Amarin Corporation PLC (AMRN) 2015 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 2015. This conference is being recorded today, May 8, 2015. I will now turn the conference over to Mike Farrell, Vice President of Finance for Amarin. Please go ahead, sir.

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 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, managed care coverage; and the adequacy of our financial resources; our current expectations regarding product development internationally; government agency decisions and pending litigation; our current expectations regarding our cardiovascular outcome study, such as anticipated enrollment, the related regulatory process and potential outcomes; our plans to protect the exclusivity and commercial potential of our product; and our current expectations regarding our co-promotion agreement and our business generally.

These statements are based on information available to us today, May 8, 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 statement section in today's press release and the risk factor section of our quarterly report on Form 10-Q for the year ended March 31, 2015. These documents have been filed with the SEC and 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. We have made important progress thus far in 2015. On today's call we will discuss Amarin's recent commercial, operational and financial performance; provide an update on company initiatives; and then take questions from analysts and investors.

Our priorities for 2015 remain unchanged: to support and improve patient care with Vascepa; to increase revenues; continue to execute on our cardiovascular outcome study, REDUCE-IT; and to manage our business in an opportunistic and cost-effective manner.

In the opportunistic category, one of the highlights of our Q1 2015 performance is our agreement with Eddingpharm for the commercialize of Vascepa in China. Our operating results in Q1 reflect both the receipt of the $15 million up-front payment, which is part of that agreement, and the recognition of a portion of that payment, approximately $400,000, in Q1 as licensing revenue.

More important than this up-front payment is the large market opportunity for Vascepa in China and the commitment Eddingpharm is making to commercialize of Vascepa. Eddingpharm is experienced both in securing regulatory approvals for products in China and successfully marketing products in China. As previously announced, the terms of our agreement with Eddingpharm include double-digit royalties to Amarin on Vascepa sales; cost-plus product purchases; and a range of potential additional regulatory and sales-based milestones totaling $154 million in aggregate.

China was our top priority for commercialization of Vascepa outside the United States. We are increasingly, but selectively, assessing other partnership opportunities to commercialize Vascepa in other markets outside the United States. It required more than six months to reach mutually acceptable terms with Eddingpharm. We cannot predict the timing or terms of other potential ex-US commercialization agreements for Vascepa.

In addition to the Eddingpharm agreement, our recent highlights include continued prescription growth for Vascepa, which Aaron Berg and I will discuss further; REDUCE-IT continuing to progress on schedule with enrollment anticipated to be completed this year. In our last investor conference call we described reasons why we believe REDUCE-IT will be successful and the huge size of the opportunity. I won't repeat those comments here, though they remain applicable.

With respect to REDUCE-IT, the independent committee which reviews safety from the study continues to support our progressing with the study. Amarin remains blinded to all data. While we are assuming that the REDUCE-IT study will run through completion in 2017, we are developing plans for how to effectively proceed if the interim results, projected to be reviewed by the independent data monitoring committee in 2016, leads to stopping the study early based upon overwhelming efficacy, which is possible, even if not the most likely scenario.

Another recent highlight has been research results that go further to favorably differentiate EPA, the active ingredient in Vascepa. These research results include presentations by Harvard-affiliated Elucida research, showing evidence of the potential atheroprotective benefits of Vascepa and showing differentiation compared to other triglyceride-lowering therapies regarding EPA's potential anti-inflammatory effect, antioxidant effect, and ability to protect cell membranes and disrupt a salvaged crystalline domain.

In addition, in Q1 we completed a private placement of equity resulting in net proceeds of over $52 million and increasing Amarin's cash balance at the end of March 2015 to over $150 million.

Commercial results in Q1 were choppy week to week, but picked up in March. As Aaron will describe further, going in Q1 we didn't predict the extent of the limiting impact of severe winter weather on our prescription growth, or the extent to which prescription fulfillment would in some cases be delayed due to beginning of the year insurance matters for patients.

Starting with the big picture regarding our Q1 commercial results, in Q1 normalized prescriptions of Vascepa of 154,000 and 137,000 were reported based on data from Symphony Health Solutions and IMS Health, respectively. These levels represent increases of approximately 66% and 76%, respectively, over the corresponding quarter of 2014 and represent growth of approximately 5% based upon both data sets over the fourth quarter of 2014. January and February prescriptions were sluggish, while March prescription levels achieved a new record monthly high for Vascepa prescriptions. With payers we have continued to increase covered lives and improve our formulary position.

