Amarin Corporation PLC (AMRN) 2018 Q4 法說會逐字稿

Welcome to Amarin Corporation's conference call to discuss its financial and operating results for the fourth quarter and full year 2018. This conference call is being recorded today, February 27, 2019.

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

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 prescriptions, Vascepa product and licensing revenues, costs and other commercial metrics, gross margin, expenditures and the adequacy of our financial resources; our current expectations for scientific presentations, publications, regulatory reviews and related timing thereof; our expectations that REDUCE-IT results could lead to a new treatment paradigm in the patient population studied; our plans and preparation for extended promotion of Vascepa and related market positioning and potential, including the potential for further development and collaboration with Mochida; our plans to purchase additional supply of Vascepa, our goals regarding the timing and scope of international expansion; our current expectations regarding the effective co-promotion agreement on our business; our current plans for sales force and other commercial expansion. These statements are based on information available to us today, February 27, 2019. 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 Statements section in today's press release and the Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2018. 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 of 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, amarincorp.com, in the Investor Relations section under the subcategory, Events & Presentations, 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, everyone. Thank you for joining us today. Before discussing our 2018 results, I would like to make some comments regarding our outlook for 2019 and beyond.

While we are proud of our 2018 results, and they are the subject of today's reporting, 2018 seems like a long time ago, and we commented on our preliminary 2018 results at the start of January.

Regarding U.S. commercialization, we currently think about it in 4 phases. The first phase, which ended in 2018, was prior to REDUCE-IT results when we promoted Vascepa with a relatively small, specialty-focused sales team supported by a co-promotion partner. During this first phase, Vascepa was promoted predominantly with biomarker data and competed against various products with their respective biomarker data. Such promotion emphasized lowering triglyceride levels.

We recently transitioned into the second phase of our commercial evolution. For this new phase, we more than doubled the size of our U.S. sales force. At the beginning of 2019, we had approximately 400 sales reps plus their managers compared to approximately 150 sales reps plus their managers in 2018 prior to REDUCE-IT results. We also approximately doubled the number of physicians we are targeting with our sales reps to approximately 54,000 physicians. And we expanded various other forms of physician-focused promotion while we also expanded our medical affairs team and other support groups.

Our sales force expansion, most of which occurred late in 2018 or at the start of 2019, added Amarin sales reps to many parts of the United States where we didn't previously have sales reps while also increasing the concentration of Amarin sales reps in select geographies where we already had productive sales reps.

In parallel, as anticipated, for 2019 and beyond, we did not renew the co-promotion agreement we had in place during the first phase of our commercialization. We believe that having our own sales reps focused first and foremost on Vascepa promotion will be the most productive way to grow Vascepa awareness and prescription levels.

In the second phase, we are communicating outcomes data to health care professionals, in addition to communicating the earlier biomarker results. Communication of outcomes study results is accompanied by communication of various qualifying language, including disclaimers that the FDA has not reviewed or approved REDUCE-IT results.

As part of our current promotion to health care professionals, we are distributing copies of The New England Journal of Medicine's publication of the primary results of the REDUCE-IT study, which became available in print form in early January of this year.

During the second phase, we anticipate little increase in direct-to-consumer promotion as we prioritize educating health care professionals.

We plan to begin the third phase of our commercialization in the United States after the anticipated FDA approval of an expanded label for Vascepa that includes a new indication based upon REDUCE-IT results. We are on track towards submitting an sNDA to the FDA before the end of March to seek the expanded label based upon results of the REDUCE-IT study.

In contrast to our current label, which refers to lowering a biomarker, triglycerides, the indication we are seeking is for a much larger population and based at -- outcomes data. We will seek an indication referencing the use of Vascepa to reduce major adverse cardiovascular events in at-risk patients.

As discussed previously, we won't know until after the FDA has had an opportunity to review our submission whether its review will proceed on a standard 10-month review clock or whether a 6-month priority review is achievable. Until we know otherwise, we are assuming the full standard review clock.

In this third phase, it is our intention to further expand promotion of Vascepa. In particular, we intend in this third phase to significantly expand direct-to-consumer promotion of Vascepa with emphasis on improved cardiovascular outcomes. We also intend to further expand other key aspects of our Vascepa sales, marketing and medical affairs support.

Our current sales force size, which was sized and positioned with the guidance of external consultants, prioritize geographies and targets in which we believe our sales reps can become a -- quickly productive and cover their cost relatively soon. Such assessment was made with an understanding that the current label for Vascepa is relatively narrow and that our consumer promotion is limited to our current label.

