Earnings Call Transcript - AMRN Q4 2023

Operator, Operator

Welcome to Amarin Corporation's Conference Call to discuss its Fourth Quarter and Full Year 2023 Financial Results and Business Updates. I would now like to turn the conference call over to Mark Marmur, Vice President, Corporate Communications at Amarin.

Mark Marmur, VP, Corporate Communications

Good morning, everyone, and thank you for joining us. Turning to our forward-looking statements. Please be aware that this conference call will contain forward-looking statements that are intended to be covered under the Safe Harbor provided under federal securities law. 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 31st, 2023, which has been filed with the SEC and is available through the Investor Relations section of our website at www.amarincorp.com. We encourage everyone to read these documents. An archive of this call will be posted on Amarin's website in the Investor Relations section. Turning to today's agenda. Patrick Holt, Amarin's President and Chief Executive Officer, will provide a brief overview of 2023 highlights and 2024 priorities; and Tom Reilly, Amarin's Chief Financial Officer, will provide a review of our fourth quarter and full year 2023 financial results. Following prepared remarks, we will open the call to your questions. I will now turn the call over to Patrick Holt, President and Chief Executive Officer of Amarin. Pat?

Patrick Holt, President and CEO

Thank you, Mark. Good morning, everyone, and thank you for joining us today. Before we review our 2023 highlights and our 2024 priorities, I want to take a moment to reflect on our strategy at Amarin. Every day, our team is focused on driving operational momentum to maximize the patient uptake of VASCEPA/VAZKEPA. To enhance the value of Amarin and deliver shareholder value, we must drive operational momentum across our three key regions. In Europe, where we have a potential IP runway out to 2039, we are focusing efforts and investment to accelerate prescription growth and revenue as well as secure pricing and reimbursement in those key markets. In the US, we're maintaining and extending our IP market leadership. And in the Rest of World, we're enabling our partners to get our product into the hands of as many patients as possible. We firmly believe this focus on operational momentum is the best path forward for Amarin and will more strongly position us for potential future options. Turning to Slide 6. While we believe this strategy is the best way to deliver shareholder value today, the only way to gain shareholder confidence is to deliver against it. We have made meaningful progress in 2023, and we have clear priorities in place for 2024. For Europe, in 2023, with new leadership and a more focused strategy in place, our teams made launch progress and have advanced pricing and reimbursement goals. In Spain, our team is focusing on health care practitioners who are early adopters of cardiovascular products. We are continuing to deliver strong launch progress such that we now have approximately 2,500 patients on therapy. In the United Kingdom, we have a more focused strategy in place, including driving uptake in key accounts. Currently, we have at least 1,500 patients on therapy. Turning to pricing and reimbursement. We've secured pricing reimbursement across nine countries in Europe. As I have shared previously, we have strengthened our focus to advance our opportunities in key EU five markets. I'm pleased to share in Italy, we have now resubmitted our dossier and will advance this process with the authorities to potentially achieve market access for VASCEPA by the end of 2024. In France and Germany, we are sharpening our scientific arguments and have strategies and plans in place to advance submissions for VASCEPA in these markets. We do not expect these processes to conclude in 2024. We will continue to communicate progress on France and Germany as additional steps are achieved. Importantly, we are also aiming to successfully conclude pricing reimbursement decisions in at least five additional markets in 2024. We remain confident in our path forward in Europe. We have patents and applications that have the potential to extend our IP up to 2039. As a testament of this progress, we successfully defended our 2033 patent from opposition. We expect to share more on this topic in the coming months. Turning to the United States. In 2023, we continued to extend IP market leadership, closing the year with a 57% market share. We achieved this through focused investment in managed care, trade, and medical capabilities to extend VASCEPA's life cycle despite the elimination of our sales force and reduced marketing spend in July. As we turn to 2024, we have begun the year in a slightly improved position compared to last year. Based on what we currently know with our exclusive accounts, these represent at least 50% of the total IP market volume. While we are encouraged to start the year in a solid managed care position, the market remains highly dynamic, and we continue to monitor this closely. We do expect Q1 2024 results to be impacted by typical first quarter payor dynamics. We continue to stand ready to execute aggressive approaches, including the potential future launch of an authorized generic bolstered by our strong supply position to retain market leadership within the IP market. In the Rest of World, in 2023, we made progress on regulatory market access and commercial fronts as well as new partnerships. In China, the second-largest cardiovascular market globally, Amarin's partner, Edding, launched VASCEPA in October for the very high triglycerides indication. Additionally, the NMPA has accepted the regulatory filing for the cardiovascular risk reduction indication, which opens up the potential for future national reimbursement and drug listing. In 2023, Amarin also entered into three new partnerships across 15 countries. In 2024, our focus for Rest of World shifts toward enabling our partners to obtain market access and commercial uptake across key markets. Finally, in Research and Development and Medical, our teams delivered important progress with data publications and medical education, supporting our brand globally to build confidence in our science. In 2024, we will continue to build on this momentum, including additional data on REDUCE-IT and EPA. Indeed, we have seven abstracts at the upcoming American College of Cardiology meeting in April. We'll be showing more on this in coming weeks. This important operational progress has supported our financial position, with $321 million in cash and no debt. As you're aware, due to our recent progress in our financial position, we announced plans for a share repurchase program of up to $50 million. I'm pleased to share that we are on track to complete the necessary shareholder and UK High Court approvals. We continue to anticipate completing these steps in the second quarter of 2024, and that share repurchases would commence shortly thereafter. In summary, 2023 was a meaningful year for operational momentum, and we are well-positioned to continue to build on this in 2024. Now, I'd like to hand over the call to Tom Reilly to review our fourth quarter and year-end 2023 financial performance. Tom?

