Amarin Corporation PLC (AMRN) 2014 Q4 法說會逐字稿

Greetings, and welcome to the Amarin Corporation year-end 2014 results 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. I will now turn the conference over to your host, Mike Farrell, Vice President of Finance. Thank you. You may begin.

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 by the Private Securities and 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; supply-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 outcome study, such as enrollment and the potential implications of our regulatory process on such study; our plans to protect the exclusivity and commercial potential of our product; and our expectations regarding the effect of our co-promotion agreement on our business.

These statements are based on information available to us today, March 3, 2015. We may not actually achieve our goals, carry out our plans or intentions, or meet the expectations disclosed in our 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 if 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 statements section in today's press release and the risk factor section of our annual report on Form 10-K for the year ended December 31, 2014. These documents have been filed with the SEC on are available through the investor relations section of our website at www.AmarinCorp.com. We encourage everyone to read these documents. This call is intended for investors in Amarin and is not intended to promote the use of Vascepa outside of its approved indication. Finally, an archive of this 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, our 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. I will now turn the call over to John Thero, President and Chief Executive Officer of Amarin.

Good afternoon. Thank you for joining us today. Amarin made important and significant progress during the fourth quarter of 2014 and during 2014 as a whole. On today's call, we will discuss Amarin's recent commercial, operational and financial performance, provide a regulatory update, discuss our recently announced agreement for the development and commercialization of Vascepa in China and then take questions and from analysts and investors.

We commenced 2015 as a much stronger Company than we were a year ago. Our priorities in 2015 are to support improved patient care with Vascepa, increase revenues, continue to position our cardiovascular outcome study, REDUCE-IT, for success and to manage our business in an opportunistic and cost-effective manner. 2015 is off to a good start for Amarin, highlighted by our recently announced plan to commercialize Vascepa in China through our new partner, Eddingpharm. After completing our US co-promotion deal with Kowa, which launched in mid-2014, we increased focus on other strategic opportunities, including opportunities to introduce Vascepa to markets outside the United States. We increased our interaction and evaluation of third-party companies which are expert in operating in these geographies.

Our announced partnership with Eddingpharm is the first of what we anticipate to be multiple partnerships for Vascepa in territories outside the United States. Our Eddingpharm agreement covers the commercialization of Vascepa in mainland China, the Hong Kong and Macau special administrative regions, and Taiwan. The agreement is with Eddingpharm Limited, a privately held and aggressively growing pharmaceutical company which specializes in commercialization of products in the greater China market. Eddingpharm has significant experience in gaining regulatory approval, government and hospital reimbursement and prescription growth for new drugs.

Eddingpharm is responsible, at their expense, for Vascepa development and commercialization activities in the territory. Amarin will provide development assistance and be responsible for supplying Vascepa for clinical trials to be conducted in the territory. Terms of the agreement include upfront and milestone payments to Amarin of up to $169 million, including a non-refundable $15 million upfront payment, which we received last week, together with development, regulatory and sales-based milestone payments of up to an additional $154 million. Eddingpharm will also pay Amarin tiered double-digit percentage royalties on net sales of Vascepa in the territory, escalating to the high teens based on sales performance, and Eddingpharm will reimburse Amarin on a cost plus administrative fee basis for commercial product sold in the territory.

Our research indicates that there is a large population of patients in China that could benefit from Vascepa. While the US regulatory package will be useful in gaining regulatory approval in the territory, in China it is anticipated that Eddingpharm will need to fund clinical trials of Vascepa in China to gain regulatory approval. The design of such trials is being defined, after which we will be able to better predict the timing of likely Vascepa approval in the various regions of the territory.

Currently, we are increasingly assessing other partnership opportunities to commercialize Vascepa in important markets outside the United States. Cementing a deal for China was our top priority and there were many qualified bidders for Vascepa in China, as illustrated by the upfront milestone payment level, which is considerably higher than is usually seen for such transactions. With this China partnership signed, we will shift our business development focus to further potential opportunities.

Other highlights of our recently announced operating performance include product revenues that doubled in 2014 over 2013 and our position to increase further; REDUCE-IT continuing to progress on schedule with an efficacy interim look in 2016; advancing research to favorably differentiate EPA, the active ingredient in Vascepa, from other triglyceride-lowering therapies beyond the differentiation clearly evident by Vascepa's current labeling; continued positive feedback from physicians and patients on the efficacy, safety and tolerability of Vascepa; further expansion of our Tier 2 coverage for Vascepa in the United States; and adherence to our successful cost controls and other initiatives to increase productivity that have already led to revenues doubling in 2014 while SG&A costs were cut in half compared to 2013.

A year ago at this time, we were adjusting to the FDA's surprising shift in its policy regarding its reliance, or lack thereof, on surrogate endpoints for drugs focused on cardiovascular risk reduction. In particular, we were adjusting to the FDA's rescission of the special protocol assessment agreement for our ANCHOR study despite all the primary and secondary endpoints of that study being met. In the immediate wake of that setback, we restructured our sales team.

Vascepa prescription growth flattened in early 2014 due to a combination of our smaller sales force, the redirecting of targets of our sales force and typical beginning of the year market factors. Witnessing such flattening, many investors and analysts wrote is off as a company that couldn't be sustained, with predictions that by now we would be running out of cash. We urge former investors and analysts to take a fresh look at Amarin and the significant progress that we have accomplished. Our revenues have grown and are expected to continue to grow based upon our currently approved indication for Vascepa. Despite the slow start in 2014, revenues for the year more than doubled.

