Amarin Corporation PLC (AMRN) 2014 Q1 法說會逐字稿

Welcome to Amarin Corporation's conference call to discuss its financial and operating results for the first quarter of 2014. This conference is being recorded today, May 9, 2014.

I would now like to turn the conference over to Mike Farrell, controller and senior director of investor relations for Amarin.

Welcome, and thank you for joining us today. Please be aware that this conference call will contain forward-looking statements that are intended to be covered under the Safe Harbor provided Private Securities Litigation Reform Act.

Examples of such statements include, but are not limited to, our current expectations regarding our commercial and financial performance -- including levels of Vascepa sales, revenues, and other commercial metrics -- expenditures, supplier-related activities, and the adequacy of our financial resources. Our current expectations regarding regulatory filings, government agency decisions, and potential label expansion. Our current expectations regarding our cardiovascular outcomes study, such as enrollment and the potential implications on such study of regulatory process. Our plan to protect commercial potential of our product candidates and approved product through patents, regulatory exclusivity, trade secrets, and manufacturing barriers to entry. And our current expectations regarding the effect of our new co-promotion agreement on our business.

These statements are based on information available to us today, May 9, 2014. We may not achieve our goals, carry out our plans or intentions, or meet the expectations disclosed in forward-looking statements. Actual results or events could differ materially, so you should not place undue reliance on these statements. We assume no obligation to update these statements as circumstances change.

Our forward-looking statements do not reflect the potential impact of significant transactions we may enter into, such as mergers, acquisitions, dispositions, joint ventures, or any material agreement that we may enter into, amend, or terminate.

For additional information concerning the factors that could cause actual results to differ materially, please see the forward-looking statement section in today's press release and the risk factors section of our quarterly report on form 10-Q for the three months ending March 31, 2014. This document has been filed with the SEC and is available through the Investor Relations section of the website at Amarincorp.com. We encourage everyone to read these documents.

This call is intended for investors and Amarin and is not intended to promote the use of Vascepa outside of its approved indications. Finally, an archive of the call will be posted to the Amarin website in the Investor Relations section.

In addition to myself, on today's call from Amarin are John Thero, President and Chief Executive Officer; Steve Ketchum, our President of R&D; Joe Kennedy, our Senior Vice President and General Counsel; and Aaron Berg, our Senior Vice President of Marketing and Sales. Joe Bruno, who has historically been part of these calls in an Investor Relations capacity, has taken on some marketing projects for us that will be his primary focus going forwards. So while he remains very active at Amarin, he will not be part of this call.

I'll now turn the call over to John Thero, President and Chief Executive Officer of Amarin.

Good morning, and thank you for joining us today.

During today's call, we will review Amarin's recent commercial and operational performance and financial results for the first quarter of 2014. I will summarize our highlights and achievements and then ask Aaron Berg to provide you with a commercial update.

Following Aaron, Mike Farrell will review Amarin's financial performance. I will then cover various other matters before fielding questions from the analysts and investors, as time permits.

The first quarter of 2014 was an important transitional period for Amarin. As discussed in our February call, following our reduction in staff in late 2013, we repositioned our sales team to focus on the smaller group of positions that represent the highest prescribers of omega-3 prescription therapy.

Our sales team has now made this transition. As a result, we are now witnessing prescription growth from this targeted group. These physicians provide and represent potential for considerable future prescription growth.

Our sales team in Q1 achieved approximately the same level of sales achieved through a roughly half the cost. The growth in prescriptions written by these highest-potential prescribers has been masked by a reduction in prescriptions from physicians on whom we ceased calling after our reduction in force.

As we work to continue to increase the productivity of our own sales representatives, co-promotion with Kowa begins this month. Training of the Kowa sales team has commenced, and they will then help to educate physicians on the benefits and use of Vascepa.

Kowa's co-promotion efforts are planned to significantly expand our target physician subscriber base and more than double current sales detail frequency, including resumption of details for physicians not currently targeted by Amarin's sales representatives. The combination of Kowa's sales details and sales details from Amarin's sales force should soon put us at a level that exceeds our detailing levels before we reduced the size of our sales team by half in late 2013. Aaron will provide additional comments on our sales-related activities.