Vascepa product revenues during the first quarter of 2015 of $15.6 million reflected growth of 42% over Q1 2014, which percentage is higher if you consider the accounting method change described in Q1 2014. While up year over year, Q1 product revenues reflect a decrease of 5% as compared to Q4 2014. Remember, last year we experienced a slow Q1 and then revenues grew significantly beyond Q1.

Sluggishness in Q1 was not unique to Vascepa. Overall shipments of statin and non-statin lipid-lowering therapy were down in Q1 2015. Vascepa results compare favorably to these broader market dynamics. Aaron will quantify such dynamics a bit later for a perspective.

Aside from the seven severe winter storms which affected our growth in Q1, we witnessed prescription fulfillment rates via certain payers decline, which we attribute to two seasonal factors; first, beginning of the year new deductible levels for patients and, second, annual beginning of the year reviews by payers of prior authorizations. Both of these factors held back prescriptions being filled. We believe that most of these seasonal issues are behind us as we move beyond Q1, although we are still assessing the extent to which government exchanges are affecting some prescriptions for patients they cover.

On a consecutive quarter basis, while prescription levels increased, the decline in revenues is attributable to the timing of shipments to wholesalers with days of supply on hand declining on average by four days in March, as compared to December, as well as an approximate $0.04 lower net sales price per capsule in Q1 as a result of higher overall rebates associated with our expanded commercial coverage and continued improvements in formulary position.

During Q1 we completed a training session for physicians to speak to their peers about Vascepa. This training session, comprised of approximately 100 physicians, was well received, with physicians leaving the session enthusiastically. In January and February, before that meeting, we completed an aggregate of 24 programs. Since that meeting in February we have now completed over 100 additional programs with many more planned.

We believe that Vascepa is a best-in-class therapy based upon its demonstrated efficacy, safety and tolerability profile. We regularly receive positive feedback from clinicians which support this view. In addition, thus far in 2015 we have supported four posters or publications regarding Vascepa, its clinical performance and/or its mechanistic differentiation, with a number of other posters and publications in process. 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 the investor relations section of our website.

As expected and previously disclosed in late April, the FDA issued a complete response letter on our sNDA for the ANCHOR indication. In communications with the FDA, the acknowledged that Vascepa lowered triglycerides compared to placebo in the ANCHOR study. Consistent with prior regulatory dialogue in which they strongly urge us to complete the REDUCE-IT cardiovascular outcome study, in the CRL FDA pointed to REDUCE-IT as potentially generating data that could be submitted to satisfy FDA's uncertainty on the connection between triglycerides and cardiovascular risk in ANCHOR patients. The REDUCE-IT study is expected to address FDA's concern regarding lack of outcomes data from a prospectively conducted study that enrolls only patients with elevated triglyceride levels. No such study has been completed to date. It is also the case that no cardiovascular outcomes study has tested a high 4-gram dose of pure EPA.

Despite FDA's uncertainty, many doctors continue to prescribe triglyceride-lower drugs to treat patients at risk for cardiovascular disease after statin therapy. Statins do a great job of reducing cardiovascular risk, but they only do so about 30%. Significant risks remain after statin therapy for millions of patients. Until there is definitive scientific proof in the form of a completed double-blinded, randomized, placebo-controlled outcomes study demonstrating that lowering triglycerides further reduces the risk of cardiovascular disease, these doctors rely on available scientific data and clinical guidelines that recommend using drugs to lower residually-high triglyceride levels after statin therapy.

Particularly given FDA's acknowledged uncertainty in the science on the correlation between triglycerides and cardiovascular risk, these doctors need ready access to more, not less, information about the current state of the science and available drugs to make fully-informed clinical decisions about what is best for their patients. Yet, FDA's effective all-out ban on any promotion or discussion initiated by Amarin on off-label use of Vascepa as a practical matter prevents most docs from receiving such essential information. We think this approach is not in the best interest of patient care in this case.

We are seeking a remedy from the judicial system on this matter in the interest of Amarin, physicians and the patients for whom they care. Joe Kennedy, our General Counsel, will go into further detail on the suit during this call. While we hope that the courts will address this matter within a year, we cannot predict the timing or results of this litigation.

I now ask Aaron Berg, our Senior Vice President of Marketing and Sales, to comment further on our commercial progress.

Thank you, John.

As John mentioned, we're pleased that Vascepa revenues grew significantly in Q1 compared to the same period of the prior year, but we clearly seeking greater growth. Vascepa revenues and prescription growth in the first quarter of 2015 was impacted by the effects of severe winter weather throughout much of the US, as well as by beginning of the calendar year healthcare plan issues such as new year patient deductible amounts.

