Amarin Corporation PLC (AMRN) 2011 Q3 法說會逐字稿

Greetings and welcome to the Amarin Corp. 2011 Q3 conference call. At this time all participants are in a listen-only mode. A brief 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, Director of Investor Relations for Amarin Corp. Thank you, Mr. Schultz. You may begin.

Welcome and thank you 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 announcements and publication of these results; our current expectations regarding regulatory filings, regulatory approvals, and potential indication for our product candidate, if approved; our current expectations regarding a cardiovascular outcomes study and the potential implications of any such study on our regulatory process; the potential market opportunity, patent protection, and exclusivity of our product candidates that there can be no guarantee that any patents will issue or the certainty of what, if any, commercial value that granted patent in our patented state will provide; our current expectations regarding potential strategic collaborations; and our costs 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. And these include the risks and uncertainties under the heading Risk Factors in our most recent Annual Report on Form 10-K and in our most recent Quarterly Report 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. 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, November 8, 2011 only. We do not undertake any obligation to revise or update such forward-looking statements.

In addition, please note that the comments on this conference call regarding the efficacy, safety and competitive positioning of AMR101 are made for consideration of investors, and not to promote the use of AMR101, which is not approved for sale or use outside of the approved clinical trials.

And finally, please note that these remarks will contain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure will be used or discussed in a reconciliation of the differences between each non-GAAP financial measure, and the comparable GAAP financial measure, can be found within the Company's third-quarter financial results press release, in the Investor Relations section of the Company's website, again at www.amarincorp.com

An archive of this call will be posted to the Amarin website in the Investor Relations section. Please note that Amarin is scheduled to present at various upcoming investor conferences which are referenced in our Q3 press release as well.

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

Thank you, Steve, and welcome to everyone who's joining us on the call today.

During this call we will briefly review our recent accomplishments, update you on Amarin's financial performance in the third quarter of 2011, and answer a few questions from those on the call.

I am joined today on the call, in addition to Steve, by John Thero, Amarin's President; Paul Huff, our Chief Commercial officer; Paresh Soni, Senior VP and head of development; and Fred Alholm, Amarin's VP of Finance and Principal Accounting officer.

Since our last quarterly update, we achieved a number of key objectives including submission of an NDA seeking approval to market and sell AMR101 for the treatment of patients with very high triglycerides; reached agreement on a Special Protocol Assessment or SPA, with the FDA, on our AMR101 cardiovascular outcomes study, REDUCE-IT.

We also secured quotes from CROs which position us to contain the costs associated to conduct these outcomes studies to less than $125 million over six years, as previously announced -- this includes less than $25 million in aggregate spending through 2012; increased patent portfolio to 16 pending US applications across 11 US patent families; secured several high-profile publication and presentation opportunities for our AMR101 data that includes the MARINE data that was published at the American Journal of Cardiology, and upcoming podium presentations at ANCHOR and MARINE data at the American Heart Association scientific sessions next week; and finally, ended the third quarter with $125.9 million in cash.

Let me expand at this point on these accomplishments.

Regarding our clinical progress, on September 26, Amarin submitted an NDA to the DA requesting approval to market and sell AMR101 for the indication studied in the Phase III MARINE trial, reduction of triglycerides in patients with very high triglycerides, greater than 500 mgs per deciliter.

As previously stated, the NDA submission is based on the entire dataset from the AMR101 development plan, including safety and efficacy data from the Phase III MARINE trial and the Phase III ANCHOR study.

You may recall that AMR101 met the primary endpoints for both the MARINE and ANCHOR studies. Now that the AMR101 NDA has been submitted, our R&D team is focused on getting our REDUCE-IT cardiovascular outcome study underway. Together with the selected CRO, we are in the process of identifying and selecting clinical sites to begin enrollment.

We aim, as previously guided, to have this trial 50% enrolled by the end of 2012.

Now, let me remind everyone, that for the MARINE study which we've already submitted, there are no obligations or connections to the outcomes study. It is totally independent.

On the ANCHOR application, the FDA has asked us to be substantially underway in that study prior to filing for that indication. We believe what we are doing will more than be effective for accomplishing that goal before the end of next year. We believe that the indication for which we are seeking approval in our recently submitted NDA represents a large and clinically important market, as approximately one in 50 adult Americans in the US alone have very high triglyceride levels, meaning that they have very high levels of fat in the blood stream which is both a risk factor for cardiovascular disease and pancreatitis.

Furthermore, we believe that our clinical results position AMR101 to be the best in class therapy for treating these patients. While we can't predict the timing of the NDA approval, we plan to be well prepared to support the launch of AMR101 in Q1 2013.

