Economy Processed transcript of the conference call or presentation of...

Processed transcript of the conference call or presentation of the AMRN result on February 25, 2020 at 9:30 p.m. GMT


Q4 2019 Amarin Corporation PLC earnings call

Dublin, February 26, 2020 (Thomson StreetEvents) – Minutes of the conference call or presentation of Amarin Corporation PLC results released Tuesday, February 25, 2020, 9:30 p.m. GMT

TEXT version of Transcript

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Corporate participants

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* Aaron D. Berg

Amarin Corporation plc – Senior VP and Chief Commercial Officer

* Elisabeth Schwartz

Amarin Corporation plc – Senior Director of IR

* John F. Thero

Amarin Corporation plc – President, CEO and Director

* Michael W. Kalb

Amarin Corporation plc – CFO, Senior VP and Deputy Secretary

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Conference call participants

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* Kyuwon Choi

Goldman Sachs Group Inc., Research Department – Equity Analyst

* Louise Alesandra Chen

Cantor Fitzgerald & Co., Research Department – Senior Research Analyst & MD

* Michael Jonathan Yee

Jefferies LLC, Research Division – stock analyst

* Yasmeen Rahimi

Roth Capital Partners, LLC, Research Department – MD, Senior Research Analyst and Co-Head of Biotechnology Research

* Yuko Oku

JP Morgan Chase & Co, Research Department – Analyst

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operator [1]

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Welcome to the Amarin Corporation conference call to discuss fourth quarter and full year 2019 financial and operating results. This conference call will be recorded on February 25, 2020.

I would now like to forward the conference call to Elisabeth Schwartz, Amarin Senior Director Investor Relations.

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Elisabeth Schwartz, Amarin Corporation plc – Senior Director of IR [2]

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Please note that this conference call contains forward-looking statements that are intended to fall under the safe haven of the Private Securities Litigation Reform Act. Examples of such statements include, but are not limited to, our current expectations regarding our economic and financial performance, including the amount of Vascepa prescriptions; Vascepa product and license revenue, costs and other commercial metrics, gross margin, expenses, e.g. B. for the purchase of an additional Vascepa offer, and the adequacy of our financial resources; our current expectations for, and the timing of, additional scientific presentations, publications, medical guidelines, and regulatory reviews outside the United States; our plans and preparations for increased Vascepa funding and related market positioning and potential, including potential for further product development; our goals in terms of timing, scope and success of international expansion; our current plans for salespeople and other commercial expansions in the United States; and our current expectations regarding the outcome of litigation related to Vascepa exclusivity in the United States.

These statements are based on information available to us today, February 25, 2020. We may not achieve our goals, carry out our plans or intentions, or meet the expectations stated in our forward-looking statements. Actual results or events may differ materially, so you should not rely on these statements inappropriately. We are under no obligation to update these statements if circumstances change. Our forward-looking statements do not reflect the potential impact of significant transactions that we may conclude, such as mergers, acquisitions, disposals, joint ventures, or material agreements that we may conclude, change, or terminate.

For more information about the factors that could cause actual results to differ materially, see the “Forward-Looking Statement” section of today’s press release and the “Risk Factors” section of our annual report on Form 10-K for December 31, 2019 ending fiscal year. These documents have been filed with the SEC and are available in the Investor Relations section of our website at We recommend everyone to read these documents.

This call is for Amarin investors and is not intended to encourage the use of Vascepa outside of the approved indication. Please note that we also provide slides for today’s call. These slides, which can be found on our website in the Investor Relations section under the Events and Presentation subcategory, summarize some of the most important updates that were discussed in today’s call.

Finally, an archive of this request will be published on the Amarin website, also in the Investor Relations section.

I will now forward the call to John Thero, President and Chief Executive Officer of Amarin.

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John F. Thero, Amarin Corporation plc – President, CEO and Director [3]

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Hello everybody. Thank you for joining us today.