The exact impact of weather events is difficult to quantify given other market variables involved. However, it appears to have had a particularly significant impact on retail pharmacy prescriptions for drugs used to treat chronic conditions. Symphony Health identified seven winter storms during early 2015 that negatively impacted retail total prescription volumes for the entire industry at the national level. Prescription activity was affected by one or more storms in 31 states and the District of Columbia. Based on Symphony Health total prescription data, prescriptions for other drugs were adversely affected as well, including statins, antihypertensive agents and oral diabetes agents. The good news, which I'll get to, is that Vascepa prescriptions achieved record highs in March.

For January, Symphony Health reported the prescriptions filled in the non-statin lipid market were down 7.2% from December. For February, Symphony Health reported that prescriptions in the non-statin lipid market were down 8.5% from the already low January levels. Vascepa prescriptions were also down in January and February, but not to the same extent. In March, based on Symphony Health data, Vascepa new prescriptions grew 14.1% over the December high, while Vascepa normalized total prescriptions rebounded in March to achieve 5% growth from Q1 overall versus Q4 of 2014 and 66% growth over Q1 2014.

Vascepa prescription growth continues to be primarily generated from higher-decile physicians targeted by both Amarin and Kowa sales representatives. We believe that Vascepa can grow considerably further based on the currently-approved indication, supported by the strong efficacy, safety and tolerability profile of Vascepa, the current size of our market opportunity and the relatively limited penetration of Vascepa compared to earlier market entrants.

As we've noted, the FDA has decided not to approve our proposed expanded indication for Vascepa based on the results of the ANCHOR study. FDA acknowledged that Vascepa yielded a treatment difference against placebo in the patient population studied in the ANCHOR study and urged us to complete the REDUCE-IT cardiovascular outcome study, pointing to final REDUCE-IT data as a means to settle FDA's uncertainty on the connection between triglyceride reduction and cardiovascular outcomes in the ANCHOR population; specifically, those patients with persistently high triglycerides after statin therapy.

Unfortunately for patients, in the interim, under FDA regulations, because FDA decided not to approve any form of our ANCHOR sNDA, Amarin is prohibited by the FDA from freely communicating to healthcare professionals known truthful and non-misleading information about Vascepa such as the ANCHOR clinical data relevant to how doctors can meet clinical guideline recommendations and potentially achieve additional cardiovascular risk reduction.

While certain physicians are aware of the results from medical inquiries and other restricted means of communication, most physicians are unaware of the ANCHOR results. This is especially problematic since fenofibrates and prescription niacin, which are widely used to treat patients with high triglycerides, have failed in cardiovascular outcome studies that focused on patients, including some with persistently high triglycerides. These products, along with DHA-containing omega-3 products, have certain unwanted effects not associated with Vascepa as has been evident in their FDA-approved labeling.

Available scientific evidence reflects that EPA may have benefits within cardiovascular disease beyond triglyceride lowering not evident with other drugs. FDA's regulations prevent the free communication of important information to inform clinical practice and prevent doctors from getting information about a viable treatment alternative possibly better suited for specific patients. We believe that knowledge of this information by healthcare professionals could improve patient care.

This is also particularly true given that, at the direction of certain doctors or pharmacists, patients turn to dietary supplements to treat their high triglycerides. These products are not required to demonstrate efficacy or safety and most commonly have low levels of omega-3, have unknown manufacturing quality, and contain DHA, which has been associated with increases in LDL cholesterol in patients with high and very high triglyceride levels. This is such an important public health issue that on March 26th the American Pharmacists Association held a Clarity for Patient Care Roundtable to discuss the health implications of this problem and how to best further consumer, prescriber and pharmacist education on this issue. After that session they made efforts to warn their constituents and other healthcare professionals to not use dietary supplements to treat serious medical conditions such as elevated triglycerides.

In late April FDA revised labeling for certain triglyceride-lowering drugs, including fenofibrate products such as Trilipix, and the prescription niacin product Niaspan, to remove from their labels the use of these drugs on top of statin therapy. As a result, these therapies are no longer approved for treatment of mixed dyslipidemia to augment statin therapy. This action follows failed outcome studies for these therapies as published in prior years. Both of these drugs had been promoted and used for years, and continue to be used, to treat high triglycerides in combination with statins. Fenofibrate and niacin drugs are now generic and it's unclear the extent to which healthcare professionals will become aware of these label changes. These label changes by the FDA are consistent with Amarin's messages regarding Vascepa, that drug therapy used on top of statins should be well tolerated, safe, and not work against the benefits of statin therapy.