Our current level of sales and marketing activities for Vascepa is significant. We believe that such level is appropriate for our current commercialization phase in which we don't yet have an approved label for cardiovascular risk prevention. The extent to which we expand our sales force and other promotional efforts in the third phase after label expansion will be further informed by the experience in the second phase as well as by further market research. We anticipate such research to evolve as health care professionals become better informed about the unprecedented results of the REDUCE-IT study; as more data is presented about REDUCE-IT, including additional REDUCE-IT data scheduled for presentation in March at the annual scientific session of the American College of Cardiology, or ACC; as well as pharmacoeconomic analysis, which we anticipate seeing later this year.

While we anticipate significant prescription and revenue growth from Vascepa based upon our current level of promotion, we believe that an expanded label for Vascepa, combined with expanded promotion of Vascepa, including consumer promotion, will further accelerate Vascepa use and related revenue growth.

As we have discussed in the past, there is no ideal analog for Vascepa. We are seeking to address a market for which there is no proven therapy. In doing so, we demonstrated outcome results for efficacy and safety which are unprecedented. We're also doing [similar] product which is priced affordably and for which, since launch, there were already been more than 5 million prescriptions.

If we look at therapies for diabetes, such as JARDIANCE, we observed that they grew in usage significantly following their outcome study results, and their usage accelerated following label expansion, aided by direct-to-consumer advertising. While we are not directly comparing our product with JARDIANCE, we believe that growth in Vascepa usage will be pronounced in our current phase of commercialization and then accelerate further following label expansion and increased promotion.

The fourth phase of our anticipated U.S. commercialization is in recognition of the value created in the first 3 phases regarding physician relationships, managed care coverage and the overall breadth and depth of a highly productive primary care-focused commercial team. We will seek opportunities to diversify based upon further internal development and/or through licensing or acquiring other products which could enhance shareholder value.

As discussed in the past, while we are -- always seek to be opportunistic in reviewing multiple forms of potential strategic transactions, with respect to licensing or acquiring other products, we are currently in a nice-to-have and not a need-to-have phase. That being said, there are arguments in support of diversification and leveraging our core competencies, and these arguments will likely grow as Amarin grows.

As I hope we've made clear from our remarks, we are continually focused towards execution at Amarin to maximize the value of the REDUCE-IT outcome. Our objective is to grow shareholder value.

Regarding questions you may have with respect to M&A rumors, as stated in the past, Amarin has a general policy to not comment on rumors or speculation or stock price movement related to such rumors or speculation. A no-comment response from Amarin is neither confirmation nor denial of any given rumor or speculation. It simply relays that Amarin has no comment on the matter. Accordingly, we will not be addressing this topic today.

I emphasize that Amarin is confident in our ability to significantly grow our business. Vascepa clinical results were unprecedented. We have strong relationships with key opinion leaders, and we already have broad managed care coverage for Vascepa. We have been interacting with many managed care plans, and they appear to appreciate the value of the Vascepa data. As a result of this interaction, we're now anticipating some modest further expansion of managed care coverage for Vascepa in 2019, although majority of our focus regarding managed care coverage is shifting to contracts for 2020.

Internationally, we continue to work with our existing commercial partners in Canada, China and the Middle East to advance Vascepa. While our plans for a regulatory submission in Europe are not yet finalized, we currently aim to submit in Europe during 2019. Such submission will leverage the data package we are preparing for the U.S. sNDA.

We continue to wait to see what happens in Europe regarding the regulatory status of the prescription drug Omacor, known in the U.S. as Lovaza, which failed in 2 outcome studies during 2018 to demonstrate cardiovascular benefit. And regulatory authorities in Europe appear to be questioning the appropriateness of the existing outcomes-related language in its label for use after a heart attack.

Regardless of whether or not that indicated use is removed from the label of such earlier-generation product, we envision a significant potential for Vascepa in Europe and intend to pursue regulatory approval for Vascepa with the submission this year.

Our expanded sales team has been in the field now for coming up on 2 months. This team is very enthusiastic and motivated by the potential to improve patient care with Vascepa and by the early feedback from physicians, which continues to be quite favorable, regarding REDUCE-IT results. Physicians who have been presented the REDUCE-IT results are impressed and increasingly prescribing it for their patients. We are witnessing increased prescriptions for Vascepa written by physicians who are general practitioners as well as physicians with specialties in areas such as internal medicine, cardiology and endocrinology. We are seeing many physicians who never previously prescribed Vascepa, prescribing Vascepa now; and moreover, we are witnessing increased rates of Vascepa prescriptions by prior prescribers.

