This
Quarterly Report on Form 10-Q contains forward-looking information based on our current expectations. Because our actual results may differ materially from any forward-looking statements that we make or that are made on our behalf, this section
includes a discussion of important factors that could affect our actual future results, including, but not limited to, our capital resources, our ability to successfully commercially launch Vascepa, the progress and timing of our clinical programs,
the safety and efficacy of our product candidates, risks associated with regulatory filings, risks associated with determinations made by regulatory agencies, the potential clinical benefits and market potential of our product candidates, commercial
market estimates, future development efforts, patent protection, effects of healthcare reform, reliance on third parties, and other risks set forth below.
Those risk factors below denoted with a * are newly added or have been materially updated from our Quarterly Report on 10-Q filed with the SEC on May 9, 2014.
Risks Related to the Commercialization and Development of Vascepa
* Our ability to generate increased revenue over the next few years depends, in part, on FDA approval for the use of Vascepa in the ANCHOR indication in the United States and we may be delayed in
obtaining, or never obtain, such approval. In October 2013 an advisory committee convened by the FDA voted 9 to 2 against recommending approval of Vascepa in the ANCHOR indication and the FDA has rescinded our ANCHOR clinical trial Special Protocol
Assessment Agreement, as a result of which there is a significant risk that FDA will not approve Vascepa for this indication.
While we are currently marketing Vascepa for use in the MARINE indication in the United States, our ability to commercialize Vascepa in the ANCHOR indication in the United States or market Vascepa for
either indication outside of the United States is dependent upon receiving additional regulatory approvals. In April 2013, the FDA accepted our Supplemental New Drug Application, or sNDA, which seeks approval for the use of Vascepa in patients with
high triglyceride levels (TG
>
200 mg/dL and <500 mg/dL) who are also on statin therapy for elevated LDL-C levels, which we refer to as the ANCHOR indication. The FDA originally assigned the sNDA a Prescription Drug User Fee Act, or
PDUFA, date of December 20, 2013 for the completion of its review. The PDUFA date is the goal date for the FDA to complete its review of the sNDA. On December 19, 2013, the FDA notified us it did not expect to take action on our sNDA on
December 20, 2013 because our request to re-instate the ANCHOR special protocol assessment, or SPA, agreement remained under consideration with the FDA. Our request to reinstate the ANCHOR SPA was denied twice and we are in the process of
appealing that decision within the FDA. No new PDUFA date has been established.
On October 16, 2013 the FDA convened an
advisory committee meeting to review the sNDA for the ANCHOR indication. At the meeting, the advisory committee voted 9 to 2 against recommending approval of Vascepa, based on the following question:
Taking into account the described efficacy and safety data for Vascepa, do you believe that its effects on the described
lipid/lipoprotein parameters are sufficient to grant approval for co-administration with statin therapy for the treatment of patients with mixed dyslipidemia and CHD or CHD risk equivalent prior to the completion of REDUCE-IT?
During the advisory committee meeting, based in part on the briefing materials prepared by the FDA for the meeting, the advisory
committee reviewed the safety and efficacy data observed in the ANCHOR trial. This included a discussion regarding observed nominally statistically significant changes from baseline in an adverse direction, while on background statin therapy, in
certain lipid parameters, including TGs, in the placebo group, raising the possibility that the mineral oil placebo used in the ANCHOR trial (and in the REDUCE-IT trial) was not biologically inert and might be viewed as artificially exaggerating the
clinical effect of Vascepa when measured against placebo in the ANCHOR trial. Because no strong evidence for biological activity of mineral oil was identified by the FDA in the MARINE trial, ultimately it was concluded that the between-group
differences likely provided the most appropriate descriptions of the treatment effect of Vascepa and that whatever factor(s) led to the within-group changes over time in the placebo group were likely randomly distributed to all treatment groups.
Thus, the FDA approved Vascepa for use in the MARINE indication in July 2012. Following this discussion at the advisory committee meeting, while no formal vote was taken related to the inert nature of the placebo, we believe that the consensus of
the advisory committee, although not unanimous, and the FDA was that, based on the information made available to the advisory committee and FDA at the meeting, Vascepa appeared to be safe and effective for the reduction of TGs in patients with mixed
dyslipidemia on statin therapy.
However, there was also extensive discussion during the advisory committee meeting regarding
the expected clinical benefit of a reduction in TGs in this patient population. That is, whether the clinical data derived from the ANCHOR trial was a sufficient basis for approval. In particular, the advisory committee and FDA noted the lack of
prospective, controlled clinical trial data demonstrating that pharmacological reduction of TGs in patients with mixed dyslipidemia on statin therapy significantly reduces residual cardiovascular risk in these patients. The FDA noted that prior
clinical outcomes studies conducted by others, albeit in different patient populations, evaluating different drugs with different mechanisms of action, failed to demonstrate a statistically significant reduction in cardiovascular events following
concomitant use of drug therapy in patients on statin therapy. We believe that the negative vote of the advisory committee was principally due to the lack of recent conclusive data in these clinical outcomes studies in favor of the hypothesis that
TG reduction will result in reduced cardiovascular risk. The FDA is not bound by the recommendations of the advisory committee, but it generally follows such recommendations.
47
A Special Protocol Assessment, or SPA, agreement is an agreement with the FDA that Phase 3
trial protocol design, clinical endpoints, and planned statistical analyses are acceptable to support regulatory approval. A SPA is generally binding upon the FDA except in limited circumstances, such as if the FDA identifies a substantial
scientific issue essential to determining safety or efficacy after the study begins, or if the study sponsor fails to follow the protocol that was agreed upon with the FDA. On October 29, 2013, the FDA notified us that it rescinded the SPA
agreement we entered into for the ANCHOR trial protocol because the FDA determined that a substantial scientific issue essential to determining the effectiveness of Vascepa in the studied population was identified after testing began. As a basis for
this determination, the FDA communicated that, consistent with discussion at the advisory committee meeting, it determined that results from outcome studies of other triglyceride-lowering drugs failed to support the hypothesis that a
triglyceride-lowering drug significantly reduces the risk for cardiovascular events among the population studied in the ANCHOR trial. Thus, the FDA stated that it no longer considers a change in serum triglyceride levels as sufficient to establish
the effectiveness of a drug intended to reduce cardiovascular risk in subjects with serum triglyceride levels below 500 mg/dL. On November 7, 2013, we submitted to the FDA a formal appeal of its decision to rescind the SPA including documents
outlining why we believe the SPA was wrongfully rescinded.
On November 21, 2013, we received notification from the
dispute resolution group of the Office of New Drugs at the FDA that it had not accepted for review, on procedural grounds, our appeal regarding the rescission of the SPA. We were also notified by the FDA that our request for a meeting at a high
level within the FDA regarding the appeal was not granted and that we would first need to address the matter at the division level within the FDA. On December 19, 2013, the FDA notified us it did not expect to take action on our sNDA on
December 20, 2013 because our request to re-instate the ANCHOR SPA agreement remained under consideration with the FDA. The FDA also communicated to us that, as of December 19, 2013, it viewed our appeal of the ANCHOR SPA agreement
rescission and the ANCHOR sNDA as separate administrative decisions worthy of separate consideration and that the FDA planned to complete its review of our request to re-instate the ANCHOR SPA agreement. The FDA provided no additional information on
when it expects to complete its review of the ANCHOR sNDA. On January 17, 2014, the Division of Metabolism and Endocrinology Products, or DMEP, within the FDA notified Amarin in connection with Amarins request for reconsideration of the
October 2013 decision to rescind the ANCHOR SPA agreement that the DMEP does not plan to re-instate the ANCHOR SPA agreement. We appealed the DMEP decision to the next level within the FDA, the Office of Drug Evaluation II, or ODE II,
and were informed in late April 2014, that ODE II determined to uphold the DMEP rescission determination. We have appealed the ODE II decision to the next level within the FDA in accordance with FDA dispute resolution guidance and are currently
waiting for that determination. There can be no assurance that we will be successful in the reinstatement of the ANCHOR SPA agreement or in approval of the ANCHOR indication sNDA.
Based on our communications with the FDA, we currently expect that final positive results from the REDUCE-IT outcomes study will be
required for FDA approval of label expansion for Vascepa. If we do not receive FDA approval of the ANCHOR indication, we plan to re-evaluate the REDUCE-IT study, including the likelihood of REDUCE-IT providing clinically and commercially useful
results, the likelihood of FDA approval for an expanded indication for Vascepa based on these results and whether it is best to continue or discontinue the study. We anticipate that in any such re-evaluation we will seek further feedback from
the FDA. The aggregate cost to complete REDUCE-IT, excluding amounts previously expensed, is estimated to exceed $100 million, which is a significant financial burden given our current financial position. To the extent the FDA conditions
approval of Vascepa for the ANCHOR indication on its review of the data from the REDUCE-IT trial, Vascepa may never be approved for this indication. Any delay in obtaining, or an inability to obtain, marketing approval in this indication could
prevent us from growing revenue significantly and could have a material adverse effect on our operations and financial condition, including our ability to reach profitability.
Even if we obtain additional regulatory approvals for Vascepa, the timing or scope of any approvals may prohibit or reduce our ability to commercialize the product successfully. For example, if the
approval process for the ANCHOR indication takes too long, we may miss market opportunities and give other companies the ability to develop competing products or establish market dominance. Additionally, the terms of any approvals, including the
approval received from the FDA in July 2012 for the MARINE indication, may prove to not have the scope or breadth needed for us to successfully commercialize Vascepa or become profitable.
Our SPA agreement for ANCHOR has been rescinded and our SPA agreement for REDUCE-IT is not a guarantee of FDA approval of Vascepa
for the proposed REDUCE-IT indication.
A SPA is an evaluation by the FDA of a protocol with the goal of reaching an
agreement that the Phase 3 trial protocol design, clinical endpoints, and statistical analyses are acceptable to support regulatory approval of the drug product candidate with respect to effectiveness for the indication studied. The ANCHOR trial
was, and the REDUCE-IT trial is, being conducted under an SPA agreement with the FDA. In each case, the FDA agreed that, based on the information we submitted to the agency, the design and planned analysis of the trial is adequate to support use of
the conducted study as the primary basis for approval with respect to effectiveness. A SPA agreement is generally binding upon the FDA except in limited circumstances, such as if the FDA identifies a substantial scientific issue essential to
determining safety or efficacy after the study begins, or if the study sponsor fails to follow the protocol that was agreed upon with the FDA.
