Amarin Corporation PLC (AMRN) 2011 Q1 法說會逐字稿

Greetings and welcome to the Amarin Corporation first-quarter 2011 financial results. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Steve Schultz, Senior Director of Investor Relations and Communications for Amarin Corporation. Thank you, you may begin.

Thank you. Welcome and thank you all for joining us today. Before we comment on our financial and operating results I remind everyone that today's call will include statements that are not historical and may be characterized as forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, including without limitation statements regarding the results of our clinical trials and the potential efficacy and safety of our product candidates, the timing of our planned announcement and publication of these results, our current expectations regarding regulatory filings and potential indication for our product candidate, if approved, our current expectations regarding a potential clinical outcome study, and the potential implications of any such study on our regulatory process, the potential market opportunity for our product candidates, our current expectations regarding potential strategic collaborations, and the adequacy of our financial resources.

These statements involve various risks and uncertainties that could cause our actual results to differ materially from those expressed in such forward-looking statements. These include the risks and uncertainties under the heading, Risk Factors, in our most recent Annual Report on Form 10-K and on our quarterly reports on Form 10-Q and other periodic reports filed with the SEC, which reports are available on our website at www.AmarinCorp.com. They are also available on the SEC's website.

These forward-looking statements are only predictions and actual results or plans may vary materially from those projected.

The forward-looking statements we make on today's call are based on our beliefs and expectations as of today, May 10, 2011 only. We do not undertake any obligation to revise or update such forward-looking statements. And an archive of this call will be posted to the Amarin website under the Investor Relations section.

Please note that Amarin plans to continue to be active at investor conferences with the upcoming presentations scheduled for the Jefferies 2011 global Health Care Conference in New York City. That is June 6 through 9. Our presentation is on the 6th. The Canaccord Genuity Growth Conference in Boston, August 9 through 11, and the Wedbush 2011 Life Sciences Conference in New York City, August 17.

Additionally, the MARINE study results will be presented next week during the National Lipid Association's annual scientific sessions in New York City, May 19 through the 22nd.

I will now turn the call over to Joe Zakrzewski, Executive Chairman and Chief Executive Officer of Amarin.

Thank you, Steve, and welcome to everyone who's joining us today. During this call we will provide a brief review of our recent accomplishments and Amarin's financial performance in the first quarter of 2011.

I'm joined on today's call by Fred Ahlholm, our Vice President of Finance and Principal Accounting Officer, who will take you through our financials for the quarter. Also, available for the Q&A portion of the call, in addition to Fred and to Steve, are John Thero, our President, Paul Huff, Our Chief Commercial Officer, and Paresh Soni, our Senior VP and Head of Development.

Recently we witnessed what is arguably the most significant accomplishment in Amarin's history, when we reported the successful results of the ANCHOR trial three weeks ago.

The ANCHOR trial was a Phase 3 study for AMR101 conducted under an SPA agreement with the FDA. While the result of the MARINE trial, as announced nearly six months ago were impressive, the ANCHOR trial results were even more significant, as we believe those results position AMR101 to be the first-in-class drug approved for use in the large mixed dyslipidemia market, with AMR101 having successfully achieved or exceeded all of the primary and secondary endpoints of the ANCHOR trial.

The ANCHOR study evaluated the safety and efficacy of AMR101 in 702 patients with mixed dyslipidemia or multiple lipid disorders, with high triglyceride levels of 200 to 500 milligrams per deciliter, and who where also on optimized background statin therapy. Said differently, they were all on statins.

In the seven largest worldwide markets there are over 100 million people with triglyceride levels over 200 milligrams per deciliter. And in the US alone there are approximately 40 million people with triglyceride levels over 200 milligrams per deciliter, the majority of whom have mixed dyslipidemia.

Clinical treatment guidelines recommend that patients with triglyceride levels above 200 milligrams per deciliter be treated with triglyceride lowering therapy; However, existing triglyceride lowering therapies have limitations. Including the fact that they increase LDL-C, also known as bad cholesterol.

In the US there is no prescription omega-3 product approved for this patient population, which represents a huge and significant market opportunity for Amarin.

The ANCHOR study showed that AMR101 not only demonstrated that it significantly lowered triglyceride levels compared to placebo, but it also demonstrated that it significantly lowered other important lipid parameters and biomarkers on inflammation.