Due to our focus on cash preservation and expense management, our cash burn declined in Q1 2014. Mike will quantify and elaborate on the sources of this reduction in his comments.

It is one of our top priorities to grow Vascepa revenues, based upon our existing resources. As previously described, our goal is to achieve net cash outflow of not more than $80 million in 2014. And to make our cash last. While from quarter to quarter our cash burn will vary, overall, we anticipate it to markedly decline, going forward, independent of whether we continue reduce it on its current course or not.

I will now turn the call over to Aaron Berg, our Senior Vice President of Marketing and Sales, for further comments on our commercial progress. Aaron?

Thank you, John.

As John mentioned, we look forward to the addition of 250 Kowa sales representatives promoting Vascepa. Promotion of Vascepa by the Kowa sales team will begin this month as they complete their Vascepa product training. The entire Kowa team is enthusiastic about promoting Vascepa.

We selected Kowa as a co-promotion partner because of their experience and capability and are confident that Vascepa sales growth will be important to them and their sales team. The Kowa sales team has been promoting other lipid agents to thousands of key valuable prescribers. As a result, Kowa is very familiar with the therapeutic category and have established relationships with many of the high-decile omega-3 prescribers.

We expect this dynamic to complement the Amarin sales team efforts and result in accelerated Vascepa prescription growth, with initial evidence of their contributions beginning to be visible in the second half of 2014.

The addition of the Kowa sales force to our existing Amarin sales force will more than double our Vascepa detailing levels, resulting in a significant increase in reach and frequency of Vascepa promotion to the high-value target positions. Prescription data continues to confirm that increased frequency of quality calls to high-decile prescribers will generate increases in prescription growth.

It is notable that, through the Kowa sales team, Vascepa detailing will resume targets that the Amarin sales force no longer calls on, as we focus our efforts on the smaller group of the highest-potential prescribers. We also expect Kowa to use their relationships to introduce Vascepa to many physicians on whom we've never called.

We have approximately 130 sales representatives promoting Vascepa, while Kowa will use approximately 250 sales representatives to promote Vascepa. Our product will be one of the two products their representatives promote. With a required minimum level of position one and position two sales calls under our agreement, we anticipate the detailing of Vascepa to primary care physicians and cardiologists by Kowa sales representatives will more than double Amarin's current sales detail frequency.

While we are very pleased with the addition of Kowa to co-promote Vascepa, we're convinced that we're positioned for Vascepa revenue growth, based on the efforts of our own team. Throughout Q1 2014, we witnessed progress. Our sales managers at representatives began to focus on their new target lists.

There were numerous issues to be managed, following late 2013 halving of our sales force. We've managed beyond most of those issues. And I'm proud that we saw month-to-month progression in Q1 with, for example, NRxs and TRxs in March growing 9% and 11% over February, respectively.

Our Q1 2014 revenues reflect an approximate doubling of average revenue per sales representative, compared to late 2013 before we reduced the size of our sales team. And while aggregate Q1 revenues were relatively flat with our Q4 2014 results, this comparison masks the considerable internal progress we made in getting the sales team refocused on a narrower list of targets, the time necessary for sales representatives to adjust to new territory alignments and target lists, and the mix of revenue growth from our newly-targeted list of highest-potential prescribers. The critical group of the highest-valued physicians, those in deciles 8 to 10, have led to recent overall growth with omega-3 NRx share that has risen to 14.2% in March 2014 from 11.5% at the end of 2013.

We continue to hear positive feedback from clinicians regarding their patients' response to Vascepa. This includes comments regarding the safety and tolerability of Vascepa and consistent physician feedback regarding positive effect on patient lipid management.

Based on reports from the field, many physicians have self-prescribed Vascepa. We're also continuing to hear stories of patients being switched to Vascepa from other triglyceride-lowering therapies and witnessing notable improvement, particularly with respect to attaining desired triglyceride reduction without increasing LDL-cholesterol. Some of these physicians have expressed interest in publishing their clinical experiences, which we look forward to beginning to see in the coming months.

