Amarin Corporation PLC (AMRN) 2019 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 of 2019. This conference call is being recorded today, February 25, 2020.

I would now like to turn the conference call over to Elisabeth Schwartz, Senior Director of 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, such as for the purchase of additional supply of Vascepa, and the adequacy of our financial resources; our current expectations for additional scientific presentations, publications, medical guidelines and regulatory reviews outside the United States and related timing thereof; our plans and preparation for expanded promotion of Vascepa and related market positioning and potential, including the potential for further product development; our goals regarding the timing, scope and success of international expansion; our current plans for sales force and other commercial expansion in the United States; and our current expectations regarding the outcome of litigation pertaining to Vascepa exclusivity in the United States.

These statements are based on information available to us today, February 25, 2020. We may not actually achieve our goals, carry out our plans or intention 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 annual report on Form 10-K for the year ended December 31, 2019. These documents have been filed with the SEC and are available through the Investor Relations section of our website at amarincorp.com. We encourage everyone to read these documents.

This call is intended for investors in Amarin and is not intended to promote use of Vascepa outside its approved indication. Please note that we are also providing slides to accompany today's call. These slides, which can be found on our website, amarincorp.com, in the Investor Relations section under the subcategory Events and Presentation, 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.

Hello, everybody. Thanks for joining us today.

During this call, we will recap our 2019 results which were quite positive and provide some insights into our 2020 priorities and early 2020 progress. After our prepared comments, we will respond to questions. Some of you sent questions in advance. We attempted to address many of those questions in our prepared comments.

It is an exciting and busy time for Amarin. We are enthusiastic and encouraged by the progress we are making and by the feedback we are hearing from health care professionals regarding Vascepa in its now expanded role in improving patient care.

Amarin's results in 2019 position us well for the future. In 2019, we received FDA approval of Vascepa for a broad and new cardiovascular risk reduction indication, pursuant to the completion of our 7-year REDUCE-IT outcome study and following a unanimous 16-0 AdComm vote. Unanimous AdComm votes are uncommon, and this vote reflects the robust and consistent clinical results demonstrated by Vascepa, with clinical benefits which clearly outweighed risks for patients needing this paradigm-shifting therapy.

Realized an 87% increase in revenue over 2018, predominantly through increased volume of Vascepa sold in the United States, reflecting growth in normalized prescriptions of Vascepa. Typically, an 87% increase in revenues would be the first on a list of achievements. For 2019, this growth is eclipsed by the enormity of the importance of patient care and to Amarin of the FDA's approval of the expanded indication for Vascepa.

In addition, we contributed to the issuance of 57 scientific publications and presentations, supported our Canadian partner's approval to market Vascepa in Canada, filed for approval to market Vascepa in Europe and had that filing accepted for review as a centralized filing by the European Medicines Agency, hired and onboarded hundreds of sales representatives to broaden our sales reach while further bolstering our sales management, observed Vascepa becoming recognized as a new treatment option for cardiovascular risk reduction by 8 major medical societies. Such recognition includes reference to Vascepa clinical trial results not being generalizable to any product other than Vascepa. And witnessed multiple pharmacoeconomic analyses to conclude that Vascepa is cost effective, including an analysis from MedStar, reporting that in most scenarios, the use of Vascepa should save money for society by helping reduce the occurrence of high-cost cardiovascular events, such as stroke and heart attacks.

I could cite many additional Amarin accomplishments in 2019. Clearly, 2019 was an outstanding year of execution and results. We are now focused on the success of the commercial launch of Vascepa for its new indication. Accordingly, let's shift our discussion to 2020.

Vascepa represents a new class of proven preventative therapy. Vascepa is the first and only drug with this new cardiovascular risk reduction indication. Our launch of Vascepa for this new indication reflects the uniqueness of Vascepa. Such uniqueness is magnified by a backdrop in which all potential competitors that completed or terminated cardiovascular outcome studies have failed to demonstrate that the benefits of their products exceed the risks of such products.

Of course, we are pleased that the FDA approved Vascepa for this new indication. And we are pleased that the new label for Vascepa provides significant discretion to health care professionals regarding which at-risk patients should be treated with Vascepa. It is further gratifying that the FDA immediately after approval of Vascepa in December, as the first and only drug for this new indication issued a press release pertaining to this approval, in which it was stated, "Today's approval will give patients with elevated triglycerides and other important risk factors, including heart disease, stroke and diabetes, an adjunctive treatment option that can help decrease their risks of cardiovascular events." Not every FDA approval results in a corresponding FDA-issued press release.

The demonstrated benefit of using Vascepa is tremendous and robust. Our commercial launch of Vascepa emphasizes education of health care professionals regarding these benefits and includes focus on securing affordable access for managed care for all patients who can benefit from Vascepa. Thus far, our launch of Vascepa for this expanded indication is progressing as planned. We are hearing positive feedback regarding Vascepa from physicians, pharmacists and other health care professionals while witnessing some early positive examples of further improvements to managed care coverage.

Our messaging reflects that existing therapy, such as statins, are helpful, but they don't do enough. Statins have been shown to lower cardiovascular risk by approximately 25% to 35%. Vascepa has been shown to lower cardiovascular risk by another 25% beyond the risk reduction from statins. This is the largest risk reduction shown in addition to statin therapy. For example, ezetimibe and PCSK9 inhibitors have demonstrated approximately 6% and 15% relative risk reductions, respectively, in statin-treated patients.