As a reminder, not unique to Vascepa, we historically have experienced headwinds regarding prescription growth for Vascepa in the first quarter of each year as some patients elect to not fill prescriptions due to financial hardship caused by beginning of the year deductible levels under their insurance plans. Also, many of our sales reps have only been in the field for a short period of time. Nonetheless, based upon data reported to us from third parties, such as Symphony Health, it appears that prescription levels in early 2019 have been approximately 50% higher than in the same period of last year, and new prescription levels have been even stronger.

We are early in Phase II of our U.S. commercialization of Vascepa. By the end of Q1, we hope to have called on approximately 75% of our target physicians 2 or more times but likely less than 50% of these targets more than 3x regarding Vascepa with access to the results published in The New England Journal of Medicine.

We know, based on launches of other products, that it typically takes a much larger number of sales calls to significantly change physicians' behavior. We anticipate that some physicians will wait for the FDA to approve an expanded label for Vascepa before altering their prescribing behavior. We anticipate that other physicians will elect to study the REDUCE-IT data further before altering their prescribing behavior. Nonetheless, we are confident that as physicians and other health care professionals dig deeper into the data for Vascepa and as they reflect on the high risk of their patients and the limitations of earlier-generation therapy, they will conclude that Vascepa should be used to help more patients.

The data which has been published regarding REDUCE-IT results in The New England Journal of Medicine is, in our view, very compelling. We appreciate that the REDUCE-IT study was selected as the top story of 2018 in The New England Journal of Medicine Journal Watch, Cardiology section. Similarly, we appreciate that the American College of Cardiology, or ACC, included REDUCE-IT results in its top 10 list for 2018. The ACC's list was presented alphabetically, so we don't know where within that top 10 we ranked. What we do know about ACC is that they have designated additional data regarding REDUCE-IT to be presented on March 18 at their annual scientific sessions to qualify for late breaker presentation status. At ACC, Dr. Bhatt, the study's principal investigator, plans to present this late-breaking new data from REDUCE-IT.

Amarin remains committed to scientific presentation and publication, and there will be 5 other presentations of data at ACC which we support. We supported 40 scientific presentations and papers in 2018, and we're off to a good start with presentations and publications in 2019.

For background, based upon ACC guidelines, late-breaking presentations should highlight [noble] and practice-changing studies, and few presentations are selected with this designation. We are honored that the presentation entitled REDUCE-IT: Reduction in Total Ischemic Events with Icosapent Ethyl in REDUCE-IT was selected at the prestigious ACC conference as a late breaker.

At this time, we are limited as to what details we can provide around this presentation and the others at ACC but look forward to sharing more information with you.

We plan to host a webinar in the evening of March 18 with several leading physicians in the cardiovascular field. Details on this webinar will be released in the coming weeks. We hope you will find the time to listen to this event.

With respect to pharmacoeconomic analysis of Vascepa, we anticipate presentation of such data by potentially multiple groups in 2019. We look forward to such analysis. If such analysis is prepared in a manner, which is consistent with analysis in recent years for other cardiovascular therapies, we anticipate that such analysis for Vascepa will support that Vascepa is affordably priced given the unprecedented results of the REDUCE-IT study in our pricing of Vascepa. We are proud that Vascepa is affordably priced, and we anticipate that, similar to statin therapy, the affordable pricing of Vascepa makes it suitable for potentially helping millions of patients.

With respect to 2018, the highlight was, of course, the unprecedented results of the REDUCE-IT cardiovascular study. We also achieved record revenues in 2018 with a relatively small productive sales team. And we strengthened our balance sheet and made other financial progress, which Mike Kalb, our CFO, will discuss shortly.

The REDUCE-IT study demonstrated that Vascepa significantly lowers cardiovascular events, including cardiovascular death, in patients who, despite well-controlled cholesterol and treatment with statin therapy, have remaining cardiovascular risk. The results of the primary endpoint of the study, a 25% relative risk reduction in major adverse cardiovascular events, exceeds what has been shown for any other therapy studied as an add-on to statin therapy in any patient population. A 20% relative risk reduction in cardiovascular death is nearly unheard of in cardiovascular outcome studies, as is the number needed to treat of 21% to avoid 1 primary endpoint event. And all of this was achieved with a safety and tolerability profile, which was comparable to placebo and consistent with clinical experience associated with omega-3 fatty acids and the current FDA-approved labeling. The positive results of the 7-year, $300 million study will hopefully lead to improved standard of care for tens of millions of people at risk for cardiovascular events.

