Amarin Corporation PLC (AMRN) 2017 Q3 法說會逐字稿

Welcome to Amarin Corporation conference call to discuss its third quarter 2017 financial and operating results. This conference is being recorded today, November 1, 2017.

I would now like to turn the conference over to Elisabeth Schwartz, Senior Director of Investment Relations for Amarin.

Thank you all for joining us today. Please be aware 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 prescriptions; Vascepa product and licensing revenues; trends and wholesaler inventories; costs and other commercial metrics; gross margin; expenditures and the adequacy of our financial resources; our current expectations regarding our cardiovascular outcome study, such as timing of study completion, regulatory review and the likelihood of success; our plans in preparation for expanded promotion of Vascepa and related market positioning and potential; our plans to purchase additional supply of Vascepa; our goals regarding the timing and scope of international expansion and our current expectations regarding the effect of our co-promotion agreement on our business.

These statements are based on information available to us today, November 1, 2017. 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 as circumstances change. Our forward-looking statements do not reflect the potential impact of significant transactions we may enter into, such as mergers, acquisitions, dispositions, joint ventures or any material agreements that we may enter into, amend or terminate.

For additional information concerning the factors that could cause actual results to differ materially, please see the Forward-looking Statement section in today's press release and the Risk Factors section of our quarterly report on Form 10-Q for the quarter ended September 30, 2017. 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 its approved indication.

Please note that we are also providing slides to accompany this morning's call. These slides, which can be found on our website, www.amarincorp.com, in the Investor Relations section under the heading overview summarize some of the key updates discussed on today's call. Finally, an archive of this call will be posted on the Amarin website, also in the Investor Relations section.

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

Good morning, Q3 2017 was another positive quarter for Amarin both with respect to commercial growth and preparations for anticipated REDUCE-IT success.

Product revenue in Q3 achieved a record high for Amarin. Our reported net product revenues of $47.1 million and $126.3 million for the 3, 9 months ended September 30, 2017 respectively are consistent with our public guidance of $165 million to $175 million for the full year 2017, which we provided in August as an update to our previously issued guidance of $155 million to $165 million.

Our potentially game changing cardiovascular outcome study REDUCE-IT, which began in 2011 is now less than a year from completion and reported results.

In recent months, there has been considerable activity with respect to advancing the REDUCE-IT study and preparing for expansion based upon its results.

This activity includes completion of the second and last pre-specified interim efficacy and safety analysis, hiring our first Chief Commercial Officer, advancing planning for expanded commercialization based upon assumed positive REDUCE-IT results, witnessing positive results from studies of other therapies, which add confidence to our expectations regarding REDUCE-IT, in observing increased attention to the importance of triglyceride reduction in the REDUCE-IT study from key opinion leaders at cardiology focused forums.

The second interim efficacy and safety analysis also referred to as the 80% interim look was completed in August. As expected and consistent with our prior guidance the recommendation of the independent data monitoring committee from this analysis was to complete the REDUCE-IT study as planned without modification.

While this was the expected result and the result which we guided, I'll comment a bit further here to help ensure clarity. Amarin and the FDA remain blinded to the data from this interim analysis. The data as intended was only reviewed by the independent data monitoring committee. After this most recent DMC review was completed similar to at the end of prior DMC reviews they delivered to us a paper recommendation form in which the DMC had placed a checkmark next to "continue as planned."

We are not provided any underlying data from their interim review and we do not receive an explanation for their recommendation. It is important for the integrity of this study that Amarin continue to be blinded to the trial results until study completion, and that nothing is done to introduce bias.

The operational objectives of having the interim analysis were achieved. As previously described these objectives included ensuring that the data tables roll up affectively for the primary endpoints and for the numerous secondary and tertiary endpoints and subgroups. And to identifying programming tweaks, which may be necessary to improve the reporting of these results. This operational validation and related improvements together with completion of documentation for nearly 80% of the target, 1,612 primary major adverse cardiovascular events in the study, will help us proceed with confidence into an efficient rollup and review of data as study completion.

The interim look also helped confirm that our clinical sites could efficiently collect interim vital data from over 97% of the patients in the study. This results helps focus clinical site attention on getting vital status confirmation from the remaining 3% of the patients and on preparing for more rapid data collection and cleaning prior to the end of the study.

Furthermore, the waves of patient visits flowing into each interim look allowed clinical sites to meet again with patients in the study, reiterate the importance of the study and urge the patients to remain in the study until completion. We are very appreciative of the patient's continued commitment to the REDUCE-IT study. Some of these patients are approaching 6 years on study drug.

Observations from other outcome studies suggests that this added interaction between clinical sites and patients is helpful in keeping patients active in long term studies, which was always a challenge and even more so when studying conditions which are asymptomatic to the patients.