Vascepa provides a new treatment option and does not compete in the increasingly crowded field of LDL-cholesterol management. We wish all such cholesterol-lowering products well in improving patient care. With Vascepa, we are addressing the unmet medical need of patient care beyond cholesterol management.

Strong scientific knowledge and evaluation has led us to clinical success with Vascepa. We intend in 2020 to continue to be active at medical congresses and other scientific forums. Such activity will include further presentation of detailed results of the REDUCE-IT study. For example, at the upcoming 2020 Annual Scientific Sessions of the American College of Cardiology scheduled for late March, 8 Amarin-sponsored scientific presentations related to Vascepa for persistent cardiovascular risk have been accepted. This includes one presentation on Vascepa that has been accepted as a late breaker. In conjunction with this medical conference, we plan to webcast comments from many of these presenters regarding their findings. Details regarding that webcast will be made in March as we get closer to that conference.

In parallel with such presentations of new data at scientific forums, we're also sponsoring various forms of medical education regarding Vascepa. And the principal investigator for the REDUCE-IT study remains active in making invited lectures, also known as grand rounds, at leading medical institutions regarding the unprecedented results of the REDUCE-IT study. Unfortunately, many health care professionals do not have the opportunity to attend all scientific forums. Accordingly, we are increasing our promotion of Vascepa via multidimensional commercial means, including outreach through our sales force, through electronic means and various forms of advertisement.

Regarding our sales force in the United States, we are now close to doubling its size. As previously described, we believe that a U.S. sales force of 800 sales representatives, supported by our other promotional activities, is positioned to make Vascepa a multibillion-dollar brand. Our sales team enthusiastically believes this as well. We hired and trained new sales representatives in waves during December, January and February. At this point, nearly all of the targeted 800 sales representative positions have been filled. A small number of newly hired sales representatives are still undergoing training. They should be in the field soon. As is the nature of hiring, some people don't succeed and need to be replaced. Overall, we are impressed with the attitudes, intelligence, passion and experience of the members of our sales team.

We did not wait for all of our new sales representatives to be hired before commencing the launch of Vascepa in the United States for its new indication. In early January, we conducted sales training for our new sales representatives regarding promotional materials and messaging for Vascepa. It is too early in the launch to judge the progress of our newly hired sales representatives or the progress of our sales launch. It typically takes the better part of a year for new sales representatives to become highly productive. Although with Vascepa, it is possible that this may occur faster. We are hearing many positive anecdotes from both our recently hired and our more tenured sales representatives. Many of these anecdotes relate to physicians to whom we did not directly promote Vascepa previously and who are now aware of Vascepa's unprecedented clinical results. Other anecdotes come from prior prescribers of Vascepa, who comment that their patients are responding and are more receptive to taking Vascepa pursuant to the FDA approval.

As an aside, doctors are impressed with the breadth of the FDA-approved label for Vascepa. They like that the language in the label reflects medical terminology which they use in their practice every day, such as "established cardiovascular disease" rather than the definitions used for clinical trial purposes. Many doctors have expressed to us that they believe that they can help many patients with this label. They appreciate that the label doesn't reference fasting or nonfasting triglycerides, that it doesn't set any required target for management of LDL-cholesterol and it does not distinguish between type 1 and type 2 diabetic patients. This past weekend, we completed training for select physicians who will conduct peer-to-peer programs regarding Vascepa. It was thrilling to see the excitement and energy that these doctors are bringing to our educational efforts across most of the United States.

Many doctors want to be part of this program. Unfortunately, we were limited regarding the number of doctors we could invite. Throughout the meeting, I repeatedly heard these physicians referring to that they take Vascepa themselves and that they are proud to prescribe it for their patients. They ranked the REDUCE-IT study results with the results of 4S, the study which made statin therapy a standard of care, as the 2 most important clinical studies conducted in the modern era regarding preventative cardiovascular care.

Unless you're a health care professional, you won't see these speaker programs and you won't see electronic communication sent to health care professionals regarding Vascepa. However, many of you have commented that you've recently seen that we began promotion of Vascepa on television. In addition, a month ago, we launched a campaign featuring unbranded TV spots that are intended to raise awareness of the persistent risk that exists beyond maximally tolerated statin therapy. The campaign reminds viewers that earlier generation therapies have not been shown to be effective in addressing such risks. There are, for example, roughly 5x as many patients being treated with fibrates than with Vascepa. This imbalance may have been easier to justify before successful REDUCE-IT results. However, today, given the failure of fenofibrates to demonstrate cardiovascular benefit and the success of Vascepa, we seek to remind health care professionals and consumers that they should look beyond fenofibrates and other earlier generation products for proven effective therapy. The same is true regarding products consisting of omega-3 mixtures, all of which have failed on top of statin therapy to demonstrate cardiovascular benefit, including multiple failed studies in the past 2 years.