In Q4, prescriptions of Vascepa of 146,000 and 131,000 were reported based upon data from Symphony Health Solutions and IMS Health. These levels represent an increase of approximately 55% and 66% respectively over the corresponding quarters in 2013. As previously stated, we need prescription levels for Vascepa, excluding ex-US contribution, to increase to approximately double our current levels in order to achieve commercial breakeven, excluding R&D costs. We believe that this and much more is achievable, based upon the current indications for Vascepa.

The pricing of generic Lovaza is more expensive than Vascepa for many payers. And with GSK dropping its direct promotion for branded Lovaza on January 1 of this year, and with their contracted rebates expiring for Lovaza, we have begun to get call from payers that we could not progress previously, requesting that Amarin resubmit Tier 2 proposals. While payers often take months to react to such proposals, we interpret these results as harbingers of additional future progress. The pricing for Lovaza generics has been largely static since their launch. Were not aware of any other Lovaza ANDAs pending. We began 2015 with approximately 125 million lives covered on Tier 2 in the United States. As expected, none of these Tier 2 lives are stepped through Lovaza.

Our cash burn during 2014 improved such that during 2014, we burned cash from operations of $72 million, compared to $190 million in 2013, excluding proceeds from financing in 2013. We burned $14 million in cash from operations in Q4 2014, a significant improvement compared to $33 million in the same period of 2013. As a result, we exited 2014 with $120 million in cash prior to the $15 million we received last week as an upfront payment from Eddingpharm for our China collaboration.

REDUCE-IT continues to progress as planned and on schedule. During 2014, as a result of our own work reviewing the study's potential for success and review of the results of other studies, our confidence in the likelihood of success for the REDUCE-IT study increased further, as did our degree of commitment to the study. The opportunity to improve patient care represented by REDUCE-IT eclipses the opportunity presented by the successful ANCHOR study. On our website, we referenced numerous epidemiological, clinical and genetics data that support the likelihood of excess success for Vascepa in the REDUCE-IT study.

This research continues to advance and includes multiple genetic studies published in 2014 that place triglycerides and triglyceride-rich lipoproteins in the causal pathway of coronary heart disease risk, which is similar to the genetic link established for LDL cholesterol. Assuming REDUCE-IT study success, this would be huge, as tens of millions of patients have above-normal triglyceride levels. This financial opportunity, we believe, should be measured in billions of dollars. The number of people with high triglyceride levels is comparable to the number of people with high cholesterol.

Statins are proven therapy. We are not trying to replace statins. Rather, we envision Vascepa as being the ideal add-on therapy to statins. Statin therapy has demonstrated an ability in patients with high cholesterol levels to reduce cardiovascular risk by approximately one-third. The JELIS study was a large controlled coronary outcome study conducted in Japan which administered EPA, the active ingredient in Vascepa, on top of statin therapy in patients with elevated cholesterol levels.

In comparison to statin monotherapy, the addition of EPA to statin resulted in a further 19% reduction in major coronary events such as sudden cardiac death and heart attack. And a subgroup analysis of patients with elevated triglyceride levels and low HDL cholesterol, an even more substantial 53% reduction in major coronary events was observed compared to statins alone. We don't need Vascepa to lower cardiovascular events by 53% to be successful in REDUCE-IT, and we acknowledge the published differences between JELIS and REDUCE-IT. Still, the JELIS study highlights the potential therapeutic power of EPA.

Also on JELIS, note that while patients were studied for five years, there was a significant split between the active and control arm of the study that occurred at an average of less than 1.5 years of patient treatment. We are blinded to the efficacy results in REDUCE-IT and accordingly, we are planning for REDUCE-IT to continue through completion in 2017. However, when the independent data monitoring committee in 2016 looks at the REDUCE-IT study interim efficacy results as provided under the protocol, if the results are comparable to JELIS, the committee could elect to stop the study early due to overwhelming efficacy, potentially leading to an opportunity to seek approval for an expanded indication for Vascepa earlier than expected. If REDUCE-IT is as successful as we believe that it is positioned to be, the opportunity is much larger than typical Phase III results. We do not believe that the magnitude of this opportunity is currently reflected in our stock price.

Our commitment to making Vascepa a huge success is deep-rooted. We believe that Vascepa is a best-in-class therapy based upon its demonstrated efficacy, safety and tolerability profile. During 2014, we supported a total of 16 posters and publications regarding Vascepa, its clinical performance and/or its mechanistic differentiation. We planned for an increased number of such posters and publications in 2015. On the investor section of our corporate website, we post references to these publications. We also provide perspective on some of these posters and publications in the frequently asked questions section of our website.

Note that this information on our website is provided for investor purposes. It is there to help investors understand the scientific and clinical communities' enthusiasm for Vascepa. For example, in December there was a publication in Cardiology and Therapy authored by Doctor Amir Hassan. In this publication, Doctor Hassan documents his clinical experience in switching patients from other prescription therapies to Vascepa and the resulting improvements in various lipid parameters he witnessed.

To update you briefly on the ANDA litigation front, we are at stage where ANDA filers were required to submit [art] they see as relevant to the enforceability of our patents. We've considered that art closely, which largely tracks with that examined by the US PTO, and remained as confident today as we have in the past that our patents will provide Vascepa exclusivity into 2030. I now ask Aaron to comment further on our commercial progress.