As a reminder, it was a very high bar to get over for the REDUCE-IT study to be stopped at the 80% interim look. Stopping early required achieving success against both high quantitative and high qualitative measures. We do not know if the quantitative threshold was surpassed or not.

We cannot consult with members of the REDUCE-IT data monitoring committee regarding their confidential interim data review. However, their peers within the medical community readily tell us that, because REDUCE-IT is the first study ever of this large patient population and because the results of the study had the potential to significantly influence medical care for decades to come it would have been very surprising if the DMC elected to stop the REDUCE-IT study early particularly given that the DMC had a leeway under the qualitative assessment to continue the study to completion regardless of the quantitative result.

For emphasis, I am not saying that REDUCE-IT did or did not hit the target p-value at the interim look. We won't know this until the study ends. What I am saying is that Amarin has no read-through from the interim look regarding the efficacy results in the study and we do not view the continued as planned recommendation from the data monitoring committee as increasing or decreasing the likelihood of REDUCE-IT's success at trial completion.

As we have commented in the past, it is unusual for cardiovascular outcome studies to stop early. Studies like JUPITER, which was a study of rosuvastatin also known as CRESTOR published in 2009 is still questioned and criticized today for having stopped early even though the early stop was in the wake of multiple prior studies demonstrating that statin therapy is effective in lowering cardiovascular events.

More recent, the FOURIER study, which was the first cardiovascular outcome study of a PCSK9 inhibitor has been criticized due to its average time of patient study at less than 4 years. The criticism is that more would have been answered regarding outcome as benefit of this therapy had the study gone longer, as it would've provided greater time for separation between the active and placebo arms of the study regarding cardiovascular related deaths, heart attacks and strokes.

PCSK9s are not competitive with Vascepa, mention of them here is intended to emphasize the view that the medical community wants to see robust results from cardiovascular outcomes studies, and running REDUCE-IT to completion whereby the average time and study for patient should be between 4 and 5 years increases the likelihood that the study will provide answers needed to best inform treatment care decisions.

For those of you who appreciate the statistical details, you may recall that the statistical method for analyzing the results of the stain plus Vascepa arm compared to the statin plus placebo arm of the REDUCE-IT study, involves a survival or Kaplan-Meier method of analysis using a stratified log-rank test.

Under this method, p-values are subject to adjustment to reflect the actual number of adjudicated events. When the database for the second interim efficacy and safety analysis was locked, the number of adjudicated primary major adverse cardiovascular events was approximately 76% of the 1,612 events targeted for completion of the study.

As a reminder, we targeted a wave of visits for the second interim look based upon an estimated timing of the onset of primary MACE events with adjudication of events being conducted in parallel. Because the interim look was conducted based upon 76%, rather than 80% of the events the p-value at completion of the REDUCE-IT study, assuming exactly 1,612 primary MACE events will be p less than 0.0436 compared to the prior threshold of p less than 0.0422.

The lower number of adjudicated events compared to our estimate at the time appears to reflect that primary MACE events are occurring slightly slower in the late stage of the REDUCE-IT study than we predicted. We do not know if the slowdown is on the active or placebo arm of the study or in both arms.

The database lock for the interim look was months ago, since then we have moved beyond 80% of the target MACE events. Based upon current data, we believe that the 1,612 primary MACE event, the number targeted for completion of the study will be reached before the end of the first quarter of 2018. This should position us to have results for the study to report before the end of the third quarter of 2018.

We continue to believe that REDUCE-IT is a robustly designed study and we are excited that we will have the results from the study to share with you less than a year from now. Results of the study could be a major breakthrough in preventative care for patients at risk for cardiovascular events for which there is a large unmet need.

The second update that I mentioned regarding REDUCE-IT was our hiring of Amarin's first Chief Commercial Officer Mark Salyer. This hire should benefit our current business, as well, but was largely made with an eye towards more significant growth after REDUCE-IT.

It should be noted that this addition is to further strengthen our commercial growth which has been strong since launch despite limited resources in keeping the size of our sales force flat. Our vision is to create a brand with revenues measuring in the billions of dollars. As described in our press release on September 13th, Mark has an exceptional record of accomplishment with valuable experience at companies small and large including Altana, Teva and GlaxoSmithKline.

Mark has grown business units that were smaller than when he arrived at Amarin to over a billion dollars in annual revenues. And he wants to do the same again with sights set even higher. We are excited to have him in this position and look forward to his contributions.

For emphasis, hiring Mark is additive to our existing commercial team. We have a very dedicated commercial team who deserve tremendous credit for growing Vascepa revenues with limited resources. I look forward to that team augmented by Mark to help us reach new heights, both before and after REDUCE-IT results.