Refocusing our sales team and adding Kowa as a co-promotion partner are just two of our Q1 accomplishments. We're active on many other fronts. Notably, we launched a new $9 co-pay program to further reduce the out-of-pocket cash burden to Vascepa patients.

We also continue to participate in key targeted medical conferences. Earlier this month, we had a strong presence at the National Lipid Association's Scientific Sessions in Orlando, Florida, where three posters reflecting data from novel research conducted or supported by Amarin were presented to lipid experts and other attendees.

Additionally, our efforts continue to focus on leveraging strong and growing Tier 2 formulary coverage. Physicians in most regions of the country who are experienced in writing Vascepa prescriptions are expressing satisfaction with Vascepa formulary coverage. In fact, many of them have expressed that they're impressed with the level of coverage that Vascepa has secured so quickly after launch.

We continue programs to drive awareness of this positive formulary access to those physicians who have less experience at prescribing Vascepa to mitigate natural reimbursement-related hesitancy they have at prescribing any new drug -- results in administrative issues for their patients or office staff. In this outreach, we also emphasize our co-pay program as being a cost-savings benefit to patients.

As we have discussed, we see significant favorable product differentiation between our product and Lovaza. While Lovaza and Vascepa are approved for the same indication, our label speaks to Vascepa's significant triglyceride reduction without increasing LDLC.

As mentioned, we continue to hear reports that LDLC improvement and patients converted from Lovaza to Vascepa. Moreover, the FDA-approved label for Lovaza identified that patients treated with Lovaza experienced significant increases in LDLC in their registration trials.

As you may recall, Lovaza was approved for this indication based on the study of 84 patients, with such registration studies being conducted 15 or more years ago. The baseline triglyceride levels studied had a median of 816 milligrams per deciliter. And we know that in the study of lipid therapies, the higher the baseline, the higher the potential triglyceride-lowering effect.

Notably, a more recent study of Lovaza was recently documented in the FDA-approved label for another severe hypertriglyceridemia therapy. In that study of 103 patients of Lovaza, the median baseline triglyceride levels were 655 milligrams per deciliter. And as expected, the Lovaza triglyceride-lowering effect was reported to be less pronounced, what a 14% placebo-adjusted reduction while LDLC increased again from baseline, relative to placebo.

Recently, generic Lovaza was launched by one of the major generic companies. That company established a wholesaler price for generic Lovaza, which while at a discount to branded Lovaza, is at a small premium to Vascepa. The wholesale price for 120 capsules, or a one-month supply of Vascepa, is $195.04, compared to $198.50 for generic Lovaza and $229.75 for branded Lovaza. The price for the branded Lovaza reflects a recent price increase from its manufacturer.

Vascepa is not AB rated to Lovaza. It is not substitutable and provides patients with unique clinical attributes. As a reminder, Lovaza is comprised of 84% EPA and DHA.

It's important to remember, as reflected in it's current approved labeling, Vascepa not only significantly lower triglycerides in patients with very high triglycerides, but also demonstrated a positive impact on a broad spectrum of other lipid parameters, including total cholesterol, non-HDL cholesterol, VLDL cholesterol, and ApoB. Vascepa reduced triglycerides without reducing LDL cholesterol and displayed a safety and tolerability profile similar to placebo with no adverse events occurring at the typical label cutoff of greater than 3% and greater than placebo. And only one labeled adverse event, arthralgia, occurring at a rate greater than 2% and greater than placebo.

To this day, no other approved therapy for severe hypertriglyceridemia can make these claims, as only Vascepa has such a clinical profile. As always its the benefit to patients and the efficacy and safety of a product that are first and foremost when marketing a pharmaceutical product. And that's why we believe we can and will be successful in selling Vascepa.

With that, I'll now welcome Mike Farrell, Amarin's Controller, to comment on Amarin's first-quarter 2014 financial results. Mike?

Thank you, Aaron.

I will provide some commentary regarding our financial results. You will find a more detailed discussion of our results in our 10-Q and press release, issued earlier today.

In Q1 2014 we recognized $11 million in net revenues, as compared to $2.3 million in Q1 2013. We also reported significant reductions in expense levels in Q1 2014, as compared to same period in 2013.