During this call, we will summarize our fairly positive results for 2019 and provide some insight into our priorities for 2020 and progress for early 2020. After our prepared comments, we will answer questions. Some of you have sent questions in advance. We have tried to answer many of these questions in our prepared comments.

It’s an exciting and busy time for Amarin. We are excited and encouraged by the progress we are making and the feedback we have received from healthcare professionals about 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 Vascepa’s FDA approval for a comprehensive and new indication to reduce cardiovascular risk. This was done after completing our 7-year REDUCE IT results study and after a unanimous 16: 0 AdComm vote. AdComm unanimous votes are unusual, and this vote reflects the robust and consistent clinical results that Vascepa has shown. The clinical benefit clearly outweighed the risks for patients who need this paradigm-changing therapy.

Realized an 87% increase in sales compared to 2018, mainly due to an increased volume of Vascepa sold in the US due to the growth of Vascepa’s normalized prescriptions. Typically, an 87% increase in sales is the first on a list of successes. For 2019, this growth will be overshadowed by the tremendous importance of patient care and by Amarin through FDA approval for the expanded indication for Vascepa.

In addition, we have contributed to the publication of 57 scientific publications and presentations, supported the approval of our Canadian partner for marketing Vascepa in Canada, applied for approval for the marketing of Vascepa in Europe and this submission as a centralized submission from the European Medicines Agency Accepted for review, Vascepa, who hired and hired hundreds of sales people to expand our sales reach while further strengthening our sales management, found that Vascepa was recognized by 8 major medical companies as a new treatment option to reduce cardiovascular risk. This recognition includes the indication that the results of the Vascepa clinical trial cannot be generalized to a product other than Vascepa. Several pharmaco-economic analyzes have shown that Vascepa is inexpensive, including an analysis by MedStar that has reported that using Vascepa should save money for society in most scenarios by reducing the incidence of expensive cardiovascular events such as stroke and stroke Heart attack.

I have had many more Amarin achievements in 2019. 2019 was clearly an outstanding year of execution and results. We are now focusing on the success of the commercial launch of Vascepa for its new indication. Accordingly, let’s postpone our discussion to 2020.

Vascepa is a new class of proven preventive therapies. Vascepa is the first and only drug with this new indication to reduce cardiovascular risk. Our launch of Vascepa for this new indication reflects the uniqueness of Vascepa. This uniqueness is reinforced by a background in which all potential competitors who have completed or completed cardiovascular outcome studies have not been able to demonstrate that the benefits of their products outweigh the risks of such products.

We are of course pleased that the FDA has approved Vascepa for this new indication. And we are pleased that the new Vascepa label gives healthcare professionals significant discretion in treating Vascepa at-risk patients. It is also gratifying that immediately after Vascepa was approved in December, the first and only drug for this new indication, the FDA issued a press release on the approval, which reads: “Today’s approval will affect patients with elevated triglycerides and other important risk factors , including heart disease, stroke, and diabetes, an additional treatment option that can help reduce the risk of cardiovascular events. “Not every FDA approval results in an FDA press release.

The proven benefit of using Vascepa is enormous and robust. Our commercial launch of Vascepa focuses on educating healthcare professionals for these benefits and includes focusing on ensuring affordable managed care access for all patients who can benefit from Vascepa. So far, our introduction of Vascepa for this expanded indication is proceeding as planned. We hear positive feedback on Vascepa from doctors, pharmacists and other health professionals, while we see some early positive examples of further improvements in managed care coverage.

Our messages reflect that existing therapies such as statins are helpful but not enough. Statins have been shown to reduce cardiovascular risk by approximately 25% to 35%. Vascepa has been shown to reduce cardiovascular risk by a further 25% beyond the risk reduction associated with statins. This is the greatest risk reduction shown alongside statin therapy. For example, ezetimibe and PCSK9 inhibitors have shown a relative risk reduction of about 6% and 15%, respectively, in statin-treated patients.