The third update I mentioned regarding REDUCE-IT was advanced planning for expanded commercialization. Our preparations including having to find additional sales territories for physician targeting to be implemented in the U.S. assuming REDUCE-IT success. We are also conducting research with respect to consumer promotion initiatives.

Our analysis of sales force size is primarily a footprint for expansion after REDUCE-IT results, such size could be influenced by the level of relative risk reduction demonstrated in REDUCE-IT. We currently assume that if REDUCE-IT is as successful as we expect we will increase Amarin's U.S. sales force from its current size of approximately 135 sales representatives to between 400 and 500 sales representatives.

Prior to REDUCE-IT results, we will make some tweaks to our sales team. In particular, we plan to hire approximately 10 to 20 sales representatives in Q4 or early 2018, and we also plan to add a small number of regional sales managers prior to REDUCE-IT results. We do not expect these additions to have a major impact on Q3 product revenues.

As we have stressed in the past, the vast majority of our planned sales force expansion will occur after REDUCE-IT results, assuming success. Because an estimated 1 in 3 adults in the United States have above normal triglyceride levels, and many of these patients have elevated triglycerides after statin therapy, assuming REDUCE-IT success Vascepa should become a well known consumer product.

We are conducting research regarding consumer marketing with an eye to launching direct to consumer promotion based upon the Vascepa's current indication following REDUCE-IT results and prior to label expansion. We are also conducting research into whether an initial piece of this promotion should begin prior to REDUCE-IT results to create further brand recognition and growth opportunities.

At this time, we have not committed to launch direct to consumer promotion. I mention it here because some investors periodically ask about it and because they want to affirm that we are preparing to make Vascepa much more visible. Assuming REDUCE-IT's success Vascepa with its unique clinical profile will be the only product with a successful outcome study for the large population being targeted.

After Mark Salyer has been here a bit longer, we will have more of an update that we can provide on the potential timing and scope of such an initiative.

The fourth and fifth updates that I mentioned regarding REDUCE-IT, we're witnessing positive results from studies of other therapies which add confidence to our expectation regarding REDUCE-IT and observing increased attention to the importance of triglyceride reduction in the REDUCE-IT study from key opinion leaders at cardiology focus forums.

As you may recall Vascepa has many biological effects; it is much more than a triglycerides lowering drug. For example, in the JELIS study EPA, the active ingredient of Vascepa, demonstrated 19% relative risk reduction in treating patients in the study group which study group did not have elevated triglyceride levels.

The clinical and biological effects of EPA reported in the peer-reviewed scientific literature are broad. There is data suggesting that EPA has a beneficial effect on many aspects of the atherosclerotic pathway, from improved endothelial cell function to plaque formation to plaque rupture. One of these steps is inflammation.

In 2 separate Phase III studies, Vascepa demonstrated significantly lower levels of some measures of inflammation such as hs-CRP and Lp-PLA2. While the exact mechanism of inflammation causing atherosclerosis is not known the role of at least 1 pathway of inflammation has recently received more attention.

The CANTOS study showed that the use of a specific inhibitor of IL-1 beta led to a reduction of a number of inflammatory biomarkers and a reduction in MACE events. While there are many differences between the CANTOS study and REDUCE-IT for the first time the data from the CANTOS study provides evidence that inhibition of an inflammatory pathway can lead to reduction in MACE.

The CANTOS study, the FOURIER study and the REVEAL study which was a study of another CETP inhibitor have all contributed to increased recent discussion among the medical community of the need to address the significant residual cardiovascular risk remaining despite statin therapy.

These and other studies appear to confirm that lower is better regarding LDL cholesterol, but that even with very low LDL cholesterol significant residual cardiovascular risk remains. These studies also demonstrated that changing HDL cholesterol levels except when also changing LDL cholesterol or other biomarkers appears to have little or no impact on reducing the incidence of cardiovascular events.

A consensus within the medical community is building that the next study frontier in lipid management is triglyceride levels. For example, at the recent CMHC meeting in Boston physicians such as Paul Ridker pointed to data suggesting that triglyceride levels should be more proactively treated. We anticipate that the REDUCE-IT study results will help create more of a consensus on this topic as we realize that many physicians want to see outcomes data.

At this point Mike Kalb, our SVP and Chief Financial Officer will speak to the details of our financial and prescription results.

Thanks John. As mentioned at the start of the call both our most recent 10-Q and today's press release can be found on our website. In them you can find a more detailed discussion of our third quarter and year-to-date financial results and the highlights I am speaking to now.

As John stated overall the third quarter was another strong quarter for the company. In Q3 2017 estimated normalized prescriptions for Vascepa grew 44% over the same period last year as reported by both Symphony Health Solutions and IMS Health. As is likely true for results at other companies this growth might have been even stronger had it not been for the devastation caused by hurricanes Harvey and Irma.