Thank you, John. During Q4 2014, we witnessed prescription growth from physicians called on solely by Amarin sales reps, from physicians called on jointly by Amarin and Kowa sales reps, and from physicians called on by Kowa sales reps only. Underlining these positive trends in 2014, we witnessed prescription growth from physicians who had in early 2014 reduced their prescribing of Vascepa, following the intentionally narrower sales target focus we implemented earlier in the year. We attribute some of this positive trend to the early impact of our co-promotion partner, Kowa. Much work remains to be done to grow prescriptions further. Our sales and marketing team is energized and optimistic regarding continued growth in 2015.

Our 63% Vascepa revenue growth in Q4 2014 over the corresponding period in 2013 and our 105% revenue growth in 2014 over 2013 was achieved with the net price of our product remaining relatively flat in 2014. We increased the wholesale price for Vascepa by 7% in late November 2014. This increase, which during 2015 is likely to be largely offset on a net price basis by rebates for expanding Tier 2 coverage, continues to position the price of Vascepa at a level that is below the net price of generic Lovaza for most payers with, of course, the clinical differentiation that drove our Tier 2 coverage before generic Lovaza became available.

Normalized prescriptions for the quarter ended December 31, 2014, based on data from Symphony Health Solutions and IMS Health, totaled approximately 146,000 and 131,000, respectively, representing growth of approximately 11% and 16%, respectively, over prescriptions during the previous quarter this year and representing growth of 55% and 66%, respectively, as compared to the same periods in 2013. Such prescription growth continues to be primarily generated from higher decile physicians targeted by both Amarin and Kowa sales representatives. For clarity, the term normalized prescriptions refers to prescriptions of 120 capsules of Vascepa, representing a one-month supply.

Vascepa revenues grew to $54.2 million in 2014 from $26.4 million in 2013, an increase of $27.8 million. We're striving for an equal to greater increase in 2015. We believe that Vascepa can grow considerably further, based on the currently approved indication. Vascepa scripts reached an 11.2% share of the prescription omega-3 market in December, which is up from 10% in September despite the continued availability of multiple generic Lovaza products. Given the efficacy, safety and tolerability profile of Vascepa, clearly, there's room to grow the omega-3 market share and, of course, even greater room to grow based on Vascepa's current indication in the overall non-statin lipid lowering market.

As has been true since we shifted the focus of our sales team earlier this year, overall prescription growth in Q4 was led by prescriptions written by the group of target physicians for the highest decile prescribers of omega-3 products. In this group of physicians, those in deciles 8 to 10 as targeted by Amarin's direct sales force, total prescription volume grew to 28,000 for December from 20,000 in September, while Vascepa new prescription volume rose to 10,000 in December from 9,400 in September. Omega-3 new prescription market share rose in this highest-value physician group to 21% in December from 18% in September.

Kowa has also significantly expanded our ability to reach additional physicians with Vascepa promotional messaging, many of whom have never been presented with a Vascepa detail. Q4 was the second full quarter that the Kowa sales force of 215 sales representatives were promoting Vascepa. While the greatest growth came from physicians who have been called on the longest, it's encouraging that we continued to see a reversal in prescription trends for some of the lower-decile physicians who Amarin didn't have the bandwidth to address prior to Kowa.

As previously described, the Kowa sales team is targeting more than twice the number of physicians targeted by Amarin sales representatives. Whereas the Amarin sales team continue to focus on a smaller set of the highest volume omega-3 prescribers with a high frequency, the Kowa sales teams is calling on a much broader set of physician targets with lower frequency. As of the end of Q4, Kowa sales team had called on each of their Vascepa targets an average of approximate two times and approximately one-third of their target physicians five times to educate them about Vascepa.

As previously stated, Amarin believes detailing efforts for new therapies that treat chronic asymptomatic conditions typically require five or more calls to significantly affect physician prescribing habits and that it typically takes six months or more for a co-promotion relationship to begin showing meaningful impact. We expect that Kowa's contribution will continue to grow as they cumulatively invest more time in educating physicians about Vascepa. However, we continue to rely on the Amarin sales team for the largest portion of our sales growth, as it's the Amarin sales reps who are targeting the highest potential target physicians with the greatest frequency. We're convinced that Vascepa is well-positioned for future revenue growth.

One market factor of interest to investors has been the approval of generic forms of Lovaza, which as the first approved prescription omega-3 therapy is the market leader in this space. The concern was that a generic Lovaza would negatively impact Vascepa sales. Lovaza has now been generic since April of 2014. While we saw some small pockets of disruption, overall, we have not witnessed any pattern of patients being switched away from Vascepa. Moreover, Vascepa prescriptions continue to grow despite generic Lovaza.

Physicians, payers and pharmacists are being reminded that Vascepa and any form of Lovaza are not AB-rated and therefore, not substitutable. Vascepa doesn't include DHA and therefore doesn't increase bad cholesterol and generic Lovaza is not a typical generic in that it's more expensive, on par with Vascepa and periodically in short supply. There are three companies approved in distributing in generic Lovaza, Par, Teva, and Apotex. We're not aware of any additional ANDAs pending for generic Lovaza. We know that ANDAs take a long time to progress, so we don't anticipate any additional forms of generic Lovaza introduced in 2015.