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On October 29, 2013, the FDA notified us that it rescinded the ANCHOR study SPA
agreement because the FDA determined that a substantial scientific issue essential to determining the effectiveness of Vascepa in the studied population was identified after testing began. Specifically, consistent with discussion at the advisory
committee meeting, the FDA determined that results from outcome studies of other drugs failed to support the hypothesis that a triglyceride-lowering drug significantly reduces the risk for cardiovascular events among the population studied in the
ANCHOR trial. In response to our appeal of the decision to rescind the ANCHOR SPA agreement, on January 17, 2014, the DMEP within the FDA notified Amarin in connection with Amarins request for reconsideration of the October 2013 decision
to rescind the ANCHOR SPA agreement that the DMEP does not plan to re-instate the ANCHOR SPA agreement. The DMEP also stated that it no longer considers a change in serum triglyceride levels as sufficient to establish the effectiveness
of a drug intended to reduce cardiovascular risk in subjects with serum triglyceride levels below 500 mg/dL. We appealed this decision within FDA, were denied twice, and are currently waiting for the determination on the third level of our appeal.
Thus, even though we have received regulatory approval of Vascepa for the MARINE indication under an SPA agreement, our
ANCHOR SPA agreement was rescinded and there is no assurance that the FDA will not rescind our REDUCE-IT SPA agreement. The inability to obtain marketing approval in the ANCHOR or REDUCE-IT indications has and would prevent us from growing revenue
significantly, and it has had, and could continue to have, a material adverse effect on our operations and financial condition, including our ability to reach profitability.
If we do not obtain FDA approval of the ANCHOR indication, we may choose to discontinue our ongoing REDUCE-IT outcome study of Vascepa, which is designed to determine whether Vascepa is effective in
reducing major cardiovascular events in a high risk patient population on statin therapy and our development of AMR102, a fixed dose combination of Vascepa and a leading statin product.
Our ongoing REDUCE-IT cardiovascular outcome study was designed to determine whether Vascepa, when added to statin therapy, would reduce
the risk of major cardiovascular events in an at-risk patient population. We expect the ongoing incremental cost of the REDUCE-IT study to us over the next several years will exceed $100 million as the study currently involves over 450 clinical
trial sites in eleven countries. The timing of completion of the REDUCE-IT study is based on the rate of cardiovascular events for patients in the study. If it takes longer for such events to accrue than we expect, the trial could take longer to
complete and cost more than we currently expect. AMR102, a fixed dose combination of Vascepa and a leading statin product, is in early stage development with relatively minimal current expenses associated with ongoing development, but significant
expense associated with development over the next several years. We have not been profitable in any of the last five fiscal years. Our cash and cash equivalents at June 30, 2014 were $150.5 million. For the fiscal year ended December 31,
2013, we reported a loss of approximately $166.2 million. For the six months ended June 30, 2014, we reported a loss of approximately $10.7 million and we had an accumulated deficit at June 30, 2014 of $924.5 million. For the six months
ended June 30, 2014, net revenue from the sale of Vascepa based on the MARINE indication was $23.6 million. Given the substantial ongoing cost of the REDUCE-IT cardiovascular outcome study, our current capital resources and the current sales of
Vascepa resulting from FDA approval of Vascepa for use in the MARINE indication, we may not be able to continue the study with our current financial resources and anticipated revenues from Vascepa without the additional revenues that may be
available to us from the sale of Vascepa following an FDA approval of the ANCHOR indication. If we do not receive FDA approval of the ANCHOR indication, we plan to re-evaluate the REDUCE-IT study, including the likelihood of REDUCE-IT providing
clinically and commercially useful results, the likelihood of FDA approval for an expanded indication for Vascepa based on these results and whether it is advisable to continue or discontinue the study. We anticipate that in any such
re-evaluation we will seek further feedback from the FDA. If we do not receive FDA approval of the ANCHOR indication and do not continue the ongoing REDUCE-IT trial or our development of AMR102, our ability to generate revenue now and over the
next several years will be substantially dependent on sales of Vascepa resulting from FDA approval of Vascepa for use in the MARINE indication. Accordingly, our prospects for substantially increasing future revenue from sales of Vascepa beyond what
might be expected from the MARINE indication labeling alone will be substantially diminished.
We are dependent upon the
success of Vascepa, which we launched commercially in the MARINE indication in early 2013.
As a result of our
reliance on a single product and our primary focus on the U.S. market in the near-term, much of our near-term results and value as a company depends on our ability to execute our commercial strategy for Vascepa in the United States, which we
launched in January 2013. If commercialization efforts for Vascepa in the MARINE indication are not successful, our business will be materially and adversely affected. Even if we are able to develop additional products from our research and
development efforts, the development time cycle for products typically takes several years. This restricts our ability to respond to adverse business conditions for Vascepa. If we are not successful in developing any future product or products, or
if there is not adequate demand for Vascepa or the market for such product develops less rapidly than we anticipate, we may not have the ability to effectively shift our resources to the development of alternative products or do so in a timely
manner without suffering material adverse effects on our business. As a result, the lack of alternative products we develop could constrain our ability to generate revenues and achieve profitability.
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Our current and planned commercialization efforts may not be successful in increasing
sales of Vascepa.
In January 2013, we began selling and marketing Vascepa in the United States through our own, newly
established sales and marketing teams and through a newly established third-party commercial distribution infrastructure. We hired key personnel in these areas over the last several years and hired and trained a professional sales force in early
January 2013. In October 2013, following an FDA advisory committee recommendation against approval for the ANCHOR indication, we implemented a plan to reduce our workforce and our team of sales professionals in half. In May 2014 we began
co-promoting Vascepa in the United States with Kowa Pharmaceuticals America, Inc., or Kowa Pharmaceuticals America, under a co-promotion agreement we entered into in March 2014. Under the agreement, approximately 250 Kowa Pharmaceuticals America
sales representatives devote a substantial portion of their time to promoting Vascepa with Amarins approximately 130 sales representatives based on a plan designed to substantially increase both the number of sales targets reached and the
frequency of sales calls on existing sales targets. However, the commercialization of a new pharmaceutical product is a complex undertaking for a company to manage, and we have very limited experience as a company operating in this area and
co-promoting a pharmaceutical product with a partner.
Factors related to building and managing a sales and marketing
organization that can inhibit our efforts to successfully commercialize Vascepa include:
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our inability to attract and retain adequate numbers of effective sales and marketing personnel;
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our inability to adequately train our sales and marketing personnel, in particular as it relates to various healthcare regulatory requirements
applicable to the marketing and sale of pharmaceutical products, and our inability to adequately monitor compliance with these requirements;
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the inability of our new sales personnel, working for us as a new market entrant, to obtain access to or persuade adequate numbers of physicians to
prescribe Vascepa;
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the effect of our recent reduction in force and regulatory events on our ability to contact potential purchasers of Vascepa in an efficient manner;
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the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more
extensive product lines; and
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unforeseen costs and expenses associated with operating a new independent sales and marketing organization.
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In addition, we believe that investors should view with caution both the results for the twelve months ended December 31, 2013 and
the results for quarterly periods for the foreseeable future, as data for this limited period may not be representative of a trend consistent with the results presented or otherwise predictive of future results, especially in light of competitive
developments in the market in which we operate, our interactions with FDA on potential label expansions with Vascepa, the October 2013 approximately 50% reduction in our sales force, and the March 2014 co-promotion Agreement with Kowa
Pharmaceuticals America. We commenced our commercial launch of Vascepa on January 28, 2013. Accordingly, there is a very limited amount of information available at this time to determine the actual number of total prescriptions for Vascepa. We
believe investors should consider our results for the twelve months ended December 31, 2013 together with results over several future quarters, or longer, before making an assessment about potential future performance.
In addition to the factors identified above, seasonal fluctuations in pharmaceutical sales, for example, may affect future prescription
trends of Vascepa. Prior to 2013, we recognized no revenue from Vascepa sales. In accordance with GAAP, until we had the ability to reliably estimate returns of Vascepa from its Distributors, revenue was recognized based on the resale of Vascepa for
the purposes of filling patient prescriptions, and not based on sales from us to such Distributors. During the six months ended June 30, 2014, we concluded that we had developed sufficient history such that we can reliably estimate returns and
as a result, began to recognize revenue based on sales to our Distributors. The change in revenue recognition methodology resulted in the recognition of previously deferred revenue. At December 31, 2013, we had deferred approximately $1.7
million in amounts billed to Distributors that was not recognized as revenue. This change in revenue recognition methodology resulted in the recognition of such deferred revenues during the six months ended June 30, 2014. We cannot assure that
our revenue recognition process will consistently result in accurate financial results or that future adjustments, possibly material in scope or amount, will not occur.
If we are not successful in our efforts to market and sell Vascepa, our anticipated revenues will be materially and negatively affected, and we may not obtain profitability, may need to cut back on
research and development activities or need to raise additional funding that could result in substantial dilution.
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Vascepa may fail to achieve the degree of market acceptance by physicians, patients,
healthcare payors and others in the medical community necessary for commercial success.
We began marketing and selling
Vascepa for use in the MARINE indication in January 2013. Vascepa may fail to gain sufficient market acceptance by physicians, patients, healthcare payors and others in the medical community. If Vascepa does not achieve an adequate level of
acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of Vascepa for the MARINE indication and any future approved indications will depend on a number of factors, including:
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the perceived efficacy, safety and potential advantages of Vascepa, as compared to alternative treatments;
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our ability to offer Vascepa for sale at competitive prices;
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convenience and ease of administration compared to alternative treatments;
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the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
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the scope, effectiveness and strength of product education, marketing and distribution support, including our sales and marketing team (which was
affected by our recent reduction in force);
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publicity concerning Vascepa or competing products;
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perception that we will continue to market and sell Vascepa in the MARINE indications and any future approved indications;
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sufficient third-party coverage or reimbursement; and
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the actual efficacy of the product and the prevalence and severity of any side effects, including any limitations or warnings contained in
Vascepas approved labeling.
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* We may not be able to compete effectively against our
competitors pharmaceutical products.