Assuming, as we expect, that we submit the sNDA before the end of March 2019, this submission time line of approximately 6 months from top line results will be consistent with the time line for submission of sNDAs for various other outcome studies, most of which were submitted by companies much larger than Amarin.

We are periodically asked why an sNDA submission requires approximately 6 months to prepare, so I will spend a little time explaining the compilation process.

REDUCE-IT was a multiyear study conducted in multiple countries. The database includes millions of data points from more than 35,000 patient years of study. The study contained multiple endpoints and multiple subgroups. The results encompassed more than 200,000 pages of data. Each page undergoes extensive medical, statistical and quality review. The resulting documents need to be compiled and linked electronically to match the required regulatory format. Given the enormity of the file, the electronic compilation linking process, the final steps of which are commenced after all of the data has completed quality review, requires weeks to complete by an outside vendor which specializes in such electronic submissions. We have a very capable team working on the submission. Having spent over 7 years to reach this stage, we want to make sure that we get the filing right.

Assuming that the FDA approves our sNDA, Vascepa will be the first therapy approved for use in dyslipidemic patients to address the tremendous residual cardiovascular risk, which remains beyond management of LDL cholesterol. We do not envision that we will compete with therapies for managing LDL cholesterol. Rather, Vascepa presents a new opportunity for healthcare professionals to help patients reduce their cardiovascular risk.

In the United States, approximately 1 in 4 patients have elevated triglycerides, a cardiovascular risk factor independent of LDL cholesterol or bad cholesterol, including more than 12 million patients in the United States on statin therapy. It is difficult for us to not be enthusiastic when presented with such an opportunity to improve patient care.

I now turn the discussion over to Mike Kalb. Mike?

Thanks, John.

As mentioned at the start of this call, both our 2018 Annual Report on Form 10-K and today's press release can be found on our website. They contain discussion of our fourth quarter and full year financial results, including some details, which go beyond the highlights I will cover in this morning's call.

Our final net total revenue in 2018 was $229.2 million, which is slightly higher than we guided to earlier. The majority of our revenues in 2018 were derived from product sales of Vascepa in the United States.

Our 2018 net product revenue was $228.4 million, an increase over 2017 of 27%. This result was supported by record prescription levels for Vascepa.

Net pricing for Vascepa in 2018 remain consistent with 2017 levels with some quarterly variability.

While reported results for all 4 quarters of 2018 showed growth over the corresponding quarters of the prior year, our fourth quarter 2018 total revenues of $77.3 million was a record quarterly high for us. This result represented a 44% increase from the fourth quarter of 2017. This growth in the fourth quarter of 2018 was primarily driven by record quarterly prescription levels.

While the growth in revenues and prescriptions during the first 3 quarters of 2018 did not reflect REDUCE-IT results, the results of this landmark study likely had some impact on fourth quarter results. We cannot accurately determine the amount of increase attributable to REDUCE-IT results as prescription levels going into the fourth quarter were already growing, and historically, fourth quarter of each year tends to be our strongest result. However, we did, in fact, witness some increase in prescription levels following the announcement of REDUCE-IT top line results at the end of September, particularly from the physicians called upon by our sales team. We witnessed additional increases in prescription levels following presentation of REDUCE-IT results at the 2018 annual scientific session of the American Heart Association on November 10, 2018.

Inventory levels at wholesalers ended 2018 at levels which were consistent with the industry norms. We do not believe that our 2018 revenues were significantly impacted by shifts in wholesaler inventory levels.

Our net product revenue in Q4 was slightly higher than what may have been calculated by review of prescription data from independent sources such as Symphony Health and IQVIA. As described previously, these sources use various sampling techniques to estimate prescription levels. They are only estimates as demonstrated by the different results reported by different sources. The techniques they use appear to be more effective over long periods of time compared to short periods. It is our speculation that actual prescription levels for Vascepa in the fourth quarter may have increased faster than what was reported by these sources.

Predicting revenue growth for 2019 remains difficult as we are early in what John described as the second phase of our commercial evolution, that is the post-REDUCE-IT data pre-FDA approval phase.

At the beginning of 2019, we provided guidance that our net revenue in 2019 will be approximately $350 million. Today, we reiterated that guidance without modification. This guidance assumes that the timing of potential label expansion from Vascepa is such that it does not have a material impact on revenue levels in 2019.