When I say that our new TV ad campaign is unbranded, that means that it does not mention Vascepa by name. An unbranded TV ad can be more easily launched without FDA promotional review. Separately, for future use, we have developed targeted television promotion that names Vascepa and ties Vascepa directly to its cardiovascular risk reduction effects. The messaging from such promotion is currently under review by the FDA's Office of Prescription Drug Promotion. We expect such review to be completed in time to support our launch of branded direct-to-consumer advertisement in mid-2020. At that time, with advertising which both references Vascepa by name and refers to lowering cardiovascular risk, we intend to increase the frequency of our advertising. We anticipate the branded direct-to-consumer promotion will be a significant factor in raising Vascepa awareness among people who might benefit from Vascepa and health care professionals who are not otherwise called upon by Amarin's sales team. While we anticipate meaningful growth in Vascepa prescriptions prior to launch of such branded consumer promotion, the DTC program is anticipated to provide further inflection upward in such prescription growth.

Regarding managed care coverage for Vascepa. Overall, the coverage is good. We are working to improve it. At the start of every year, there are changes in managed care coverage. Changes at the start of 2020 were, in aggregate, favorable. Managed care plans with expanded coverage for Vascepa exceeded those with restrictions. Such beginning of the year coverage changes were decided by payers before FDA approval of the expanded label for Vascepa in mid-December. Following FDA approval of the expanded label for Vascepa, our managed care team and our medical affairs team have been interacting with payers to ensure that they appreciate the clinical benefit of Vascepa, the FDA approval, the pharmacoeconomic analysis of Vascepa and the guidelines of multiple medical societies which recommend use of this drug without substitute.

In recent weeks, we have learned of more payers removing prior restrictions to Vascepa coverage, including Blue Cross Blue Shield plans of Michigan, North Carolina and Arkansas. We are confident that additional payers will move to expand coverage of Vascepa. Some of this further improvement should occur because of our educational initiatives with payers and because it is the right thing to do. Some of this improvement is likely to occur because patients and physicians insist that this new class of preventative care therapy be broadly covered by insurance. The voices of physicians and patients are powerful in this regard.

Insurance coverage for patients can be particularly tricky in the early part of a calendar year. This is due to beginning of the year insurance deductibles that are part of the coverage provisions under various insurance plans. Such beginning of the year deductibles are independent of insurance coverage for individual drugs. As discussed in prior years, these beginning of the year deductibles often result in patients forgoing filling their prescriptions, creating a seasonal effect. As expected and as guided at the start of 2020, we are again seeing this impact this year. However, we are also seeing an increase in the number of new prescriptions to patients and an increase in the number of physicians prescribing Vascepa. Such increases should continue to contribute to growth year-over-year.

The amount a patient is required to pay out of pocket for Vascepa is determined largely by the patient's insurance plan and not Amarin. The insurance plan decides whether the patient is subject to deductible and the amount of the deductible. Most payers have Vascepa covered on Tier 2, which is good. The amount of deductible varies. Deductible amounts from nongovernment insurance can be offset by co-pay cards. Amarin continues to make co-pay cards broadly available for Vascepa.

Recently, it was announced that Epanova, the product that many people thought could become the strongest competition for Vascepa, had its outcome study, the STRENGTH trial, discontinued early. Epanova is an omega-3 mixture in free fatty acid form containing DHA and slightly over 50% EPA. While the details behind the termination of that study are not yet public, it appears clear that AstraZeneca won't be pursuing a cardiovascular risk reduction indication based on STRENGTH. Epanova joins a long list of products that failed cardiovascular outcome studies on top of statin therapy. Earlier examples include niacin, fibrates, DHA-containing prescription and dietary supplement omega-3s. Only pure, stable, prescription Vascepa is proven to reduce major adverse cardiovascular events in high-risk patients and only Vascepa is proven for this indication by the FDA.

We look forward to learning more about the results of the STRENGTH trial. Data from that study may provide further helpful insights into differences in effects between EPA and DHA and between esterified fatty acids and free fatty acids. On the surface, the termination of such study further supports that stable and pure EPA is unique and has multifactorial effects beyond triglyceride lowering and adds further to the growing questions about ways in which DHA may offset the positive impact of EPA.

It also raises questions about whether short-term testing of free fatty acids provides reliable information regarding effectiveness for chronic use compared to esterified fatty acids. These differences and uncertainties, together with the high bar established by proven cardiovascular risk reduction with Vascepa, are likely to increase clinical research while heightening the multiyear testing requirements of potential future competitive products in this field.

For avoidance of doubt, when I refer to pure and stable EPA, I am referring to icosapent ethyl, marketed as Vascepa. The reference to stable is a reminder that EPA is fragile. It is easily damaged by, for example, heat; or degrades if exposed to oxygen. The clinical effects of oxidized EPA are not proven to be effective and is only pure and stable EPA in esterified form as delivered by Vascepa that has been shown to be effective.

Recently, the American Association of Clinical Endocrinologists added icosapent ethyl to their guidelines as a therapy to use if statins alone don't get patients' medical profiles to recommended levels. They join other medical societies with icosapent ethyl in their guidelines, such as the American Diabetes Association, European Society of Cardiology and National Lipid Association. These medical societies and their guidelines appreciate that there is no current substitute for Vascepa to lower the risk of cardiovascular disease in appropriate patients beyond statin therapy. In particular, the guidelines from these medical societies appreciate that triglyceride-lowering agents, other than Vascepa, have all failed to show outcomes supporting that the effects of Vascepa go uniquely beyond triglyceride lowering.