Furthermore, AMR101 demonstrated that not only did it not increase LDL-C, but that it reduced LDL-C above and beyond that to a background statin. The ANCHOR trial's primary endpoint was a statistically significant reduction in trigs compared to placebo.

Secondary endpoints were noninferiority regarding LDL-C as compared to placebo, as well statistically significant reductions in Non-HDL-C, Apo B, Lp-PLA2 and VLDL-C compared to placebo.

All of these biomarkers are important risk factors for cardiovascular disease. AMR101 achieved the primary endpoint and all of the secondary endpoints of the ANCHOR trial at both the 4 grams and 2 grams per day dosing. We couldn't have been more pleased.

Moreover, at 4 grams AMR101 not only demonstrated noninferiority of placebo regarding its effects on LDL-C, it demonstrated statistical superiority by reducing LDL-C with a reported reduction in LDL-C of more than 6%.

We believe that these positive ANCHOR trial results, along with the positive results from our first Phase 3 clinical trial, MARINE, individually and together represent potentially multibillion dollar commercial opportunities for AMR101 as a potential first-in-class prescription medicine for the treatment of high triglycerides in patients on statin therapy, and as a best-in-class prescription medicine for the treatment of very high triglycerides respectively.

Regarding MARINE trial results, in addition to the NLA presentation that Steve described that comes up next week in New York City, I am pleased to inform you today of two important data presentations. First, the European Society of Cardiology has accepted MARINE results for oral presentation at the ESC Congress in August of this year. And the American Journal of Cardiology has accepted a MARINE trial manuscript for publication in September of this year. This is very exciting news.

The high quality of these forums help further validate the importance of these findings. We anticipate a series of potential additional publications and presentations of the MARINE trial results to follow. Similarly, investigators in the ANCHOR trial are evaluating multiple potential publications of those results, and we intend to update you shortly on those presentations and venues.

Our current top priorities as we head through the rest of the year are submitting an NDA in the third quarter, preparing for the commercialization of AMR101, and expanding our supply capacity. The latter, the supply capacity, is now even more important following the better-than-expected ANCHOR clinical trial results.

We are on track for submitting an NDA in Q3, seeking an indication based on the MARINE trial results, with potential reference to ANCHOR results in the clinical trial section of that initial label. For clarity, no outcome study is required for the MARINE trial indication and the SPA associated with it.

An outcome study must be substantially enrolled, but results are not required in order to secure approval of an indication based on the ANCHOR trial results. We are nearing completion of our outcome study design, and recently began receiving quotes and estimates from various CROs.

While we have not yet committed to the commencement of the outcome study formally, if we are able to get the trial started quickly, and begin patient enrollment this year, we anticipate that the outcome study will be substantially enrolled by the end of 2012.

When you review our recent recently issued proxy statement, you will note that the Company proposes adding Dr. David Feigal to our Board of Directors. David is a regulatory affairs expert and has served in many senior positions, including at the FDA, as a regulatory expert. Most recently he served as Vice President of Global Regulatory Affairs at Amgen.

These are going to be very critical as we work closely with David, our regulatory team internally, to submit the NDA on time and look for a rapid approval.

Regarding preparations for the commercialization of AMR101 under the leadership of Paul Huff, who performed great activities in launching the asset at Reliant, their Lovaza product, he -- we hired him recently as our Chief Commercial Officer. We are making progress in multiple areas, including hiring additional marketing personnel, selecting a brand name for AMR101, and conducting additional market research, all in anticipation of commercial launch.

In parallel with building our own commercial operations capacity for the launch of AMR101, we continue discussions with numerous commercial partners. As you might imagine with the results we realized from ANCHOR, AMR has attracted even more attention that we have previously disclosed, and given that it is a cardiovascular drug with multibillion-dollar potential.

While our discussions with potential commercial partners are active, we are not going to provide public guidance on the timing or structure of a potential commercial partnership. And there can be no assurance that these discussions will result in a transaction at all.

We believe that we could be successful in launching AMR101 ourselves ourselves or through a partner. We will seek to select the path which positions us to maximize shareholder value the best. Unless and until we believe we have a better path via commercial partner, we will continue to pursue the one thing that we control, and that is to launch AMR101 on our own.