We've spoken in the past about the important labeled clinical differentiation between Vascepa another triglyceride-lowering therapy, including that Vascepa has demonstrated that it does not increase LDL-C in its approved indication compared to placebo. In contrast, fenofibrates and omega-3 mixtures that contain DHA all report significant increases in LDL-C, or bad cholesterol, relative to placebo, by a significant 45% or more in our target indication. There are now multiple published reports of LDL-C improvement in the scientific community, as well as triglyceride level improvement in patients from whom their therapy was switched from Lovaza to Vascepa.

As previously discussed, versions of generic Lovaza continue to be priced in a manner that, while less expensive wholesale pricing than branded Lovaza, is as expensive, or more expensive, than managed care and to patients of Vascepa, particularly when adjusted for discounts available to managed care plans for Tier 2 coverage of Vascepa and co-pay card discounts available to patients. Even though the recently launched Apotex version of generic is the third generic to market, the wholesale acquisition cost is at a premium to the second market entrant and is priced at $198.50 for a bottle of 120 capsules. This is equal to the first available generic Lovaza, for which the price is not eroded since launching 10 months ago.

As we've previously stated, manufacture of highly pure omega-3 products is not easy nor inexpensive. While Lovaza does not have the 96% or higher EPA only purity of Vascepa, Lovaza is EPA plus DHA content is approximately 84%. It remains difficult to profitably manufacture and sell highly pure omega-3 products at the discounted price typical of generic versions in other drug classes. From a cost perspective, our $9 co-pay card makes Vascepa available to patients at a monthly cost that is approximately the same as, and in some cases less than, the monthly co-pay cost for generic Lovaza. As physicians, payers and pharmacists become more aware that pricing of Lovaza generics is atypical, or that Lovaza generics have periodic supply shortages, this could help Vascepa prescriptions. Simply put, we've not lost significant business to generic Lovaza.

As a reminder, if the DHA component of omega-3 products that has been correlated to increases in bad cholesterol and Vascepa is the only approved omega-3 therapy that excludes DHA, approximately half of patients treated with triglyceride-lowering therapies are also on statin therapy. We believe it's difficult for physicians to justify offsetting the value of LDL-C reduction achieved with statin therapy by simultaneously using a drug, or even a dietary supplement, that, because it contains DHA, may increase LDL-C. The importance of keeping LDL-C levels down was supported further by the results of the improvement outcome study reported at the end of 2014. An important takeaway from the improvement study is that lower is better regarding LDL-C management. Physicians looking to Vascepa as an add-on to statin therapy do not have the concern that Vascepa will offset part of the value of the statin therapy as they do with alternative therapies.

One other opportunity for Vascepa sales growth we see is related to the high rate of use of dietary supplement fish oil, or omega-3 products, by very high triglyceride patients not to supplement their diet, but to lower their triglycerides. The quality and labeling of dietary supplements have recently come under increasing scrutiny. Fish oil, or omega-3 dietary supplement products, are one of the top-selling classes of supplements, with over $1 billion sold annually here in the US. These products are often mistaken as OTCs, which is a class of drugs approved by, and regulated by, FDA. There are no OTC omega-3 or fish oil products.

Let me repeat that. There's no such thing as an OTC omega-3 product, yet they are used very frequently by patients with elevated triglycerides in an effort to lower triglycerides and prevent complications. In fact, according to a market research survey with over 800 patients, 54% of those with high or very high triglycerides used supplement fish oil to try to lower triglycerides. Often very important to triglyceride patient health, omega-3 dietary supplements contain DHA, which, as we've said, is often associated with significant increases in bad cholesterol in patients at the highest risk. Remember, labeling for Lovaza a highly regulated mixture of omega-3s, including DHA, reflects a 49% increase in LDL-C over placebo and warns doctors and patients that LDL-C should be closely monitored during use.

Quality dietary supplements can be a very important part of consumer wellness. However, unlike regulated prescription and over-the-counter drugs, dietary supplements, including omega-3 and fish oil products, are not required to meet strict FDA drug standards for safety, efficacy and manufacturing and often come at a surprisingly high cost. The misuse of these supplements to treat disease by diagnosed patients is a serious medical health issue that places many patients at risk and can actually cost more than appropriate, proven, highly regulated prescription products like Vascepa. Patients with a serious medical condition, such as very high triglycerides, should consult their doctor about appropriate FDA-approved drug therapy. This is a position that is supported by leading physicians and industry groups.

In Q4, we continued to complement our field sales efforts with non-personal tactics, including our expanding digital presence, which delivers targeted content via WebMD and Medscape. Further, we continued our support of promotional medical education through our speaker meeting programs, which continued to include support from our Kowa colleagues to drive attendance by high-value targets and to conduct additional programs across the country in areas where Amarin does not have a direct sales presence.

From a managed care perspective, we continued to gain additional Vascepa lives covered in Tier 2 in the fourth quarter of 2014. Vascepa is now up available in formulary to over 215 million lives in the US, including over 125 million lives with Tier 2 coverage. The continued conversion of lives to Tier 2 status has enabled Amarin to continue to grow Vascepa market share and accelerate new patient starts. Vascepa Medicare Part D coverage remains very strong, in spite of generic competitor entrants with 70% of all Part D lives covered.