Internationally, we continue to work with our existing commercial partners in Canada, China and the Middle East to advance Vascepa. Health Canada, at the end of 2019, provided approval to our Canadian partner, HLS Therapeutics, to market and sell Vascepa in Canada. HLS started selling Vascepa very recently in what is likely to be a phased launch starting with a core sales team and expanding from there. Our partner in China, Eddingpharm, is progressing with its clinical trial with anticipated completion before the end of 2020. We are told by people who are closest to that trial that they do not anticipate any delay in completion because of coronavirus.

The European approval process for a cardiovascular risk reduction indication for Vascepa is ongoing, and so far, has proceeded as expected. We submitted our European marketing application as a centralized filing to the European Medicines Agency or EMA. And as we announced at the start of December, it was accepted for review. The Day 120 letter from EMA, which contains questions and requests for additional information, is expected near the end of March 2020. Similar to what was pursued and approved in Canada, in Europe, we are seeking an indication for cardiovascular risk reduction. Our decision to not seek approval in Canada for triglyceride lowering has preserved the 10 years of regulatory exclusivity available for a new product in Europe for use with the indication we are now seeking. We anticipate patent protection to extend beyond 10 years relating to Vascepa in cardiovascular risk reduction in Europe.

While Amarin could launch Vascepa in Europe on its own, initial expressions of interest for European marketing rights to Vascepa have been robust from multiple established and capable commercial players. However, for reasons discussed in prior investor communications, we have been deferring more complete exploration of such interest. If there are no surprises from the initial review by European Medicines Agency, with the early steps of our Vascepa launch in the United States well underway, we intend at that time to increase our attention on commercialization opportunities for Vascepa in Europe in preparation for our expectation that we will receive approval in late 2020 from the EMA to commence Vascepa marketing and sales in Europe.

The need for preventative cardiovascular care beyond currently available therapy is very large in Europe as it is throughout the world. In Europe, there are more than 80 million people living with cardiovascular disease. This number is growing with approximately 11 million new cases of cardiovascular disease added each year in EU countries. Cardiovascular disease results in approximately 1.8 million deaths each year in Europe, on top of large numbers of debilitating events such as strokes and heart attacks resulting from cardiovascular disease. Caring for cardiovascular disease in Europe is expensive, with annual spending estimated to currently exceed EUR 20 billion annually. These data, combined with clinical results with Vascepa, likely contributed to the medical guidelines issued by the European Society of Cardiology and the European Atherosclerosis Society recommending use of icosapent ethyl. Numerous key opinion leaders in Europe are urging for the approval of Vascepa in Europe to help them improve care for their patients.

With respect to Amarin's ongoing patent litigation with generic pharmaceutical companies, you are likely aware that the trial portion of the litigation was completed in late January. Post-trial briefs are expected to be publicly available on the court docket on February 28.

As previously expressed, Amarin does not plan to provide commentary regarding details of this ongoing litigation. Based on court proceedings, the court's decision on this matter is expected near the end of March. Amarin's commercial plans assume that the courts uphold our patents and otherwise ensure that Amarin retains the exclusivity, which we believe we deserve under the law. Such exclusivity will support Amarin's further promotion and education, leading to expanded use for the benefit of millions of at-risk patients. In my view, it would be a considerable setback to pharmaceutical development and patient care if we do not prevail in this litigation. As we've described before the litigation began, while there is risk in any litigation, we believe that our legal arguments are persuasive and should prevail. The U.S. Patent Office was convinced of the appropriateness of our patents, and we believe that the court should conclude similarly.

Amarin has made considerable progress in the past year. In many respects, we are just getting started. A year ago, there were 4 primary areas of concern expressed to us by investors: one, FDA approval of an expanded Vascepa label; two, competition from Epanova; three, adequacy of our financial resources; and four, results of the ANDA litigation. 3 of these 4 have been successfully addressed; with the fourth, the results of the ANDA litigation, scheduled to be addressed soon. As previously stated, based on court proceedings, the court's decision on the ANDA litigation matter is expected near the end of March. After the decision is published by the court, we will update our stakeholders with regard to this litigation.

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

Thanks, John.

As mentioned at the start of this call, both our 2019 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 various details which go beyond the highlights I will cover in today's call. Because our actual results for 2019 and financial guidance for 2020 are consistent with what we communicated at the start of 2020, I intend to be brief in my financial review.

John reported that our 2019 full year normalized scripts increased 78% while our revenue increased 87%. Both percentage increases represent solid growth and reflect strong execution by our commercial organization. Differences are not uncommon between script numbers, which are estimated by third parties and product shipments for which we have direct records and upon which we recognize revenue. We have, on various prior occasions, provided explanations for such differences. I will summarize such explanations here as a question is likely to otherwise be raised.

As a reminder, Amarin recognizes product revenue when its customers, consisting mostly of independent commercial distributors, take title to the product they order. This is typical practice for pharmaceutical companies. Amarin revenue is not recognized when individual patients fill prescriptions. One factor which in some reporting periods explains such differences is changes in channel inventory levels. That explanation was not a major factor in our 2019 results as channel inventory levels have stayed within normal and consistent industry ranges.