Tom Reilly, CFO

Thank you, Pat. Good morning, everyone. I'm pleased to report details on our financial performance for the fourth quarter of 2023. In the fourth quarter of 2023, Amarin reported total net revenue of $74.7 million, including net product revenue of $70.6 million versus $66.1 million in the third quarter of 2023 and $4.2 million in licensing and royalty revenue. US product revenue was $64.9 million, with stable performance in the US despite multiple competing generics on the market. The US business continues to provide profit supporting our expansion into Europe. The revenue results include European product revenue of $1.5 million, a 65% increase versus the third quarter of 2023, reflecting early revenues from European markets, including Spain and the United Kingdom. We recognized $8.4 million in the Rest of World revenue in the fourth quarter of 2023, including product revenue of $4.2 million related to commercial sales to our partners in Canada, China, and the Middle East, and licensing and royalty revenue of $4.2 million, resulting primarily from the achievement of the Edding CVRR milestones. Cost of goods sold in the fourth quarter of 2023 were $29.6 million compared to $23.6 million, excluding restructuring in the third quarter of 2023. Amarin's overall gross margin on net product revenue in the fourth quarter was 58% compared with 64% in the third quarter of 2023. This was primarily due to an increase in one supply sales to our partner, Edding. Moving on to operating expenses. Operating expenses were $49.7 million in the fourth quarter, comprised of $43.9 million in selling and general administrative expenses, and $5.8 million in research and development expenses. In the second half of 2023, Amarin reported operating expenses of $101.2 million. This represents a $21 million reduction in operating expenses versus the first half of 2023. We are on track to deliver the previously announced $40 million reduction in operating expenses by July 2024. Amarin reported a net loss of $5.8 million for the fourth quarter of 2023 or basic and diluted loss per share of $0.01. Let me now turn to our efforts and results in controlling costs and effectively managing our cash. As of December 31st, 2023, Amarin reported aggregate cash and investments of $321 million. Importantly, this is the sixth consecutive quarter of positive or neutral cash flow generation for Amarin, and our cash balance is now $10 million higher when compared to December 31st, 2022. In 2023, we made progress in controlling our costs and managing our cash position through our cost reduction programs and renegotiating supply agreements. In 2024, we will continue to focus on cash preservation, prudently invest in the right opportunities, particularly in Europe, based on pricing reimbursement decisions and pending shareholder and UK High Court approvals will initiate our shareholder repurchase program. With that, I will now turn the call back over to Pat for closing remarks and to begin the Q&A portion of our call. Pat?

