Amarin Corp Plcuk Q4 FY2022 Earnings Call

Thank you, Holly. Good morning, everyone, and thank you for joining us. 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. We may not 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 risk factors that could cause actual results to differ materially, please see the Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2022, which have been filed with the SEC and are now available through the Investor Relations section of our website at www.amarincorp.com. We encourage everyone to read these documents. This call is intended for investors in Amarin and is not intended to promote the use of VASCEPA/VAZKEPA. An archive of this call will be posted on Amarin's website in the Investor Relations section. Karim Mikhail, Amarin's President and Chief Executive Officer, will lead our discussion, and Tom Reilly, Amarin's new Chief Financial Officer, will provide a more detailed review of our fourth quarter 2022 financial results. After prepared remarks, we will open the call to your questions. I will now turn the call over to Karim Mikhail, President and Chief Executive Officer of Amarin. Karim?

Thank you, Lisa. Good morning. And thank you all for joining us today. While 2022 was a challenging year for Amarin, it was also a year filled with significant accomplishments that we believe have created the foundation for our future and gives us confidence that 2023 will be a year of tremendous evolution for the company. We are only beginning to see the results of the actions we took in 2022, and already in 2023. Throughout the remainder of this year, as each piece falls into place, we will be able to see more clearly a successful turnaround and the growing business that we have been building internationally. Amarin is in a unique position as we are building value for a product outside of the U.S. while facing increasing genetic competition in the U.S. market. Our company is made up of people who come to work every day because they believe in our bold vision to stop cardiovascular disease from being a leading cause of death. This vision is what drives us. I'm proud of this team and what we have been able to accomplish together, and I'm excited for what we are able to accomplish in the future as we continue to execute on our strategy. Today, I will briefly summarize the actions that we took in 2022 in the spirit of operational excellence to create value over the long term and bring VASCEPA, VAZKEPA to as many eligible patients as possible across the globe. I will also provide an update on our launch in the UK and where we stand with our plans for global expansion. I will provide an update on our results in the U.S. where the team's efforts to stabilize this business are providing the support for our global commercialization efforts. I will then briefly discuss Amarin's presence at the upcoming ACC meeting. Tom will then discuss our financial results for the fourth quarter and our guidance for 2023, and I will conclude with a look ahead at the remainder of 2023. In 2022, we focused on three main areas: global commercialization, preserving our cash, and ensuring that we have the right talent to execute on our new global strategy. We began the year 2022 negotiating pricing in one market in Europe and ended the year with our product available in five European markets. Since the beginning of 2023, we have added a sixth country, Switzerland, where we have received individual reimbursement in February. We also have an additional five European markets in advanced stages of pricing and reimbursement negotiations. Our objective is to conclude the vast majority by the end of 2023 as we focus on building a diverse and sustainable revenue stream in Europe. In Spain, we remain active in the reimbursement process and are confident in our ability to secure pricing in this market. We have gone through two rounds of review and made solid progress. We anticipate a potential third round of review imminently. In the Netherlands and Italy, we are in advanced stages of our price negotiations and are optimistic a decision could come around mid-year for these markets. We're also making good progress in France, which typically can take slightly longer than the other markets based on historical benchmarks. Other markets such as Norway, Portugal, Israel, and others are also progressing with potential decisions expected this year. We focused on preserving our cash. In the first quarter of 2022, we saw almost $100 million in cash burn with new members on our management team. We took swift action to renegotiate supply purchase arrangements. We also implemented a comprehensive cost-saving plan in June, and today, we are excited to announce that we are on track to exceed our $100 million cost-saving target. Thanks to our continued fiscal discipline and cost-cutting efforts, which Tom will discuss in more details later in the call. These actions resulted in a cash flow positive fourth quarter and a year-end cash balance of more than $300 million. Lastly, we also built a strong European commercial organization with expertise in medical affairs, product launches, and with extensive cardiovascular product knowledge. Many of our team members come from companies where they successfully commercialized blockbuster drugs and have significant contacts, expertise, and knowledge of their respective markets. These professionals came to Amarin because of our leading product, our unmatched data, and our entrepreneurial culture, and they are utilizing their background and leveraging their experience to build the Amarin business and brand in Europe. This European team also benefited from the valuable experience that our U.S. colleagues had building the brand successfully over several years in the U.S. market. I'd like now to focus on providing an update on the UK. First, I think it's useful to provide a reminder of the key highlights. We completed our NICE application in July of 2021, spent the year focusing on securing final NICE approval, which came in July of 2022. Ninety days later, in October of 2022, the NHS funding was made available to begin adding VASCEPA to formularies, and in November of 2022, the national guidelines were published, and they included VASCEPA's place in therapy for UK patients. All of these steps and achievements were critical to help us establish a strong position for launch in this market. When we look at the pricing of VASCEPA compared to other oral analogs in the UK, we are extremely