Another explanation for the recurrent discrepancies between script and revenue numbers is limitations of the data available to the third-party prescription reporting services. Because of practical limitations, they rely on incomplete prescription information for their algorithm calculations. As in the past, such algorithms seem to be delayed in reflecting inflections upward or downward in growth. For 2019, our growth was faster than reflected by the algorithms from these third-party providers of script estimates. As you recall, in the past, on a quarterly basis, they have sometimes overshot and other times undershot in their script estimates.

While Amarin anticipates that net total revenue will increase in each quarter of 2020 compared to the corresponding quarter of 2019, at this time, the company is not providing quantified revenue guidance by quarter. There is not a good analogue to follow regarding a market potential of this magnitude being created by a product with the robust clinical results as demonstrated by Vascepa. This is particularly true for preventative cardiovascular care.

The company anticipates continued industry-wide seasonality regarding prescription growth with, for example, Q1 impacted by annual headwinds caused by beginning of the year insurance deductibles under various health insurance plans. Such beginning of the year headwinds are not specific to Vascepa, nor should comments be interpreted as an expression of concern regarding our anticipated Q1 growth. Rather, such comments are intended to be constructive reminder that historically, the therapies which are most significantly impacted by such seasonal headwinds are therapies which address chronic, asymptomatic medical conditions similar to Vascepa. We believe that it is most insightful to review Vascepa growth on year-over-year corresponding period basis rather than on a consecutive quarter basis. In prior years, we have communicated similar advice regarding seasonality. In each of those years, investors expressed to us in Q2 that they wish that they had listened. We will see whether the same pattern repeats itself this year.

We are often asked whether we expect gross margin to further improve with higher volume of Vascepa production. The answer is that, while we do expect further improvements in our gross margin primarily due to lower cost of goods with significant increase in volume, we do not expect to see major improvements in our gross margin as Vascepa is an expensive product to manufacture. As a reminder and for reference, we have improved our gross margin from 66% in 2015 to 78% for 2019. As we grow, we believe that it is possible that our gross margin as a percentage of product revenue may approach 80%, although reaching that gross margin level in 2020 is not currently expected.

Our cash balance on December 31 was $644.6 million. Regarding our cash balance, we today reiterate the guidance we provided in our January 7 press release, which is that we believe our current cash resources are adequate to reach positive net cash flow based on Vascepa following its launch for its new FDA-approved cardiovascular risk reduction indication, assuming other significant variables remain in line with our expectations.

We also reiterate our full year 2020 net total revenue guidance of $650 million to $700 million. And we reiterate our 2020 spending guidance, as defined in our January 7 press release, including guidance that we expect to spend approximately $250 million on inventory in 2020, which is approximately twice the amount we spent for inventory purchases in 2019. Such guidance also includes that we expect operating expenses to increase approximately $200 million to $250 million in 2020 over 2019 levels. Included in these higher operating expenses are previously described increased costs associated with the company's planned expansion of its sales team and other expanded Vascepa promotional activities, including direct-to-consumer advertising.

In the event that net total revenue grows faster than expected, selling, general and administrative or SG&A expenses may be higher than reflected in this operating expense guidance. Our 2019 results reflect significantly expanded levels of commercial spending compared to 2018. Such added spending supported our reported 87% increase in total revenue during the 2019 year, of which growth was faster than we expected at the beginning of 2019. Our spending was limited as we waited for FDA approval of Vascepa for cardiovascular risk reduction. While waiting, the pace of revenue growth exceeded the pace of spending growth which showed up both in reported cash flows, which included multiple positive cash flow quarters in 2019 and in our bottom line operating results.

You will note that for Q4 2019, we reported net income. While we are working to achieve sustained and growing net income, given our increased spending assumptions for 2020, which includes a significant increase in the size of our sales force and our planned marketing initiatives to robustly launch Vascepa, we anticipate that we will revert to net losses before achieving sustained net income. Similarly, we anticipate starting 2020 with net cash outflows for the sales force expansion as new members of our expanded sales team become productive and as our other forms of expanded promotion take hold.

Management reiterates that we believe spending levels are likely to vary quarterly. We will consider further expanded promotion, including potential further sales force expansion, if the pace of our revenue growth exceeds our expectations and if such added promotion can be reasonably predicted to pay for itself on a reasonably prompt basis. Our sales team's leadership believes that this is achievable. We hope that they are right. However, it is too early to make judgment in this regard and changing prescribing habits for physicians often does not occur immediately even when the physicians concur that the clinical data is compelling.

Our planned spending supports our guided revenue growth. We will continue to evaluate opportunities for further acceleration of such growth. If we become confident that we can do so, we will be happy to adjust our expectations and to make such adjustments publicly known. That being said, our current expectation of growing revenue to $650 million to $700 million in 2020, assuming achievement, will be substantial, particularly as we are creating a new market for cardiovascular risk reduction beyond statin therapy.

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

Thank you, Mike.

I thank our shareholders for your support. I also thank our employees and many collaborators for your tremendous contributions. We have a very capable team at Amarin, and we are confident in our ability to continue to execute effectively. We are motivated to do so for many reasons, not the least of which that we are passionate about improving patient care and because we, too, are Amarin shareholders.

Amarin will be participating in 2 upcoming investor conferences: The first is tomorrow, the Leerink conference in New York City; the second is the Cowen conference in Boston on March 2. We look forward to seeing some of you at those conferences.