While the population for the indication studied in the MARINE trial is considered large, the indication studied in the ANCHOR study represents a significantly larger opportunity as approximately one in five adults in the US have triglycerides greater than 200 mg per deciliter. While we have not yet requested regulatory approval of the indications studied in the ANCHOR trial, because the ANCHOR clinical trial results are included in our initial NDA submission and because the efficacy and safety results of the study were favorable, we believe that this indication will be well positioned for approval.

While we cannot predict the timing of such approval, we note that supplemental approvals of these nature typically take less than half the time of an NDA to be approved.

On the IP front, continuing to enhance the proprietary position of AMR101 is one of our top priorities, and we are aggressively pursuing the strategy which includes patents, regulatory exclusivity, manufacturing-related barriers, and trade secrets. We have filed and are actively prosecuting numerous patent applications. Amarin has filed 16 pending US patent applications belonging to 11 US patent families that collectively include hundreds of independent and dependent claims.

Many of our patent applications contain claims based upon the unexpected findings we observed in our MARINE and ANCHOR Phase III clinical trials. Some of these applications were filed under the US PTO's new process for prioritized examination, which could enable these applications to reach final deposition within 12 months. If granted, we believe that some of the resulting patents would expire in 2030 and beyond.

We are also aware of some of your concerns regarding the US PTO's website posting of the MARINE trial patent application last week. What I can tell you is that this is a top priority for us, and we are very active in our efforts to bring this to a favorable conclusion. We remain confident in the Amarin patent portfolio and the intellectual property position overall.

Please note that this type of office action is not uncommon and is part of the active exchange that often occurs at the patent office. While we are in active dialogue with the US PTO, it would be inappropriate for us to comment further for logical and, hopefully, obvious reasons.

Regarding the communication of our clinical data, we are very proud that the data from our two Phase III clinical trials has been selected for presentation and publication in a number of very well respected and high-profile settings.

Earlier in the year, MARINE trial data was presented at annual gatherings of the National Lipid Association and the European Society of Cardiology, followed by publication in the American Journal of Cardiology.

Next week, two oral presentations of AMR101 clinical results will be presented at the annual meeting of the American Heart Association. One of these presentations will be the first presentation of ANCHOR trial results in a scientific forum. This will occur on November 16. This abstract schedule as part of the scientific session titled Novel Lipid Modifying Therapies and other [Aphoral] Preventative Treatments will be presented by Dr. Christine Valentine, principal investigator of the ANCHOR trial.

The other oral presentation, scheduled for November 15, is titled New Frontiers in Lipid Management and will be presented by Dr. Harold Baines, principal investigator of the MARINE study. This presentation on MARINE trial result is anticipated to include information on particle concentration and related results not previously presented.

We intend to remain active in seeking additional opportunities to present and publish our clinical trial results in the coming months, including the full ANCHOR manuscript.

From a commercialization standpoint, we believe that AMR101 -- based on its demonstrated product profile and our previously reported clinical studies of reducing triglycerides, not increasing LDL cholesterol, and excellent safety profile -- is positioned to compete effectively with current therapies and those that are under development.

Our goal is not simply to take market share, which we believe we can do successfully, but to expand the market well beyond current levels.

Both indications in the ANCHOR and MARINE trial represent potential multibillion-dollar opportunities, with the possibility for additional growth if favorable data from our cardiovascular outcomes study produce it.

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

Thank you, Joe.

Recently, Amarin filed its Quarterly Report on Form 10-Q with the US Securities and Exchange Commission, for the three and nine months ended September 30, 2011, Amarin's third 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.

Our cash and cash equivalents as of September 30, 2011, totaled $125.9 million, reflecting a decrease of $5.5 million from our reported $131.4 million in cash and cash equivalents at June 30, 2011. This Q3 decrease in cash and cash equivalents reflects $9.3 million paid for operating activities, partially offset by $3.8 million received from warrant and option exercises. The warrant exercises resulted in our issuance of 2.5 million American depository shares -- ADS -- where each ADS represents one ordinary share.

As of September 30, 2011, Amarin had outstanding 135.8 million ordinary shares and share equivalents, the majority of which were in the form of ADS. In addition, on the same date we had stock options and warrants outstanding for the purchase of approximately 10.8 million and 21.1 million ADS, respectively.

For the three months ended September 30, 2011, our operating expenses were $9.4 million compared to $9.8 million in the same period of the prior year. Operating expenses for Q3 2011 included a $1.5 million fee related to the filing of our NDA.