Following the ANCHOR and MARINE trials, we believe that AMR101 has the potential to be favorably differentiated from existing triglyceride therapies. This differentiation is comprehensive, including that AMR101 demonstrated that it does not increase LDL-C, while existing prescription omega-3 and fenofibrate therapies increase LDL-C by up to 50%.

We believe that an important part of the opportunity for AMR101 is the potential to take marketshare from existing prescription omega-3 and fenofibrate therapies, as growth classes of drugs sell in excess of $1 billion each in the United States.

However, we also believe that our greatest opportunity could come from market expansion. Note that fish oil products have become the top-selling dietary supplements on the market today. Our market research suggests that when consumers are made aware of the shortcomings of such supplements, a large number will seek out a proven prescription drug, approved by the FDA, that their patients can be comfortable with -- the patients and the physicians can be comfortable with, with the profile of AMR101.

Finally, in regard to securing adequate supply to support our potentially explosive growth, we are also making considerable progress in the manufacturing front. As background, our supply chain consists of three primary phases -- sourcing of raw material, refining that raw material to give it the purity of greater than 96% EPA, with no DHA, and encapsulation and packaging.

It is the refining step that requires the most attention, as fish oil is reasonably available, and encapsulation and packaging are sourced from companies with vast experience in the field.

With respect to refining fish oil into our API, as discussed previously, we have one proven Japan-based supplier that has successfully produced API for us for a decade. They would like to produce all of our API. However, while we plan to rely on them for our initial launch supply and going forward beyond that, we believe that it is prudent to have multiple suppliers as we grow our brand. Having multiple suppliers helps us reduce risk. It also promotes competitive pricing and positions us to grow capacity faster in order to support billions of dollars in annual revenues.

Our aim is to add two additional suppliers this year. Based on the success in the ANCHOR trial, we may elect to increase the number of suppliers we add from two to three. There are a very small number of companies in the world that, even with our support, can produce API for AMR101.

We have technically qualified the two suppliers that we seek to add this year, and we are in discussion with the suppliers regarding long-term contracts. We are currently in the early stages of technically technically qualifying that third potential additional supplier.

While we believe that our plan is clear, sustained execution and focus are needed to be successful, and this is even more true following the better-than-expected results of our ANCHOR and MARINE trials.

Overall, we believe that we are making tremendous progress. That AMR101 has the potential to be well differentiated from potential competitors, risk mitigated for regulatory approval, and well-positioned to address multibillion-dollar market opportunities.

I now ask Fred Ahlholm, Amarin's Vice President of Finance, to comment on Amarin's first-quarter 2011 financial results.

Thank you, Joe. Today Amarin will file its quarterly report on Form 10-Q for the three months ended March 31, 2011, Amarin's first quarter. While I will provide some comments here regarding our financial results, you'll find a more detailed discussion of our results in our 10-Q.

Amarin's cash and cash equivalents as of March 31, 2011, totaled $129.5 million. This cash balance includes $98.7 million in net proceeds received from our January 2011 public offering of 13.8 million American Depository Shares, or ADSs, where each ADS represents 1 ordinary share. This cash balance also includes $8.2 million in net proceeds received in Q1 from the exercise of stock options and warrants.

Amarin had 126.2 million ADSs outstanding at March 31, 2011, which includes the 13.8 million shares issued in the January equity offering, and approximately 5.6 million shares issued in 2001 year-to-date for stock option warrant exercises. On March 31, 2011 Amarin also had 10.4 million and 29.4 million outstanding stock options and warrants, respectively.

During the three months ended March 31, 2011, net cash outflows from operating activities were $8.8 million compared to cash flows from operating activities of $7.8 million for the same period in 2010.

During Q1 2011 the Company's total operating expenses were $7.2 million as compared to $7.4 million in the same period of the prior year. This reduction was a result of lower research and development expenses, reflecting the timing of clinical trial costs, partially offset by higher net non-cash charges for stock and warrant-related compensation expense, and to higher costs in preparation for the commercialization of AMR101.

In conjunction with the private placement of ADSs completed in October of 2009, the Company issued warrants that contained a pricing variability feature, whereby the exercise price of the warrants could increase if the exchange rate between the US dollar and the British pound changes beyond a defined threshold.

Although the number of shares eligible to be issued under the warrants does not change under any circumstance, under US GAAP this pricing variability feature requires the warrants to be classified for accounting purposes as a financial derivative liability.