Our average price per capsule sold in Q1 2014 was comparable to Q4 of 2013. We continue to anticipate that higher costs for our enhanced co-pay card program will be offset by continued improvements in Tier 2 coverage.

Revenues reported in Q1 2014 reflect the benefit of a change in revenue recognition methodology, such that we are now recording revenues based on shipments to customers, otherwise known as the sell-in method, as opposed to sell-through which was our basis of accounting in 2013. This change, which was expected and is consistent with the reporting for newly-launched drugs by other companies, resulted in the elimination of deferred revenue and establishes that our revenues are now recorded based upon sales to our customers and not based upon their resale of the product. Had we recorded revenues for Q1 2014 based on the prior sell-through method, revenues for the three months ended March 31, 2014, would've been approximately $10 million.

Cash collections from the sale of Vascepa in the first quarter of 2014 were $11.6 million. Gross margin during the quarter ended March 31, 2014, was 61%, as compared to 45% in Q1 2013.

The majority of the Vascepa capsules, including cost of goods sold in both periods, included API sourced from a single API supplier. Amarin's purchases of API from the supplier are at a higher cost per kilogram level than purchases of API from our other approved suppliers and has resulted in an unusually high cost of goods sold as a percentage of revenue. We expect our gross margin percentage to improve further as we increase purchase volumes and source lower-cost API.

As we work through the cost of previously-purchased inventory, most of this anticipated future improvement in gross margin will be visible beyond 2014. The timing of purchases of lower-cost API is subject to multiple variables, including qualification and approval of expanded capacity for the Slanmhor/Novasep Consortium, potential renegotiation of certain minimum purchase requirements with certain suppliers, and whether or not certain suppliers can achieve the high-quality standards we require for Vascepa.

Our SG&A expenses in Q1 2014 were $20.6 million, as compared to $39.3 million in the first quarter of 2013. The decrease was primarily driven by a decrease in sales force staffing, marketing program spend, and other general and administrative costs associated with commercialization of Vascepa. The first quarter of 2013 was the first quarter in which we sold at Vascepa and as such, included certain launch-year-related costs.

Our R&D expenses in first quarter 2014 were $11.7 million, as compared to $21.8 million in first quarter of 2013. The decrease was primarily driven by a decrease in REDUCE-IT expenses, reflecting quarterly variability as the trial is now fully operational across all countries and sites, as well as lower pre-commercial inventory supply purchases and reduced overhead costs.

Under US GAAP, we reported a net loss of $26 million in the first quarter of 2014. A basic and diluted loss per share of $0.15. This net loss included $2 million in non-cash share-based compensation expense, $0.1 million in non-cash warrant compensation income, and a $4.4 million gain on the change in fair value of derivatives.

Amarin reported cash and cash equivalent of $164.3 million at March 31, 2014, representing a net decrease of $27.2 million from our reported cash and cash equivalents of $191.5 million as of December 31, 2013. In aggregate, our net cash outflow from operations was $27.5 million in Q1 2014, as compared to $33.1 million Q4 2013 and $59.6 million in Q1 2013. The decrease in cash outflows from operations from Q4 of 2013 to Q1 2014, of $5.6 million or 17%, was achieved as a result of our focus on cash preservation and targeting spend efficiently in order to maximize Vascepa revenues and minimize cash burn.

Net cash outflows in three months ended March 31, 2014, included approximately $13.9 million in sales- and marketing-related expenses incurred in conjunction with the commercialization of Vascepa. Net cash outflows also included approximately $7.5 million of costs incurred through our clinical research organization and for clinical trial materials in support of the REDUCE-IT cardiovascular outcome study. Net cash outflows also included approximately $3.6 million for debt interest payments and $2.6 million for Vascepa API purchases.

As a result of the headcount reductions resulting from Company-wide reduction in force in the fourth quarter of 2013 and additional anticipated reductions in spend, we expect that we will experience continued reductions in quarterly net cash outflows from operations. Our cash outflows may be variable from quarter to quarter but, overall, should continue to decline. We continue to estimate that during 2014, our net cash outflows will be less than $80 million.