Key elements of our anticipated Vascepa growth for the balance of 2015 are:

Moving beyond the seasonal Q1 factors described earlier, which impeded more robust prescription growth to start the year.

The dedication, knowledge and ability of our sales team, which continue to educate physicians on the efficacy, safety and tolerability profile of Vascepa. We recently concluded our annual national sales meeting, marking our move into our third year of promotion. The enthusiasm, seriousness and confidence of this team is inspiring. Enhanced speaker bureau programs, which as John stated is being increasingly utilized with key physicians.

Improved manage care coverage, including recent wins with key plans such as Humana where, beginning in May, Vascepa is at parity with generic Lovaza.

An increased experience of our co-promotion partner Kowa Pharmaceuticals and their sales team of promoting Vascepa as they approach the anniversary of launching their co-promotion efforts and increasingly applying lessons they've learned. We're pleased that Kowa has increased its participation in the speakers bureau program for Vascepa, including helping to increase physician attendance at Amarin-sponsored programs. And Kowa is sponsoring their own speakers bureau programs as well.

Overall, our commercial team looks optimistically at 2015. I expect we'll be even more optimistic as the year progresses. Vascepa is simply too good a product for us not to experience greater growth.

I'll now turn the call over to Joe Kennedy, our General Counsel, who will provide an overview of recently-filed litigation.

Thank you, Aaron.

As John and Aaron noted, FDA's decision to not approve any form or our ANCHOR sNDA, which included a decision to not approve the addition of ANCHOR efficacy data in current Vascepa labeling, has created a real problem for the care of patients with persistently high triglycerides after statin therapy. Using drugs like Vascepa to treat these patients is commonplace in medical practice. Doctors choose to lower patient lipid levels based on their own expert medical judgment and with guidance from multiple national and international treatment guidelines and physician statements. A decision to treat is followed by the need to decide among available treatment options. That decision is based on clinical data and scientific evidence known to the doctor. For the years before Vascepa was available, doctors treated these patients with fenofibrate and niacin products and then Lovaza and of course continue to do so.

As Aaron explained, in late April, contemporaneous with the issuance of our ANCHOR CRL, FDA withdrew indications and data from labeling of fenofibrate and niacin products related to the treatment of patients studied in the failed outcomes trials, [ACCORD] Lipid from 2010 and AIM-HIGH from 2011.

As additional information for investors, we've included in the Frequently Asked Questions section of our Investor Relations website an overview of Amarin and FDA's views on those studies, as well as on the HPS2 THRIVE study and on the JELIS Cardiovascular Outcomes Trial of EPA in Japan, each as discussed publicly over time and, in particular, since FDA's October 2013 ANCHOR Advisory Committee Meeting.

Fenofibrate and niacin drugs are still widely used for treatment of patients with persistently high triglycerides, despite years ago having failed in cardiovascular outcomes trials that included some patients with persistently high triglycerides. Similarly, Lovaza data in the high triglycerides despite statin therapy patient population was withdrawn from labeling by FDA in May 2014. Each of these drugs has significant safety concerns and side effect profiles not associated with Vascepa. Despite the labeling revisions, doctors are familiar with the effects of these drugs as they were lawfully detailed for many years.

Our ANCHOR Phase III clinical trial results were announced publicly in April 2011, over four years ago. But under FDA regulations, we cannot freely communicate known, truthful and non-misleading information about an ANCHOR study in a promotional setting with doctors without violating FDA regulations and the very real possibility of potential criminal prosecution of Amarin's employees and significant civil liability under the False Claims Act. That is because FDA forbids promotion of drugs that are unapproved or so-called off-label uses. That's the case even if the promotion is of data that are unquestionably truthful and presented in a non-misleading manner, and even if the promoted use is within accepted medical practice and recommended by guidelines. By controlling the flow of information, FDA significantly affects what drugs doctors prescribe, and thus the practice of medicine and the treatment of patients. In this case, we believe the restricted flow of information negatively affects patient care.

Amarin's cardiovascular outcomes study of Vascepa in REDUCE-IT is ongoing. As FDA has acknowledged in regulatory dialogue in the context of the JELIS trial of EPA in Japan, the effects of EPA that may contribute to cardiovascular risk reduction may not be limited to triglyceride lowering alone and other effects demonstrated in the ANCHOR trial.