The fair value of this derivative liability is remeasured at each reporting period, with changes in the fair value recognized in Amarin's results of operations. The warrant derivative liability represents a non-cash item. Upon the exercise of these warrants, the fair value of the warrants exercised is reclassified from liabilities to equity.

During Q1 two changes occurred which affected the value of the warrant derivative liability as reported at March 31, 2011. The first was that 3.9 million of the warrants issued in October 2009 were exercised during Q1, resulting in the transfer of 29.2 million from warrant derivative liability to equity.

The second was that the market value of Amarin's ADSs moved lower during Q1, resulting in a reduction in the fair value of the warrant derivative liability, and as a result Amarin recorded a $25.3 million non-cash gain on change in the fair value of derivative liability. As we move through 2011, we anticipate that additional warrants may be exercised, which will further reduce this warrant derivative liability.

However, as the market price for our ADSs has moved higher in Q2, we anticipate that the fair value of the warrant derivative liability could increase. This increase in the fair value would result in a loss rather than a gain on change in fair value of the warrant derivative liability during Q2 2011.

I mention this shift from a gain in Q1 to a loss in Q2 2011 to draw attention to our expectation that the change in the fair value of the warrant derivative liability can shift significantly from quarter to quarter. Again, this bears repeating that this is a non-cash item.

In Q1 the $25.3 million gain from the change in fair value of the warrant derivative liability offset the Company's operating expenses, resulting in the Company reporting on a fully diluted basis net income of $18.2 million or $0.12 per share of income during Q1 2011 compared to a net loss of $9.2 million or $0.09 per-share loss in the same period of the prior year.

Excluding the warrant derivative liability, the Company's liabilities as of March 31, 2011, totaled $4.4 million, of which the majority were accrued expenses and accounts payable from operating activities.

During 2011, excluding the effect of non-cash derivative accounting and stock-based compensation charges, we anticipate that our G&A spending will increase modestly as we accelerate our commercial preparation activity.

We have begun to add additional staff to support these commercial preparations, and expect more substantial hiring in 2012 in the event that AMR101 is not partnered by that time.

R&D spending related to our MARINE and ANCHOR clinical trials is declining as these trials approached their completion. We paid approximately $3.7 million to our CRO during Q1, 2011, and estimate that approximately $5.3 million remains to be paid to our CRO in 2011 for the completion of those trials.

We will provide guidance on R&D spending from the proposed outcome study after we had better estimates of the commencement date and the cost associated with that study.

This concludes my prepared comments. I would like to hand this call back to Joe Zakrzewski.

Thanks, Fred. Ladies and gentlemen, we have a great opportunity ahead of us with AMR101. While we are very proud of all that we have accomplished to date, we now understand that the opportunity is to go much higher. Our focus on getting AMR101 approved for sale and building the foundation for the commercial success of AMR101 is in front of us.

I and the team are very excited about our prospects. I thank you for your attention today. After a lengthy ANCHOR results conference call three weeks ago I promised people we would keep this call short. With that in mind, I would now like to the call for questions. Operator.

Ladies and gentlemen, at this time we will begin conducting a question-and-answer session. (Operator Instructions). Ram Selvaraju, Morgan Joseph & Co.

At this stage how do you envision the process going forward with respect to determining the formal design of the outcome study, and whether or not you would seek some kind of formal signoff from the FDA regarding that study?

Thanks, Ram, for the question. I think just at a very high level, as we're still working through that, what we are doing is we've got a design in place. We are when working with the agency on the design. One of the benefits that we had, as we have been having all the partnering discussions that are going on, we have also had the ability or have the ability to have feedback from the partners on our study.

So as we bring this forward to resolution and getting it underway, it couldn't be more robust in our opinion right now. So look for more information from us in the coming weeks, months on that. But right now we are using world-class CROs. We are getting feedback from the companies that we could or could not partnered with, and we're working closely with the FDA.

Then, very quickly, with respect to formulation of AMR101 with existing classes of cardiovascular drugs, can you give us an update on where that stands and how you see that playing out over the coming months?

Well, we have -- we had since last year in our plans a study to be commenced, I believe it is early next year, in a combo setting product.

But clearly on the heels of the ANCHOR data and on the heels of the MARINE data, but more specifically, ANCHOR, when we saw all the increases in statins -- as the statin level goes up, the effect is even more dramatic. And when you compare that to data that is available for fenofibrate and other drugs which show the exact opposite of that, we think that is a real opportunity for us and a real place to go.