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

(Operator Instructions)

And our first question today is from the line of Michael Yee with Jefferies.

Two questions and neither of them are about the patent. I'll let someone else ask about that. In the U.S., could you provide some more color around thoughts around Q1 seasonality? In other words, scripts do appear to be growing, but you made a comment about how maybe third-party data may not be so accurate if something is changing in the algorithm or some label change or something like that. Can you maybe talk about that and whether it's possible that sales in Q1 could be flat or sequentially down? Just what would you expect versus what scripts are growing?

And then in Europe, my question is around your comments about the potential for approval at the end of the year. Do you expect to hire a sales force there? Is that in the guidance -- in expense guidance? Or when would you think about that because that can take some time? And I thought you made a comment about how the patent could be longer than 10 years out there. So just maybe talk to that.

Michael, thanks for the questions and interest. With regard to the U.S. seasonality, this is not new to us, nor is it unique to us. We've seen Q1 every year on a year-over-year basis have good growth, but on a consecutive quarter basis, in this case, compared to Q4 of the prior year, often drop off. That included even last year where we were coming off of a result presented at AHA and really very terrific results. So we saw last year even because of this, we saw close to 40% of patients who were on the drug not fill prescriptions in the first quarter of last year. Now a lot of those patients end up circling back later, but these patients are sick patients. They're often on 5, 6, 7, 8 therapies. And if they've got, for example, a $5,000 co-pay and they go in expecting on a monthly basis an aggregate for those 5, 6, 7 drugs to pay a co-pay of, say, $200 to $300 and they get told that it's $3,000, they start making decisions. And one of those decisions tend to be, "I've got to pay for my pain medicine, but I curtail my spending elsewhere." So we anticipate that we will, despite the very positive results with Vascepa and the benefit that it provides for patients, be subject in Q1 of this year to some of that spending discretion of patients.

Now we also expect that to be offset and we've seen early signs of that this year as we did last year, offset by new patient prescriptions. As to the degree to which the new patient prescriptions will offset the decline in refills in the first quarter, that remains to be seen. I think we had very good NRx numbers in the first quarter of last year. We're hoping for the same this year. But even with those strong NRx numbers in the first quarter of last year, we had some downward revenue numbers versus that fourth quarter. And then if patients start refilling in the second quarter and we had good growth thereout. So I know various investors -- I'm sure you're too smart for this, Michael, various investors have done simpler models that just say, you're going to grow on a consecutive quarter basis and they just sort of build it that way. That's a bit flawed. If people look at things on a year-over-year basis, I think that those patterns are much more predictable.

Because we are with an expanded sales team that's still getting its legs on the ground, I talk about the expanded sales team just for perspective, I think it's fewer than, I think probably fewer than 5, but certainly fewer than 10 of the sales reps that we're still looking to hire at this point in time. I don't know, about 50 or 60 of them haven't completed all their training yet, but some or even the ones that have completed training have just completed it here recently. So that stuff is taking root. We'll see how those NRxs do in terms of offsetting this industry-wide, but particularly chronic therapy impact of this seasonality. Again, not new to us. I don't see it as a negative reflection on the drug. It's just the way that the insurance payments are. As Mike Kalb had commented, often have had investors in Q2 say, oh, geez, I should have seen that coming, as things start picking up again as patients come back on therapy. So hopefully, those comments are helpful there.

With regard to EU, we are doing a lot of work already and which is built into our numbers relative to EU-related planning. That includes pharmacoeconomic analysis, preparations for reimbursement, which needs to occur on a country-by-country basis, mapping out how one would approach a sales launch in Europe. As we have done throughout much of Amarin's history, we use a combination of employees and contractors, sometimes as individuals, sometimes as consultants to do that work, and we're taking a similar approach to that in Europe at this point in time.

So our aim is to be in a position that if the right answer is for us to launch in Europe that we could do that, but we're also going to be in the time frame described previously. Focus and timing is all important here. Focus got us successfully through the REDUCE-IT study. Right now, I don't think there's anything more important than we could be doing globally than to ensure that we're successful with the launch here in the United States. So as we've talked about, let's get the initial comments back from EMA. And at that point in time, we will get into more active dialogue with the various companies who think that they should be our partner for Europe and then we'll make some choices from there. But spending for putting ourselves in a position to be able to either partner or to launch ourselves are in the guidance that we've provided. That being said, if we were to be launching, our assumption is approval in fourth quarter. So the real expense of the launch, if we were to do it ourselves, really isn't predominantly in 2020, it would be in the following year. So hopefully, those comments are useful.

Our next question is from the line of Yasmeen Rahimi with Roth Capital.

Congrats on the continued tremendous progress that you're making. John, thank you for sharing with us that 8 abstracts have been accepted at upcoming ACC. I would love to hear your thoughts to the extent that you can give us color on the late breaker, which is supposed to show us EPA levels of REDUCE-IT and related to cardiovascular outcomes. Can you maybe tell us a little bit how that data set is different from what we have seen at last AHA to the extent that you can?

And then the second question is, in regards to the failure of STRENGTH. As you've been discussing with physicians as well as some of the top experts in the space and third-party providers, has the failure of STRENGTH created sort of even a stronger buzz for Vascepa? I would love to hear sort of the sentiment that you're getting on the heels of that.