With respect to this revenue guidance, we continue to anticipate quarter-to-quarter variability, including the impact of seasonal effects. We continue to believe that measurement of Vascepa growth compared to corresponding periods of the prior year is a better measure of our progress than evaluating consecutive quarter growth. This is particularly true with respect to the first quarter of each year due to the beginning of the year issue with insurance deductibles that John referenced earlier, which is not unique to Vascepa.

Gross margin on product sales was 77% and 76% in the quarter and year ended December 31, 2018, as compared to 75% in the quarter and year ended December 31, 2017, respectively. This improvement was primarily driven by lower unit cost API purchases. While we may see some slight improvement in gross margin in 2019, for the most part we anticipate our gross margin from net product revenue to remain little changed until sales volumes get much higher, at which point gross margins could approach 80%.

Selling, general and administrative, or SG&A, expenses for Q4 2018 were $79.7 million, an increase of $44 million over Q4 2017. SG&A expenses for full year 2018 were $227 million, an increase of $92.4 million over 2017. These expense levels include $4 million and $15.9 million of noncash compensation expenses in Q4 2018 and for the full year 2018, respectively. Excluding these noncash costs, SG&A expenses increased $43 million and $88.4 million in Q4 2018 and for the full year 2018 compared to the corresponding periods of 2017.

This increase in SG&A expense was due primarily to increased promotional activities, including commercial spend in preparation for and following successful REDUCE-IT results. Overall, our SG&A costs remain subject to quarterly variability.

As previously stated, in 2019, we increased our sales force from approximately 150 sales reps, which we had in place for most of 2018, to approximately 400 sales reps.

As of December 31, 2018, Kowa is no longer co-promoting Vascepa. Amarin and Kowa intentionally designed the co-promotion agreement to naturally end as of December 31, 2018, and mutually agreed not to renew the agreement. In accordance with the terms of our agreement with Kowa, Kowa is eligible to receive $17.8 million in co-promotion copayments, the present value of which is $16.6 million and was fully accrued as of December 31, 2018. The accrued tail payments will be paid over 3 years with declining amounts each year, beginning with $7.3 million to be paid in 2019.

Research and development expenses for Q4 2018 were $11.9 million, which is flat as compared to Q4 2017. Research and development expenses for full year 2018 were $55.9 million, an increase of $8.7 million compared to 2017. These R&D costs includes $0.7 million and $2.9 million of noncash compensation expenses in Q4 2018 and for the full year 2018, respectively. Excluding these noncash costs, R&D expenses were flat in Q4 2018 and increased $8 million for the full year 2018 compared to the corresponding periods of 2017. Most of these R&D expenses pertained to the REDUCE-IT study with variability and spending levels based on timing of REDUCE-IT-related activities.

In our press release dated January 4, 2019, we disclosed that we anticipated operating expenses for 2019 to increase $25 million to $50 million over 2018 levels, net of the $46.8 million we expensed in 2018 related to our prior co-promotion partner. Included in these amounts are increased costs associated with Vascepa promotion, partially offset by modestly lower R&D expenses as the REDUCE-IT trial is complete. R&D expenses, while lower than 2018, are anticipated to remain relatively high to support the sNDA submission to support multiple potential additional publications of REDUCE-IT results, to support partners with respect to international submissions for Vascepa and to evaluate future product opportunities on Amarin's own and in collaboration with its development partner, Mochida.

Total R&D expenses for 2019 are anticipated to be approximately $40 million and likely highest in the first half of 2019. These expense estimates assume the Vascepa label expansion is approved following an anticipated 10-month FDA review cycle. In the event that the label is expanded earlier than expected or product revenue grows faster than expected, SG&A expenses may be higher than reflected in this operating expense guidance. Today, we reiterated that expense guidance without modification.

As of December 31, 2018, Amarin reported cash and cash equivalents of $249.2 million. This balance was augmented by approximately $195 million in net proceeds from an equity financing transaction completed in November 2018.

As of December 31, 2018, the company also had $66.5 million in net accounts receivable or $86.1 million in gross accounts receivable before allowances and reserves and $57.8 million in inventory.

We ended 2018 with no debt except for the remaining balance due on our royalty-like instrument.

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

Thank you, Mike.

I want to take this opportunity to thank our shareholders for your support.

We will be participating in 2 upcoming investor conference. The first is tomorrow, the Leerink conference in New York City; the second is the Cowen conference in Boston on March 13.