Again, we have been talking about this more as a platform than as a single drug. You could go further into anti-inflammation and other areas. Those are things strategically we are thinking about, but not ready to comment on any further at this point in time.

Okay, and thanks again. Congratulations on your progress.

Bill Tanner, Lazard Capital Markets.

Joe, I had just a question, maybe a clarification for you. I think you mentioned that the Company is making preparations for commercial launch. I wonder if you could just provide a little bit more detail on what that actually is. I understand the merits of going ahead, planning for the commercial launch. I just want to understand a little bit better, maybe, the scope of that.

It is really twofold. One is the supply side, building that up to multiple levels in terms of multiple suppliers, etc., on the API side. We expect to have those in North America, partners in Europe, partners in Asia in terms of supplying us the API that could provide $1 billion plus opportunity in each area.

On the commercial side, as it relates to marketing and selling, whether we partner, sell the Company, or do it ourselves, the activities we are doing right now are critical. You are hiring 10 people plus or minus. You've got your Chief Commercial Officer onboard. You're bringing onboard your marketing people. You are bringing onboard Medicare and reimbursement experts. You're bringing on folks that begin to form the basis of your medical science liaison team. You might even hire the head of sales.

Whether you, again, partner it, sell the Company, or do it ourselves, you need those people now. So we don't see this as an incremental expense. We just see this as guiding our way and leaving our options open.

Where it really begins to get heavy for us is by the time we get to, let's call it the middle of next year, when you begin to, quote, hire a sales force, rent a sales force, do something else regarding a sales organization, that is when the drive and the impetus comes up regarding a lot of the spending. But right now it is the nuts and bolts and it is the foundation of where we're going.

Could you comment than on the extent to which these folks have been hired? is there something that -- go ahead?

I would say to you that approximately one-third to one-half have been hired and/or identified with offers out to them in terms of this foundation building.

So Paul and I have been spending a lot of time with John and the rest of the team working to put that infrastructure in place as we build that commercial organization.

Okay, thanks very much, and congratulations to on your progress.

Ladies and gentlemen, we have time for one more question. Ritu Baral, Canaccord Adams.

Thanks for taking the question. Can you comment on the release put out this morning by Takeda and Pronova about their Phase 3, essentially Lovaza trial, in Japan where they comment at the end that the two doses of Lovaza, looking at the 2 gram and the 4 gram, did not show any statistically significant change in LDL? What are the details of that trial design that we should be looking at?

Sure, Ritu. Thanks. Always good to hear from you. Well, the first thing is I was amazed there was no data in their press release, which makes me wonder what was going on there. I was also suspect to see that they were comparing 4 grams of Lovaza to 1.8 grams of [Epidel].

And, again, what I am surmising from their press release, again which had no data, no numbers, no nothing in it, is the fact that they still saw a very high raise in LDL. It just wasn't statistically significant.

Now what that number is we will only find out over time. I think the fact that they also didn't publish what their triglyceride number was tells me that it is a much lower increase than what we have seen over here in the US. Again, you've got different demographics. You've got different patients, you've got different everything.

I think the best way I can characterize what this data means to Pronova is, if you look at their stock performance today it is up about 4%, or in US dollars about $0.07 a share. So I believe the markets are efficient, or at least semi-efficient. And I believe the market has spoken and we will have to wait to see what data has.

I also found it interesting that they're going to take about a year to submit from today. So, again, we will let the data speak for itself and see where it really goes from here.

Thanks for that perspective. Just a very quick follow-up on where you are with CMC and sort of lot stability testing in preparation for the Q3 NDA submission?

I think everything that we are seeing to date is right in line with where we would want it to be. There are no delays, no surprises. We are very pleased, so everything is on track as we -- still a lot a lot of work to do. And it is an aggressive timeline, but I think we are all feeling very good right now.

Great. Thanks. I look forward to seeing you at NLA next week.

Yes, I look forward to it.

Thank you, ladies and gentlemen. At this time I would like to turn the floor back to management for any closing remarks.

Well, thanks everyone for continuing to support the Company, for your time today. And we will look forward to speaking more in the immediate future at both the various analyst meetings that we have coming up, as well as the NLA and the meeting in Europe. And, again, thank you for your support. We wouldn't be here without you. So thank you.

Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. And thank you for your participation.