Excluding non-cash costs and credits associated with warrants and options, operating expenses were $11 million in Q3, 2011, compared to $9 million in Q3 2010. The increase of $2 million primarily reflects higher staffing levels, commercial preparation costs, and an NDA submission fee -- partially offset by lower clinical trial costs.

Our GAAP net income for Q3 2011 was $96.3 million, or basic income per share of $0.72 and diluted income per share of $0.62, and included $2.7 million in share-based compensation expense, $3.4 million in warrant compensation income, and a $106.6 million gain on the change in fair value of the warrant derivative liability.

For the same period in 2010, GAAP net loss was $11.2 million or basic and diluted loss per share of $0.11, and included $0.8 million in share-based compensation expense, $36,000 in warrant-compensation expense, and a $1.4 million loss on a change in the fair value of the warrant derivative liability.

Beginning this quarter, we are also providing non-GAAP adjusted results as a complement to our reported GAAP results. We believe that these adjusted results, which exclude non-cash items, help to clarify underlying trends in the Company's ongoing operations.

The non-cash items that we have excluded in our non-GAAP adjusted results are share-based compensation, warrant compensation, and change in value of derivative. A reconciliation between our non-GAAP adjusted results and reported GAAP results for the third quarter of fiscal years 2011 and 2010 is detailed in our Q3 press release issued yesterday and available on our website.

As a reminder, our balance sheet and operating statements as reported under US GAAP reflect a warrant-derivative liability and corresponding gain or loss on the change in fair value of the warrant derivative. Both are non-cash items. The warrant derivative of liability relates to accounting for warrants issued by the Company in October 2009. The number of shares that can be issued under the warrants does not change by this derivative liability, and the derivative liability does not represent a claim on the cash of the Company.

Finally, exercise of the underlying warrants for accounting purposes, the fair value of the warrant exercised is reclassified from liabilities to equity.

As of September 30, 2011, the fair value of this warrant-derivative liability was $155 million, a net decrease of $131 million from June 30, 2011. This decrease in the fair value of the warrant-derivative liability was due primarily to the decrease in the market price of our ADS since June 30, 2011. The closing price of our ADS has a significant impact on the value of the derivative liability, and therefore the fair value of the derivative liability can fluctuate significantly from quarter to quarter.

Excluding the warrant derivatives, the Company's liability as of September 30, 2011, totaled approximately $7 million.

Our research and development expenses for Q3 were approximately $5.6 million, excluding non-cash costs associated with stock-based compensation compared to $7.4 million for the same period in 2010. This decrease resulted primarily from lower cost associated with the MARINE and ANCHOR studies, the results of which were reported within the past year.

Our marketing, selling and general expenses for Q3 were approximately $4.5 million excluding non-cash cost associated with stock and warrant compensation compared to $1.6 million for the same period of 2010. We anticipate that these costs will increase during the balance of 2011 as we prepare for the commercialization of AMR101, including costs for market research, salesforce preparation, and inventory management.

We believe that our current resources will be sufficient to support the launch of AMR101 for the indication studied in the MARINE trial. We base this belief on our current projected operations, which contemplate not only working capital and general corporate needs, but also commercial preparation of AMR101 and the initiation of the REDUCE-IT cardiovascular outcome study.

As previously guided, we anticipate that payments to a CRO for the REDUCE-IT study will not exceed $25 million by the end of 2012.

Thanks, Fred.

We believe AMR101 is one of the great drugs currently under development, and is well-positioned in the next generation in lipid management therapy. With Phase III clinical trial results that hit all primary endpoints in both the MARINE and ANCHOR clinical trials, three SPAs with the FDA, and an NDA submitted for an initial indication that addresses a market of 4 million people, and a second indication that addresses a potential market 10 times larger in the US alone, we remain very confident in and very pleased with the progress the Company has made over the past quarter and are increasingly excited about the market positioning of AMR101.

As is the case with any biotech company with a valuable late-stage asset like AMR101, we have three options -- self commercialization, a strategic transaction to sell the Company, or a partnership. As is normal for a Company in our situation, we can't comment on specific outcome or timing at this point.

What we can say is that we will continue to evaluate and pursue what in our view are the best options to maximize the value of AMR101.

Thank you for your interest in Amarin. I would now like to open the call for a few questions.

Operator.

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions).

Bill Tanner with Lazard Capital Markets.

Thanks for taking the question. Joe, just, I think obviously everybody knows that IP is going to be key to how well the stock performs perhaps over the near term. So I'm wondering if you might be able to characterize how the potential partners, where they are on the due diligence process on the IP front, just generally speaking. And then also, to what extent the notice of allowance might be a gating factor with respect to their view.