Yasmeen, thanks for the nice comments and for the questions. With regard to your first question on ACC, we are very pleased by the attention that is coming our way for publication and research. You may remember, particularly those who have followed Amarin for a while, we had publications coming out of the successful Phase III ANCHOR and MARINE studies for 5, 6 years after those studies were completed, that the more you dug, the data has kept getting better and better and better. And I suspect here with REDUCE-IT, we'll be having streams of publications that will be lasting years as well. So we are looking forward to the multiple presentations that are coming up here in March at ACC. And as commented on the call, we will be having a webcast of summaries of those presentations by some of the authors of the various items.

With respect to the late breaker, the ACC is very adamant that we not describe details of it. If we do describe details of it, it jeopardizes our ability to make the presentation at ACC. And we think that having information disseminated in a peer-reviewed setting and in front of various cardiologists and other leading physicians is valuable to the brand and its opportunity to help millions of patients. So I can't comment on details there other than to say that we are looking forward to it. We'll provide update as that becomes public.

With regard to the failure of the STRENGTH study. I think it's probably in a minor way helped us, but we had been expecting all way along that our results would be differentiated from what they had. I think to the extent that it helps us, it probably helps us in the 2 following ways: Our managed care coverage is already good. We have managed care coverage on commercial plans that puts us on formulary at about 85% roughly of covered lives for commercial plans and approaching 95% on Medicare Part D plans. On the Medicare Part D plans, some of them have some higher co-pays. We're working through that, but most of them don't have restrictions.

There are about 1/3 of the commercial plans that have restrictions predominantly to our prior label. And as we talked about, we're working through those. I mentioned in the call 3 plans where the restrictions have been removed. And that's somewhat extraordinary in the sense that once you're on formulary, getting formularies to change coverage midyear, often they have their reviews of those things annually, typically only not more than twice a year. For them to do something off-cycle is really, I think, a reflection of the enormity of the value of Vascepa in terms of benefit to patients, but also the cost effectiveness that's been demonstrated through real-world data, but also through the couple of pharmacoeconomic analyses that have been presented, one of which showed that Vascepa even at twice the price would be cost effective and the other that went beyond that and looked at full costs and showed that Vascepa saves money for society overall in most scenarios.

And to the extent that managed care might have said, "well geez, let's wait and see what the other study looks like," which is sometimes the pattern to try to have multiple drugs competing against each other, not having that drug coming along sort of takes away that potential approach for managed care. Now we think we already have a very effective and affordable price. I mean, as the price of Vascepa is comparable to where atorvastatin was before it went generic. It's about, I don't know, the new diabetes drugs are 2, 2.5x higher. The PCSK9s are much higher. So we think that Vascepa is actually a bit of a bargain for them, but I think not having that other product coming will probably help us move faster in removing some of those remaining restrictions relative to Vascepa. And we've had some of the investigators from the STRENGTH study reach out to us, seeing how they could get involved and wanting to learn more. And certainly, hopefully, some of those patients from the STRENGTH study will circle over and become users on Vascepa.

Because I digressed and went a little bit into managed care, I do want to just point out that while there can always be improvements on managed care, our managed care coverage is good. And a lot of drugs, if they're launching are, how are you going to get on formulary? We're on formulary. What we're trying to do is improve the formulary coverage. But our real challenge is one of education. The coverage is there. It's education and it's making up for the fact that for so many years, we were spending almost all of our resources on research and development. And now we're getting into the commercialization of it. This is a transformative year for the company in that regard. And we're going to be the one and only. The high hurdle that we've created based upon REDUCE-IT results, I think, is going to make it very difficult for someone to come up behind us. So it's up to us to make sure that we're doing the right thing here to help millions of patients. And this is one of those areas where we can help patients and shareholders at the same time, and we're proud to be doing so. Hopefully, those comments help.

Our next question is from the line of Louise Chen with Cantor Fitzgerald.

Congrats on the quarter. So my first question for you is with respect to your sales guidance, did you include anything for the EU in that guidance? And then secondly, you had mentioned some additional improvements in coverage in the coming months. Can you provide any more color on how that will translate into sales or what you expect there? And then the last question I had for you was with respect to who is prescribing Vascepa. Is it mostly specialists? And then is that mix going to change over time to more primary care as you get out with this new label and your promotion? Any thoughts there would be very helpful.

Louise, thanks for the questions. With regard to our guidance, no, there's not anything in there for the EU. If we were to get approved and launched this year, net revenues for the EU, that would be incremental.

With regard to coverage improvements, as just mentioned, I think our real upside here is through education, awareness and usage. We are anticipating improvements in managed care coverage to the extent that, that improvement were to happen faster than what we're expecting, that could be upside, but we have baked into our expectations that we will get continued improvement in guidance. Some of which we saw at the beginning of the year, some of which we've referenced has happened here earlier and some of which we have seen occurring here in the first quarter.

With respect to who's writing the drug today and where that might come from in the future, I'm accompanied here by various of our team. Let me turn that one over to Aaron Berg, our Chief Commercial Officer. Aaron?

Thanks, John, and thanks for the question, Louise. Right now about 80% of the prescriptions come from PCPs that includes NPs, PAs; cardiologists are about 15% and growing rapidly; endocrinologists are another 5%.