well-positioned. Thanks to the efforts of our local team. Given the volume of data available for VASCEPA and the efforts of our local team in conveying the value this product brings to patients, our pricing from a daily treatment price perspective far exceeds oral analogs across the cardiometabolic spectrum of products in the UK. When we look at the market access picture of VASCEPA in the UK, initial market access is trending ahead of other recent comparable launches in the market. Our team has unlocked 19 out of the first 20 priority accounts, which collectively represents 50% of the eligible patient population for VAZKEPA in the UK. As a reminder, the UK is a market that has historically grown slower initially in terms of revenue. Based on these trends and the price achieved, we believe there is a viable, strong and long-term business opportunity for VAZKEPA in the UK. Moving now to our progress on global expansion outside of Europe. As a reminder, we set out to achieve more than 20 regulatory approvals between 2022 and 2024 in international markets. We achieved our 2022 objective of getting approvals in six markets, and already in 2023, we received an additional regulatory approval in New Zealand. And yesterday, following this important approval, we announced an exclusive license and distribution agreement with CSL Seqirus in Australia and New Zealand. We are excited to announce this agreement with CSL Seqirus, a world-class pharmaceutical licensing and distribution partner. CSL Seqirus brings highly experienced market access and commercialization teams in Australia and New Zealand that are well positioned to support pricing and reimbursement efforts for VAZKEPA, particularly with their strong record in successfully supporting pharmaceutical benefits listings, and eventual marketing and promotion to help us deliver this important medicine to patients in these countries. Importantly, both Australia and New Zealand contribute significant numbers of patients to reduce it, so it is gratifying to know that we are moving in the direction of giving patients and physicians access to the product there. We expect the next wave of approvals to include China through our partner Eddingpharm. Regarding China, our partner Eddingpharm is in charge of the regulatory review process. In their latest update, Edding indicated they expect an approval by mid-year as a result of delays related to the shutdown of the regulatory process in China for a period due to COVID-19 restrictions. We are working very closely with Edding to ensure we have the latest update from our partner. As of today, we have not received any indication that there are any open questions or concerns regarding the regulatory filing for our product. In Canada, HLS Therapeutics has gained reimbursement from all major private and public payers, gaining access to a majority of eligible patients in Canada. HLS continues to be in the launch phase in the public sector, and they are seeing stronger growth with the product in provinces where public access was secured. We are also actively negotiating potential agreements in the Asia-Pacific and Central Eastern European regions, which would enable us to get this important product into the hands of clinicians and patients, and ensure we can extract value from these important markets. I'm pleased with the progress we have made in advancing international expansion plans. We remain focused on our core future objective, which is global growth and expansion for VASCEPA/VAZKEPA in Europe and internationally, as we believe expansion is the key to creating value for shareholders. We remain confident in the multi-billion-dollar market opportunity for VASCEPA/VAZKEPA in Europe and internationally. Moving to our U.S. business and our plans for ECC 2023, in the fourth quarter of 2022, we recorded $90.2 million in total net revenue, including $88 million in U.S. product sales. In line with last quarter despite the continued pressure from generic competition. This is the fourth quarter of four consecutive quarters of revenue stabilization in the U.S. in 2022. This unique achievement was only possible through the relentless dedication and efforts of our highly experienced U.S. team on the field and with the managed care organizations. We are continuing to maintain our share in the IPE market. Our trends in January and February support continued stabilization of the business. In the first quarter, we're experiencing typical pharma seasonal trends that branded products like VASCEPA can expect in the U.S. from fourth quarter to first quarter, driven by co-pays and deductibles resetting for patients and their healthcare plans with a new calendar year. We also expect to see some continued price erosion this year, as we continue to experience generic competition. Tom will talk in more details about what we can expect shortly. One compelling fact is that our U.S. team has generated more than $1 billion in sales since generics launched in 2020. We continue to have multiple levers we can consider to maintain our profitability. As I mentioned earlier, our cost savings are ahead of plan, and we have the ability to launch either a brand generic or an authorized generic as needed and at the right time. While we are planning carefully for all potential scenarios, it is clear today that the strong and nimble infrastructure we retained in the U.S. provides us with the right team to continue to support business stabilization in the near term. Lastly, we continue to benefit from the strong data that we have generated with reduce four abstracts that were accepted and will be presented at the American College of Cardiology meeting taking place later this week in New Orleans. We are excited to share new findings from the reducer trial that add to the wealth of data that has consistently validated the utility of VASCEPA in treating patients’ populations at high risk of cardiovascular disease. This important information coupled with the analyses comparing the antioxidant effects of EPA, DHA, mineral oil, and corn oil should help advance the medical community's understanding of the role and value of VASCEPA and EPA to reduce cardiovascular events in at-risk patients globally. We remain committed to investing in our data and our medical presence with a global focus to support the medical education efforts for the launches of VASCEPA, VAZKEPA around the world. With that, I'll turn it over to Tom to talk more about our progress and strong results this quarter.