The biotechnology and pharmaceutical industries are highly competitive.
There are many pharmaceutical companies, biotechnology companies, public and private universities and research organizations actively engaged in the research and development of products that may be similar to our products. It is probable that the
number of companies seeking to develop products and therapies similar to our products will increase. Many of these and other existing or potential competitors have substantially greater financial, technical and human resources than we do and may be
better equipped to develop, manufacture and market products. These companies may develop and introduce products and processes competitive with or superior to ours. In addition, other technologies or products may be developed that have an entirely
different approach or means of accomplishing the intended purposes of our products, which might render our technology and products noncompetitive or obsolete.
Our competitors both in the United States and Europe include large, well-established pharmaceutical companies,
specialty pharmaceutical sales and marketing companies, and specialized cardiovascular treatment companies. GlaxoSmithKline plc, which currently markets Lovaza
®
, a prescription-only omega-3 fatty acid indicated for patients with severe hypertriglyceridemia has been on the market since 2004. As described below, generic
versions of Lovaza are now available in the United States. Other large companies with competitive products include AbbVie, Inc., which currently markets Tricor
®
and Trilipix
®
for the
treatment of severe hypertriglyceridemia and mixed dyslipidemia and Niaspan
®
, which is primarily used to raise
HDL-C, but is also used to lower triglycerides. Generic versions of Tricor, Trilipix, and Niaspan are also now available in the United States. In addition, in May 2014, Epanova
®
(omega-3-carboxylic acids) capsules, a free fatty acid form of omega-3 (comprised of 55% EPA and 20% DHA), was approved by the FDA for patients with severe
hypertriglyceridemia. Epanova was developed by Omthera Pharmaceuticals, Inc., and is now owned by AstraZeneca Pharmaceuticals LP (AstraZeneca). We expect AstraZeneca will utilize its substantial commercial resources to market its product. Also, in
April 2014, Omtryg, another omega-3-acid fatty acid composition developed by Trygg Pharma AS, received FDA approval for severe hypertriglyceridemia. We are not aware of the commercialization plan for Omtryg. Each of these competitors, other
than Trygg, has greater resources than we do, including financial, product development, marketing, personnel and other resources.
In April 2014, Teva Pharmaceuticals USA Inc., or Teva, launched a generic version of Lovaza after winning its patent litigation against Pronova BioPharma Norge AS, now owned by BASF, which owns such
patents rights. In June 2014, Par Pharmaceutical Inc., or Par, received FDA approval of its version of generic Lovaza. Pronova/BASF has appealed to the U.S. Supreme Court to challenge its loss in the Lovaza patent litigation against Teva and Par,
which, if Pronova/BASF wins, could lead to an injunction against Teva and Par from selling generic versions of Lovaza in the United States. In addition, in March 2011, Pronova/BASF entered into an agreement with Apotex Corp. and Apotex Inc., or
Apotex, to settle its patent litigation in the United States related to Lovaza. Pursuant to the terms of the settlement agreement, Pronova/BASF granted Apotex a license to enter the United States market with a generic version of Lovaza in the first
quarter of 2015, or earlier depending on circumstances. Apotex must obtain FDA approval of a generic version of Lovaza before it is permitted to sell such product in the United States.
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In addition, we are aware of other pharmaceutical companies that are
developing products that, if approved and marketed, would compete with Vascepa. We understand that Acasti Pharma, a subsidiary of Neptune Technologies & Bioresources Inc., announced in late 2012 that it intends to conduct a Phase 3
clinical program to assess the safety and efficacy of its omega-3 prescription drug candidate derived from krill oil for the treatment of hypertriglyceridemia. We believe Catabasis Pharmaceuticals, or Catabasis, Resolvyx Pharmaceuticals, or
Resolvyx, and Sancilio & Company are also developing potential treatments for hypertriglyceridemia based on omega-3 fatty acids. To our knowledge, Catabasis initiated a Phase 2 clinical trial of its product in December 2013; Resolvyxs
compound remains in Phase 1 clinical testing; and Sancilio is preparing to commence Phase 3 clinical testing. In addition, we are aware that Matinas BioPharma, Inc. is developing an omega-3-based therapeutic for the treatment of severe
hypertriglyceridemia and mixed dyslipidemia. Matinas BioPharma, Inc. has reported that it is preparing to file an Investigational New Drug Application with the FDA and to conduct a human study in the first half of 2014. Isis Pharmaceuticals
announced favorable Phase 2 results of ISIS-APOCIII
Rx
a
drug candidate administered through weekly subcutaneous injections, in patients with high triglycerides and type 2 diabetes and in patients with moderate to severe high triglycerides. Finally, Madrigal Pharmaceuticals has completed Phase 1
clinical testing of MGL-3196 for the treatment of high triglycerides and various lipid parameters in patients.
Generic
company competitors are seeking approval of generic versions of Vascepa.
The Food Drug and Cosmetic Act, or FDCA, as
amended by the Drug Price Competition and Patent Term Restoration Act of 1984, as amended, or the Hatch-Waxman Amendments, permit the FDA to approve abbreviated new drug applications, or ANDAs, for generic versions of brand name drugs like Vascepa.
We refer to the process of generic drug applications as the ANDA process. The ANDA process permits competitor companies to obtain marketing approval for a drug product with the same active ingredient, dosage form, strength, route of
administration, and labeling as the approved brand name drug, but without having to conduct and submit clinical studies to establish the safety and efficacy of the proposed generic product. In place of such clinical studies, an ANDA applicant needs
to submit data demonstrating that its product is bioequivalent to the brand name product, usually based on pharmacokinetic studies.
The Hatch-Waxman Amendments require an applicant for a drug product that relies, in whole or in part, on the FDAs prior approval of Vascepa, to notify us of its application, a paragraph IV notice,
if the applicant is seeking to market its product prior to the expiration of the patents that claim Vascepa. A bona fide paragraph IV notice may not be given under the Hatch-Waxman Amendments until after the generic company receives from the FDA an
acknowledgement letter stating that its ANDA is sufficiently complete to permit a substantive review.
The paragraph IV notice
is required to contain a detailed factual and legal statement explaining the basis for the applicants opinion that the proposed product does not infringe our patents, that our patents are invalid, or both. After receipt of a valid notice, we
would have the option of bringing a patent infringement suit in federal district court against any generic company seeking approval for its product within 45 days from the date of receipt of each notice. If such a suit is commenced within this 45
day period, we will be entitled to receive a 30 month stay on FDAs ability to give final approval to any of the proposed products that reference Vascepa that begins on the date we receive the paragraph IV notice. The stay may be shortened or
lengthened if either party fails to cooperate in the litigation and it may be terminated if the court decides the case in less than 30 months. If the litigation is resolved in favor of the applicant before the expiration of the 30 month period, the
stay will be immediately lifted and the FDAs review of the application may be completed. Such litigation is often time-consuming and costly, and may result in generic competition if such patents are not upheld or if the generic competitor is
found not to infringe such patents.
We have received six paragraph IV notices notifying us of submitted ANDAs to Vascepa
under the Hatch-Waxman Amendments. We are now engaged in costly litigation with the ANDA applicants to protect our patent rights. If an ANDA filer is ultimately successful in patent litigation against us, it meets the requirements for a generic
version of Vascepa to the satisfaction of the FDA under its ANDA (after any applicable regulatory exclusivity period and the litigation-related 30-month stay period expires), and is able to supply the product in significant commercial quantities,
the generic company could, with the market introduction of a generic version of Vascepa. Such a market entry would likely limit our U.S. sales, which would have an adverse impact on our business and results of operations. In addition, even if a
competitors effort to introduce a generic product is ultimately unsuccessful, the perception that such development is in progress and/or news related to such progress could materially affect the perceived value of our company and our stock
price.
In addition to the six paragraph notices received to date, in February 2014, prior to the FDAs three-year
exclusivity determination for Vascepa, we received a purported paragraph IV notice from a generic drug company with respect to an ANDA to Vascepa. The FDA confirmed with us after we received the notice and before the exclusivity determination was
made that the FDA had not accepted for review any ANDA to Vascepa. The FDA has repeatedly taken the position that paragraph IV notices delivered to pioneer companies such as Amarin prior to the acceptance by the FDA for review of a submitted ANDA
are not effective under the Hatch-Waxman Amendments. The generic company may challenge the FDAs position on whether the notice is valid in court in connection with patent litigation. Generic companies are thought to send such premature notices
to seek to avail themselves of the
52
180-day generic exclusivity period for an approved product under an ANDA based on the generics view that it would then have first-to-file status and to seek an early end to related patent
litigation with the branded drug company and the associated 30-month stay. Because we and the FDA do not believe this purported paragraph IV notice is an effective notice under the Hatch-Waxman Amendments we do not plan to initiate patent litigation
against the generic company that submitted the ANDA until within the 45-day period after we receive a valid paragraph IV notice from such applicant.
Our suit against FDA challenging its denial of five-year, NCE exclusivity to Vascepa under the Hatch-Waxman Amendments may not achieve its intended goal to delay generic competition challenges to
Vascepa.
The timelines and conditions under the ANDA process that permit the start of patent litigation and allow the
FDA to approve generic versions of brand name drugs like Vascepa differ based on whether a drug receives three-year, or five-year, new chemical entity (NCE) marketing exclusivity. The FDA typically makes a determination on marketing exclusivity in
connection with an NDA approval of a drug for a new indication. We applied to the FDA for five-year, NCE marketing exclusivity for Vascepa in connection with the NDA for our MARINE indication, which NDA was approved by the FDA on July 26, 2012.
On February 21, 2014, in connection with the July 26, 2012 approval of the MARINE indication, the FDA denied a grant of NCE marketing exclusivity to Vascepa and granted three-year marketing exclusivity. Such three-year exclusivity extends
through July 25, 2015 and is expected to be supplemented by a 30-month stay that we believe will extend into September 2016, assuming the related Vascepa patent litigation is not resolved against us sooner.