The physiological effects of omega-3s in the body that may contribute to the reduction of cardiovascular risk have been explored in scientific literature but have not been fully elucidated. Peer-reviewed published data suggest that these effects of EPA may go behind triglyceride lowering. For example, hardening of the arteries, or atherosclerosis, is a primary underlying process of cardiovascular disease involving oxidative stress, inflammation, cell dysfunction and cholesterol accumulation with the arterial wall. That is followed by the formation and progression of plaque which can eventually become unstable and rupture, leading to heart attack and stroke.

Research has shown that EPA may reduce atherosclerotic burden by improving many aspects of the lipid profile and by improving various parameters within an atherosclerotic plaque. Studies have also suggested that EPA may have beneficial effects on arterial function, heart rate, blood pressure, blood clotting and cardiac function and rhythm.

Based on data consistent with the above, for more than a decade FDA has permitted dietary supplement manufacturers that sell supplements containing EPA and/or a DHA to make the following qualified health claim directly to lay consumers: supportive but not conclusive research shows that consumption of EPA and DHA, omega-3 fatty acids, may reduce the risk of coronary heart disease. This health claim was approved by FDA in 2004, before the encouraging JELIS outcomes trial of pure EPA in Japan.

But if Amarin's pharmaceutical sales reps made this statement, the same truthful and non-misleading statement, to sophisticated doctors about Vascepa, which consists of pure EPA, those pharmaceutical sales representative and Amarin could be subject to criminal charges or massive civil liability under FDA's regulatory structure. Thus, like the ANCHOR data, free communication about the state of research on omega-3s and other potential effects of EPA to healthcare professionals are also off label and prohibited from being freely communicated to healthcare professionals in promotion of Vascepa.

This leaves most physicians making decisions regarding the treatment of their patients with elevated triglyceride levels with incomplete information regarding treatment options. We must ask ourselves, if data are accurate, fairly presented, why should doctors have restricted access to it? We believe patient care is best served when doctors are fully informed on available treatment options. We believe making it illegal to share data freely and proactively in our case does not help patients; it hurts them.

We don't know yet whether Vascepa will reduce cardiovascular risk in the REDUCE-IT study. But every day across America doctors need to make choices among available treatment options for patients with high triglycerides despite statin therapy. Ready access to accurate information of Vascepa will help doctors make these informed choices.

Last night we filed a lawsuit in Federal Court in New York with the Second Federal Circuit to permit Amarin to share truthful and non-misleading information with healthcare professionals in the United States that would be considered off label by the FDA. It's important to highlight that our lawsuit does not seek to offend FDA's regulatory structure and the judgment requested would not. It does ask the court to make what's known as a judicial declaration, to declare, only as applied to Amarin's promotion of Vascepa in this case, had FDA regulations limiting off-label promotion are unconstitutional under the First Amendment's freedom of speech principles or the Fifth Amendment restrictions against state laws.

This would allow Amarin to promote the ANCHOR data, make the referenced qualified health claim with respect to Vascepa, and share peer-reviewed publications on the potential effect of EPA on cardiovascular risk, together with appropriate disclaimers to ensure that truthful information communicated is not misleading, including that the effect of Vascepa on cardiovascular risk has not been determined and that FDA has not approved Vascepa for use described in the ANCHOR study or for cardiovascular risk reduction. If we win at the district court level, we expect to be able to promote the requested data during any period of appeal by FDA.

We believe our request for judicial declaration falls squarely within the landmark Second Circuit Precedent of the United States v. Caronia in which the Second Circuit Court of Appeals reversed on First Amendment grounds a lower court's criminal conviction of a pharmaceutical sales representative based on his truthful and non-misleading off-label promotion.

We have been urged by many physicians to pursue lawful promotion of the subject accurate information and are joined in our lawsuit by a number of individual physicians who strongly support this effort and, as our suit contends, their First Amendment rights to achieve truthful and non-misleading information from Amarin. With past history as a guide, we expect the FDA will have its own very strong positions, which we expect to play out in court over the next six to nine months. It is too early at this stage to provide any guidance on timing for an outcome. This is a somewhat unique case in this area of law as most arguments of this nature have been made in response to FDA enforcement actions. There are no inquiries or allegations of any wrong doing against Amarin from FDA or any governmental entity on this topic.

We remind you that the outcome of litigation is difficult to predict and we can make no assurance that the outcome will be positive for Amarin. This suit does not change Amarin's priorities as John described them. Our focus remains on increasing Vascepa prescription growth based on the current approved Vascepa indication and on progressing REDUCE-IT to conclusion as quickly as possible.