Thank you, Karim. Good morning, everyone. I'm pleased to report additional details on our financial performance for the fourth quarter and full year 2022 following our pre-announcement in January. Let me begin by discussing our revenue performance for the fourth quarter of 2022. We reported total net revenue of $90.2 million, including net product revenue of $89.5 million, a decrease of 38% compared to the fourth quarter of 2021. U.S. product revenue was $88 million in line with a third quarter of 2022, reflecting a relatively stable trend in volume. We remain pleased with the stable trends in spite of multiple competing generics on the market. The U.S. business continues to generate a positive contribution margin and provides necessary financial support for expansion in Europe and other geographies around the world. The results included international product revenue of $1.5 million, which included European product revenue of $0.3 million, beginning to reflect very early revenues from the UK. Cost of goods sold for the three months ended December 31st, 2022 was $26.6 million compared to $30.6 million in the corresponding period of 2021. Gross margin was 70.3% for the three months ended December 31st, 2022, compared to 78.7% in Q4 2021, as a result of lower U.S. net selling price. Now moving on to operating expenses. During the fourth quarter of 2022, we reported expenses of $73.2 million compared to $97.7 million in the fourth quarter of 2021. It decreased by $24.5 million, or 25%. The decrease compared to last year includes the impact of the cost-saving initiative announced in June of 2022. These savings were partially offset by our investments in growth and expansion in Europe. Under U.S. GAAP, Amarin reported net income of $0.9 million for the fourth quarter 2022 for basic and diluted loss per share of zero. As of December 31st, 2022, Amarin reported aggregate cash and investments of $310.6 million demonstrating the cash positive for the quarter of 2022. We continue to experience relatively stable trends in our U.S. business. Currently, we are not seeing any significant impact from Teva's listing on a one-gram generic version of the CFA. We do expect our U.S. revenues for the first quarter 2023 to reflect the impact of typical brand branded seasonality, resulting in first quarter revenues slightly lower than the fourth quarter. We do expect the year to reflect continued pressure on both prescriptions and price as we work to retain key customers to the brand. We've continued to make progress against our cost reduction program announced in June of 2022, and we are on track to exceed the $100 million cost savings target we announced in mid-2022. For the full year of 2023, we now expect the operating expenses to be between $290 million to $305 million compared with approximately the $350 million originally anticipated at the time of our June 2022 cost savings announcement. The lower than anticipated expenses are the result of additional initiatives taken across the organization to reduce costs, along with the timing of our European investments, where we committed to invest carefully in Europe ahead of reimbursement decisions. Since the cost savings announcements in June, we have taken significant steps this year to strengthen and streamline the company operationally. In addition, we have made significant progress amending our supply agreements, and those negotiations are still ongoing. With these initiatives and relatively stable trends in the U.S., we believe our current available cash and resources, including U.S. profitability, are adequate to support continued operations, including European launch activities. Now, with that, I will turn the call back to Karim for closing remarks.