Vascepa offers a new treatment option and is not competing in the increasingly crowded area of ​​LDL cholesterol management. We wish all of these cholesterol-lowering products a good improvement in patient care. With Vascepa, we address the unmet medical needs of patient care beyond cholesterol management.

Strong scientific knowledge and assessments have led us to clinical success with Vascepa. We intend to continue to be active at medical congresses and other scientific forums in 2020. These activities include the further presentation of detailed results from the REDUCE IT study. For example, at the American College of Cardiology’s annual 2020 scientific sessions scheduled for late March, 8 Amarin-sponsored scientific presentations on Vascepa due to ongoing cardiovascular risk were accepted. This includes a presentation about Vascepa that was accepted as a late breaker. In connection with this medical conference, we plan to webcast comments from many of these speakers on their results. Details of this webcast will be released in March as we approach this conference.

In parallel with such presentations of new data in scientific forums, we also promote various forms of medical education related to Vascepa. And the lead researcher for the REDUCE-IT study continues to give active lectures, also known as large rounds, to leading medical institutions on the unprecedented results of the REDUCE-IT study. Unfortunately, many health professionals are unable to attend all scientific forums. Accordingly, we increase our advertising for Vascepa through multidimensional commercial means, including contacting our sales staff, through electronic means and various forms of advertising.

We’re about to double the size of our U.S. sales force. As previously described, we believe that a US sales force of 800 sales people, supported by our other advertising activities, will be able to make Vascepa a billion dollar brand. Our sales team is also convinced of this. In December, January and February we hired and trained new sales staff in waves. At this point, almost all of the targeted 800 sales staff positions were filled. A small number of newly hired sales employees are still in training. You should be in the field soon. As is the way of hiring, some people have no success and need to be replaced. Overall, we are impressed with the attitudes, intelligence, passion, and experience of the members of our sales team.

We didn’t wait for all new salespeople to be hired before we started rolling out Vascepa in the US for the new indication. At the beginning of January, we conducted sales training on advertising material and messaging for Vascepa for our new sales staff. It is too early to start to assess the progress of our newly hired sales people or the progress of our sales start. It usually takes almost a year for new sales people to be highly productive. Although with Vascepa, it is possible that this will occur more quickly. We hear a lot of positive anecdotes from both our recently hired and our permanent sales staff. Many of these anecdotes relate to doctors to whom we did not previously advertise Vascepa and who are now aware of Vascepa’s unprecedented clinical results. Other anecdotes are from previous Vascepa prescribers commenting that their patients are responsive and more receptive to FDA-approved Vascepa use.

Apart from that, doctors are impressed by the breadth of the FDA-approved label for Vascepa. They find it good that the language on the label reflects the medical terminology they use every day in their practice, e.g. B. “established cardiovascular diseases”, and not the definitions used for clinical study purposes. Many doctors have told us that they believe they can help many patients with this label. They appreciate that the label does not contain fasting or non-fasting triglycerides, that it does not set a required target for the treatment of LDL cholesterol and does not differentiate between type 1 and type 2 diabetics. Last weekend we completed training for selected doctors who will be running peer-to-peer programs related to Vascepa. It was exciting to see how exciting and energetic these doctors support our educational efforts in most parts of the United States.

Many doctors want to be part of this program. Unfortunately, we were limited in the number of doctors we could invite. Throughout the meeting, I repeatedly heard these doctors point out that they are taking Vascepa themselves and are proud to prescribe it to their patients. They rated the results of the REDUCE-IT study with the results of 4S, the study that made statin therapy the standard of treatment, as the 2 most important clinical studies that were carried out in modern times with regard to preventive cardiovascular care.