NCE marketing exclusivity, not granted to Vascepa, precludes approval during the five-year exclusivity period of certain 505(b)(2)
applications and ANDAs submitted by another company for another version of the drug. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. In this case, the pioneer drug
company may be afforded the benefit of a 30-month stay against the launch of such a competitive product that would extend from the end of the five-year exclusivity period, and may also be afforded other extensions under applicable regulations,
including a six-month pediatric exclusivity extension or a judicial extension if applicable requirements are met. Another drug sponsor could also gain a form of marketing exclusivity under the provisions of the FDCA, as amended by the Hatch-Waxman
Amendments, if such company can, under certain circumstances, complete a human clinical trial process and obtain regulatory approval of its product.
The three-year period of exclusivity granted to Vascepa under the Hatch-Waxman Amendments is for a drug product that contains an active moiety that has been previously approved when the application
contains reports of new clinical investigations (other than bioavailability studies) conducted by the sponsor that were essential to approval of the application. Our MARINE clinical trial was a new clinical investigation that was essential to the
approval of our new drug application. We are entitled to three-year exclusivity even though FDA determined that the EPA moiety was previously approved in Lovaza because our MARINE clinical investigation was essential for the approval of our new drug
product, Vascepa.
Such three-year exclusivity protection precludes the FDA from approving a marketing application for an
ANDA, a product candidate that the FDA views as having the same conditions of approval as Vascepa (for example, the same indication and/or other conditions of use), or a 505(b)(2) NDA submitted to the FDA with Vascepa as the reference product, for a
period of three years from the date of FDA approval. The FDA may accept and commence review of such applications during the three-year exclusivity period. Such three-year exclusivity grant does not prevent a company from challenging the validity of
our patents at any time. In this case, Amarin would be, and has been, afforded the benefit of a 30-month stay against the launch of such a competitive product that extends from the period that Amarin receives notice of the patent challenge (the
paragraph IV notice), assuming Amarin responds to the patent challenge with 45 days, and Amarin may also be afforded a judicial extension if applicable requirements are met. Currently, Amarin believes its 30-month stay extends until September 2016.
This three-year form of exclusivity may also not prevent the FDA from approving an NDA that relies only on its own data to support the change or innovation.
On February 27, 2014, we commenced a lawsuit against the FDA that challenges FDAs denial of our request for five-year NCE exclusivity for Vascepa based on our reading of the relevant statute,
our view of FDAs inconsistency with its past actions in this area and the retroactive effect of what we believe is a new policy at FDA as it relates to our situation. Our complaint requests that the court vacate FDAs decision, declare
that Vascepa is entitled to the benefits of five-year statutory exclusivity, bar the FDA from accepting any ANDA or similar application for which Vascepa is the reference-listed drug until after the statutory exclusivity period and set aside what we
contend aredue to the denial of five-year exclusivity to Vascepaprematurely accepted pending ANDA applications.
We may not be successful in this lawsuit against the FDA. Further, a generic company could enter this litigation, complicating the
ultimate determination. Even if we are successful at the federal district court level, the FDA may appeal and we may need to win on appeal before the FDA takes, or the court imposes on the FDA, the remedies we request in suit. In addition, we may
not be able to stay the continuation of currently pending ANDA-related patent litigation. The legal process can be costly and time-consuming and even if we are successful the remedies available to us diminish in value over time as we approach the
natural expiration of the benefits associated with five-year exclusivity.
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Vascepa is a prescription-only omega-3 fatty acid. Omega-3 fatty acids are also
marketed by other companies as non-prescription dietary supplements. As a result, Vascepa would be subject to non-prescription competition and consumer substitution.
Our only current product, Vascepa, is a prescription-only omega-3 fatty acid. Mixtures of omega-3 fatty acids are naturally occurring substances contained in various foods, including fatty fish. Omega-3
fatty acids are also marketed by others as non-prescription dietary supplements. We cannot be sure physicians will view the pharmaceutical grade purity of Vascepa as having a superior therapeutic profile to naturally occurring omega-3 fatty acids
and dietary supplements. To the extent the price of Vascepa is significantly higher than the prices of commercially available omega-3 fatty acids marketed by other companies as dietary supplements (through that lack of coverage by insurers or
otherwise), physicians may recommend these commercial alternatives instead of writing prescriptions for Vascepa or patients may elect on their own to take commercially available omega-3 fatty acids. Either of these outcomes may adversely impact our
results of operations by limiting how we price our product and limiting the revenue we receive from the sale of Vascepa due to reduced market acceptance.
We may not be successful in our Vascepa co-promotion effort with Kowa Pharmaceuticals America.
In March 2014, we entered into a co-promotion agreement with Kowa Pharmaceuticals America to co-promote Vascepa in the United States under which approximately 250 Kowa Pharmaceuticals America sales
representatives devote a substantial portion of their time to promoting Vascepa with Amarins approximately 130 sales representatives. Co-promotion under the agreement commenced in May 2014 based on a plan designed to substantially increase
both the number of sales targets reached and the frequency of sales calls on existing sales targets. While our agreement provides for minimum performance criteria, we have little control over Kowa Pharmaceuticals America, and it may fail to devote
the necessary resources and attention to promote Vascepa effectively. If that were to occur, depending on Vascepa revenues, we may have to curtail the continued development of Vascepa for approval for additional indications or increase our planned
expenditures and undertake additional development or commercialization activities at our own expense. Or, we may seek to terminate the agreement and search for another commercialization partner. If we elect to increase our expenditures to fund
development or commercialization activities on our own, depending on Vascepas revenues, we may need to obtain additional capital, which may not be available to us on acceptable terms, or at all, or which may not be possible due to our other
financing arrangements. If we do not generate sufficient funds from the sale of Vascepa or, to the extent needed to supplement funds generated from product revenue, cannot raise sufficient funds, we may not be able to devote resources sufficient to
market and sell Vascepa on our own in a manner required to realize the full market potential of Vascepa.
The commercial
value to us of the MARINE and ANCHOR indications may be smaller than we anticipate.
There can be no assurance as to
the adequacy for commercial success of the scope and breadth of the MARINE indication or, if approved, the ANCHOR indication. Even if we obtain marketing approval for additional indications, the FDA may impose restrictions on the products
conditions for use, distribution or marketing and in some cases may impose ongoing requirements for post-market surveillance, post-approval studies or clinical trials. Also, with regard to the MARINE indication and any other indications for which we
may gain approval, the number of actual patients with the condition included in such approved indication may be smaller than we anticipate. If any such approved indication is narrower than we anticipate, the market potential for our product would
suffer.
Our products will be subject to extensive post-approval government regulation.
Once a product candidate receives FDA marketing approval, numerous post-approval requirements apply. Among other things, the holder of an
approved NDA is subject to periodic and other monitoring and reporting obligations enforced by the FDA and other regulatory bodies, including obligations to monitor and report adverse events and instances of the failure of a product to meet the
specifications in the approved application. Application holders must also submit advertising and other promotional material to regulatory authorities and report on ongoing clinical trials.
With respect to sales and marketing activities including direct-to-consumer advertising and promotional activities involving the
internet, advertising and promotional materials must comply with FDA rules in addition to other applicable federal and local laws in the United States and in other countries. Industry-sponsored scientific and educational activities also must comply
with FDA and other requirements. In the United States, the distribution of product samples to physicians must comply with the requirements of the U.S. Prescription Drug Marketing Act. Manufacturing facilities remain subject to FDA inspection and
must continue to adhere to the FDAs current good manufacturing practice requirements, or cGMPs. Application holders must obtain FDA approval for product and manufacturing changes, depending on the nature of the change. We also are subject to
the new federal transparency requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, which require manufacturers of certain drugs, devices, biologics, and medical supplies to
report to the Centers for Medicare & Medicaid Services, or CMS, information related to payments and other transfers of value to physicians and teaching hospitals and physician ownership and investment interests. We may also be subject,
directly or indirectly through our customers and partners, to various fraud and abuse laws, including, without limitation, the U.S. Anti-Kickback Statute, U.S. False Claims Act, and similar state laws, which impact, among other things, our proposed
sales, marketing, and scientific/educational grant programs. If we participate in the
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U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs, or other government drug programs, we will be subject to complex laws and regulations
regarding reporting and payment obligations. All of these activities are also potentially subject to U.S. federal and state consumer protection and unfair competition laws. Similar requirements exist in many of these areas in other countries.
Depending on the circumstances, failure to meet these post-approval requirements can result in criminal prosecution, fines or
other penalties, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, or refusal to allow us to enter into supply contracts, including government contracts.
We may also be held responsible for the non-compliance of our partners, such as Kowa Pharmaceuticals America. In addition, even if we comply with FDA and other requirements, new information regarding the safety or effectiveness of a product could
lead the FDA to modify or withdraw a product approval. Adverse regulatory action, whether pre- or post-approval, can potentially lead to product liability claims and increase our product liability exposure. We must also compete against other
products in qualifying for coverage and reimbursement under applicable third party payment and insurance programs.
The
commercial value of Vascepa may be negatively affected by the advisory committee recommendation against approval of Vascepa in the ANCHOR indication, the rescission of the ANCHOR SPA agreement or any subsequent rejection of the pending FDA
application with the FDA for the use of Vascepa in the ANCHOR indication.
Though we are restricted from promoting
Vascepa under applicable regulations for any indication other than the FDA-approved MARINE indication, healthcare professionals are not restricted from prescribing Vascepa for such so-called off-labeled uses. A significant amount of the sales of
Vascepa may, in fact, be attributable to so-called off-labeled uses of the drug. We expect that among the off-labeled uses of Vascepa are uses that would fall into, or be closely related to, the proposed ANCHOR indication. The recent negative
recommendation of the advisory committee meeting against approval of Vascepa in the ANCHOR indication, the recent rescission by the FDA of the ANCHOR SPA, and/or a subsequent decision by the FDA to not approve Vascepa in the ANCHOR indication may
negatively and materially affect the perception of the utility of Vascepa for use in the ANCHOR indication or for other purposes and thus negatively and materially affect sales of Vascepa.
The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. If we
or Kowa Pharmaceuticals America are found to have improperly promoted off-label uses of Vascepa, we may become subject to significant fines and other liability.
The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by
the FDA or such other regulatory agencies as reflected in the products approved labeling. Even though we received FDA marketing approval for Vascepa for the MARINE indication, physicians may still prescribe Vascepa to their patients for use in
the treatment of conditions that are not included as part of the indication statement in our FDA-approved Vascepa label. If we are found to have promoted such off-label uses, we may become subject to significant government fines and other related
liability. We may also be held responsible for the non-compliance of our co-promotion partner, Kowa Pharmaceuticals America. For example, the Federal government has levied large civil and criminal fines against companies for alleged improper
promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.