While formulary covers for Vascepa is good, there continue to be some healthcare plans that restrict access to Vascepa. In most cases, such plans restrict access to Lovaza as well, and it's not uncommon for coverage to differ between health plans. Due to the increasing demand for Vascepa and continued high cost of generic omega-3 products, some health plans that have not previously placed Vascepa in a favorable tier are now revisiting the benefits of Vascepa. We anticipate further progress and will continue our aggressive efforts to improve the availability of patients to obtain Vascepa at a lower cost.

Overall, our sales, marketing and managed care teams look optimistically at 2015. I suspect we will be even more optimistic once some of the tough winter weather gets behind us. I'll now turn the call over to Steve Ketchum, our President of R&D, for a regulatory update. Steve?

Thank you, Aaron. Regarding the sNDA for the ANCHOR indication, we have no new updates to provide since our last investor call in November 2014. The FDA continues to assure us that they are working on the sNDA review. When we have a definitive update, we will share it publicly. We note that during today's call, we are not going to comment further on the pending sNDA.

Our primary R&D efforts continue to be in support of bringing the REDUCE-IT it study to a timely and successful conclusion. REDUCE-IT is the first prospective double-blinded cardiovascular outcome study of any drug in a population of patients who, despite stable statin therapy, have elevated triglyceride levels. Within the REDUCE-IT study, we seek to demonstrate the benefit of EPA-only therapy in augmenting, as opposed to replacing, statin therapy.

I would like to move into some of the design elements of the REDUCE-IT study. This is an events-driven trial that is designed to be completed upon documenting 1,612 patients with primary endpoint events. The study was initially designed for 6,990 patients. For added statistical rigor, before the trial started, Amarin expanded target enrollment to 8,000 patients. Thus far, over 7,300 patients have been enrolled in REDUCE-IT, representing over 90% of the total targeted enrollment. We anticipate completing study enrollment in 2015.

The REDUCE-IT study was designed with 90% power to detect a 15% relative risk reduction and the study protocol pre-specifies one interim analysis of the efficacy and safety results of the trial after 60% of events accrue. Thus far, the pooled, blinded event rate in the REDUCE-IT study is tracking to our expectations for the 60% interim look by the independent data monitoring committee, or DMC, to occur during 2016. Based on the efficacy and safety results at the interim look, the DMC could recommend to the independent steering committee and to Amarin to continue or to stop the study. Amarin is blinded to the results of REDUCE-IT and is planning to continue REDUCE-IT until attainment of 100% of the primary events, which is estimated to be in 2017 with results published in 2018.

I would now like to take a moment to highlight the safety data for Vascepa and how it relates to the ongoing REDUCE-IT study. The REDUCE-IT DMC meets at regularly scheduled intervals to review the safety data from REDUCE-IT. Based on such safety reviews, the DMC has advised the steering committee and Amarin to continue the study as planned. In addition, Amarin regularly reviews pooled, blinded safety data for REDUCE-IT and has not identified any safety concerns. Over 1,000 patients have been dosed with Vascepa in various clinical studies prior to REDUCE-IT, including MARINE and ANCHOR. In all studies performed to date, Vascepa has shown a favorable safety and tolerability profile, with safety profile similar to placebo and no treatment related serious adverse events observed in either MARINE or ANCHOR.

In addition, Vascepa has been on the market since January 2013, and periodic reviews of Vascepa post-marketing data have detected no significant safety concerns. With over 7,300 patients currently enrolled in REDUCE-IT, which is a considerable clinical study experience, and over two years of post-marketing experience, this represents a substantial level of safety data that continues to support Amarin's confidence that Vascepa therapy underscores patient safety and that the REDUCE-IT trial is designed for success.

We have previously conveyed that our scientific rationale for the REDUCE-IT study is supported by three main categories of data regarding triglycerides and cardiovascular risk. Firstly, epidemiological data that suggests elevated triglyceride levels correlate with increased cardiovascular disease risk. Secondly, genetic data that suggests triglyceride and/or triglyceride-rich lipoproteins are independently in the causal pathway for cardiovascular disease, which is similar to the findings for LDL cholesterol. And thirdly, clinical data that suggests substantial triglyceride reduction in subgroups of patients with elevated baseline triglyceride levels correlates with reduced cardiovascular risk.

The fourth category of data that would be particularly compelling is outcomes data, but no outcome study prior to REDUCE-IT prospectively enrolled patients with elevated triglyceride levels despite statin therapy. We believe that the REDUCE-IT study will fill this important clinical and scientific gap.

While we await the results of REDUCE-IT, and in addition to the extensive data that I just highlighted, our scientific rationale for the REDUCE-IT study is also supported by recent mechanistic research on the differentiated effects of EPA, the active ingredient in Vascepa, from those of other TG-lowering agents or the omega-3 fatty acid DHA. For example, increased oxidation and inflammation have been associated with the development and progression of atherosclerosis and recently presented research suggests that EPA has antioxidant, anti-inflammatory and endothelial modulating properties that are additive to those of a statin, as well as being unique in comparison to other TG-lowering agents or to DHA.

Some of this research has been conducted by Dr. Preston Mason from the Department of Medicine, Division of Cardiology at the Harvard Medical School Brigham and Women's Hospital in Boston and President of the Cardiovascular Research Institute at Elucida Research, and this research was supported by Amarin. We are very pleased that Dr. Mason will be presenting some of his in vitro findings this month at the Deuel Conference on Lipids in Monterey, California, and additional findings at the American College of Cardiology meeting in San Diego, California. At a top-line level, Dr. Mason's recent data suggests that EPA plus a statin, such as atorvastatin, may have reversed endothelial cell dysfunction that results from oxidative stress in a manner that is enhanced by their coadministration and not identified for other therapies.

