setting. And I know that a number of the other benzos were evaluated. But particularly the nanocrystal form of delivery was viewed as a very attractive route to getting lorazepam into the outpatient setting.

Well, I certainly agree with that, and thank you for the information, and good luck.

Thank you, Walter.

Good luck.

At this time, there are no further questions.

Well, thank you very much, and we look forward to updating you with the next quarter's conference call.

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