Based on current cash position anticipated burn rate moving forward, post the reduction in infrastructure expenses executed late last year, we anticipate being able to reach a position that is cash flow positive under the majority of scenarios.

That concludes my prepared comments. And I will now turn the call back to John Thero. John?

Thank you, Mike and Aaron.

As Aaron pointed out, we have a focused commercialization strategy for 2014, which, including the upcoming promotion support from Kowa, should result in accelerated revenue growth. We continue to review other opportunities such as ex-US markets for Vascepa. But our primary goal is on US revenue growth.

We also continue to pursue FDA approval of label expansion for Vascepa for the ANCHOR indication. That effort includes continuing to appeal the FDA rescission of our ANCHOR SPA agreement and working towards label, expansion including both in ANCHOR indication and ANCHOR data and label.

Consistent with guidance on our February call, the review division's rescission was upheld at the ODE-II level. And we expect that it will be this summer before we reach the level within FDA that we originally targeted in our initial appeal back in November. This process continues, and there can be no assurance that it will be successful.

In regards to REDUCE-IT, we have now enrolled over 6,800 patients, representing 85% of the total number of patients for which the study was designed. This study is active in 11 countries and approximately 450 clinical sites. Based upon our current estimates, we anticipate completing the study in or around 2017. The actual timing of completion is based upon event rates.

There is one interim look at the data by the independent data monitoring committee, or DMC, built into the study. This interim look by the DMC is planned to occur upon reaching 60% of the required events. We currently anticipate reaching this level in 2016.

It is important to know we remain scientifically committed to the REDUCE-IT trial. And thus far, we have not made any change to the progress or design of REDUCE-IT as a result of the FDA's unwillingness thus far to approve the ANCHOR indication. However, if we do not receive approval for the ANCHOR indication, we will be forced to reconsider whether to continue the REDUCE-IT study in its current form.

We look forward to making 2014 a successful year for Amarin by staying focused on our three key objectives -- growing revenues, expanding on the current MARINE indication for Vascepa, and efficiently managing our expenditures to ensure that our cash resources support our long-term plans by strategically pursuing growth opportunities.

With that, I would now like to open the line to some questions. Operator?

Thank you.

(Operator Instructions)

Our first question comes from the line of Thomas Wei with Jefferies. Please proceed with your question.

Hello, this is [Sean]. I'm filling in for Thomas. Thanks for taking my questions. I wanted to ask you about REDUCE-IT. And specifically, I was curious how you were thinking about potentially modifying that trial if you're unable to get positive feedback on the ANCHOR indication.

Good morning. This is John. Thanks for the question. At this point in time, we believe strongly in our arguments -- both clinically, medically, regulatory, legally -- with regard to our reasons why we should have the ANCHOR indication. Were also are very much scientifically committed to the REDUCE-IT study. In the event that we don't succeed, there are a variety of different paths that we could potentially go down.

While we are pursuing the ANCHOR indication, it would be detrimental for us to stop the progress in the direction that we're currently heading. And until we have more feedback from the FDA and greater clarity on what can be accomplished, to get into a range of possibilities in terms of what might happen to the REDUCE-IT study, I think, is a little bit premature. We still need some initial information, feedback, from our interactions with the Agency before being able to make conclusions there. And if you get into hypothetical -- or scenario analysis, I think it's still a little bit premature.

Great. And then, briefly on the Kowa collaboration. So my understanding is there's going to be an initial impact in the second half of this year. I was just curious -- by what time do you expect to see detailing out to the level you had prior to the sales force reduction? And what would you think about the trajectory of sales once this comes online? Thanks.

The Kowa team should be, before the end of this month, be fully trained -- out and promoting Vascepa. They will have the advantage in getting started that they already have relationships with customers. And in many cases, they're going to be going back into targets that Amarin used to call on when we had a larger sales force and we haven't been calling on since we contracted in size. There also will be some overlap with the customers that we're currently calling on. As we have discussed in the past, the nature of a sale for Vascepa or any a lipid-modifying therapy is -- it's treating a chronic ailment. It is very much call-dependent. We see that with our own sales reps.