A sizable number of Vascepa prescriptions are in regions heavily affected by these hurricanes. While we may see some lingering impact of these storms on Vascepa prescriptions in Q4, our most recent data suggests that for the most part the sales teams in these impacted territories by the end of October successfully brought prescriptions back to pre-hurricane levels.

We will continue to assess growth trends to determine if there are any longer term effects. Our sympathies go out to residents of the areas affected by these storms including Puerto Rico.

I am proud to say that Amarin employees have been actively involved in contributing to the rebuilding efforts at impacted areas. We recorded net product revenue of $126.3 million and $90.6 million during the 9 months ended September 30, 2017 and 2016 respectively; an increase of $35.8 million or 40%.

This increase in revenue was driven primarily by an increase in estimated normalized total Vascepa prescriptions. There appears to have been little impact on our 2017 results from changes in channel inventory levels.

Licensing revenue during the 9 months ended September 30, 2017 and 2016 was $900,000 and $800,000 respectively. Licensing revenue is primarily from the amortization of a $15 million upfront payment received in February 2015 and a $1 million milestone payment achieved in March 2016 both associated with a Vascepa licensing agreement for the China territory, as well as a small amount of amortization of a $5 million upfront amount associated with the Vascepa licensing agreement for Canada received in September 2017.

We received half of this payment amount in Q3 2017 with the other half due in 2018. The upfront payments are being recognized over the estimated period in which we are required to provide regulatory and development support and clinical and commercial supply under the respective agreements. The amount of licensing revenue recorded may be variable from period to period based on changes in estimates of the timing and level of support required.

We are continuing to evaluate potential strategic partners for the promotion of Vascepa in other global markets. However, as previously described, we believe that the best regulatory and reimbursement strategies in markets which have an earlier generation prescription Omega-3 product approved may be to leverage the REDUCE-IT trial results for potentially broader labeling and higher reimbursement.

Our gross margin on product sales for the 9 months ended September 30, 2017 and 2016 was 75% and 73% respectively. This modest but valuable improvement was primarily driven by lower unit cost API purchases.

Selling, general and administrative expense for the 9 months ended September 30, 2017 and 2016 was $98.9 million and $80.1 million respectively an increase of $18.8 million or 23%. This increase is due, primarily, to increased promotional activities including commercial spend for anticipated expansion following successful REDUCE-IT results, increased co-promote fees associated with higher revenues and increased legal costs.

Research and development expense for the 9 months ended September 30, 2017 and 2016 was $35.2 million and $39.8 million respectively, a decrease of $4.6 million or 12%. This decrease is mainly due to timing of REDUCE-IT and related costs.

As we have stated in the past our SG&A and our R&D expense levels tend to vary from quarter-to-quarter based on the timing of various initiatives.

Amarin reported cash and cash equivalents of $79.1 million as of September 30, 2017 representing a decline of $6.4 million from the end of the prior quarter. For the 9 months ended September 30, 2017 cash outflows relating to research and development, the majority of which are REDUCE-IT related were approximately $31.7 million and cash paid for interest and royalties, in aggregate, was approximately $12.5 million.

Excluding these R&D costs which should substantially decline after the REDUCE-IT study is complete and excluding finance related cash flows relating to the debt refinancing we announced in Q1 interest and royalties our net cash flows from our commercial business was positive for both the 3 and 9 months ended September 30, 2017.

We reference net cash flow without cost of REDUCE-IT interest and royalties as a measure of the progress of our commercial business.

As of September 30, 2017, the company had $34.6 million in net accounts receivable and $28.6 million in inventory. Both of these balances have grown during 2017 reflecting increased revenues and anticipation of future increases in revenues. The reported accounts receivable are current.

As of quarter end we had accounts payable and accrued expenses of $67.4 million. These balances have grown during 2017 primarily due to the timing of rebates, co-promotion fees and supplier payments.

As of September 30, 2017 Amarin had approximately 270.9 million American Depository Shares and ordinary shares outstanding. 32.8 million common share equivalents of Series A Convertible Preferred Shares outstanding. And approximately 23.6 million equivalent shares underlying stock options at a weighted-average exercise price of $3.26 as well as 11.9 million equivalent shares underlying restricted or deferred stock units.

Outside the U.S. our partner for China, Eddingpharm is working to commence a clinical trial for Vascepa in China before the end of 2017. This study, similar to our MARINE study, will evaluate the triglyceride-lowering effect on patients with triglyceride levels which are 500 milligrams per dL or greater.