With that, we conclude our prepared comments and would like to open the line to some questions. Operator?

(Operator Instructions) The first question is coming from the line of Louise Chen with Cantor.

I had a few here. My first question is on your EU partnership. Just curious if you could provide more color where you are with that and any timing that you could provide. Secondly, will there be an ADCOM for the REDUCE-IT label expansion? Third question I had was just on SG&A, what the run rate would be if the fourth quarter is a good run rate as we look at 2019? And then just one more question here on -- what percentage of physicians do you think will wait for your label expansion in order to alter their prescribing habits for Vascepa?

Thanks for this [thorniest] part of questions. Well, regarding a EU partner, we are continuing to evaluate whether the right strategy there is to partner and go forward through the regulatory process with a partner or to de-risk the regulatory process and to partner after that process is de-risked. There are pros and cons to each approach, and we've not decided nor have we had to decide. Our primary focus right now is on getting the sNDA submitted in the -- for the U.S. filing. And until we've done that, we've been hesitant to allow potential partners to get into the database or ask questions of our regulatory and clinical group as we don't want to have those folks distracted from getting the sNDA filed, which we think is the most important path to creating value. So after we have sNDA submitted, we will turn more attention to the prioritization in Europe. But key there is that the data that will be submitted to the FDA with slightly different format should be the basis for the filing for Europe. But in terms of partnering, while we've had some expressions of interest, until we're further along with the -- and have filed the sNDA in the U.S., we're holding some of the interest at bay from a prioritization perspective. So more to come on that, which I have made those answers yet. With respect to an ADCOM, we won't know that answer until after the sNDA is submitted and the FDA has had an opportunity to look at the data. I mean, this is an enormous filing. It is a first-ever indication in a space which potentially represents 1 in 4 adults in the United States, so I can make arguments that the FDA would potentially want an ADCOM as this is a present-setting filing. It's --- they may want an ADCOM to use this as an opportunity to emphasize that this is not about triglycerides. They may want to have an ADCOM to evaluate where this falls in the sort of the dietary supplement world out there and to use this as an opportunity to emphasize differences between prescription therapy and dietary supplements. There's a lot of potential reasons that they could want an ADCOM. But we won't know [fully]. Yes, the timing probably the Day 74 letter would be when we might get a signal as to whether they'd want an ADCOM or not. We don't think that if there is an ADCOM that's necessarily a bad thing. But we really don't know. We will be preparing for one just as usually there could potentially not be an ADCOM. We just don't know nor quite believe the FDA knows at this point in time if they've not received a submission or had an opportunity to review it. With respect to SG&A and run rate, I'll turn things over to Mike Kalb.

Sure. Thanks, John. So thanks for the question. When we look at what we had guided in -- on January 4 and then we reiterated this morning, if you take 2018 and then add to that about $25 million to $50 million in your model, you'll do what you believe is appropriate, but that gets you to somewhere between kind of $252 million and $277 million. And take Q4 and annualized that, you're at just over $300 million. If you back out stock comp, you're a little under -- right around $300 million rather. So somewhere in there whatever you deem is appropriate is, I think, reasonable. But again, our guidance has not changed this morning.

And maybe Aaron Berg, who runs commercial for us, you can take on the comment about physicians.

Right. To the question around how many physicians do we think will wait, until we get the label, it's hard to know for sure. We're very early in promotion. As those feedback said, it could be as much as 10% to 20%. But again, it's very early, and we got some time until that label to educate those physicians then we'll see what their actual response is.

And even physicians who aren't waiting, this is a new -- this is a population that has been treated before. They're likely to start off with the highest-risk patients, use Vascepa for them, get experience with it, and then add more patients as time passes and they get that experience. That's not unique to Vascepa. That's the experience that statin's had, for example, and a variety of other therapies. So we think there's an evolution process, so.

Our next question is from the line of Joel Beatty with Citi.

The first question is related to revenue and script trends. It looks like revenue was up about 44% in the fourth quarter compared to the fourth quarter one year ago while scripts were up around 32% to 33% in this quarter compared to the fourth quarter one year ago. Could you discuss the differences between those 2 such as any differences in stacking by wholesalers?

Mike, why don't you take that one on?

Sure. Thanks, John. Thanks for the question. So if you look at our MD&A for the year, and I think this is consistent with what we've said historically, for the year, our revenue is up 27%. IQVIA and Symphony reported increased scripts of 25% and 27%, respectively. I think as we've discussed previously, given the sampling techniques, given the IQVIA and Symphony data and how they culled data, they're a little slower at points of inflection to capture those trends up or down, and that's why we've said over longer periods of time that, that tends to be a little bit more consistent.