Patrick Holt, President and CEO

Thank you, Tom, for the financial overview of our results. Our team is focused on operational momentum to maximize shareholder value across all three areas of our business. We believe we have the right plan, focusing on operational momentum to drive shareholder value. We have a strong future because of our fundamentals, best-in-class science supporting VASCEPA/VAZKEPA, a large global opportunity to impact cardiovascular patients, a team that is dedicated to delivering results, and a strong balance sheet. Finally, thank you to our colleagues for their commitment and dedication. I look forward to driving shareholder value together. And with that, Mark, let's begin the Q&A portion of the call.

Mark Marmur, VP, Corporate Communications

Thank you, Pat. As we announced last year, to enhance engagement with the company's shareholder base and facilitate connections with its investors, Amarin is partnering with Say Technologies to allow retail and institutional shareholders to submit and upvote questions, a selection of which will be answered by Amarin Management during today's earnings call. Let's begin the Q&A. So Pat, we received a number of questions on the company's long-term strategy and ways that we plan to maximize shareholder value. What would you say to these investors?

Patrick Holt, President and CEO

Thanks for the question. I get this question a lot. It's a really important question. We believe the best path forward for us to both increase our value and put us in the best possible place for future strategic options is to focus on our current efforts around operational momentum, whether that be in Europe, in the US or in the Rest of World. As we shared earlier in the call, we are making progress on all three fronts, which provides us greater optimism and optionality for the future.

Mark Marmur, VP, Corporate Communications

Great. Thanks, Pat. Our second set of questions focuses on China and Asia Pacific. What can you tell us on progress around the commercial launch in China? And what is the status of the cardiovascular risk reduction regulatory filing in China? Also, more broadly in Asia Pacific, can you share any updates on efforts with our partners?

Patrick Holt, President and CEO

Well, there's a lot in that. As some of you know, I know this region pretty well. So let me break that down into some parts. Firstly, regarding the China launch. Amarin's partner, Edding, is making important progress in China, which I'll remind everybody, is the second-largest cardiovascular market globally. Edding launched VASCEPA for very high triglycerides in Q4 2023. To give you an idea, the Edding sales force is covering 200 hospitals, which includes around 500 key opinion leaders, the majority of which are cardiologists in the three largest cities of Beijing, Shanghai and Guangzhou. In summary, the launch is progressing well, and the structure of the agreement provides immediate profitability to Amarin. Let's also think about the future in China as we reflect upon the cardiovascular risk reduction indication. The NMPA has accepted the regulatory filing for cardiovascular risk reduction, which opens up the potential for national reimbursement drug listing. The submission was accepted with a clinical trial waiver, meaning a separate clinical trial will not be required in order to be reviewed for approval. The teams are now focused on advancing that submission together with the authorities, and we expect the regulatory review process to conclude in 2025. Asia Pacific is a large region, so let me just touch on other areas within the region. As you know, last year, we entered into partnerships in Australia, New Zealand, with CSL Seqirus, and also 11 Asian markets, including South Korea with Lotus Pharmaceuticals. I'm pleased to share that CSL is advancing pricing and reimbursement processes in Australia with the authorities. In other markets, our partner, Lotus, is advancing regulatory discussions and filings with the various authorities across the region.

Mark Marmur, VP, Corporate Communications

Great. Thanks, Pat, for that information on China and Asia Pacific. Now turning to the US. Is there a path toward growth in the market? Could we potentially take market share from other products or classes?

Patrick Holt, President and CEO

Great question. Our US revenues and cash flows are incredibly important to our business. When we take a step back and think about the US market and where it stands today, it's important to remember that the IP market in the US is currently highly genericized. Our focus has been and continues to be to maintain IP market leadership. As a result of that, we are not focused on growing the market. We have achieved an atypical performance three years post LOA, ending 2023 with a market-leading share of 57%. We have secured market leadership and continued that success through our exclusive contracts, driven by our capabilities in payor, managed care, and medical areas. Again, as we mentioned, we've started 2024 in a strong position in terms of our exclusive contracts. But to remind everyone, it's a dynamic market, and we do monitor it closely and continue to assess our strategic options for our branded product and beyond, should we consider them. In terms of taking share from other products or classes, given those generic dynamics, we do not view this as an optimal strategy.