As we get multiple calls and increase the frequency of calls with physicians, we see that script levels increased -- just as we saw, as Aaron was describing, we shifted our focus to high prescribers. So we've seen increases in the scripts there. We've seen declines where we haven't been focusing in on prescribers. So we anticipate that it will take Kowa multiple calls before they have a major impact, relative to prescription writing. It may be a little bit different than normal in the sense that some of these docs have been called on by Amarin in the past, albeit multiple months back, at this juncture. We're not prepared to quantify the extent of their impact. But we would anticipate that, that impact will be increasing throughout the second half of this year and accelerating beyond that, in the years going forward.

I can tell you, they are very excited. We've been going through regional training. The profile of our drug is -- we think it's terrific; they think it's terrific. And there's strong sense of enthusiasm there, which I envision carrying over to their calls in the field, albeit early at this juncture.

Okay.

Thank you. Our next question comes from the line of Gary Nachman with Goldman Sachs. Please proceed with your question.

Hello. Good morning. On the competition from generic Lovaza, you mentioned the pricing. Any changes in how formularies are handing Vascepa versus a generic available? Any [prior auths] or step-edits that might be put in place? And with the expectation when AstraZeneca launches EPANOVA later this year -- how they may impact the market and what type of effort they may have behind it?

Good morning, Gary. Relative to generic Lovaza -- it's still relatively new to the market. At this time, we've not seen any change from payer coverage of Vascepa as a result of that, nor are we expecting any. We have seen, in some cases, the generic come on at Tier 1. In other in other cases, it's not come on at Tier 1. We've seen some Lovaza move back out of Tier 2. But relative to Vascepa, where we're on Tier 2, unrestricted, it's has remained on Tier 2, unrestricted. The products are different products.

I think the managed-care folks understand that. And not only are they not AB rated, but a lot of the reason why Amarin had such rapid uptake in its Tier 2 coverage -- and we do believe that rapid uptake has been significantly faster than most drugs, certainly faster than Lovaza was at the onset -- is because the managed-care plans understand that Vascepa, unlike the other therapies for triglyceride management, doesn't increase LDL, works well with diabetic and non-diabetic populations. And I think that, that clinical differentiation is well-appreciated by the managed-care folks. So we're not anticipating issues there.

In the field, we've not been seeing switches of Vascepa to generic Lovaza, nor do we expect any. But we do monitor for it, and we haven't seen it. And albeit relatively early, that generic Lovaza has been out there. Week-to-week data can be deceptive. We've been continuing to see our scripts -- particularly amongst our highest-decile docs -- increase as well as our shipments levels increased during the period of time that generic Lovaza has been out there. So far, so good. But given our clinical profile and given our discussions with payers, we're not anticipating any major changes -- or any backward major changes -- in our Tier 2 coverage. We continue to look to, in fact, continue to expand our Tier 2 coverage. And we're optimistic that, that will happen.

Relative to AstraZeneca's launch of EPANOVA -- as you know, they were -- that's a drug that was recently approved. They've not yet established pricing or, to our knowledge, a launch date for that product. As we've talked about in the past, that's an EPA, DHA mixture like Lovaza. It increases LDLC. It also increases ApoB. It's being presented as being a 3-fatty acid opposed to a esterified. And we can get into that detail if you want to. But in essence, that was an effort to be different, which showed some encouragement. And PK studies didn't appear to translate over into the clinical trials.

Historically, 3-fatty acids have had issues with tolerability. And we think one of the important aspects of an Omega-3 is that it be safe, tolerable, and be able to be dosed at an optimal dose level without issue to the patient. It appeared as though that particular drug, compared to Lovaza, isn't distinguished, relative to efficacy profile. But it is somewhat distinguished, relative to its safety and tolerability profile, which will probably limit the dosing of that product. So we'll see what happens when it comes into the market.

Clearly, this is a large market. It remains a very under-penetrated market. And to the extent marketing efforts by a company like AstraZeneca can call attention to the space and get physicians to think about the treatment of these patients, we think that Vascepa is very well-positioned -- from an efficacy prospective, from a safety tolerability perspective, and from a coverage perspective -- to win those analyses by clinicians. We look forward to the opportunity to compete and to continue to educate physicians, relative to the best treatment of their patients.