CV disease has been growing in China, and about 11.9% of adults in China have elevated triglycerides. Our partner for the Middle East [Biologics] anticipates that they will receive, late this year or early in 2018, the first of an anticipated series of country-by-country approvals allowing for promotion of Vascepa.

For Canada, as announced in September we entered into an agreement with HLS Therapeutics for commercialization of Vascepa. We seek to make Vascepa the first prescription Omega-3 fatty acid product available in Canada.

We are in the early stages of working with HLS on the regulatory strategy for Vascepa in Canada which will then inform the commercial strategy. We are very pleased to be working with HLS and its experienced management team.

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

Thank you, Mike. We are looking forward to continue to provide you with updates regarding Amarin's progress. We are scheduled to present at 3 investor conferences in coming months including Jefferies London Healthcare Conference in 2 weeks, Citi's Global Healthcare Conference in December and the J.P. Morgan Healthcare Conference in January.

We will webcast any podium presentations we make at these conferences. Hopefully, our comments today have helped you better understand the progress in Amarin as reported and the significant upside potential we seek to capture.

We now conclude our prepared remarks. We would like to open up the line for some questions. Operator?

(Operator Instructions) Our first question is from Louise Chen with Cantor Fitzgerald.

Thanks for taking my questions, I had a few here, the first question I had was if you could tell us what percentage of patients with elevated triglycerides are treated and why this percentage might be so low and what is that percentage for [statin]?

If I understand your question, you're asking about the overall treatment of patients who have elevated triglycerides. So we know from data out there depending upon the source of the data that 1 in 3 to 1 in 4 patients in the United States have elevated triglyceride levels. The guidelines break those triglyceride levels between different strata with 115 below being considered normal, 150 to 200 being considered borderline high, which particularly deserves treatment for patients who are diabetic, 200 to 500 being considered high and 500 and above being considered very high with particular [node] of pancreatitis risk. Currently, the data suggests that only about 4% of patients with elevated triglyceride are treated. And we think that that's due to a number of factors not the least of which is that there's never been an outcome study prospectively conducted in this space. The development in science has for the last couple of decades predominantly focused in on good and bad cholesterol. And fortunately the advances in studying LDL or bad cholesterol have proven to be quite fruitful starting with statins and then progressing to the point where it's now generally recognized that lower is better on the LDL side of things. But we know that LDL even when well controlled to say, below 70, still there is a significant residual risk remaining. It had been thought that addressing HDL -- so bringing bad cholesterol down, we could be able to bring in good cholesterol which is associated with clearing out of bad cholesterol, would be helpful. Multiple studies done there from niacin to fibrates, the CETP inhibitors all of which have failed. Underlining some of that failing data is suggestive data that the sub-populations within certain of those studies where the therapies not only increased HDL, but also lowered triglycerides provided benefit. And as a result of that subset data, a variety of different genetic studies, epidemiological data, the JELIS study of course, the shift has occurred or is the -- as some physicians are sort of looking at in presenting of slides of -- sort of a teeter-totter, it used to be HDL to focus and that now has shifted to triglycerides as being the focus -- Peter Libby, at the Brigham, in particular has been sort of a champion of that year, and really over the past year, so this is a growing emphasis. And we're being given accolades for being out at the forefront of it. But I think the predominant reason why more patients aren't treated with elevated triglycerides is that this just hasn't been the area of medical attention. It was elsewhere, it's shifting in this direction. Physicians, even those who believe in the need for proactive treatment of triglycerides are still longing for outcomes data. And we're very pleased that our REDUCE-IT study which will be the first prospective study of this fat population will now have results less than a year from now, and as a robust study we think that that will be both very meaningful to patient care and quite meaningful to Amarin and its investors as well.

Thank you, and my second question here is why do you think that the adoption of Vascepa, if the outcome studies are positive, will be faster than what we've seen with the PCSK9s and other CV therapies?

That's a good question. So I think when we think about our product I think it's probably more analogous to what we saw would stand there, be that it is with more of a specialty therapy like PCSK9. So we see Vascepa as being much more of a pragmatic therapy. It's got a broad effect which we have seen and demonstrated in Phase III studies and look forward to having more broadly expressed based upon the outcome study. It's safe, it's affordable, PCSK9s have lots of reimbursement issues at $14,000 per year. It's oral, so it's not an injectable product, and it's intended for the masses. So Amarin's product, we're -- we've got a fairly narrow indication today, but if you were to look at scripts and essentially say Vascepa at the same starting point as PCSK9s despite there being 2 players out there on the PCSK9 side of things, the script rates for Vascepa despite our narrow indication and much more limited marketing budget has eclipsed -- sort of dwarfed the level of prescriptions of PCSK9. So PCSK9s are valuable drugs, they're providing incremental LDL reduction beyond statin therapy. We're advancing a new paradigm in treatment. They're going further with LDL reduction; we're advancing a new paradigm in treatment trying to address that significant residual risk that exists beyond what can be achieved with LDL reduction. And we think with positive outcome results combined with that pragmatic care that we're talking about, pragmatic drug, effective, say tolerable, affordable, available, all should be helpful. Not to mention that well -- we've got coming up on 5 years of real experience with the drug. So lots of physicians and patients already have witnessed success with it and that's something to build upon.