With that, I welcome Mike Farrell, our Vice President of Finance, to comment on Amarin's first quarter 2015 financial results. Mike?

Thank you, Joe.

My comments will address our recent financial results. You will find a more detailed discussion of our results in our 10-Q and press release issued earlier today.

In the first quarter of 2015 we recognized $15.6 million in net product revenues, representing an increase of 42% as compared to net revenues of $11 million in the first quarter of 2014. Net revenues in the first quarter of 2014 include approximately $1 million in previously deferred revenues related to a change in our revenue recognition methodology from the sell-through to the sell-in method. We also recognized $400,000 in licensing revenue from our China collaboration during the first quarter of 2015.

As previously described, the timing of shipments to the wholesalers vary from period to period. At the end of March wholesalers held approximately four days fewer in inventory than they held at the end of the December. We view this to be more of a matter of timing and not an ongoing trend. You may recall that during 2014 we commented that in some quarters wholesalers increased inventory levels and in other quarters their inventory levels declined. The largest wholesalers purchase most of their product once per week and smaller wholesalers sometimes purchased less frequently. Depending upon the timing of orders and the timing of shipments, their average inventory levels vary.

Our average net price per capsule sold in the first quarter of 2015 was slightly lower than our average price in the fourth quarter of 2014 as a result of additional rebates due to expanded commercial coverage and improvement in formulary position, partially offset by the price increase implemented in mid-November 2014. For the first quarter of 2015 this resulted in a reduction in Vascepa product revenues of approximately $400,000. Our overall rebate levels remain consistent with industry practice, but utilization of such rebates has been higher with expanded tier-2 coverage. We believe that such expanded tier-2 coverage contributes to increased prescriptions.

Cash collections from the sale of Vascepa in the quarter ended March 31, 2015 were approximately $21.5 million and all of our customers remain current in their payments.

Gross margin on product sales during the quarter ended March 31, 2015 was 64% as compared to 61% in the first quarter of 2014. While our gross margin may fluctuate from quarter to quarter, overall we expect our gross margin percentage to improve as we source lower-cost API.

We began purchasing an increasing proportion of lower-cost API during 2014 and anticipate the purchase cost will continue to fall on average based on supplier mix, purchase price concessions, and the improved strength of the US dollar as it relates to foreign exchange rates.

Our SG&A expense in the first quarter of 2015 was $24.7 million. That's compared to $20.6 million in the first quarter of 2014. The 20% increase in SG&A expenses was driven by quarterly variability and legal expenses, as well as co-promotion expense of $1.5 million related to our partnership with Kowa, which did not commence until the second quarter of 2014.

Other than anticipated growing costs for Kowa's co-promotion and the timing of legal costs, our intention is to keep 2015 SG&A expenses generally consistent with 2014 levels while growing revenues. Our level of expenses will be variable from quarter to quarter and we do not plan significant increases in our sales and marketing spend until supported by considerably higher revenues.

Our R&D expenses in the first quarter of 2015 were $12.6 million as compared to $11.7 million in the first quarter of 2014. The increase in R&D expenses compared to 2014 was primarily driven by quarterly variability in costs associated with the ongoing REDUCE-IT trial. 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 enrolment for REDUCE-IT.

Under US GAAP we reported a net loss of $32 million in the first quarter of 2015. Our basic and diluted loss per share in the first quarter of 2015 was $0.18. This net loss included $3 million in non-cash, share-based compensation expense, a $500,000 non-cash gain on the change in fair value of derivatives, and a $900,000 charge for a non-cash deemed dividend for accounting purposes.

Reported cash and cash equivalents of $161.2 million at March 31, 2015, representing a net increase of $41.7 million from reported cash and cash equivalents of $119.5 million as of December 31st, 2014.

So in the first quarter of 2015, cash inflows included a $15 million up-front payment received upon execution of our initial ex-US licensing agreement for Vascepa, as well as net proceeds of $52.2 million from the issuance of convertible preferred stock.

Net cash outflows from operations, excluding the $15 million in proceeds from the up-front licensing fee, were $27.6 million in the first quarter of 2015 as compared to $27.5 million in the first quarter of 2014. As a result of the timing of certain items, including interest payments and the timing of supply purchases, legal costs and REDUCE-IT expenses, we expect quarterly variability in 2015 cash outputs from operations.

On the investor relations front, Amarin will be presenting at the 2015 Jefferies Healthcare Conference in New York City during the first week of June.

I will now turn the call back to John Thero for closing remarks. John?

Thank you, Mike.