Thank you, Tom, for that financial overview and our results during the fourth quarter. We exited 2022 with a strong foundation to support our future growth plans as we focus on becoming a globally diversified cardiometabolic player, and we are off to a strong start in 2023. We have a very clear set of priorities. Our first and main objective is to conclude reimbursement discussions successfully in the remaining European markets and launch. We will do this while remaining focused on preserving our cash. We're just beginning to see the results of our efforts over the last 18 months. Gaining pricing and reimbursement in Europe remains critical for a sustainable future and creating shareholder value. We would also like to address Amarin’s General Meeting that was held yesterday, and the results of which were disclosed after the market closed. On behalf of the Amarin board and management team, we would like to thank all of our shareholders for their engagement and feedback throughout this process. Continuing to enhance our shareholder engagement program across our broad investor base remains a key priority as we move through this year and beyond. 2023 is a critical year for Amarin as we continue pricing and reimbursement negotiations. We are in the process of transitioning to a new board, including onboarding all new members to ensure that the company remains focused on progressing against our strategic objectives to deliver enhanced value for shareholders. I would like to thank [indiscernible] for his leadership, dedication, and counsel during his role as Chairman of the Amarin Board. The board expects to appoint a new Chairman in due course. I would also like to commend our employees across the organization for their hard work, focus, and commitment to Amarin. Finally, I hope we provided our shareholders with clear details of our fourth quarter and full year earnings results. And with that, operator, we are ready to take questions.

Your first question for today is coming from Michael Yee at Jefferies.

Hi. Good morning. This is Jocelyn on the line for Mike Yee. Thanks for taking my question. I guess I have two. First, on your UK launch, the access data you shared looks very promising. So how do you see the access you have in the UK could translate to your product sales? And do you plan to break out European sales in your future reporting? And secondly, on Germany, I think you have mentioned that you plan to submit another dossier to Germany. Maybe remind us what the process looks like and how we should think about the timeline? Thank you.

Thank you for the question. I'll start with the UK launch. So, as you have seen, it is difficult that any company shares very specific metrics of a country launch. We decided to do that since the UK is one of our first big market launches and we believe that there is value for shareholders to stay very close to these metrics. What we have presented today is showing the formulary listing, which is really the most important step to opening the door for physicians to prescribe for the product. It demonstrates that, the product availability is real for a very large majority of patients. Now in terms of future results, we will try as much as possible to share more metrics hopefully also from a revenue perspective at the right moment. Having said that, a breakout of reporting between countries in Europe is not a very customary thing, and I think would not help us honestly in terms of negotiating prices and maintaining proper working relationship with the reimbursement agencies. But our intent is to share as much as possible, especially on the UK as the first country launch. For Germany resubmission, yes, this is the plan to go back to Germany, because we believe that the German patients deserve to use VASCEPA. But we believe, the timing for this would have better chances of success after other large markets approving the product. So, once we have Spain, Italy, France, it will probably be a better time to submit the file. And at that point in time, we will have a stronger association to submit. But thank you for the question. We are not giving up on Germany. We will keep trying.