If you are not a healthcare professional, these speaker programs will not be displayed and electronic communication will not be sent to healthcare professionals via Vascepa. However, many of you commented that you recently saw that we started promoting Vascepa on TV. In addition, we launched a campaign a month ago with unbranded TV spots designed to raise awareness of the ongoing risk that goes beyond statin therapy as tolerated as possible. The campaign reminds viewers that previous generations’ therapies have proven ineffective in addressing such risks. For example, there are approximately 5 times as many patients treated with fibrates as with Vascepa. This imbalance may have been easier to justify before successful REDUCE-IT results were achieved. Given the failure of fenofibratates to demonstrate the cardiovascular benefits and success of Vascepa, we would like to remind healthcare professionals and consumers today that they should seek proven effective therapy beyond fenofibratates and other earlier generation products. The same applies to products consisting of omega-3 mixtures, all of which showed no cardiovascular benefits in addition to statin therapy, including several failed studies in the past 2 years.

When I say that our new TV advertising campaign has no brand, it means that Vascepa is not mentioned by name. A TV spot without a trademark can be started more easily without FDA advertising control. For future use, we have developed targeted television advertising that names Vascepa and links Vascepa directly to its cardiovascular risk reduction effects. The messages from such advertising are currently being checked by the FDA Office of Prescription Drug Promotion. We expect this review to be completed in time to support the rollout of direct marketing in mid-2020. At this time, we intend to increase the frequency of our advertising with advertisements that refer both to Vascepa by name and to the reduction in cardiovascular risk. We believe that branding directly to consumers will be an essential factor in raising awareness among people who could benefit from Vascepa, as well as health professionals who are not otherwise requested by the Amarin sales team. While we anticipate significant growth in Vascepa prescriptions prior to the launch of such brand advertising for consumers, the DTC program is expected to further bend this prescription growth further.

Regarding managed care coverage for Vascepa. Overall, the coverage is good. We are working to improve it. There are changes in managed care coverage at the beginning of each year. The changes at the beginning of 2020 were favorable overall. Managed care plans with extended coverage for Vascepa outperformed those with restrictions. Such changes in coverage at the beginning of the year were approved by payers before the FDA approved the expanded label for Vascepa in mid-December. After the FDA approved the expanded label for Vascepa, our managed care team and medical affairs team worked with the payers to ensure that they understood Vascepa’s clinical benefits, FDA approval, and Vascepa’s pharmaco-economic analysis and the guidelines of several medical companies value companies that recommend the use of this medicine without a replacement.

In the past few weeks, we’ve seen more payers lift previous Vascepa coverage restrictions, including the Michigan, North Carolina, and Arkansas Blue Cross Blue Shield plans. We are confident that additional payers will expand Vascepa’s coverage. Part of this further improvement should be due to our educational initiatives with payers and because this is the right thing to do. Part of this improvement is likely to happen because patients and doctors insist that this new class of preventive care therapy is largely covered by insurance. The voices of doctors and patients are powerful in this regard.

Insurance coverage for patients can be particularly difficult at the beginning of a calendar year. This is due to deductibles at the beginning of the year, which are part of the actuarial reserves under various insurance plans. Such deductibles at the beginning of the year are independent of insurance cover for individual medications. As discussed in previous years, these deductibles at the beginning of the year often lead to patients refraining from filling out their prescriptions, which leads to a seasonal effect. As expected and as planned at the beginning of 2020, we see these effects again this year. However, we are also seeing an increase in the number of new prescriptions for patients and an increase in the number of doctors prescribing Vascepa. Such increases should continue to contribute to year-over-year growth.

The amount that a patient has to pay for Vascepa out of their own pocket is largely determined by the patient’s insurance plan and not by Amarin. The insurance plan decides whether the patient is deductible and how high the deductible is. Most payers covered Vascepa on Tier 2, which is good. The amount of the deductible varies. Deductibles from non-government insurance can be compensated for using co-pay cards. Amarin continues to provide co-pay cards to Vascepa.