In addition, incentives exist under applicable laws that encourage competitors, employees and physicians to report violations
of rules governing promotional activities for pharmaceutical products. These incentives could lead to so-called whistleblower lawsuits as part of which such persons seek to collect a portion of moneys allegedly overbilled to government agencies due
to, for example, promotion of pharmaceutical products beyond labeled claims. These incentives could also lead to suits that we have mischaracterized a competitors product in the marketplace and may, as a result, be sued for alleged damages to
our competitors. Such lawsuits, whether with or without merit, are typically time-consuming and costly to defend. Such suits may also result in related shareholder lawsuits, which are also costly to defend.
The REDUCE-IT cardiovascular outcomes trial may fail to show that Vascepa can reduce major cardiovascular events in an at-risk
patient population on statin therapy, and the long-term clinical results of Vascepa may not be consistent with the clinical results we observed in our Phase 3 clinical trial, in which case our sales of Vascepa may then suffer.
In accordance with the SPA for our MARINE and ANCHOR trials, efficacy was evaluated in these trials compared to placebo at twelve weeks.
No placebo-controlled studies have been conducted regarding the long-term effect of Vascepa on lipids, and no outcomes study has been conducted evaluating Vascepa. The REDUCE-IT study is designed to evaluate the efficacy of Vascepa in reducing major
cardiovascular events in an at-risk patient population on statin therapy.
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Outcomes studies of certain other lipid-modifying therapies have failed to achieve the
endpoints of such studies. For example, in 2010, the results of the ACCORD-Lipid trial were published. This trial studied the effect of adding fenofibrate onto open-label simvastatin therapy on cardiovascular outcomes. The addition of fenofibrate
did not show any treatment benefit on cardiovascular outcomes over simvastatin monotherapy in this study. In 2011, the results of the AIM-HIGH trial were published. This trial studied the effect of adding a second lipid-altering agent,
extended-release niacin, to simvastatin therapy on cardiovascular outcomes in people at high risk for cardiovascular events. No significant incremental treatment benefit with extended-release niacin was observed. In addition, in September 2012,
researchers published in the
Journal of the American Medical Association,
or
JAMA,
the results of a retrospective meta-analysis of twenty previously conducted studies regarding the use of omega-3 supplements across various patient
populations. This meta-analysis suggested that the use of such supplements was not associated with a lower risk of all-cause death, cardiac death, sudden death, heart attack, or stroke. We believe the results of these studies may not be directly
applicable to the use of Vascepa over time. For instance, the outcomes studies for fenofibrates and niacin were conducted in patient populations in which the majority of patients studied had triglycerides below 200 mg/dL and fenofibrates and niacin
are believed to work differently than Vascepa in the body and do not have as favorable a side-effect profile, and nineteen of the twenty studies included in the JAMA meta-analysis involved the use of omega-3 supplements containing a mixture of EPA
and DHA, and most were evaluated at relatively lower doses. In addition, in May 2013,
The New England Journal of Medicine
published the results of an outcome study of 1 gram per day of an omega-3 acid ethyl ester
composition. In that study, the composition failed to show a benefit in reducing the rate of death from cardiovascular causes or hospitalization for cardiovascular causes when administered to patients with cardiovascular risk factors under different
study conditions than in the REDUCE-IT study. Vascepa is comprised of highly-pure ethyl-EPA, and has been approved by the FDA for use in patients with severe hypertriglyceridemia at a dose of 4 grams per day and is being studied in REDUCE-IT at 4
grams per day.
The only other outcomes study involving the use of a highly-pure formulation of ethyl-EPA, called the Japan
EPA Lipid Intervention Study (JELIS), suggested that use of a highly-pure formulation of ethyl-EPA in Japan, when used in conjunction with statins, reduced cardiovascular events by 19% compared to the use of statins alone. However, there are several
limitations to the JELIS study. First, the patient population was exclusively Japanese, the majority of the participants were women, and at baseline patients had a much higher LDL, limiting its generalizability to the intended target population.
Second, a low dose of statins was used. It is unknown whether the positive treatment effects would have persisted if these patients had been optimally treated with statins using contemporary LDL targets in the United States. Third, JELIS was an
open-label trial, which could influence patient and physician behavior and reporting of symptoms, decisions regarding hospitalization, and referral of events for adjudication. This may be particularly relevant since hospitalizations for unstable
angina was a primary contributor of the overall positive result, and is considered a softer endpoint than fatal cardiovascular events.
Although we believe the results of the JAMA meta-analysis and other studies are not directly applicable to the potential long-term clinical experience with Vascepa, there can be no assurance that the
endpoints of the REDUCE-IT cardiovascular outcomes study will be achieved or that the lipid-modifying effects of Vascepa in REDUCE-IT or any other study of Vascepa will not be subject to variation beyond twelve weeks. If the REDUCE-IT trial fails to
achieve its clinical endpoints or if the results of these long-term studies are not consistent with the 12-week clinical results, it could prevent us from expanding the label of any approved product or even call into question the efficacy of any
approved product.
We may not be successful in developing or marketing future products if we cannot meet the extensive
regulatory requirements of the FDA and other regulatory agencies for quality, safety and efficacy.
The success of our
research and development efforts is dependent in part upon our ability, and the ability of our partners or potential partners, to meet regulatory requirements in the jurisdictions where we or our partners or potential partners ultimately intend to
sell such products once approved. The development, manufacture and marketing of pharmaceutical products are subject to extensive regulation by governmental authorities in the United States, the European Union, Japan and elsewhere. In the United
States, the FDA generally requires pre-clinical testing and clinical trials of each drug to establish its safety and efficacy and extensive pharmaceutical development to ensure its quality before its introduction into the market. Regulatory
authorities in other jurisdictions impose similar requirements. The process of obtaining regulatory approvals is lengthy and expensive and the issuance of such approvals is uncertain. The commencement and rate of completion of clinical trials and
the timing of obtaining marketing approval from regulatory authorities may be delayed by many factors, including:
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the lack of efficacy during clinical trials;
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the inability to manufacture sufficient quantities of qualified materials under cGMPs for use in clinical trials;
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slower than expected rates of patient recruitment;
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the inability to observe patients adequately after treatment;
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changes in regulatory requirements for clinical or preclinical studies;
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the emergence of unforeseen safety issues in clinical or preclinical studies;
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delay, suspension, or termination of a trial by the institutional review board responsible for overseeing the study at a particular study site;
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unanticipated changes to the requirements imposed by regulatory authorities on the extent, nature or timing of studies to be conducted on quality,
safety and efficacy;
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government or regulatory delays or clinical holds requiring suspension or termination of a trial; and
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political instability affecting our clinical trial sites, such as the potential for political unrest affecting our REDUCE-IT clinical trial sites in
the Ukraine and Russia.
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Even if we obtain positive results from early stage pre-clinical or clinical
trials, we may not achieve the same success in future trials. Clinical trials that we or potential partners conduct may not provide sufficient safety and efficacy data to obtain the requisite regulatory approvals for product candidates. The failure
of clinical trials to demonstrate safety and efficacy for our desired indications could harm the development of that product candidate as well as other product candidates, and our business and results of operations would suffer. For example, the
efficacy results of our Vascepa Phase 3 clinical trials for the treatment of Huntingtons disease were negative. As a result, we stopped development of that product candidate, revised our clinical strategy and shifted our focus to develop
Vascepa for use in the treatment of cardiovascular disease.
Any approvals that are obtained may be limited in scope, may
require additional post-approval studies or may require the addition of labeling statements focusing on product safety that could affect the commercial potential for our product candidates. Any of these or similar circumstances could adversely
affect our ability to earn revenues from the sale of such products. Even in circumstances where products are approved by a regulatory body for sale, the regulatory or legal requirements may change over time, or new safety or efficacy information may
be identified concerning a product, which may lead to the withdrawal of a product from the market or similar use restrictions. The discovery of previously unknown problems with a product or in connection with the manufacturer of products may result
in restrictions on that product or manufacturer, including withdrawal of the product from the market, which would have a negative impact on our potential revenue stream.
Legislative or regulatory reform of the health care system in the United States and foreign jurisdictions may affect our ability to profitably sell Vascepa.
Our ability to commercialize our future products successfully, alone or with collaborators, will depend in part on the extent to which
coverage and reimbursement for the products will be available from government and health administration authorities, private health insurers and other third-party payors. The continuing efforts of the U.S. and foreign governments, insurance
companies, managed care organizations and other payors of health care services to contain or reduce health care costs may adversely affect our ability to set prices for our products which we believe are fair, and our ability to generate revenues and
achieve and maintain profitability.
Specifically, in both the United States and some foreign jurisdictions, there have been a
number of legislative and regulatory proposals to change the health care system in ways that could affect our ability to sell our products profitably. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and
Education Reconciliation Act, or collectively the PPACA, enacted in March 2010, substantially changes the way healthcare is financed by both governmental and private insurers. Among other cost-containment measures, PPACA establishes:
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An annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents;
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A new Medicare Part D coverage gap discount program, in which pharmaceutical manufacturers who wish to have their drugs covered under Part D must offer
discounts to eligible beneficiaries during their coverage gap period; and
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A new formula that increases the rebates a manufacturer must pay under the Medicaid Drug Rebate Program.
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We expect further federal and state proposals and health care reforms to continue to be proposed by legislators, which could limit the
prices that can be charged for the products we develop and may limit our commercial opportunity.
The continuing efforts of
government and other third-party payors to contain or reduce the costs of health care through various means may limit our commercial opportunity. It will be time consuming and expensive for us to go through the process of seeking coverage and
reimbursement from Medicare and private payors. Our products may not be considered cost effective, and government and third-party private health insurance coverage and reimbursement may not be available to patients for any of our future products or
sufficient to allow us to sell our products on a competitive and profitable basis. Our results of operations could be adversely affected by PPACA and by other health care reforms that may be enacted or adopted in the future. In addition, increasing
emphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products. Cost control initiatives could decrease the price that we or any potential collaborators could receive for any of our future
products and could adversely affect our profitability.