So -- and Joel, I think they were -- we did have growth in the fourth quarter. I think they were a little slow on recognizing that growth in some of their TRx numbers. But we do not believe that our revenue results in the fourth quarter had any significant impact by wholesaler inventory levels.

That's correct. Still within the normal ranges.

Great, got it. And then I guess another question is on -- what patient population did you see the REDUCE-IT results as a supporting use in -- for potentially consideration by FDA? For example, did you expect there'll be a triglyceride level cutoff? And if so, what level could that cutoff be at?

Why don't I ask Craig Granowitz, our Chief Medical Officer, to take that one on?

Yes, and, oh, it's an important question to ask if the question is coming from many different sides, from payers, from providers. We believe that the data supports broad utilization, really looking at residual CVD risk beyond LDL management. We think the data supports that. There is increased risk that baseline triglyceride levels grow. We have a similar magnitude of benefit regardless of the starting triglyceride level in the study down to 135. We have a similar magnitude of benefit regardless of what the triglyceride level is after a year of treatment, whether above or below 150. So we believe there is a significant risk. As you know, the placebo patients in the study -- and these are well-managed patients with baseline LDLs of 74 and similar management of other modifiable cardiovascular risk criteria. Regardless of that, over 28% of those patients develop one of the composite endpoints in the control group, over 4.9 years, and these are significant drivers of cost and morbidity. So we certainly believe that we will go to the FDA with a strong case to be made of managing residual risk in appropriate patients beyond LDL.

Great. And maybe one last question on payer coverage. How do you anticipate payer coverage of Vascepa to change from maybe Phase I before the REDUCE-IT results to the current phase now to looking either around 2020 or so after any potential little change? When, if any, of those times did you see the most difference -- changes in payer coverage? And what does that look like?

Yes, so our payer coverage today, just for perspective, the approval rates for our payer coverage is about 77%, which is sort of neck and neck with generic Lovaza, and include reversals in that, it gets almost to 90%, like around 88%. This was the approval rate that I last saw. That's a pretty good approval rate. So most prescriptions going in are getting covered. That being said, there are certain plans that tend to be the outliers in coverage in a lot of places that don't yet provide coverage. Some of those health plans by policy don't provide coverage until a label. We envision, as I commentated earlier, that there will be pharmacoeconomic analysis done during 2019 potentially by more than one group. And we think that, that analysis, given the 25% relative risk reduction, given the high cost of this -- of the treatment of these patients, they will show a result which certainly supports our current pricing for Vascepa. So we have been reaching out through our managed care team and our medical affairs team to various health plans, and I think they get it that this is a significant opportunity for improved patient care, and they're trying to estimate how fast this is going to grow. I don't think they -- based on their comments, it doesn't seem to be a question of is it going to grow or do they need to prepare for it, it's a question of how fast, how much should they be budgeting for it going forward. And we'll continue to remind them that this -- they shouldn't look at this in the vacuum of just drug cost, they should look at this in the overall spectrum of patient treatment where you'd be saving significant dollars on causes of hard-to-access strokes and revascularization and [nearing] death, which would put them in the hospital. It is very expensive. So we don't -- we're contracted through 2019 with plans. And we have, I should -- to my surprise, had a couple of plans here come forward and want to do something with us in 2019 beyond what they already had. But those are -- that's clearly the -- this tends to be more the exception than the rule. But most of our focus at this point in time is on getting ready for coverage for 2020. But I think our coverage is pretty good. Our pricing is affordable. We have patients, myself included, has seem to be -- get covered readily for the product. So we'll always look to make it better, but I think that's more perception than reality other than in a few geographies where it's a little trickier, more perception than reality. But I appreciate the question.

The next question is from the line of Michael Yee with Jefferies.

John, a couple of questions on my side. First was thinking about the first quarter of the year as you're coming up here, do you believe that the revenue recognition or demand is reflective of third-party data? Or do you think it's undercapturing or overcapturing? Just want to understand and set some expectations for the first quarter given that we are seeing growth sequentially in the first quarter despite seasonality. Second question is regarding capacity build-out and whether you have any update there and how to think about capacity and manufacturing lead times. And then third comment, as I appreciate no comments that you made on rumors and speculation, but for clarification, do you fall under Irish takeover provisions or do you not, under those provisions?