(technical difficulty) question here just on the opportunities for Vascepa outside the U.S. and how that compares to the U.S. opportunity seeing you've been making some positive developments in those kind of relationships. So just curious how we should think about it?

Oh, heart disease is major throughout the world, and most geographies it's the #1 or #2 cause of death, it's expensive everywhere. Amarin has taken the approach of promoting Vascepa on its own with our co-promotion partner here in the -- Kowa Pharmaceuticals in the United States, but leveraged third parties elsewhere. We've started off in geographies where predominantly there's very limited competition. We see ourselves potentially being the first prescription EPA product. In China, for prescription -- the Omega-3 product in Canada, and similarly are advancing ourselves to a unique space in the Middle East. In markets where -- Lovaza, our marketed drug, outside the U.S. predominantly, as -- Omacor is out there. We are -- we continue to see significant opportunity as well, but we have looked at those spaces and considered do we go into those markets based upon our current indication and studies and go sort of country-by-country, or do we wait and look at REDUCE-IT results and try to go for a broader label than what that earlier generation therapy has. And this goes to the end of the REDUCE-IT study, I think, our current leanings are to wait for the REDUCE-IT study and pursue that broader opportunity which should not only give us potential broader labeling, but also better reimbursement than the earlier generation therapy. So heart disease is a major issue worldwide, we're prioritizing what we think the biggest opportunity is that we can manage which is the U.S. and we're working on partners elsewhere, but the partners elsewhere has a strategic element to it which I hope you pick up from my most recent comments.

Operator?

Our next question is from Joel Beatty with Citi.

This is Shawn calling in for Joel, I'd like to thank you for taking my questions, my first question is [revolving] your new sales force. Can you talk a little bit about why you decided to grow that sales force now, territories of interest, and estimated growth in the U.S. coverage?

So notably, we've been planning and talking for a while about planning towards expanding our sales force significantly after the REDUCE-IT results, so also notably is that we haven't changed the sales force size, over the last 3 plus years. So I'm very proud that the team has held costs very much in control and has grown through increased productivity of that existing team significantly. In our analysis of expansion after REDUCE-IT results, which we've got down to not only geographies but physician targets, we identified certain geographies where we found sufficient enough physician targets based upon our current marketing. And again we expect that the opportunity will be much broader after REDUCE-IT. But based on our current marketing where we didn't have to rearrange sales territories of existing reps, where we didn't have to bring in additional sales management to add additional reps and felt as though given the nature of those territories that those sales reps within a year's time should be covering their cost. Now sales reps added after REDUCE-IT we would expect to cover their costs even potentially faster. But these were territories that didn't require reorganization of what we were doing elsewhere, and while our cash flow coming out of our operating business which Mike described as being positive assuming the R&D costs, and interests and royalty has been sort of modestly positive, we thought that it was a decent return on investment by spending it to add a limited number of sales reps here in the fourth quarter or early part of the coming year. We don't expect to see significant impact from those sales reps in the fourth quarter, but as we get to later in 2018 and particularly with REDUCE-IT results this would be 10 to 20 more sales territories that will be up, running, and with good momentum when the REDUCE-IT results come out before the end of the third quarter of next year. So hope that makes sense.

Thank you so much, and as a follow-up in your previous earnings REDUCE-IT guideline suggested the trial read out could come in either Q2 or Q3, but today it's kind of been narrowed to be Q3. How should we think about it, is there still the opportunity to read out in Q2 or are the new projections by decreased cardiac events, kind of trending towards Q3, how should we look at that?

Yes, so in our comments we tried to explain that when we do estimates throughout and predicting timing of when people are going to have heart attacks and strokes or die of other adverse cardiovascular events is a bit tricky. We're actually quite pleased that in a trial that's now [up till 5] some of the patients are coming up at 6 years in this study that our number of events is tracking pretty close -- particularly close for a long term cardiovascular outcome study against our expectations. So when we did the interim analysis which requires a locking down of a database, we found that, where we thought it might be by that point in time 80%, we found it to be at, closer to 76%. Percentage wise not a big difference, but it does mean that rather than 1,612 events occurring for near the end of 2017, early 2018, it looks like guidance of sort of before the end of the first quarter which is a little bit of a slip, not a huge slip but a little bit of a slip on timing. Again -- and when I say slip, maybe not the right word here, because what we're trying to do is get the robust results. And if we get to the 1,612th event in not the very beginning of Q1, it makes getting results in the second quarter somewhat unlikely. There's a -- after we get to the 1,612th event we need to notify all the clinical sites, they need to bring in all the patients who are still living back to get their vital data, collect it, that's a period that in many clinical trials is sort of 3 months in length. And then you get the data all into the tables, and independently reviewed and scrubbed and rolled up, reviewed by an independent committee; they need to write a report on it. And then Amarin sees it and then we quickly make the results known publicly. So -- but we're thinking it's much more of a Q3 rather than a Q2 event at this point in time. Hope those comments helped.