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In some foreign countries, including major markets in the European Union and Japan, the
pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take 6 to 12 months or longer after the receipt of regulatory marketing approval for a product. To
obtain reimbursement or pricing approval in some countries, we may be required to conduct a pharmacoeconomic study that compares the cost-effectiveness of Vascepa to other available therapies. Such pharmacoeconomic studies can be costly and the
results uncertain. Our business could be harmed if reimbursement of our products is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels.
As we evolve from a company primarily involved in research and development to a company also focused on establishing an infrastructure for commercializing Vascepa, we may encounter difficulties in
managing our growth and expanding our operations successfully.
We hired and trained a professional sales force of
approximately 275 sales representatives and commenced our commercial launch of Vascepa in the MARINE indication in the United States in early January 2013. The process of establishing a commercial infrastructure is difficult, expensive and
time-consuming. Our October 2013 worldwide reduction in force, which included the termination of approximately 50% of the then-staffed sales force, has made this process more difficult. As our operations expand with the anticipated growth of our
produce sales, we expect that we will need to manage additional relationships with various collaborative partners, suppliers and other third parties. Future growth will impose significant added responsibilities on members of management, including
the need to identify, recruit, maintain and integrate additional employees. Our future financial performance and our ability to commercialize Vascepa and to compete effectively will depend, in part, on our ability to manage our future growth
effectively. To that end, we must be able to manage our development efforts effectively, and hire, train, integrate and retain additional management, administrative and sales and marketing personnel. We may not be able to accomplish these tasks, and
our failure to accomplish any of them could prevent us from successfully growing our company.
Risks Related to our Reliance on Third
Parties
If we do not realize the expected benefits from our October 2013 worldwide reduction in our workforce and
from future cost savings initiatives that we may implement, the value of our company and our assets and the market price of our ADSs could materially decline.
In October 2013, we implemented a plan that reduced our worldwide workforce by approximately 50%. We cannot guarantee that we will be able to realize the cost savings and other anticipated benefits
from this worldwide reduction in force. If we experience excessive unanticipated inefficiencies or incremental costs in connection with restructuring activities, such as unanticipated inefficiencies caused by reducing headcount, we may be unable to
meaningfully realize cost savings and we may incur expenses in excess of what we anticipate. Either of these outcomes could prevent us from meeting our strategic objectives and could adversely affect our results of operations and financial
condition.
* Our supply of product for commercial supply and clinical trials is dependent upon relationships with third
party manufacturers and key suppliers.
We have no in-house manufacturing capacity and rely on contract manufacturers
for our clinical and commercial product supply. We cannot assure you that we will successfully manufacture any product we may develop, either independently or under manufacturing arrangements, if any, with our third party manufacturers. Moreover, if
any manufacturer should cease doing business with us or experience delays, shortages of supply or excessive demands on their capacity, we may not be able to obtain adequate quantities of product in a timely manner, or at all.
Any manufacturing problem, natural disaster affecting manufacturing facilities, or the loss of a contract manufacturer could be
disruptive to our operations and result in lost sales. Additionally, we will be reliant on third parties to supply the raw materials needed to manufacture Vascepa. Any reliance on suppliers may involve several risks, including a potential inability
to obtain critical materials and reduced control over production costs, delivery schedules, reliability and quality. Any unanticipated disruption to future contract manufacture caused by problems at suppliers could delay shipment of products,
increase our cost of goods sold and result in lost sales. If our suppliers were unable to supply us with adequate volumes of active pharmaceutical ingredient (drug substance) or encapsulated bulk product (drug product), it would have a material
adverse effect on our ability to continue to commercialize Vascepa.
We initially purchased all of our supply of the bulk
compound (ethyl-EPA), which constitutes the only active pharmaceutical ingredient, or API, of Vascepa, from a single supplier, Nisshin Pharma, or Nisshin, located in Japan. Nisshin was approved by the FDA as a Vascepa API supplier as part of our FDA
marketing approval for the MARINE indication in July 2012. In April 2013, we announced the approval by the FDA of Chemport, Inc. and BASF (formerly Equateq Limited) as additional Vascepa API suppliers.
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We purchase and use commercial supply from Chemport in addition to Nisshin. We recently terminated our agreement with BASF due to its inability to meet the agreement requirements and may enter
into a new development and supply agreement with BASF and may purchase API from BASF. Each of the API manufacturers obtains supply of the key raw material to manufacture API from other third party sources of supply.
While we have contractual freedom to source the API for Vascepa and have entered into supply agreements with multiple suppliers who also
rely on other third party suppliers of the key raw material to manufacture the API for Vascepa, Nisshin and Chemport currently supply all of our API for Vascepa. Our strategy in adding API suppliers beyond Nisshin has been to expand manufacturing
capacity and to partially mitigate the risk of reliance on one supplier.
Also, in December 2012 we announced the addition of
an exclusive consortium of companies led by Slanmhor Pharmaceutical, Inc. to our planned API global supply chain for Vascepa, but we do not currently source supply from the Slanmhor consortium. Slanmhor Pharmaceutical, Inc. was spun-out from Ocean
Nutrition Canada, or ONC, prior to the May 2012 acquisition of ONC by Royal DSM N.V., a global leader in life sciences and materials sciences.
Expanding manufacturing capacity and qualifying such capacity is difficult and subject to numerous regulations and other operational challenges. The resources of our suppliers vary and are limited; costs
associated with projected expansion and qualification can be significant. For example, Chemport, which was approved as one of our API suppliers in April 2013, is a privately-held company and their commitment to Vascepa supply has required them to
seek additional resources. There can be no assurance that the expansion plans of any of our suppliers will be successful. Our aggregate capacity to produce API is dependent upon the qualification of our API suppliers. Each of our API suppliers has
outlined plans for potential further capacity expansion. If no additional API supplier is approved by the FDA, our API supply will be limited to the API we purchase from previously approved suppliers. If our third party manufacturing capacity is not
expanded and compliant with application regulatory requirements, we may not be able to supply sufficient quantities of Vascepa to meet anticipated demand. We cannot assure you that we can contract with any future manufacturer on acceptable terms or
that any such alternative supplier will not require capital investment from us in order for them to meet our requirements. Alternatively, our purchase of supply may exceed actual demand for Vascepa.
We currently rely on Patheon (formerly Banner Pharmacaps) for the encapsulation of Vascepa. We have encapsulation agreements with two
other commercial API encapsulators. These companies are working to qualify their processes and to prove that the Vascepa capsules they produce meet the same quality standards as the capsules produced by Patheon. There can be no guarantee that
additional other suppliers with which we have contracted to encapsulate API will be qualified to manufacture the product to our specifications or that these and any future suppliers will have the manufacturing capacity to meeting anticipated demand
for Vascepa. We cannot assure you that we can contract with any future manufacturer on acceptable terms or that any such alternative supplier will not require capital investment from us in order for them to meet our requirements.
We may not be able to maintain our exclusivity with our certain third-party Vascepa suppliers if we do not meet minimum purchase
obligations due to lower than anticipated sales of Vascepa.
Certain of our agreements with our suppliers include
minimum purchase obligations and limited exclusivity provisions based on such minimum purchase obligations. If we do not meet the respective minimum purchase obligations in our supply agreements, our suppliers, in certain cases, will be free to sell
the active pharmaceutical ingredient of Vascepa to potential competitors of Vascepa. Similarly if we terminate certain of our supply agreements, such suppliers may be free to sell the active pharmaceutical ingredient of Vascepa to potential
competitors of Vascepa. While we anticipate that intellectual property barriers and FDA regulatory exclusivity will be the primary means to protect the commercial potential of Vascepa, the availability of Vascepa active pharmaceutical ingredient
from our suppliers to our potential competitors would make our competitors entry into the market easier and more attractive.
We have limited experience with the commercial sale of Vascepa, and such inexperience may cause us to purchase too much or not enough supply to satisfy actual demand, which could have a material
adverse effect on our financial results and financial condition.
Certain of our agreements with our suppliers include
minimum purchase obligations and limited exclusivity provisions. These purchases are generally made on the basis of rolling twelve-month forecasts which in part are binding on us and the balance of which are subject to adjustment by us subject to
certain limitations. Certain of our agreements also include contractual minimum purchase commitments regardless of the rolling twelve-month forecasts. We have limited experience with the commercial sale of Vascepa, and as such expectations regarding
expected demand may be wrong. We may not purchase sufficient quantities of Vascepa to meet actual demand or our purchase of supply may exceed actual demand. In either case, such event could have a material adverse effect on our financial results and
financial condition.
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The manufacture and packaging of pharmaceutical products such as Vascepa are subject
to FDA requirements and those of similar foreign regulatory bodies. If we or our third party manufacturers fail to satisfy these requirements, our product development and commercialization efforts may be materially harmed.
The manufacture and packaging of pharmaceutical products, such as Vascepa, are regulated by the FDA and similar foreign regulatory bodies
and must be conducted in accordance with the FDAs current good manufacturing practices, or cGMPs, and comparable requirements of foreign regulatory bodies. There are a limited number of manufacturers that operate under these cGMPs regulations
who are both capable of manufacturing Vascepa and willing to do so. Failure by us or our third party manufacturers to comply with applicable regulations, requirements, or guidelines could result in sanctions being imposed on us, including fines,
injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our products, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product, operating restrictions and criminal
prosecutions, any of which could significantly and adversely affect our business. For example, Nisshin plans to expand its capacity to supply API to us by further expanding their current facility. If we are not able to manufacture Vascepa to
required specifications through our current and potential API suppliers, we may be delayed in successfully supplying the product to meet anticipated demand and our anticipated future revenues and financial results may be materially adversely
affected.
Changes in the manufacturing process or procedure, including a change in the location where the product is
manufactured or a change of a third party manufacturer, may require prior FDA review and approval of the manufacturing process and procedures in accordance with the FDAs cGMPs. Any new facility may be subject to a pre-approval inspection by
the FDA and would again require us to demonstrate product comparability to the FDA. There are comparable foreign requirements. This review may be costly and time consuming and could delay or prevent the launch of a product.