The fastest-growing group amongst those on a percentage basis is the cardiologist followed by the endocrinologist. The specialists are growing faster, but there's just many, many, many more primary care physicians. So in aggregate, volume of the primary care is making up the biggest increase. And that's consistent with what Aaron's team has expected.

And on the growth, I mean, last year, in terms of overall growth, we had about 87% increase in revenues. We had about a 50% increase in prescribers. So that shows that existing prescribers are prescribing more, but we also had more prescribers coming on. And a lot of those added prescribers certainly included cardiologists and endocrinologists, but the biggest piece of that was in primary care.

Our next question is from the line of Jessica Fye with JPMorgan.

This is Yuko on the call for Jessica. I know it's early days, but how are the new reps tracking from a productivity standpoint? I think with the prior sales force expansion, you talked about how they hit and exceeded target productivity metrics ahead of schedule.

A good question. Certainly, something we're monitoring. It really is too early. Some of them aren't even in the field yet. Some of them have just gotten into the field. I think last year, what we expressed was that when we got to about midyear, these were comments that we were making in August in our investor call and investor meetings that by August about 90% of the sales reps that we had hired and were onboard were covering their cost, which is really fast for new sales reps, but they weren't covering their costs in the first quarter. Last year, with the new sales reps, we had anecdotes of progress. This year, we've got anecdotes of progress, but it really is too early to make judgment there. I think we've hired terrific people. We've got terrific managers. The launch materials are crisp. It's nice to be out with an FDA label which makes the description of what we're doing much easier. I think the other promotional materials, and particularly when we get to DTC advertising, I think is going to help lift things considerably. But with regard to new sales reps' performance, anecdotally encouraging, but really too early to make any judgment. Let's hope they do what was done last year, but it's too early to make that conclusion. So thanks.

Our next question is from the line of Paul Choi with Goldman Sachs.

John, maybe one question just on the new prescription growth. Could you maybe speak to what percentage or mix, I guess, is coming from first time or new prescribers? And how much of that versus your new expanded physician target base you feel like you're hitting at this point? And then I have a follow-up with an operational question.

Yes. So I'll make some comments. Aaron, if you have other things you want to add on to this, let me know.

So to really get into answering that question requires us to look at the country in sort of a divided way. Our sales team last year was calling on about 50,000 docs, not calling on with a high enough frequency, but with a lot of white space in the country and calling on docs for the first time. We now have much less white space in the country. And we are increasing the frequency of our sales calls because while we've doubled the sales force, we've increased the number of targets by about 50%. So to really sort of get into that, I think you've got to look at where were we calling on people and what was the impact in the areas that we were calling on people. And there, as we added docs and we went last year from about 20,000 targets to about 50,000 targets, the preponderance, I think over 80%, and Aaron will correct me if I'm wrong, over 80% of that expanded target group became prescribers of Vascepa last year, which is encouraging. There clearly were prescribers added who we're not calling on as well. And now with the label, all of these prescribers have significant opportunity to increase their prescribing. From where we are now, we're looking at both the, how do we take prescribers who we probably weren't calling on. In fact, we're convinced we weren't calling on frequently enough last year and increase their awareness now we have a new label, they're still somewhat early to the Vascepa story, but also go to new targets, some of which are really being introduced to Vascepa for the first time.

I don't know, Aaron, if you'd care to add further?

Paul, thanks for the question. As John said, we've done very well increasing the number of prescribers. Our real opportunity is with our frequency to drive volume in those prescribers. We still have a small percent of the entire lipid market. As you know, it's a very large market, and that's our opportunity. And that's our plan is, get more out of those prescribers, and that will drive our success.

I'm looking at the clock. Go ahead, Paul. You have one more or no?

Yes. Yes. Just as a follow-up. With regards to your supply chain, some of your API suppliers are from Asia. Could you maybe speak to your amount of inventory on hand and just how you're thinking about potential contingencies, if anything, from your overseas suppliers in Asia gets affected or impaired by some of the current things going on there?

So we are globally diversified in our supply chain. We were producing nothing in China for our product. And as you may recall, we ended up last year getting out ahead of this by making sure not only are we diversified, but which does mitigate risk, but also that we were building inventory volume. So certainly, the nature of our manufacturing process precludes any product issues, but in terms of supply chain interruption, it would have to be pretty catastrophic before we would have to worry about either the ability of us to get product from multiple regions of the country or for us to burn through the WIP that we have in hand of nonencapsulated oil, which is the encapsulation can happen here in the United States or the surplus we have of inventories that we've built up here because we just don't know how fast the revenues are going to grow. So I know lots of companies are impacted by that, but I would consider us to be somewhat in the lower end of the risk spectrum unless coronavirus becomes sort of to the extent people just aren't even leaving their homes, but I think, in which case, much bigger issues. So I think we're okay there.

I'm looking at the clock. I've been giving advice for investors over the years that these things really shouldn't go beyond an hour. Hopefully, these comments have been useful to you. I do think that Amarin (sic) [Vascepa] is rapidly becoming a new standard of care. It's clearly the fastest-growing cardiovascular drug that's out there. We're pleased with the results that we had in 2019. We think we're off to a good start here in 2020. This is a transformational year for us, and we look forward to providing you with additional updates as we move forward. So thanks a lot for your interest today and look forward to speaking with you soon. Bye.

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