Yes, that's very helpful, and for my last question, could you provide any additional granularity on where you expect to fall for revenue guidance with increased sales quarter-over-quarter with a possible -- an impact on the recent hurricane season?

So we've been -- the hurricane is an interesting question, again, now that it seems like natural disasters are abundant with fires in parts of California, for example. But as you probably recall Amarin doesn't have sales reps throughout the entirety of the country. We with limited resources have sales reps in concentrated areas. Some of those concentrated areas are areas that have been hit by natural disasters, Texas, Florida, California are all pronounced areas, but we have seen disruption in those areas. We saw some of our sales reps displaced for a bit. We've seen pharmacies closed, we saw scripts decline in those areas. As we got to sort of the end of October, in the Florida and Texas areas, we began to see prescriptions come back to levels in those areas that were sort of levels where they had been in say August sort of pretty prescription. So that's -- there's a trough that occurred there and you hope -- coming back to where you were 2 months earlier, doesn't mean that you're ahead. So hopefully, the majority of that impact is behind us, but we're still aware of pharmacies that are closed and people are struggling with getting their homes back in order and are they spending money on medical care versus homes et cetera. We still need to see where that impact is. I think we're seeing enough growth elsewhere in the country to continue to feel comfortable with our existing guidance for the year of $165 million to $175 million dollars. But we do anticipate seeing some continued impact of the hurricanes and fires here in the fourth quarter. We're still evaluating the overall magnitude of that impact.

Our next question is from John Boris with SunTrust.

Thanks for taking the questions, first question, John, when you look at the most recent trials that reported out, for example, you mentioned one reveal IMPROVE-IT, Mark gave commentary that the majority of the benefit, at least in those trials, occurred towards the very end of the trial. If you're benchmarking, are you benchmarking against those trials and what conclusions can you draw from benchmarking against some of these outcome studies based on the events in the slowing of the progression of the events. Just second question related to the 76% that you mentioned just can you reiterate the timing for when you think you'll hit 100% of the events based on the pace at which they're coming in, and then is it a couple quarters that you need for scrubbing of the data, is that the reason that you pushed it out to 3Q, because obviously it seems as though it's a positive, because -- the slowing that's occurring. But if you can just give some better clarity around that that'd be real helpful. That's the first question.

Thanks John. Let me take your second piece first, which is the dealing with the timing, and then I'll ask our Chief Medical Officer, Craig Granowitz, to jump in a little bit on the studies from others that [we] referenced. So with regard to timing of events in the REDUCE-IT study, we currently anticipate and this is an estimate based upon experience and modeling that's based upon our own experience of studies, we currently anticipate the 1,612th primary MACE event which is the target for completion of the study being reached somewhere before the end of the first quarter. After we reach that event, we will notify the clinical sites. They will invite the remaining living patients in the study back in, for their blood work and other updates of data. That's a process that in -- outcome studies, typically, is around a 3-month process, and then the data gets rolled up into databases, scrubs presented to an independent data committee, they write a report and then present it to Amarin, and we anticipate that the sum of all that activity which also includes the final adjudication of events et cetera gets us to having data to report somewhere before the end of the third quarter of 2018. Hope that makes sense. Craig, you want to jump in on the topic of other studies and impact?

Yes, thank you John, and thank you for the question. I think there's a sweet spot for follow-up duration in these studies; there is too long and too short. And I think you pointed on one of the studies that went too long which was IMPROVE-IT. And the follow-up here in IMPROVE-IT if you look at most experts that are involved the fact that they had increased enrollment several times, that they miscalculated the event rate significantly, I think, created some of the quality problems that the company faced actually in closing out and cleaning up the study. So I think having to make multiple changes to the protocol, reopen enrollment, and open additional sites multiple times, which for the patients on therapy is longer and longer follow-up has an overall deleterious effect on the quality of the study, and actually the relevancy of the study. I think the other extreme is it's too short. And I think the most recent example of that is the FOURIER trial, where I think everybody acknowledges, including the sponsor of the study, acknowledges that the follow-up period wasn't long enough to collect the number of events needed to demonstrate a clinically meaningful difference in event rates between the active arm and the control arm. I do think as has been mentioned previously by Amarin, we're looking at a median follow-up period of between 4 and 5 years if you look at many of the most successful large [CVOTs] particularly the statin trials, that is essentially what the median follow-up is. Similar follow-up -- median follow-up period in a number of -- that have diabetes studies, outcome studies that have recently come through, [Infrarag] and [Leader] also had median follow-up periods of around that time. So we feel comfortable that the follow-up period and talking to our steering committee of the physician experts who are overseeing the study that we have about the right sweet spot in terms of duration of follow-up.