It was recently announced that Epanova, the product that many believed could become Vascepa’s strongest competitor, had its results study, the STRENGTH study, stopped early. Epanova is an omega-3 blend of free fatty acids that contains DHA and a little over 50% EPA. Although the details behind the completion of this study are not yet public, it seems clear that AstraZeneca will not be pursuing a STRENGTH-based indication to reduce cardiovascular risk. Epanova joins a long list of products that have failed cardiovascular outcome studies in addition to statin therapy. Previous examples include niacin, fibrates, DHA prescription drugs, and omega-3 supplements. Only pure, stable, prescription Vascepa has been shown to reduce serious adverse cardiovascular events in high-risk patients, and only Vascepa has been proven by the FDA for this indication.

We look forward to hearing more about the results of the STRENGTH study. Data from this study can provide further helpful insight into the differences in effects between EPA and DHA and between esterified fatty acids and free fatty acids. On the surface, completing such a study further confirms that stable and pure EPA is unique and has multifactorial effects beyond triglyceride lowering, and continues to raise questions about how DHA can offset the positive effects of EPA.

It also raises questions as to whether short-term tests of free fatty acids provide reliable information on the effectiveness of chronic use compared to esterified fatty acids. These differences and uncertainties, as well as the high bar set by the proven reduction in cardiovascular risk with Vascepa, should increase clinical research while increasing the multi-year testing requirements of potential future competitive products in this area.

To avoid doubt, when I refer to pure and stable EPA, I refer to icosapent ethyl, which is marketed as Vascepa. The reference to stable reminds us that EPA is fragile. For example, it can easily be damaged by heat; or deteriorates when exposed to oxygen. The clinical effects of oxidized EPA have not been shown to be effective and are only pure and stable EPA in esterified form as supplied by Vascepa, which has been shown to be effective.

Recently, the American Association of Clinical Endocrinologists added Icosapent Ethyl as a therapy to their guidelines when statins alone did not bring the patient’s medical profile up to the recommended levels. They join other medical societies with icosapent Ethyl in their guidelines, such as the American Diabetes Association, the European Society of Cardiology and the National Lipid Association. These medical societies and their guidelines know that there is currently no substitute for Vascepa to reduce the risk of cardiovascular disease in suitable patients beyond statin therapy. The guidelines of these medical societies, in particular, recognize that triglyceride-lowering drugs other than Vascepa have shown no results to demonstrate that Vascepa’s effects clearly go beyond triglyceride-lowering.

Internationally, we continue to work with our existing trading partners in Canada, China and the Middle East to advance Vascepa. Health Canada granted our Canadian partner HLS Therapeutics approval to market and sell Vascepa in Canada in late 2019. HLS has recently started selling Vascepa. This is likely a step-by-step introduction that starts with a core sales team and expands from there. Our partner in China, Eddingpharm, is continuing its clinical trial with expected completion before the end of 2020. Those closest to this study will be informed that they do not expect the coronavirus to delay completion.

The European approval process for an indication to reduce cardiovascular risk for Vascepa has not yet been completed. We have submitted our European marketing application as a centralized submission to the European Medicines Agency (EMA). And as we announced in early December, it was accepted for review. The day 120 letter from the EMA, which contains questions and requests for additional information, is expected to be available at the end of March 2020. Similar to Canada tracked and approved in Europe, we’re looking for an indication to reduce cardiovascular risk. Our decision not to apply for triglyceride reduction approval in Canada has preserved the 10-year regulatory exclusivity available for a new product in Europe for use with the indication we are now looking for. We expect patent protection for Vascepa to reduce cardiovascular risk in Europe will go beyond 10 years.

While Amarin was able to launch Vascepa in Europe alone, the first expressions of interest in European marketing rights to Vascepa were robust by several established and capable commercial players. However, for reasons discussed in previous investor notices, we have postponed a more extensive investigation of this interest. At this time, if the first review by the European Medicines Agency with the first steps of our Vascepa launch in the USA comes as no surprise, we intend to draw our attention to marketing opportunities for Vascepa in Europe in order to prepare for our expectations that we will end 2020 Approved by EMA to start marketing and selling Vascepa in Europe.