Putting all of the research together, we believe that the improvements in triglycerides and other parameters of dyslipidemia observed with Vascepa therapy, without the LDL cholesterol raising effect that is observed in some patients on omega-3 therapies containing DHA, along with the unique benefits of EPA on other markers associated with the development and progression of atherosclerosis, provide robust clinical and scientific support for a cardiovascular benefit to Vascepa therapy. Taken together with a strong safety profile, we believe that Vascepa therapy can be a safe and effective choice for patients and provides us confidence in the design and success of REDUCE-IT.

With that, I welcome Mike Farrell, our Vice President of Finance, to comment on Amarin's fourth-quarter 2014 financial results. Mike?

Thank you, Steve. My comments will address our recent financial results. You will find a more detailed discussion of our results in our 10-K and press release issued earlier today. In Q4 2014, we recognized $16.5 million in net revenues, representing an increase of 63% as compared to net revenues of $10.1 million in Q4 2013 and an increase of 17% as compared to $14.1 million in net revenues in the third quarter of 2014. The timing of shipments to wholesalers, upon which revenues are recognized, and prescription levels, can vary between periods. In 2014, we recognized $54.2 million in net revenues as compared to $26.4 million in 2013, a year-to-date increase of 105%.

Our average net price per capsule sold in Q4 2014 approximated the average price in the first three quarters of 2014. Cash collections on the sale of Vascepa in the year ended December 31, 2014 were approximately $66.4 million and all of our customers remain current in their payments. Gross margin during the quarter ended December 31, 2014, was 65%, as compared to 59% in Q4 2013. Gross margin for the year ended December 31, 2014, was 62%, as compared to 55% in 2013. While our gross margin may fluctuate from quarter to quarter, overall we expect our gross margin percentage to improve further beyond 2014 as we source lower-cost API.

Our SG&A expenses in Q4 2014 were $18.4 million, as compared to $22.3 million in Q4 2013, reflecting an intentional reduction in expenditures. SG&A expenses in the year ended December 31, 2014, were $79.3 million, as compared to $123.8 million for the same period in 2013. The 36% decrease in SG&A expenses was primarily intentionally driven by previously announced decisions to decrease sales force staffing, marketing program spend and other costs associated with the commercialization of Vascepa following the ADCOM surprise in October 2013, which led to the rescission of the SPA agreement for the ANCHOR indication. In addition, 2013 was the year in which we commenced selling Vascepa and as such, included certain launch-year related costs.

Included in Q4 2014 expenses was approximately $0.7 million earned by Kowa for its co-promotion of Vascepa. Other than anticipated growing costs for Kowa's co-promotion, which is scheduled to increase based on its contribution to increasing gross margin from Vascepa sales, our intention is to continue to see growing productivity from Amarin sales and marketing team by holding SG&A expenses generally consistent in 2015 with 2014 levels while continuing to grow revenues. Our level of expenses will be variable from quarter to quarter. However, we do not plan significant increases in our spending until supported by considerably higher revenues.

Our R&D expenses in Q4 2014 were $12.4 million, as compared to $16.6 million in Q4 2013 and were $50.3 million in the year ended December 31, 2014, as compared to $72.8 million in 2013. The decrease in R&D expenses compared to 2013 was primarily driven by supply purchases in 2013 which were expensed to R&D prior to FDA approval of the API suppliers and to reduced staffing and overhead costs in 2014 following the decision discussed last year to narrow Amarin's R&D efforts pursuant to the ANCHOR SPA being rescinded.

The decrease in expenses in the year-to-date period was also driven by a decrease in REDUCE-IT expenses, reflecting both quarterly variability and some efficiency savings as the trial was now fully operational in 2014 across all countries and clinical sites. R&D costs are expected to be slightly higher during 2015 as compared to 2014 as a result of the timing of REDUCE-IT costs, and such costs are expected to decline modestly thereafter upon completion of enrollment for REDUCE-IT.

Under US GAAP, we reported a net loss of $19.7 million in the fourth order of 2014, or a basic and diluted loss per share of $0.11. This net loss included $2.7 million in non-cash share-based compensation expense and a $1.6 million non-cash gain in the change of fair value of derivatives. We reported a net loss of $56.4 million for the year ended December 31, 2014, or a basic and diluted loss per share of $0.32 and $0.36, respectively. This net loss included $9 million in non-cash share-based compensation expense, $0.5 million in non-cash warrant compensation income, a $13.5 million non-cash gain on the change in fair value of derivatives and a $38 million non-cash gain on the extinguishment of debt.

We reported cash and cash equivalents of $119.5 million at December 31, 2014, representing a net decrease of $15.9 million from reported cash and cash equivalents of $135.4 million as of September 30, 2014, and a net decrease of $72 million from reported cash and cash equivalents of $191.5 million as of December 31, 2013. The improvement in net cash outflows from operations to $13.6 million in Q4 2014, as compared to $33.1 million in Q4 2013, reflects our focus on maximizing our existing resources and cash preservation. It is anticipated that we will experience fluctuations in quarterly net cash outflows from operations. As a result of the timing of certain items, including interest payments and the timing of supply purchases, we expect quarterly variability in 2015 cash outflows from operations.