Furthermore, the FDA and foreign regulatory agencies require that we be able to consistently produce the API and the finished product in
commercial quantities and of specified quality on a repeated basis, including proven product stability, and document our ability to do so. This requirement is referred to as process validation. This includes stability testing, measurement of
impurities and testing of other product specifications by validated test methods. If the FDA does not consider the result of the process validation or required testing to be satisfactory, the commercial supply of Vascepa may be delayed, or we may
not be able to supply sufficient quantities of Vascepa to meet anticipated demand.
The FDA and similar foreign regulatory
bodies may also implement new standards, or change their interpretation and enforcement of existing standards and requirements, for manufacture, packaging or testing of products at any time. If we are unable to comply, we may be subject to
regulatory, civil actions or penalties which could significantly and adversely affect our business.
We rely on third
parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet established deadlines for the completion of such clinical trials.
Our reliance on third parties for clinical development activities reduces our control over these activities. However, if we sponsor
clinical trials, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trials. Moreover, the FDA requires us to comply with standards, commonly
referred to as good clinical practices, for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial
participants are protected. Our reliance on third parties does not relieve us of these responsibilities and requirements. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If
these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be delayed in obtaining regulatory approvals for our product candidates and may be delayed in our efforts to successfully commercialize our
product candidates for targeted diseases.
Risks Related to our Intellectual Property
* We are dependent on patents, proprietary rights and confidentiality to protect the commercial potential of Vascepa.
Our success depends in part on our ability to obtain and maintain intellectual property protection for our drug
candidates, technology and know-how, and to operate without infringing the proprietary rights of others. Our ability to successfully implement our business plan and to protect our products with our intellectual property will depend in large part on
our ability to:
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obtain, defend and maintain patent protection and market exclusivity for our current and future products;
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preserve any trade secrets relating to our current and future products;
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acquire patented or patentable products and technologies; and
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operate without infringing the proprietary rights of third parties.
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Amarin has prosecuted, and is currently prosecuting, multiple patent applications to protect
the intellectual property developed during the Vascepa cardiovascular program. As of the date of this report, we had 40 patent applications in the United States that have been either issued or allowed and more than 30 additional patent
applications are pending in the United States. Of such 40 allowed and issued applications, we currently have:
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2 issued U.S. patents directed to a pharmaceutical composition of Vascepa in a capsule that have terms that expire in 2020 and 2030, respectively,
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1 issued U.S. patent covering a composition containing highly pure EPA that expires in 2021,
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35 U.S. patents covering the use of Vascepa in either the MARINE or anticipated ANCHOR indication that have terms that expire in 2030,
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1 additional patent related to the use of a pharmaceutical composition comprised of free fatty acids to treat the ANCHOR patient population with a term
that expires in 2030, and
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1 additional patent related to the use of a pharmaceutical composition comprised of free fatty acids to treat the MARINE patient population with a term
that expires in 2030.
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A Notice of Allowance is issued after the USPTO makes a determination that a patent
can be granted from an application. A Notice of Allowance does not afford patent protection until the underlying patent is issued by the USPTO. No assurance can be given that applications with issued notices of allowance will be issued as patents or
that any of our pending patent applications will issue as patents. No assurance can be given that, if and when issued, our patents will prevent competitors from competing with Vascepa. We are also pursuing patent applications related to Vascepa
in multiple jurisdictions outside the United States. We may be dependent in some cases upon third party licensors to pursue filing, prosecution and maintenance of patent rights or applications owned or controlled by those parties. It is
possible that third parties will obtain patents or other proprietary rights that might be necessary or useful to us. In cases where third parties are first to invent a particular product or technology, or first to file after various provisions of
the America Invents Act of 2011 went into effect on March 16, 2013, it is possible that those parties will obtain patents that will be sufficiently broad so as to prevent us from utilizing such technology or commercializing our current and
future products.
Although we intend to make reasonable efforts to protect our current and future intellectual property rights
and to ensure that any proprietary technology we acquire or develop does not infringe the rights of other parties, we may not be able to ascertain the existence of all potentially conflicting claims. Therefore, there is a risk that third parties may
make claims of infringement against our current or future products or technologies. In addition, third parties may be able to obtain patents that prevent the sale of our current or future products or require us to obtain a license and pay
significant fees or royalties in order to continue selling such products.
We may in the future discover the existence of
products that infringe patents that we own or that have been licensed to us. If we were to initiate legal proceedings against a third party to stop such an infringement, such proceedings could be costly and time consuming, regardless of the outcome.
No assurances can be given that we would prevail, and it is possible that, during such a proceeding, our patent rights could be held to be invalid, unenforceable or both. Although we intend to protect our trade secrets and proprietary know-how
through confidentiality agreements with our manufacturers, employees and consultants, we may not be able to prevent parties subject to such confidentiality agreements from breaching these agreements or third parties from independently developing or
learning of our trade secrets.
We anticipate that competitors may from time to time oppose our efforts to obtain patent
protection for new technologies or to submit patented technologies for regulatory approvals. Competitors may seek to oppose our patent applications to delay the approval process or to challenge our granted patents, for example, by requesting a
reexamination of our patent at the USPTO, or by filing an opposition in a foreign patent office, even if the opposition or challenge has little or no merit. Such proceedings are generally highly technical, expensive, and time consuming, and there
can be no assurance that such a challenge would not result in the narrowing or complete revocation of any patent of ours that was so challenged.
* Our issued patents may not prevent competitors from competing with Vascepa, even if we seek to enforce our patent rights.
We plan to vigorously defend our rights under issued patents. For example, in March 2014, we filed a patent infringement suit
against Omthera Pharmaceuticals, Inc., and its parent company, AstraZeneca Pharmaceuticals LP. The suit seeks injunctive relief and monetary damages for infringement of Amarins U.S. Patent No. 8,663,662. The complaint alleges infringement
of the patent arising from the expected launch of Epanova, a product that is expected to compete with Vascepa in the United States. The patent covers methods of lowering triglycerides by administering a pharmaceutical composition that includes
amounts of EPA as free acid, and no more than about 30% DHA. Amarin intends to pursue this litigation vigorously and aggressively protect its intellectual property rights. However, patent litigation is a time-consuming and costly process. There can
be no assurance that we will be successful in enforcing this patent or that it will not be successfully challenged and invalidated. Even if we are successful in enforcing this patent, the process could take years to reach conclusion.
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Other drug companies may challenge the validity, enforceability, or both of our patents and
seek to design its products around our issued patent claims and gain marketing approval for generic versions of Vascepa or branded competitive products based on new clinical studies. The pharmaceutical industry is highly competitive and many of
our competitors have greater experience and resources than we have. Any such competition could undermine sales, marketing and collaboration efforts for Vascepa, and thus reduce, perhaps materially, the revenue potential for Vascepa.
Even if we are successful in enforcing our issued patents, we may incur substantial costs and divert managements time and attention
in pursuing these proceedings, which could have a material adverse effect on us. Patent litigation is costly and time consuming, and we may not have sufficient resources to bring these actions to a successful conclusion.
There can be no assurance that any of our pending patent applications relating to Vascepa or its use will issue as patents.
We have filed and are prosecuting numerous families of patent applications in the United States and internationally
with claims designed to protect the proprietary position of Vascepa. For certain of these patent families, we have filed multiple patent applications. Collectively the patent applications include numerous independent claims and dependent claims.
Several of our patent applications contain claims that are based upon what we believe are unexpected and favorable findings from the MARINE and ANCHOR trials. If granted, many of the resulting granted patents would expire in 2030 or beyond. However,
no assurance can be given that any of our pending patent applications will be granted or, if they grant, that they will prevent competitors from competing with Vascepa.
Securing patent protection for a product is a complex process involving many legal and factual questions. The patent applications we have filed in the United States and internationally are at varying
stages of examination, the timing of which is outside our control. The process to getting a patent granted can be lengthy and claims initially submitted are often modified in order to satisfy the requirements of the patent office. This process
includes written and public communication with the patent office. The process can also include direct discussions with the patent examiner. There can be no assurance that the patent office will accept our arguments with respect to any patent
application or with respect to any claim therein. The timing of the patent review process is independent of and has no effect on the timing of the FDAs review of our NDA or sNDA submissions. We cannot predict the timing or results of any
patent application. In addition, we may elect to submit, or the patent office may require, additional evidence to support certain of the claims we are pursuing. Furthermore, third parties may attempt to submit publications for consideration by the
patent office during examination of our patent applications. Providing such additional evidence and publications could prolong the patent offices review of our applications and result in us incurring additional costs. We cannot be certain what
commercial value any granted patent in our patent estate will provide to us.
Despite the use of confidentiality
agreements and/or proprietary rights agreements, which themselves may be of limited effectiveness, it may be difficult for us to protect our trade secrets.
We will also rely upon trade secrets and know-how to help protect our competitive position. We rely on trade secrets to protect technology in cases when we believe patent protection is not appropriate or
obtainable. However, trade secrets are difficult to protect. While we require certain of our academic collaborators, contractors and consultants to enter into confidentiality agreements, we may not be able to adequately protect our trade secrets or
other proprietary information.
Risks Related to our Business
We and certain of our current and former executive officers have been named as defendants in four lawsuits that could result in substantial costs and divert managements attention.
The market price of our ADSs declined significantly after the October 2013 decision by the FDA Advisory Committee to
recommend against approval of Vascepa in the ANCHOR indication. We, and certain of our current and former executive officers and directors, have been named as defendants in four purported class action lawsuits initiated earlier this year that
generally allege that we and certain of our current and former officers and directors violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading
statements or material omissions concerning the ANCHOR sNDA and related FDA regulatory approval process in an effort to lead investors to believe that Vascepa would receive approval from the FDA in the ANCHOR indication. The complaints seek
unspecified damages, interest, attorneys fees, and other costs.
We intend to engage in a vigorous defense of the
lawsuits, and we believe that we have meritorious defenses to these claims. However, we are unable to predict the outcome of these matters at this time. Moreover, any conclusion of these matters in a manner adverse to us could have a material
adverse effect on our financial condition and business. For example, we could incur substantial costs not covered by our directors and officers liability insurance, suffer a significant adverse impact on our reputation and divert
managements attention and resources from other priorities, including the execution of business plans and strategies that are important to our ability to grow our business, any of which could have a material adverse effect on our business. In
addition, any of these matters could require payments that are not covered by, or exceed the limits of, our available directors and officers liability insurance, which could have a material adverse effect on our operating results or
financial condition.