Okay, thanks. That's helpful. And one quick follow-up. On the response from FDA on ANCHOR -- is there a committed date for this summer that you have set in stone? Or is that something that could potentially get pushed out? Thanks.

Relative to the FDA interactions on that, we've got a bunch of people involved internally and externally. We're working with experts in the medical and regulatory and legal side of things in that vein. Joe Kennedy, why don't you jump in on that one, rather than my doing all the talking here. Go ahead.

Sure. Directly to your question -- there's not a date certain. We just received a response from ODE II at the end of April. And now it's the process of going through and taking a look at that response, conferring with our experts, and submitting a round of appeal in the next line of review at FDA, which has John Jenkins, the head of the office of new drugs. And then, we'll probably end up meeting with him 30 days after we submit. And then after that, he should get back to us within another 30 days. So given where we are on this and how long it takes to go through the process and delays that have occurred thus far -- it's a part of that process -- our plan is to provide updates on at least a quarterly basis. But unless there's a significant change in status, we'll probably just update on the quarterly call.

Thank you. Our next question comes from the line of Jonathan Eckard with Citi. Please proceed with your question.

Thanks very much. Quickly, on the Kowa collaboration -- could you remind us what the level of overlap or, more importantly, the level of non-overlap between the doctors that your sales force is currently hitting versus theirs? And connected with that, based on your experience in the past with regards to the initial uptake and trends in the lower-decile prescribers -- for example, some of the ones that you are not covering now or the ones that you have never touched -- based on your early experience in the launch, what are some of the dynamics of uptake? I remember in the past, you were saying that some of that uptake in those [PAET] docs are slow because they try it in a couple patients before they move on. So trying to understand better -- maybe not quantify, but the dynamics of how Kowa is going to impact the trend of the Vascepa uptake.

Sure. I appreciate the question. Obviously, time will tell. But we have some thoughts on that. And for those thoughts, let me turn things over to Aaron Berg for comment.

Sure. Thanks for the question. Kowa overlaps with about 70% of our target physicians. They extend the reach another approximately 30,000 physicians. So overall, we cover about 90% of the Lovaza prescriptions. Regarding the dynamics of uptake and why we're confident Kowa is the right partner -- is that frequency is a big player. Our message plays very well when it's delivered on a regular basis to the right physicians. We do know there is a response to that frequency. We know physicians respond well to the Vascepa message.

What's good about Kowa -- and why this is such a fundamentally sound partnership -- is that they have -- not only do they cover the physicians we need them to cover. But they have existing relationships and have been selling lipid agents -- a statin and a fibrate -- which they'll now push back and bring Vascepa in as a priority to them. We expect their uptake to happen rather quickly. Of course, as John already characterized, it still requires them to get to those physicians with a certain level of frequency. That will take some time over the second half of the year. But we're very confident in where we're going, moving forward.

When physicians -- as we get more experience -- as physicians get more patient experience with Vascepa, we continue to hear positive feedback from their use. And given the feedback, we get on the Vascepa message and we see how to frequency plays out. As time goes on, we think we'll be very successful accelerating prescriptions here, in the second half of the year.

You made reference to the fact that docs -- because this is still a new therapy to them -- often put a few patients on it and see how their experience goes, both with reimbursement but also with patient care. And that's been a path that's led to prescribers treating patients and then treating more patients. We are taking that to the next step, which is, as docs have been treating, now in many cases, dozens -- sometimes hundreds -- of patients, we're trying to collect that data and allow it to be shared more broadly with other clinicians. So we are going to be expecting various publications and other presentations of those types of data in coming months. Which we think will be useful toward accelerating the uptake of new clinicians -- if they can see what's happening in the experience of other clinicians.

And those results -- to the extent that we've seen them so far and/or are articulated to us anecdotally by various physicians -- do tend to be very positive. And this includes patients who were naive to therapy previously, but also patients who have been switched over from other lipid-lowering therapies, whether that be Lovaza or FENOFIBRATE. And this is, certainly, relative to the LDL effect but also relative to the other lipid parameters, including triglycerides. We're going to be looking forward to the formalization of some of those results as an opportunity to help in the learning curve with clinicians who have less experience with Vascepa at this time.