Thanks for that, moving onto one around Vascepa sales for 4Q in particular, if I look at the lower end of your implied range in the upper end you're looking at 1% growth up to high 20s in terms of growth. If you actually look at TRx trends, there are high 20s, low 30s, you factor in price on assumption of what you realize of that -- price increases you've taken which are in around the 9% range, it certainly seems as though your guidance seems to be conservative in the fourth quarter. We are qualifying that correctly and then is that because of some assumptions around wholesaler buyouts in the fourth quarter or the impact of the hurricanes from Texas in the upcoming quarter, and then related to that hurricane effect one would think that since you know the ZIP codes and get sales data and volume data on those ZIP codes, can you quantify what the impact -- since you indicated it was deleterious on your sales, what the impact was in the quarter?

So you asked a lot there. So relative to our overall guidance for the fourth quarter, yes, we're also obviously pleased with our third quarter results, the results of the third quarter were particularly strong in July and August, not as impressive in September, which we think is -- was impacted by hurricanes. We are still assessing what that impact -- what was stripped out, comes in on a, particularly in that granular level of ZIP codes and things comes into us on a delayed basis. So it's something we're still evaluating, and the continued impact of that is something that we're still evaluating as well. Yes, we did see in the fourth quarter of last year some channel impact in the fourth quarter, impact to the up side. We've seen enough quarters in the past where it's going up or going down, can't wholly be predicted; we're not counting out one way or the other, but on a comparative basis there was some uptick for channel in the fourth quarter of the last year. We're pleased that this year channel inventory levels of wholesalers has been pretty consistent on a day sales on hand basis. And we feel as though our guidance of 165 to 175 is the right range based upon what we know today. And we are continuing to evaluate and always will do our best to maximize the revenue opportunity.

Thanks for that, last question, just as to, I think, you initiated a lawsuit about fish oil being imported, can you just give us some color on why you did that?

So I'll -- General Counsel Joe Kennedy is here. I'll let him comment on that with one proviso that just as a reminder that that particular complaint is against a subset of dietary supplements that are modified synthetically to -- which we believe makes them drugs is not a matter that pertains to the majority of dietary supplement fish oils, but Joe if you want to provide some context?

Sure. So as John laid out, the overwhelming majority of Omega-3 supplements out there are fish oil supplements, and those are legal supplements. But as we look at the field, over the years we've seen a lot of products that's -- synthetically alter their products to concentrate the EPA in the fish oil and the DHA in the fish oil to get a higher level of efficacy. And as we look back at the regulatory scheme and FDA's interpretation of that, we believe that those products should be classified as drugs under the regulatory scheme. So we see those products as essentially competing in a way that's unfair. And so we looked at the available options to us, and the ITC provided a -- an option to exclude from import into the U.S. products that are imported based upon unfair trade competition. We filed our complaint and we recently found out that the ITC decided not to institute the complaint. And we're assessing which way to proceed. It is a procedural setback, but I think the substance, the underlying substance of matter we remain confident on. And that is that if you look at the FDA's interpretation of the statute itself the FDA's interpretations over a period of 15 years points to the conclusion that synthetically altered natural products becomes drugs under the regulatory scheme. And while the FDA weighed in, said that they might change that view in the future, it's clear based upon their multiple interpretations that today a fair interpretation of the relevant law and regulations is those products should not be out in the market without going through FDA drug approval. So -- but as John said they're an overwhelming minority segment in the market, and as we look forward to the opportunity and reduce it in the competitive sphere, we think it's just simply not appropriate for any party to be competing with us on the basis of violations of applicable law. And so when we see that we're going to go after them and we'll continue to aggressively defend the franchise in any way we can, obviously, through patents and in this case through availing ourselves of appropriate regulations and anti-competitive statutes. And there are several of them, and we'll continue to look around the regulatory schemes to do everything we can to protect the franchise going forward.

I think we're probably at a point where we've gone beyond what we had set out as being the schedule for this call. So I'm going to cut the questions off at this point. Thank you everybody for your interest. We look forward to updating you on our further progress and to talking with you soon. Have a wonderful day. Bye.

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