Regarding Q1 of 2019, we've not provided any quarterly guidance specifically in terms of quantification. The -- and we only have detail that -- we always have that prescription at the physician level for -- into, I think, the week of February 8 at this point in time. So early on, it seems to be tracking fairly closely this quarter. But historically, they have overstated scripts in the first quarter. I -- we're looking for whether that would repeat itself here in this quarter or not. So far, that doesn't seem to be the case. But having only the January data and essentially 1 week of February data, it's very early to be commenting on that. With respect to capacity on the manufacturing side, our guidance for this year in terms of revenues is $350 million. We have talked that we will purchasing supply at a rate which would support revenues of more than twice that number. So supporting and purchasing inventory to support revenues that could be over $700 million. That's because we, a, we could be wrong in our guidance; and b, we just -- our guidance doesn't assume any earlier approval from the FDA. And as a reminder, our product has a 4-year dating. One of the things we spend a lot of time in the development of this product was the stability of it, preventing oxidation, et cetera. So it's got a long shelf life. So we figured that that's the right investment to be made.

We have a supplier network that consists of over 20 independent companies. The API piece of that, we have multiple suppliers on, they are competing with one another. And they're interested in expanding capacity. We're interested in having them expand capacity, and we're in active discussions with them about steps to expand that capacity. At this point in time, we're not prepared to quantify where we might be, say, at the end of this year on additional capacity, but we are active in those discussions, and there is considerable interest from our suppliers in making that happen.

With respect to M&A, and again we're not talking about rumors in M&A, but you were asking about a specific legal provision. We have our General Counsel, Joe Kennedy, in the room. And Joe, I don't know if we can comment on that or not but go ahead.

Yes. Thanks for the question. Your comment -- your question was whether we're subject to the Irish takeover code. We're actually a U.K. corporation, but we're also -- we're not subject to the Irish takeover code. We're also not subject to the U.K. takeover code. There's a full description of what we are subject to in the recently filed 10-K. You can find that on pages 61 to 63. Potentially, we're subject to U.K.'s Company Act (sic) [Companies Act 2006] and not -- neither of the Irish nor the U.K. takeover codes. But again, the full description is on 61 to 63 of the 10-K.

And just for what (inaudible) we are -- our -- we're tax domiciled in Ireland, so a business that no one -- for the U.K. piece of it and (inaudible).

There were some questions that investors had sent in, some of which have already been answered, but let me go through a couple of others here.

One question is about whether the benefits shown in REDUCE-IT was due to the reductions in triglycerides, and I think our answer there is partially. We believe that eicosapentaenoic acid, which is the active ingredient in Vascepa, has a multifactorial effect. Some of that effect is on improving lipid -- lipoproteins, but the effects go well beyond that. They go into the anticoagulant effect, antioxidant effect, the improvement in endothelial cell function, the reduction in inflammation. It appears that there's a reduction in plaque formation associated with it. And so it has a multifactorial effect which we think provides the benefit. And this is consistent with what was seen in the JELIS study, where there was a fairly modest reduction in triglycerides, in the 19% relative risk reduction. And then, of course, in REDUCE-IT, while we saw a benefit that was essentially independent of triglyceride levels, we had strong benefit up and down the spectrum, from 135 mgs per deciliter on upward with the -- on the triglyceride side. So I think triglycerides is a factor, but it's certainly not the entire story.

We continue to have publications out on mechanisms of action for Vascepa. There was a publication earlier this year, which I hope was on our website from Dr. Preston Mason regarding mechanistic effects. There's been publications on the effects of Vascepa in atherosclerotic processes by folks Dr. Borrow of -- and Dr. [Goodall] from prior years, and a lot of this information is available on our website.

There was a question about additional publications coming out of REDUCE-IT and timing of EVAPORATE study. In the slides that we provided in conjunction with this call, we provided a variety of different sort of updates on timing. One is on EVAPORATE, our top -- that is an investigator-initiated study which we support but evaluating plaque regression with Vascepa. That study, my understanding is we'll have results from late this year or the early part of next year. With respect to REDUCE-IT, we are having publications on our Phase III studies, MARINE and ANCHOR, for about 5 years after that series over about a 5-year period. Our next update on MARINE and ANCHOR will be the results presented at the American College of Cardiology here in mid-March.

With that, I -- we're coming up on an hour. I think We need to wrap it up. So I thank everybody for your interest and attention today. I'm sure I'll see some of you tomorrow at the Leerink conference, and we look forward to providing you additional updates of our progress. Thanks much. Have a great day.

Thank you.

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