The need for preventive cardiovascular care beyond the currently available therapy is very high in Europe and worldwide. More than 80 million people with cardiovascular diseases live in Europe. This number is growing with around 11 million new cases of cardiovascular disease added every year in EU countries. Herz-Kreislauf-Erkrankungen führen in Europa jedes Jahr zu etwa 1,8 Millionen Todesfällen, zusätzlich zu einer Vielzahl von schwächenden Ereignissen wie Schlaganfällen und Herzinfarkten infolge von Herz-Kreislauf-Erkrankungen. Die Pflege von Herz-Kreislauf-Erkrankungen in Europa ist teuer. Die jährlichen Ausgaben werden derzeit auf über 20 Mrd. EUR pro Jahr geschätzt. Diese Daten, kombiniert mit klinischen Ergebnissen mit Vascepa, trugen wahrscheinlich zu den medizinischen Richtlinien der Europäischen Gesellschaft für Kardiologie und der Europäischen Gesellschaft für Atherosklerose bei, die die Verwendung von Ikosapent-Ethyl empfehlen. Zahlreiche wichtige Meinungsführer in Europa fordern die Genehmigung von Vascepa in Europa, um die Versorgung ihrer Patienten zu verbessern.

In Bezug auf Amarins laufende Patentstreitigkeiten mit Generika-Unternehmen wissen Sie wahrscheinlich, dass der Testteil des Rechtsstreits Ende Januar abgeschlossen wurde. Post-Trial-Briefs werden voraussichtlich am 28. Februar in der Gerichtsakte veröffentlicht.

Wie bereits erwähnt, plant Amarin nicht, Kommentare zu Einzelheiten dieses laufenden Rechtsstreits abzugeben. Aufgrund von Gerichtsverfahren wird die diesbezügliche Entscheidung des Gerichts Ende März erwartet. Amarins Geschäftspläne gehen davon aus, dass die Gerichte unsere Patente aufrechterhalten und auf andere Weise sicherstellen, dass Amarin die Exklusivität behält, die wir nach dem Gesetz verdienen. Diese Exklusivität wird Amarins weitere Förderung und Aufklärung unterstützen und zu einer erweiterten Nutzung zum Nutzen von Millionen von Risikopatienten führen. Meiner Ansicht nach wäre es ein erheblicher Rückschlag für die pharmazeutische Entwicklung und die Patientenversorgung, wenn wir uns in diesem Rechtsstreit nicht durchsetzen würden. Wie wir vor Beginn des Rechtsstreits beschrieben haben, sind wir der Ansicht, dass unsere rechtlichen Argumente überzeugend sind und sich durchsetzen sollten, obwohl in jedem Rechtsstreit ein Risiko besteht. Das US-Patentamt war von der Angemessenheit unserer Patente überzeugt, und wir glauben, dass das Gericht ähnlich schließen sollte.

Amarin hat im vergangenen Jahr erhebliche Fortschritte gemacht. In vielerlei Hinsicht fangen wir gerade erst an. Vor einem Jahr gab es vier Hauptanliegen, die uns von Investoren geäußert wurden: einen, die FDA-Zulassung eines erweiterten Vascepa-Labels; zweitens Konkurrenz von Epanova; drei, Angemessenheit unserer finanziellen Ressourcen; und vier, Ergebnisse des ANDA-Rechtsstreits. Drei dieser vier wurden erfolgreich angegangen; Mit dem vierten werden die Ergebnisse des ANDA-Rechtsstreits in Kürze behandelt. Wie bereits erwähnt, wird die Entscheidung des Gerichts in der ANDA-Rechtsstreitigkeit auf der Grundlage eines Gerichtsverfahrens voraussichtlich Ende März erwartet. Nachdem die Entscheidung vom Gericht veröffentlicht wurde, werden wir unsere Stakeholder in Bezug auf diesen Rechtsstreit auf den neuesten Stand bringen.