Thank you. That's very helpful. Thank you so much.

Your next question is coming from Roanna Ruiz at SVB Securities.

Hi. Good morning everyone. So, wanted to check-in about the U.S. a little bit. So, what's your level of confidence in your exclusive contracts holding up this year, and do you expect revenue stabilization to continue through most of 2023?

Thank you, Roanna. The exclusive journey in the U.S. began in July 2021, so this is not something our team has just started working on in the last quarter. Over the past 18 months, we have maintained our volume from the exclusive stable for six consecutive quarters. There is a solid foundation in place, though we are operating in a competitive market. A fourth competitor has recently entered, but their products are not yet on the market. We are confident in the stability of the foundation we have built. As mentioned previously, we expect some price erosion and typical volume decline quarter-over-quarter. We are prepared for various scenarios. If we assume this market behaves like a typical generic market, we would have lost 90% of our business by now, but we have successfully generated $1 billion in sales. We are closely monitoring the situation, which is currently stable. We have not lost any exclusives and are in a secure position. However, if any threats arise, we have a swift action plan in place to maintain profitability in the U.S.

Got it. Thanks for clarifying. So, I wanted to also ask about Europe a little. So, I think on the call you mentioned Italy might have a reimbursement decision mid-year and France and Spain may possibly come online too, so I was curious, will you be ready to immediately launch in these regions after getting decisions or just curious what the rollout might look like for VAZKEPA there.

Yes. So first of all, let me clarify. I mean, you mentioned three countries. Those three countries are very different processes and very different timelines. So, in Spain, we try to be as clear as possible that we've had two rounds of negotiation. We are starting a third round of negotiations. So, this is imminent as we described it, at least based on where we are in terms of negotiation. Italy, the process is less structured, and the way it's progressing current estimation is maybe by mid-year. France usually takes longer time, right? In terms of arriving to an agreed-upon price. But in those three markets, the minute we're going to have reimbursement, we will be ready for launch. And those markets differ; in Spain, you have a lot of sort of regional market access, which by the way, we have also made progress with just to ensure we are ready to launch when we have a Spanish price. In France, it's a very nationally driven system. So, there are no regional access hurdles. So, the minute we're going to have a French price, we're going to be launching to really the major primary care population, and it's a significant market, but France takes longer time based on benchmarks that we have. So, we're working on the three of them.

Understood. Thanks a lot.

Your next question for today is coming from Louise Chen at Cantor.

Hi. Thanks for taking my question. So, I wanted to ask you how committed you are to sustain cash flow breakeven, and how feasible is that given generics and also incremental burn with each new European approval?

Thank you, Louise. So, in 2022, we had a very clear vision to turn around the cash burn situation from the $100 million to the cash flow positive that you've seen. Now we're entering a different phase, right? Because we have a number of milestones that we are going to have in 2023, especially with European launches. With those European launches, there will be a necessity to invest. So, the situation will change quarter to quarter, but there are also other variables that impact our cash flow. Tom?

Overall, we have enough cash and cash equivalents to reach profitability and support our European launches. We anticipate a decline in our cash balance for 2023, with fluctuations between quarters. We won't be cash positive every quarter, but rather experiencing variations. As a reminder, we implemented specific initiatives last year regarding the supply chain, and we are still engaged in negotiations and cost-saving measures.

And of course, you've heard us delivering above plan in terms of OpEx and the savings, which is a significant number. A big part will also depend on the stabilization of the U.S. So, we are very clear on what are the key drivers of maintaining our cash position, whether it is the U.S. business, our level of OpEx, which we are making far more additional efforts to try to save money. But if we're going to spend a bit more, it'll be good news because it means we have more European markets that are joining the launch phase. It's important to note that a lot of our European expenses are already built in and baked within these numbers, right? So, you've seen on some of our slides, we talk about overall headcount in Europe today in the range of 200, which is basically saying we have recruited a significant number in all those markets where we're launching. We are well-equipped. So hopefully that will answer your question, Louise.