Thank you.

Thank you. Our next question comes from the line with John Boris with SunTrust Robinson Humphrey. Please proceed with your question.

Thanks for taking the questions. First question has to do with your strategy. Is it, essentially, to -- with your sales force -- go after new patient starts? Or is it to go after the Lovaza fibrate-type patients? And of the new patient starts you had in the quarter, what percent came from switches versus new patient starts? And then, I have a couple of additional follow-ups.

I appreciate the questions. Our strategy is to educate clinicians, relative to the efficacy and safety profile of Vascepa. We've have had somewhat of a specialty sales model here, of late, which has -- because of limited sales force size -- has, I think, appropriately focused on the highest prescribers of Lovaza, rather than trying to call on everyone. With the Kowa team coming onboard, that allows us to further increase the frequency of calls on those highest prescribers but also expand our reach to what Aaron described earlier and what will be covered to roughly 90% of Lovaza prescribers.

We are still focusing predominantly on prescribers of Lovaza at this point in time. That's a little different than what we had done last year. So we made that switch from the broader targeting of last year, which had presumed the ANCHOR indications, to the narrower targeting which is the writers of Lovaza. And we anticipate, with Kowa, that our frequency will be higher -- it needs to be higher -- with those highest in decile prescribers.

Relative to where those clinicians are using the product, we emphasize the clinical value of Vascepa. We have tried to make sure that clinicians are, certainly, aware of the LDL effect. And recent guidelines that have come out that have put increasing emphasis on the need for cholesterol management and not being put in a situation where you have a drug -- particularly, if a drug was being used alongside a statin -- that, that might counteract some of the value of the statin. It has translated into doc often using Vascepa for new patients. But it's also translated into a lot of switches as well.

New patients are easier from the perspective of the doc making a decision. And it presents itself as that decision. Switches tend to be a little trickier from the perspective of -- often, scripts are written without the patient even coming back to the office. So where patients are not -- particularly where patients are not at LDL goal, those patients present opportunity. A particularly strong candidate for switching from whether it be a FENOFIBRATE or Lovaza to Vascepa -- but in terms of quantification of that, it varies significantly from doc to doc. And trying to sift through what's a true NRx verses a true switch is a little bit tricky on an overall basis. So we try to look at it on a doc by doc basis. And there, it's really all over the place. But we are getting NRxs both from -- what I'll call -- naive patients to therapy but also quite a few from switches as well.

Thanks for that John. Real quickly, on that appeal on ANCHOR -- help us understand. I know you laid out what, potentially, could be the timing once you get to the John Jenkins level. But let's say, hypothetically, it's rebuffed or refused at that level. What are your next steps, then, that you have to consider and the timing that it could take to go through those next steps through the FDA?

Yes. So again, Joe Kennedy, you like talking about this stuff. So I'll -- why don't you jump on that one?

Sure. Thanks for the questions. So each round is structured in the same way through the FDA dispute resolution process. We would get a response from Doctor Jenkins. And if that were a negative response, then we'd have the ability to appeal to the next level, which is Janet Woodcock, and then up to the commissioner from there.

And it's the same process. We'd prepare an appeal document. And would submit that and choose to have a meeting -- or the FDA could choose to have the meeting -- typically within 30 days after that, under the guidance. And then within 30 days after the meeting -- or 30 days after our submission if there is no meeting -- the FDA will reply to us. At that point in time, it could be possible that the FDA takes an action on the underlying sNDA. It could be that we end up moving forward towards the potential resolution for the issue the courts under our First Amendment approach, which we outlined on previous calls. So that's something that we'd have to assess. And we'd, obviously, be in a position to assess at the point in time we get a response from Doctor Jenkins.

Thank you. Ladies and gentlemen, we've come to the conclusion of our time for questions. I'd like to turn the floor back to Mr. Thero for any closing comments.

Thank you again, everybody, for your participation today. We appreciate your interest and support. And we look forward to further updates as we move forward, relative to the three priorities that were described earlier -- growing revenues, expanding indication, and doing this all in a cost-effective manner. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.