Ich werde jetzt die Diskussion an Mike Kalb übergeben. Mike?

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Michael W. Kalb, CFO der Amarin Corporation plc – Senior VP & Assistant Secretary [4]

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Danke, John.

Wie zu Beginn dieser Aufforderung erwähnt, finden Sie sowohl unseren Jahresbericht 2019 auf Formular 10-K als auch die heutige Pressemitteilung auf unserer Website. Sie enthalten eine Diskussion unserer Finanzergebnisse für das vierte Quartal und das Gesamtjahr, einschließlich verschiedener Details, die über die Höhepunkte hinausgehen, die ich in der heutigen Aufforderung behandeln werde. Da unsere tatsächlichen Ergebnisse für 2019 und die Finanzprognosen für 2020 mit den Angaben zu Beginn des Jahres 2020 übereinstimmen, möchte ich mich in meiner Finanzübersicht kurz fassen.

John berichtete, dass unsere normalisierten Skripte für das Gesamtjahr 2019 um 78% gestiegen sind, während unser Umsatz um 87% gestiegen ist. Beide prozentualen Zuwächse stellen ein solides Wachstum dar und spiegeln die starke Ausführung durch unsere Handelsorganisation wider. Unterschiede sind nicht ungewöhnlich zwischen Skriptnummern, die von Dritten geschätzt werden, und Produktlieferungen, für die wir direkte Aufzeichnungen haben und für die wir Umsatzerlöse erfassen. Wir haben bei verschiedenen früheren Gelegenheiten Erklärungen für solche Unterschiede geliefert. Ich werde solche Erklärungen hier zusammenfassen, da sonst wahrscheinlich eine Frage aufgeworfen wird.

Zur Erinnerung: Amarin erfasst Produktumsätze, wenn seine Kunden, die hauptsächlich aus unabhängigen kommerziellen Händlern bestehen, das von ihnen bestellte Produkt erwerben. Dies ist eine typische Praxis für Pharmaunternehmen. 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?


John F. Thero, Amarin Corporation plc – President, CEO & Director [5]


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?

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Questions and Answers


Operator [1]


(Operator Instructions)

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


Michael Jonathan Yee, Jefferies LLC, Research Division – Equity Analyst [2]


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.


John F. Thero, Amarin Corporation plc – President, CEO & Director [3]


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.


Operator [4]


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


Yasmeen Rahimi, Roth Capital Partners, LLC, Research Division – MD, Senior Research Analyst & Co-Head of Biotechnology Research [5]


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.


John F. Thero, Amarin Corporation plc – President, CEO & Director [6]


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.


Operator [7]


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


Louise Alesandra Chen, Cantor Fitzgerald & Co., Research Division – Senior Research Analyst & MD [8]


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.


John F. Thero, Amarin Corporation plc – President, CEO & Director [9]


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?


Aaron D. Berg, Amarin Corporation plc – Senior VP & Chief Commercial Officer [10]


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%.


John F. Thero, Amarin Corporation plc – President, CEO & Director [11]


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.


Operator [12]


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


Yuko Oku, JP Morgan Chase & Co, Research Division – Analyst [13]


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.


John F. Thero, Amarin Corporation plc – President, CEO & Director [14]


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.


Operator [15]


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


Kyuwon Choi, Goldman Sachs Group Inc., Research Division – Equity Analyst [16]


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.


John F. Thero, Amarin Corporation plc – President, CEO & Director [17]


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?


Aaron D. Berg, Amarin Corporation plc – Senior VP & Chief Commercial Officer [18]


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.


John F. Thero, Amarin Corporation plc – President, CEO & Director [19]


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


Kyuwon Choi, Goldman Sachs Group Inc., Research Division – Equity Analyst [20]


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?


John F. Thero, Amarin Corporation plc – President, CEO & Director [21]


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.


Operator [22]


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


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