As John discussed, we will benefit in the first quarter of 2015 from the receipt of a $15 million upfront payment related to the closing of our initial ex-US partnership. While we're in the process of assessing the accounting for this payment, recognition of revenue is likely to be deferred. I will now turn the call back to John Thero for closing remarks. John?

Thank you, Mike. The more than doubling of Vascepa product revenues in 2014 illustrates the broad progress made by Amarin in our second year of Vascepa promotion. The value we believe we are creating through progressing the REDUCE-IT study will hopefully dwarf our current commercial progress. As we move forward in 2015, we are confident in our employees, initiatives and the significant market potential for Vascepa, both in the US and internationally. With that, I would like to now open the line for some questions. Operator?

(Operator Instructions)

Akiva Felt with Oppenheimer.

I was wondering if you could maybe give a little bit more color on exactly what the interim hurdle is for REDUCE-IT and whether that hurdle the DMC is looking at in your view would be similar to the FDA's hurdle for a label expansion to include cardiovascular outcomes?

Thanks.

Akiva, thanks for joining us. I appreciate the question. Steve, do you want to jump in on that one?

Yes, sure, Akiva. Thanks for your question.

To maintain the integrity of the study, we've purposely described few details regarding that 60% interim look by the independent DMC. They will be looking, as you mentioned, at efficacy and there is an overwhelming efficacy boundary that is pre-specified, but we haven't publicly disclosed exactly how we arrived at that efficacy boundary in terms of looking at prior cardiovascular diabetes outcomes trials and those types of considerations that, in conjunction with the steering committee and the DMC, were settled upon in the protocol that was the subject of the SPA agreement. So there was obviously also discussion with FDA to arrive at those -- at those provisions.

(Multiple speakers) I think you've looked at this data, but for maybe other people's benefit, while we haven't disclosed that statistical hurdle within the JELIS study, if you look at the subset population, there are patients with high triglycerides, low HDL, or the whole population of the study, there was a pretty significant divide that began to occur about less than a year and one-half in average patient life and it's studied within that trial. So that in the patient population with elevated triglycerides in that study, less than a year and one-half into it the divide between the patients being treated with EPA and those not being treated with EPA, being treated by statin alone, was up over 45%. I -- we are, again, blinded to the results of the JELIS -- of the REDUCE-IT study, but it's certainly possible that we could get surprised with a very nice delta here when that interim look does occur. But we haven't, as Steve described, we haven't described the specifics of the statistical hurdle at this juncture. (Multiple speakers) higher, yes.

Akiva, those -- the separation that John is referring is -- was true not only of the total cohort but also the primary prevention and secondary prevention cohorts, including that subgroup, which numbered about 1,000 patients that had the elevated triglycerides and the other HDL parameter.

Then maybe as a quick follow-up, because you did mention that subgroup, the high trig, low HDL. Is that sort of the patient demographics that you're referring to with REDUCE-IT and why you are increasingly optimistic about that study? Or is it just the combination of a bunch of different factors?

John, did you want to make a prefacing comment? And then I can add as you see fit.

Sure, I'll start off. There are a number of reasons why we're excited about REDUCE-IT, the potential results, including the epidemiological, genetic, mechanistic, other clinical data that was referred to previously, but one of those pieces of data certainly is the JELIS study and that is EPA on top of statin therapy, so it's the closest to what we're doing here. Now, there are differences between this JELIS study and our study. Theirs was done in Japan. Ours has being taking note for the worldwide treatment. Their population was largely a population of patients with elevated cholesterol and it showed in that overall population benefit, but when one looks at the subset population of patients with the high triglycerides above 150, we see that benefit jump from 19%. I think 19% is impressive in reducing MACE, but jumping that to 53% is really eye-catching.

We've tried to have, for REDUCE-IT, a slightly higher risk patient population than was studied in JELIS, so all of our patients have elevated triglycerides. We've commented in the past that the median baseline triglyceride levels are in the study are above 200. We are studying with four grams per day of Vascepa versus the in JELIS study. It was done with 1.8 grams per day. We noted in the ANCHOR study that the dosing of four grams per day brought EPA levels up at the blood plasma levels to the same level that was occurring in the Japanese patient population for the dosing in the active arm at the 1.8 grams of EPA there.

Now, that's notable in that in our study, we're bringing patients up on the active arm of that same level of EPA in the blood. But in the control arm, in the Japanese study, because of the diets there, levels of EPA would be higher than what we're anticipating seeing in our study. That's even further divide in our study between what was done in the JELIS study. All that data and some of those factors contribute to our confidence, as does the fact that the independent data monitoring committee has continue to look at the safety within the study and continues to give us the thumbs up to move forward and this far into the study that's encouraging to us, although of course it's not efficacy. So those are some comments.

Steve, I know you've looked at this in much more detail than I have. Do you want to jump in on anything major I may have left out? Steve?

Thank you. John Boris with SunTrust Robinson Humphrey.

Thanks for taking the questions.

Just on revenues, as you exit the year at the $54.4 million range in the incremental revenue (technical difficulty) able to achieve that same increment, the lower end of the limit would probably peg you right around $80 million, John. What are some of the variables that we should be thinking about in terms of being able to hit that number or consensus, which is obviously closer to the upper $90 millions level. What are some of the variables in terms of scripted coverage, the contribution from Kowa, that we should be thinking that are going to drive revenue going forward here?