Our key Amarin operational theme for the balance of 2015 is focus. We need to ensure that REDUCE-IT continues on track and prepare for the potential that REDUCE-IT could read out positively in 2016. While we are primarily operating on the assumption that REDUCE-IT will continue to completion in 2017, the potential enormity of the opportunity in the interim efficacy look by the independent data monitoring committee projected to occur in 2016, demand that we be prepared for a potential early stop of the trial based upon overwhelming efficacy.

Also, of course, we plan to do all that is possible to increase revenues from Vascepa's current indication in the US, while continuing to explore ex-US expansion opportunities. In the US this entails expanded communication of the efficacy, safety and tolerability profile of Vascepa, leveraging recent managed care wins, and building on the success of physicians' regular report regarding their treatment of patients with Vascepa. A growing number of research results further differentiate Vascepa from other triglyceride-lowering therapies and emphasize the potential broad clinical benefits of ethyl-EPA.

We are thankful to our shareholders for their support. While I can't mention all of our investors by name, I offer particular thanks to Baker Brother Advisors, which firm led the financing we announced in March, and Sofinnova Venture Partners, a long-time investor in Amarin which, as described in our proxy statement, seeks to increase their investment in Amarin.

As you might expect, these investors have performed extensive due diligence on Amarin, both with respect to the current indication for Vascepa and for our future prospects. We encourage other investors to conduct similar due diligence and believe that in doing so they will become similarly excited about Amarin's current position and significant potential.

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

(Operator instructions). John Boris, SunTrust Robinson Humphrey.

Okay. So the first question,, when you look at the decline in both fenofibrate and niacin, are these patients from any market research that you've pulled together, are they going on to no therapy or are they going on to some form of therapy, whether it's Vascepa or OTC fish oils? If you have any additional information there. And also whether -- what was the increase in your formulary status and/or position within the quarter?

The second question for Joe Kennedy. The sales rep case that you cited, can you remind us what the case was, what product it involved, the outcome and how long that case took as potentially a proxy for may happen here with Vascepa?

And then third and final question for John. Obviously, with the Eddingpharm deal that you inked in China, can you maybe just assess if the level of interest is similar to or greater than what you experienced in the China deal? I know that you're looking at Western Europe, Eastern Europe, Lat-Am, Middle East in terms of inking deals. So, any clarity you can give there would be appreciated. Thanks.

Thanks for the multipart questions. Let me answer all the pieces of it, then the one I'm going to throw Joe Kennedy there, first.

So with regard to your questions on the overall space, the comments that we were jumping to make in the call were to reflect that in January and February that prescriptions broadly, particularly prescriptions for drugs addressing chronic use declined. It included diabetes drugs, it included others, but it -- particularly because it's most applicable to us (inaudible) referenced statins and other sort of non-statin, lipid-modifying drugs, which includes the fenofibrates and the niacin. Based upon the data that we have seen, and this is through Symphony Health Solutions, those prescriptions or those therapies dropped in January and then in February but, like ours, increased again in March.

Fortunately, ours didn't go down quiet as much as the overall industry. And I'm not singling out individual drugs here. We don't have it drug by drug. I'm just looking at the categories as supplied to us by Symphony Health. We didn't decline as much as they did in January and February and in March they were up. But we were up further; again, versus the entire category.

We presented that not as sort of market commentary on physician use of other therapies or switches of other therapies, but rather on overall trend as it relates to topics like the severe winter weather and the fact that a lot of medical insurance plans have pushed Rxs under the medical health benefit, which then subjects them to the annual deductible. And there's other sort of procedural issues that start a year off.

And last year we had some sluggishness, as I think I referred to it in my comments. In the first quarter clearly we had sluggishness here. It appears to be industry wide. I'm hearing from CEOs of other companies that this isn't unique.

We're encouraged by our marked results. We're continuing to be encouraged here as we get into Q2 as well, although I'm not going to comment specifically on Q2 performance, but we do feel strongly that the primary issues as it relates to Q1 are behind us and we're moving forward on that.

We have been continuing to hear from physicians that patients are switching from other therapies to Vascepa. Obviously, we need to have more of that happen, but the commentary here about levels and trends was really much more a reflection of sort of Q1 anomalies than it was on a broader topic.

With regard to coverage, we have been making progress on that. I don't have the quantified numbers in front of me, but the big wins we have, just for example, Aaron Berg mentioned we're, effective in May, on parity at Humana with Lovaza generic. We had multiple wins here that are going into effect in May and some others in July. And we will be providing further updates as we move along.

