Amarin Corporation (AMRN) reported quarterly results on Friday morning, $0.02 ahead of consensus EPS but below expectations on the top-line with a $1.6M miss. Cost-cutting initiatives are stemming losses, but disappointing Vascepa revenues, a weak cash position, and a burdensome debt load have all weighed heavily on the stock in 2014.
Amarin delivered a top-line miss with yawn-inducing sequential revenue growth. Net product revenues for Vascepa, Amarin’s only marketed product, came in at $11M, up 9% from $10.1M in the fourth quarter of 2013. Consensus estimates called for revenues of $11.6M.
One bright spot: Amarin’s cost-cutting initiatives are flowing through to the bottom line. Amarin began cutting costs late last year when Vascepa failed to receive FDA approval in a larger population of patients with high triglycerides (TG 200-499 mg/dL). Vascepa is only approved for use in patients with severe hypertriglyceridemia (TG >=500 mg/dL). The company recorded a smaller non-GAAP loss of $0.16, versus $0.26 in 4Q13. Analysts expected on average a $0.18 loss. Amarin burned $36.5M in the quarter, a significant reduction from the $52.1M it averaged quarterly in 2013.
The company finished out the quarter with $164.3M in cash.
Amarin is under-equipped to advance clinical development and Vascepa marketing efforts. Amarin has $215.2M in contractual cash purchase orders, operating leases, and debt obligations through 2016. With only $164.3M in cash and no clear timeline for positive cash flow, the odds are stacked against the company.
Amarin partnered with Kowa Pharmaceuticals in March to co-promote Vascepa in the U.S. Kowa is only covering incremental costs associated with the use of its 250-person sales force, so without Amarin cutting its own marketing efforts, the partnership will have a negligible effect on in-house commercialization expenses.
Amarin’s REDUCE-IT cardiovascular outcomes study (n=8000) spans 450 centers across 11 countries, and costs through completion in 2017 are expected to approach $100M, or 61% of the company’s remaining cash. Management has made it clear that the trial is susceptible to termination without additional funding, and is trying to leverage this argument at the FDA for a reinstatement of the previous Special Protocol Assessment, a strategy more likely to frustrate the agency than make amends.
Amarin has $238.2M in debt on the books, of which $150M is due in 2032 and the remaining $88.2m was negotiated in a private transaction with BioPharma Secured Debt Fund (BioPharma) in 2012 on what could be considered ‘investor friendly’ terms (page 76 of 2013 10K outlines the financing structure). Amarin agreed to pre-determined payments based on Vascepa sales thresholds. Terms call for a payment of $2.5M in 1Q14, $8.0M/quarter for 2Q14-1Q15, $10.0M/quarter for 2Q15-1Q16, $15.0M for 2Q16-1Q17, and then a final $13.0M payment in 2Q17. The problem is, Vascepa sales simply haven’t lived up to expectations. Amarin paid out only $1.0M of the $2.5m 1Q14 obligation in February. The company doesn’t have the liquidity to both pay BioPharma and fund its REDUCE-IT trial, much less cover day-to-day expenses, with cash on hand.
Amarin has few attractive options if the Kowa co-promote doesn’t improve the Vascepa ramp: cut OPEX even more; halt the REDUCE-IT study to reduce cash burn; tap the equity/debt markets; and/or renegotiate the BioPharma financing. Amarin’s Irish tax domicile may be its only saving grace.