That's a fair question. As you know, we haven't specifically given guidance relative to the revenue level, but as Aaron stated, we increased revenues at a pretty good clip this past year and aim to do at least that well in the coming year on a dollars basis. Some of the factors were looking at domestically in terms of that increase our levels, continuing to expanding levels of Tier 2 coverage, that should be, as I have commented, potentially helped by GSK no longer rebating and our ability to get into some of those plans.

We are continuing to learn from our experiences in the field and continuing to improve the messaging that were doing but also building off the successes that we've had with patients and talking with doctors and looking at the results they've had. Trying to snowball that into a positive effect, but also having doctors talk with other doctors about experiences with Vascepa we think are taking hold.

This is largely an education play. We think that the combination of what we're doing with our sales force and the Kowa sales force is taking root. Aaron mention that the Kowa is still relatively early and averaged two times called on. They are doing a broad reach strategy. We're looking forward to having that have more of an impact as well and of course we're reaching out on digital strategy and doing -- supporting various CME programs.

But it's largely blocking, tackling, execution. We've got a terrific product. It works. It was proven in clinical studies. It has been proven here in the marketplace and we think we're going to just keep building.

We are continuing with our sales force to take very much a targeted approach to that growth. That's been working so far and we're looking to continue to leverage that. We've got the generic Lovazas in the marketplace. We're not anticipating any significant change in terms of generic competition. There is possibility of others entering the field.

We believe, as we've commented previously, that we're well differentiated if that should happen. And we're continuing to look and accumulate data that we think will allow us to continue to differentiate Vascepa from those in other potential products. Those are some of the factors that were looking at.

And just on the spending side of the equation, John? It would seem as though you've given some good clarity on the R&D side where there's probably less flexibly, but just your thoughts around the SG&A side of the equation. If your revenues start to ramp faster, would you consider increasing spending or maintaining it at the current level? I think you currently indicated that SG&A would be similar to 2014 levels, but just your thoughts around that lever?

Yes, if revenues really took off, we might have to reconsider but we think that we're targeting the right set of docs today, between the high frequency tight target group that our sales force is going after combined with the broader reach approach from Kowa, we think we're going after the right docs. Within those docs we're targeting, we think that there is significant opportunity for growth, so right now we're not feeling compelled to go after a broader set of docs than what we're doing and as such, don't see immediacy towards increasing the number of feet that we have on the street.

So as we look at SG&A costs, aside from the royalty going to Kowa, which we hope to have that continue to increase, because that means revenues are increasing, the formula's paid off of gross margin, but obviously that's tied to revenues. Other than that, we see the SG&A costs being relatively flat year-to-year. The R&D costs, as Mike had commented, will continue to be variable from quarter to quarter, particularly here as we're finishing out enrollment in the REDUCE-IT study. We will probably get a little bit of an uptick in cost and then the cost will recede a bit after that enrollment is completed.

The other piece from a modeling perspective, of course, is supply. This past year we entered the year with pretty hearty inventory levels and began purchasing supply as the year went on. We are anticipating buying more supply in 2015 than we bought 2014. That's not P&L, but that is cash flow-related. So those are sort of -- in addition to revenues, those are some comments on some of the out flows.

Thank you. Thomas Wei with Jefferies.

Just a couple of quick ones. One is, if you could be a little bit more specific on the timing of the REDUCE-IT interim in 2016? I think I remember from the FDA panel, maybe it was in the fourth quarter? But if you could help clarify that? And then I just had one other follow-up.

Thomas, it is an events-driven process and then there's the adjudication of the events and locking that down a database. At this point time, we've not given any tighter guidance than that in terms of when it might be in 2016, if it's obviously behooves us to have us as early as possible in 2016 but because it's events driven, we don't entirely control it. We may provide greater guidance on that as the year progresses, but at this point in time we've not narrowed it down to a specific timeframe within 2016.

And then just to clarify what you said in the prepared comments that you had mentioned that if the results at the interim are comparable to JELIS, you could potentially stop this study early. I just wanted to make sure, were you referring to the 53% from JELIS or to the overall 19%?

It's a statistical hurdle for the interim look that looks at both primary and secondary end points and I was -- I think the results in JELIS were impressive in both the focal cohort and the subset cohort. I think the subset cohort of patients actually with high triglycerides is more applicable here, so it was that subset cohort of the 53% overall and essentially greater than north of 45% about a year and one-third into the average patient study life that I was referring to. Doesn't need to be that high but that is just illustrative of what could be possible.

And then just lastly on the lower bound, if it's anything above one, does the study keep going? Doesn't have to be actually at a hazard ratio that's negative for the futility trigger?

Steve, you want to jump in on that one?

Yes, and I apologize. I got dropped off a little bit earlier. So Thomas, we have not shared the specifics and as John was mentioning it's -- the DMC at that interim look will look at not just the primary efficacy endpoint, but also on the robustness and consistency of secondary endpoints, so it won't be based purely on a hazard ratio observation in isolation. They will be looking at the totality of the efficacy and the safety data.

Okay, great. Thanks.

Thank you. At this time, I'd like to return the floor back over to Management for closing remarks.

Thank you everybody for joining us today. I look forward to our providing you with continued updates as we progress through 2015 and we appreciate your support. Good evening.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.