Mark Marmur, VP, Corporate Communications

Thank you. Turning to supply. If we see demand increase from Europe or Rest of World partners, are you confident that we can meet those supply demands?

Patrick Holt, President and CEO

It's a very important question. We do have strong relationships with our key supply partners. Over the last several years, we've made important progress, renegotiating our supply agreements to ensure that we can both meet our demands as well as reduce key supply commitments. We feel really confident that we can meet those supply demands moving forward.

Mark Marmur, VP, Corporate Communications

Now, one last question on the R&D side from the Say Technologies questions. Is Amarin working on advancing any additional indications for VASCEPA/VAZKEPA?

Patrick Holt, President and CEO

I was really pleased this question came up. This is such an important question when you consider the core strength that Amarin has in terms of our R&D team and our IP capabilities and leadership. This is the team that has developed and advanced the molecule from day one and delivered the REDUCE-IT data that truly has a global impact. With our team in place, we continue to look at opportunities for new indications, and we will update investors based on potential future progress of that work. So before we take additional questions, I'd like to thank those shareholders who submitted questions via the Say Technologies platform. We are committed to continuing open and transparent dialogue with all of our shareholders, and the Say Technologies platform is one way that we are trying to increase engagement and two-way dialogue with you. We look forward to continuing to hear from you and answering your questions on this platform as well as other opportunities moving forward.

Mark Marmur, VP, Corporate Communications

Thank you for those updates, Pat. We'll now open the Q&A up for additional questions.

Operator, Operator

Certainly. At this time, we will be conducting a question-and-answer session. Your first question for today is from Roanna Ruiz with Leerink Partners.

Roanna Ruiz, Analyst

Hi. Good morning, everyone. So could you talk a bit more about the ongoing generic competition in the US? Like what trends are you seeing in the field? And what do you expect in terms of possible pressure on VASCEPA net price in the next couple of years?

Patrick Holt, President and CEO

Hi, Roanna. Good morning. Thanks so much for the question. It's great to hear from you. As you probably have followed, there are more generics that have received regulatory approval, and more generics have also set prices. With that said, the market dynamics remain fairly stable so far. We closed the year and started the year with a strong position thanks to our exclusive contracts that represent greater than 50% of the IP volume. As we end the year and start the year, we feel really good about that position. However, as I'm sure you've noted, there are more dynamics with additional entrants in the market. We will continue to monitor it very closely. We have options in both the short term and the long term to maximize the economics for us in the US.

Roanna Ruiz, Analyst

Yes, makes sense. And a quick follow-up on the Rest of World. I noticed it's gaining some traction. So could you talk about what regions you expect might contribute the most momentum to future growth in revenues in 2024 and beyond?

Patrick Holt, President and CEO

Yes. It's a great question. As I mentioned, we are really pleased with the progress in 2023. Looking back, the main revenue sources, until China came on board, were primarily from Canada and then parts of the Middle East and North Africa. In 2024, I expect continued value from those existing partnerships. Furthermore, I believe China will show more progress in 2024. Opportunities will emerge as these partnerships transition from signing to the regulatory process such as Lotus, market access, reimbursement, and pricing, with CSL Seqirus in Australia and New Zealand. We're starting to see a shift from entering partnerships to really driving pre-commercial and commercial outputs. This shift in the business aims for more revenue generation. Internally, we're beefing up our capabilities and leadership to support that group.

Operator, Operator

Your next question for today is from Jessica Fye with JPMorgan.

Unidentified Analyst, Analyst

Hi, guys. Good morning. This is Na Sun on for Jessica Fye. I have a question on your progress in launching VASCEPA there. Can you just talk a little bit about how to accelerate the growth in the UK? And then for Germany, have you come up with a plan to reenter the market there? And then for Italy as well? Thank you.