Your next question is coming from Cade Cruz at Goldman Sachs.

This is Cade Cruz on for Paul Choi. Our question is how are you thinking about potential shifts in strategy? And has the new board provided any comments or directional guidance on a new strategy? Thank you so much.

Thank you. So, first of all, I mean, the new board members, it's still very fresh. I mean, the meeting was yesterday. Today is day one. We're in very early stages of onboarding. But I mean, for the moment our strategy is very clear; shareholder value creation is about expanding and launching and succeeding in Europe while maintaining the profitability in the U.S. because that's necessary for us to make it there. These are the key priorities for the moment. We have not had any shift in strategy, but as management, we have always been very open to reevaluate what's happening in the market and what we need to do because if you look at what happened in the market over the last two to three years, things have developed and evolved significantly. So, we stay very open to the market, to the situation, and to adapt our plans and our strategies accordingly. But for the moment, I believe we have a clear path to the future and moving ahead. Thank you. Thank you again for the question.

Your next question for today is coming from Naresh Chouhan at Intron Health.

Thank you. Can you hear me now?

Yes.

Great. So, three questions, please. Firstly, on G&A. Can you help us understand what's in here? So, 25% to 30% of sales. Trying to get a sense of what's in there and where we should expect that to go over time. And on COGS, they were quite a bit higher on our estimates, about 300 basis points higher than consensus expected in Q4. Is there some underlying cost inflation here or is this more one-off, and how should we view this for the rest of the year? And then in the UK, the price agreed with NICE was a good strong price, but obviously each customer then requires a further discount. So, given you have done such a good job now in terms of getting access to the local level. Just trying to get a sense of whether or not those secondary discounts are material and we should be considering those. Or if you are pretty close to the pricing set by NICE? Thank you.

Thank you, Naresh, for the questions. I'll let Tom handle the G&A sort of overview and the COGS. And I'm going to deal with sort of the price, net price, and potential discounts and so on. Tom?

Sure. So, Naresh, thanks for the question. So, in general, in the G&A, what's in that line item, it's our corporate expenses to support the organization in there as well. We have legal-based expenses. We have insurance charges related to our overall programs from a program management perspective. So, that's what's in our G&A. And your question related to cost of goods and the increase on margins of approximately 0.3. It really comes down to a sales mix. So, it comes down to U.S. product sales versus a mix of some of our product revenue that we have with some of our collaborative partners. Overall, I think the root of your question was, were there any inflation impacts? The short answer to that is no, there was not an inflation impact. On the positive side, from the working capital perspective, we brought down quite a bit of inventory, giving overall supply negotiations that we have taken and continue to onboard with. Karim, would you like to answer the last question please?

Yes. For the UK price, so you have seen from the slide that we put sort of the prices of multiple consumer oral drugs in the UK on a list level. And we are very conscious that some of these list prices for other benchmarks are not really the net, meaning that some of them are even discounting further to NHS to basically gain access. Where do we stand today? Based on our agreement, we are actually not discounting from this number that you see to NHS. So, this is for us a big part of the strategy of why we believe that the negotiation we've had was very successful, because we convinced NICE of the value of the product and that there was not necessary for us to be discounting this. So, all the formulary listings that you've seen there do not actually involve additional discounts, right? So, the list is the net and we feel very proud of that performance. And by the way, this is what’s positioning us to strong negotiations in the other markets because the Spanish governments and everybody else can see and visualize our price in the UK and they understand exactly what the British government is paying for Amarin for VASCEPA.

We have reached the end of the question-and-answer session, and I'll now turn a call over to Karim for closing remarks.

Well, I just want to thank you all for your presence today and for the engagement throughout 2022, as we've said was a challenging year, but we've had a very significant turnaround, and it's only the beginning of a two-evolution of Amarin. We look forward to stay connected throughout the quarters and to very soon be sharing with you our results in the first quarter. Thank you all for joining. Thank you.

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