I think we have quantified in the past that our coverage has been good. It remains good. We've not lost anybody in terms of our coverage. We're adding to it. There have been some sticklers relative to getting coverage. And Humana, particularly as it relates to the Medicare Part D, has been a forum for us historically because it -- they've said that they weren't providing coverage. It casts a larger shadow. Physicians will look at that as being representative of other payers, even if they haven't gone to other payers, just because of the size of Humana, particularly in certain geographies of the country. And removing that particular obstacle directly, but also removing that shadow that gets cast from it we think will be positive.

With regard to Eddingpharm, the -- actually met with Eddingpharm initially about four years ago at a JP Morgan conference, so it wasn't as though we started off discussions with Eddingpharm recently. We did heighten our interaction with them after we shifted our focus to international expansion following our mid-2014 conclusion of our domestic co-promotion deal with a Kowa. And we focused on China first due to it's market size and the growing opportunity there.

We are looking at other international opportunities there; all unique. They -- and we are talking -- in each of the other geographies that we're looking at, we are talking with multiple companies. They are -- none of those geographies are quite as direct as what we saw with China. For example, in Europe it is somewhat cluttered by the fact that when Omacor/Lovaza was launched in Europe, it was launched by multiple companies and, as a result, had multiple indications. It has different indications in different countries and different reimbursements in different countries and there are various strategies that we're evaluating, both ourselves and with potential partners, as to what the best approach is to Europe. In other geographies there are other complications.

So, there is interest, there is activity, but whenever we're talking about partnering opportunities where we're looking for long-term commitments from companies, it is our objective to find the right company for a long-term successful partnering deal, not just take a deal because it's presented to us. So when we get to the point where we feel as though we have the right deals we will announce them, but we're not providing any guidance on the specific terms or the timing of those transactions. I can tell you there's interest but, beyond that, don't want to set any expectations for an immediate result. It's possible, but we want it to be right more than we want it to be fast.

So with that, I'll turn things over to Joe Kennedy for the fourth part of your question.

Right. So, John, as I understand your question, it is whether the US v Caronia case is the appropriate proxy to determine the timing of our case. And the Caronia case was a criminal case that played out where a sales rep was convicted for off-label promotion of a drug called Xyrem. That was a case that played out over a long period of time and it's not an appropriate proxy for the timing of our case. That sales rep was convicted at a lower court level. It was appealed to the Second Circuit Court of Appeals, which is the jurisdiction in which we're filing our action. And the central (inaudible) of that case, which is what is an appropriate parameter to judge our case in, is that the US government cannot prosecute sales representatives and pharmaceutical companies for truthful and non-misleading speech, albeit off label, about their products.

So, because that was a criminal case it took a long period of time. What we're asking for is a judicial declaration, which we anticipate to take a significantly less period of time than a criminal action and the subsequent appeal. So when we look at the timing of this, in my prepared remarks I said we would expect that to play out over the next six to nine months. The actual timing is really dependent upon the judge and his schedule. We do plan to move forward to try to expedite the proceedings.

This is not a set of proceedings where we believe science will be at issue. We believe that the information that we presented in the complaint is truthful and non-misleading. And we expect that we'll be able to just move towards a more straightforward assessment under the law for the judge to determine whether, under the precedent within the Second Circuit is appropriate for us to go forward without the potential for government action based upon FDA's interpretation of the Food and Drug Cosmetic Act.

So, we'll have a better idea of timing as that case proceeds. We expect to move to expedite in short order and we should be able to update you as time goes on, but we would encourage investors to follow that suit most closely with the PACER system, which provides online access to all court filings.

And just as an add-on to that, but for emphasis, there are folks like Joe Kennedy who have focused on this First Amendment suit and we think that this is in the best interest of patient care for reasons that have been described. But, this is not an all-consuming activity. Our focus as a company remains on the objectives that I set out earlier. We have an approved indication. It's a terrific product. We're going to grow revenues off of that current indication. We have an outcome study. It's progressing. We're going to continue that. That is our focus and don't want -- and obviously being opportunistic along the way, but we don't want to -- because of the sizzle of a First Amendment suit or the attention that that may grab in the media, for example, to suggest that that in any way dilutes the focus and the opportunity that we have in our business as it's currently presented.

We have reached the end of our question-and-answer session. I'd like to turn the call back over to management for any further or closing comments.

I appreciate it. It's 9:00 here and you guys are getting ready to get into action. Appreciate your interest in Amarin. Look forward to the follow-up. Your support is something we value and we intend to try to provide continued and important communications as we move forward. Thank you.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

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