Thanks, Bill.

What I can say about the partnering process is that we are still very active. Because we are active, it really wouldn't be appropriate for me to comment further on where people are at what stage and where they are.

Regarding the notice of allowance, or notice of allowances, you know, again I think that falls under the category of it's something that we really cannot comment on. But again I can say that we are looking, as with any late-stage biotech company with a late-stage asset like AMR101, we are considering all of our options from transactions strategically, to partnering, to the go-it-alone strategy. And all of that comes together and when we bring it there.

So -- you know, getting into too much about the IP, I think we've said what we really can say today.

Joseph Schwartz with Leerink Swann.

Thank you. Good morning. I will honor your policy not to comment on the patent process.

I was wondering, in your prepared remarks you listed three options, such as self-commercialization, strategic transaction or partnership. Is there any significance in the order that you introduced those? And -- if not, is there any -- has there been any change in the relative rankings of these potential outcomes over time, now that your stock is where it is? Or are you more likely to it go it alone versus share the lion's share of the upside with an acquirer, for example?

Thanks, Joe.

There was no inference in the order of those, number one. And I don't think anything changes for us in how we are pursuing these options, regardless of the stock price. Again, we are active on all fronts. We remain committed to maximizing the value of AMR101, and you know, again as I said, there's still quite a bit of activity on all fronts and we are pretty excited about that activity.

But again, until something happens on any front we can't make any guarantees.

Okay. And then, can you help us interpret the significance of the particle size in CRP data at AHA, and when will we see the open label extension study data from the MARINE trial?

Regarding the particle size, comment regarding the AHA, that's left to when we put out the press release and when we actually present the data on the podium on the 15th or 16th of November. And regarding the open label, we are still in the process of analyzing that data.

Okay, thank you.

Ritu Baral with Canaccord Genuity.

Good morning, guys. Thanks for taking the question.

Joe, could you go over current manufacturing capacity, both in metric tons and read through to doses in patients and where that fits in the overall landscape of overall capacity amongst all the players in the Omega 3s right now?

Yes, sure. I will try to comment on that, although again, it continues -- you know, we are about a year away from launch here, so we are working through that.

We have three suppliers that we've announced. One of those suppliers is in the NDA as we speak, the other two will likely come in as alternative suppliers as sNDAs quickly after approval.

We believe that our ability to supply the market will quickly approach as we hit, we believe, this peak sales mark, thousands of metric tons of capacity. So if you think about how we're doing this, that's what we are targeting to get in this three- to five-year mark. How can you have that?

And if you look at what's already out there, about 1,000 metric tons equals somewhere between $1 billion to $1.3 billion in sales, okay? So, what you've got to be prepared for here -- and again, this varies as you come up to speed and you bring all the different folks onboard, but as you fill out that capacity -- again, about 1,000 metric tons is equal to about $1.2 billion-plus in sales, and that's some of the capacity of its out there by our competition right now.

And we expect to approach that over time.

Got it. And my follow-up is on the competitive landscape now that [Trigg and Epax] are expecting data relatively shortly and the alma thera drug has finished enrollment, can you remind us again how 101 sort of fits in its profile versus those two other compounds?

Yes, sure. I mean, from a practical perspective the difference between our drug and their drugs, as we understand it, is their drugs have DHA. Based upon how our results compare to Lovaza, we expect that those drugs to also increase LDL.

Again, we don't know that until we see the data, but those in our opinion are more likely than not Lovaza extensions, if you will. Lovaza knockoffs, if you will. So, we don't get overly concerned about them. But again, we have to look at the data and see what the data says.

We note that some of these studies have been completed for some time and we've not seen the data, or that people are saying the data is still several months away, which makes us ask questions. But again, I think where we are is, let's let the data speak for itself.

Great, thanks for taking the questions.

As this brings us to the end of our Q&A session, I will now turn the floor back over to our management team for closing comments.

Thank you for your support. We are -- we've had a great year so far; we've lots of accomplishments from the MARINE study, the ANCHOR success, to the SPA outcome study approval. We've submitted an NDA. We have 11 patent families in the US with 16 patent applications. We've published in the American Journal of Cardiology, we've presented at the National Lipid Association and the American Heart Association, the European Society of Cardiology.

We've got our supply chain in the best shape it's ever been in, with three broad suppliers for API, and I think the team has done a phenomenal job of cash management. So really, for us, this is about execution and driving this through the key next steps for the Company.

And with that, we will close the call and just thank everyone for being part of it. So, thank you and good day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.