Patrick Holt, President and CEO

Thanks, Na Sun. Great to hear from you. Look, Europe is critical for us. It's a key focus of our investments and the entire organization as we move forward. As we break that down, we think about those key launch markets. The UK is quite a unique market, and uptake there is typically slower. We are making progress with a more focused strategy on key accounts. We now estimate we have at least 1,500 patients on therapy. Regarding Spain, we did indicate that we expected it to show faster uptake, which has proven true. Today, we estimate about 22,600 patients on therapy in Spain, which is important progress for us. Moving on to reimbursement markets, we have resubmitted in Italy, building on our previous strong scientific assessment, and we expect a pricing reimbursement conclusion in 2024. For Germany, we've taken a step back and are redeveloping a potential new strategy to enter the market, assessing different patient populations with the authorities and advancing that through 2024. But I do not expect those processes to conclude in 2024. Thanks very much for the question.

Operator, Operator

Your next question for today is from Louise Chen with Cantor Fitzgerald.

Unidentified Analyst, Analyst

Hi, team. This is Wayne on for Louise and thanks for taking our questions. So first, you have reiterated that you're on track to deliver the $40 million annual savings. How should we think about operating expenses for 2024, compared to the second quarter? You saved about $7 million in the third quarter and $8 million this quarter? Should we expect a similar number going forward? And then the gross margin has dropped to 58%. How should we think about this going forward? Thank you.

Tom Reilly, CFO

Yes. Great. This is Tom. Thanks for the question. Related to operating expense and the $40 million, which we're on track to deliver, and our expectations for expenses. We reduced expenses from the second half to the first half of '23 by $21 million. Our cost basis is approximately $50 million per quarter. Our expectation is to stay within that range, depending on pricing reimbursement decisions. We will invest in those opportunities, but we will also find other ways to reduce costs. Our overall expectation is to stay within that $50 million operating expense base. Related to your question on gross margin, it's a very good question. What you've seen versus Q3 is a deterioration of gross margin, primarily due to launch supply that we provided for our partners, particularly in China. As the China market progresses, we are supplying products for revenue there, and it results in about a 2.5 to 3-point reduction in margin impact this quarter versus the previous quarter. The future margins will depend on the uptake in China and how much product side we'll be providing. We will give updates on the progress of the China market.

Unidentified Analyst, Analyst

Thank you very much.

Operator, Operator

Your next question is from Paul Choi with Goldman Sachs.

Unidentified Analyst, Analyst

Hi, everyone. Good morning. This is Khalil calling in for Paul. Thank you so much for taking our question. I guess my question is about the exclusive contracts that you've mentioned in the past. As those are renegotiated, have you seen any additional pushback as more generics enter the market? Have you or will you set a threshold for those sort of deterioration at which point the company would pivot to your own generic? Thank you.

Patrick Holt, President and CEO

Khalil, thanks very much for the question. Look, we track those contracts very carefully. We do see, on an annual basis, when renegotiating our exclusive contracts, we experience impact to those pricing in the low double-digit range typically. That's been consistent over time. We don't see significant changes to that outcome, but that's the range that we've seen. What is encouraging is we had a strong end to the year and a robust start to the year regarding our negotiations. The net-net outcome of that means that we are participating in greater than 50% of the IP market volume. That enables us to secure a 57% market share and maintain leadership. Regarding your second question about tracking the economics and overall profitability, we monitor it closely. We have specific scenarios in mind regarding when we think it becomes attractive and when it starts becoming more marginal. We have plans in place to react based on those dynamics, should they change. For now, our focus is to extend our branded life cycle as long as possible. Our US team has delivered highly atypical performance for over three years since LOA, which is critical for our business, especially in supporting our growth in Europe. We couldn't be happier with how we finished and started the year, but it's a dynamic environment, and we keep a close eye on it.

Unidentified Analyst, Analyst

Got it. Thank you so much.

Operator, Operator

We have reached the end of the question-and-answer session. I will now turn the call over to Patrick for closing remarks.

Patrick Holt, President and CEO

Thank you all for your attention, and thanks for all the Q&A. We really appreciate the interest and look forward to having additional conversations on these important results in the coming days ahead. Thank you again for your time, and I wish you a great day ahead. Thank you.

Operator, Operator

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