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Potential technological changes in our field of business create considerable
uncertainty.
We are engaged in the biopharmaceutical field, which is characterized by extensive research efforts and
rapid technological progress. New developments in research are expected to continue at a rapid pace in both industry and academia. We cannot assure you that research and discoveries by others will not render some or all of our programs or product
candidates uncompetitive or obsolete. Our business strategy is based in part upon new and unproven technologies to the development of therapeutics to improve cardiovascular health. We cannot assure you that unforeseen problems will not develop with
these technologies or applications or that any commercially feasible products will ultimately be developed by us.
We are
subject to potential product liability.
Following the commercial launch of Vascepa, we will be subject to the
potential risk of product liability claims relating to the manufacturing and marketing of Vascepa. Any person who is injured as a result of using Vascepa may have a product liability claim against us without having to prove that we were at fault.
In addition, we could be subject to product liability claims by persons who took part in clinical trials involving our
current or former development stage products. A successful claim brought against us could have a material adverse effect on our business. We cannot guarantee that a product liability claim will not be asserted against us in the future.
We may become subject to liability in connection with the wind-down of our EN101 program.
In 2007, we purchased Ester Neurosciences Limited, an Israeli pharmaceutical company, and its lead product candidate, EN101, an AChE-R
mRNA inhibitor for the treatment of myasthenia gravis, or MG, a debilitating neuromuscular disease. In connection with the acquisition, we assumed a license to certain intellectual property assets related to EN101 from the Yissum Research
Development Company of The Hebrew University of Jerusalem.
In June 2009, in keeping with our decision to re-focus our efforts
on developing improved treatments for cardiovascular disease and cease development of all product candidates outside of our cardiovascular disease focus, we amended the terms of our acquisition agreement with the original shareholders of Ester.
Under the terms of this amendment, Amarin was released from all research and development diligence obligations contained in the original agreement and was authorized to seek a partner for EN101. The amendment agreement also provided that any future
payment obligations payable by us to the former shareholders of Ester would be made only out of income received from potential partners. In connection with this amendment agreement, in August 2009 we issued 1,315,789 ordinary shares to the former
Ester shareholders. Under the terms of this amendment agreement, the former Ester shareholders have the option of reacquiring the original share capital of Ester if we are unable to successfully partner EN101.
Following our decision to cease development of EN101, Yissum terminated its license agreement with us. In June 2011, Yissum announced
that it had entered into a license agreement with BiolineRX Ltd for the development of EN101 in a different indication, inflammatory bowel disease.
We have received several communications on behalf of the former shareholders of Ester asserting that we are in breach of its amended agreement due to the fact that Yissum terminated its license and we
failed to return shares of Ester, and assets relating to EN101, to the shareholders, as was required under certain circumstances under the amended agreement. We do not believe these circumstances constitute a breach of the amended agreement, but
there can be no assurance as to the outcome of this dispute.
A change in our tax residence could have a negative effect
on our future profitability.
Under current UK legislation, a company incorporated in England and Wales, or which is
centrally managed and controlled in the UK, is regarded as resident in the UK for taxation purposes. Under current Irish legislation, a company is regarded as resident for tax purposes in Ireland if it is centrally managed and controlled in Ireland,
or, in certain circumstances, if it is incorporated in Ireland. Where a company is treated as tax resident under the domestic laws of both the UK and Ireland then the provisions of article 4(3) of the Double Tax Convention between the UK and Ireland
provides that such enterprise shall be treated as resident only in the jurisdiction in which its place of effective management is situated. We have sought to conduct our affairs in such a way so as to be resident only in Ireland for tax purposes by
virtue of having our place of effective management situated in Ireland. Trading income of an Irish company is generally taxable at the Irish corporation tax rate of 12.5%. Non-trading income of an Irish company (e.g., interest income, rental income
or other passive income), is taxable at a rate of 25%.
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However, we cannot assure you that we are or will continue to be resident only in Ireland
for tax purposes. It is possible that in the future, whether as a result of a change in law or the practice of any relevant tax authority or as a result of any change in the conduct of our affairs, we could become, or be regarded as having become
resident in a jurisdiction other than Ireland. Should we cease to be an Irish tax resident, we may be subject to a charge to Irish capital gains tax on our assets. Similarly, if the tax residency of any of our subsidiaries were to change from their
current jurisdiction for any of the reasons listed above, we may be subject to a charge to local capital gains tax charge on the assets.
The loss of key personnel could have an adverse effect on our business.
We are highly dependent upon the efforts of our senior management. The loss of the services of one or more members of senior management could have a material adverse effect on us. As a small company with
a streamlined management structure, the departure of any key person could have a significant impact and would be potentially disruptive to our business until such time as a suitable replacement is hired. Furthermore, because of the specialized
nature of our business, as our business plan progresses we will be highly dependent upon our ability to attract and retain qualified scientific, technical and key management personnel. As we evolve from a development stage company to a commercial
stage company we may experience turnover among members of our senior management team. We may have difficulty identifying and integrating new executives to replace any such losses. There is intense competition for qualified personnel in the areas of
our activities. In this environment, we may not be able to attract and retain the personnel necessary for the development of our business, particularly if we do not achieve profitability. Furthermore, the lessened probability that we will obtain FDA
approval for the ANCHOR indication could have an adverse impact on our ability to retain and recruit qualified personnel. In addition, in October 2013, we eliminated approximately fifty percent of our staff positions worldwide as part of a
restructuring following the FDA advisory committees recommendation against the potential Vascepa label expansion. Even though all employees were offered severance pay in exchange for signing a comprehensive release of claims, this
restructuring could lead to claims by former employees related to their termination. The restructuring could also have an adverse impact on our ability to retain and recruit qualified personnel. The failure to recruit key scientific, technical and
management personnel would be detrimental to our ability to implement our business plan.
We could be adversely affected
by our exposure to customer concentration risk.
A significant portion of our sales are to wholesalers in the
pharmaceutical industry. Our top three customers accounted for 96% and 94% of gross product sales for the six months ended June 30, 2014 and 2013, respectively and represented 95% and 96% of the gross accounts receivable balance as of
June 30, 2014 and June 30, 2013, respectively. There can be no guarantee that we will be able to sustain our accounts receivable or gross sales levels from our key customers. If, for any reason, we were to lose, or experience a decrease in
the amount of business with our largest customers, whether directly or through our distributor relationships, our financial condition and results of operations could be negatively affected.
Risks Related to our Financial Position and Capital Requirements
We
have a history of operating losses and anticipate that we will incur continued losses for an indefinite period of time.
We have not been profitable in any of the last five fiscal years. For the fiscal years ended December 31, 2013, 2012, and 2011, we
reported losses of approximately $166.2 million, $179.2 million, and $69.1 million, respectively, and we had an accumulated deficit at December 31, 2013 of $913.9 million. For the six months ended June 30, 2014 and 2013, we reported losses
of approximately $10.7 million and $101.9 million, respectively, and we had an accumulated deficit at June 30, 2014 of $924.5 million. Substantially all of our operating losses resulted from costs incurred in connection with our research and
development programs, from general and administrative costs associated with our operations, costs related to the commercialization of Vascepa, and from non-cash losses on changes in the fair value of warrant derivative liabilities. Additionally, as
a result of our significant expenses relating to research and development and to commercialization, we expect to continue to incur significant operating losses for an indefinite period. Because of the numerous risks and uncertainties associated with
developing and commercializing pharmaceutical products, we are unable to predict the magnitude of these future losses. Our historic losses, combined with expected future losses, have had and will continue to have an adverse effect on our cash
resources, shareholders deficit and working capital.
Although we began generating revenue from Vascepa in January
2013, we may never be profitable.
Our ability to become profitable depends upon our ability to generate revenue. In
January 2013, we began to generate revenue from the marketing of Vascepa for use in the MARINE indication, but we may not be able to generate sufficient revenue to attain profitability. Our ability to generate profits on sales of Vascepa is subject
to the market acceptance and commercial success of Vascepa and our ability to manufacture commercial quantities of Vascepa through third parties at acceptable cost levels, and may also depend upon our ability to enter into one or more strategic
collaborations to effectively market and sell Vascepa.
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Even though Vascepa has been approved by the FDA for marketing in the United States in the
MARINE indication, it may not gain market acceptance or achieve commercial success and it may never be approved for the ANCHOR indication or any other indication. In addition, we anticipate continuing to incur significant costs associated with
commercializing Vascepa. We may not achieve profitability soon after generating product sales, if ever. If we are unable to generate sufficient product revenues, we will not become profitable and may be unable to continue operations without
continued funding.
Our historical financial results do not form an accurate basis for assessing our current business.
As a consequence of the many years developing Vascepa for commercialization and the recent commercial launch of
Vascepa in the MARINE indication in the United States, our historical financial results do not form an accurate basis upon which investors should base their assessment of our business and prospects. In addition, we expect that our costs will
increase substantially as we continue to commercialize Vascepa in the MARINE indication and seek to obtain additional regulatory approval of Vascepa in the ANCHOR indication, including the continuation of the REDUCE-IT cardiovascular outcomes study.
Accordingly, our historical financial results reflect a substantially different business from that currently being conducted and from that expected in the future. In addition, we have a limited history of obtaining regulatory approval for, and no
demonstrated ability to successfully commercialize, a product candidate. Consequently, any predictions about our future performance may not be as accurate as they could be if we had a history of successfully developing and commercializing
pharmaceutical products.
Our operating results are unpredictable and may fluctuate. If our operating results are below
the expectations of securities analysts or investors, the trading price of our stock could decline.
Our operating
results are difficult to predict and will likely fluctuate from quarter to quarter and year to year, and Vascepa prescription figures will likely fluctuate from month to month. Due to the recent approval by the FDA of Vascepa and the lack of
historical sales data, Vascepa sales will be difficult to predict from period to period and as a result, you should not rely on Vascepa sales results in any period as being indicative of future performance, and sales of Vascepa may be below the
expectation of securities analysts or investors in the future. We believe that our quarterly and annual results of operations may be affected by a variety of factors, including:
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the level of demand for Vascepa;
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the extent to which coverage and reimbursement for Vascepa is available from government and health administration authorities, private health insurers,
managed care programs and other third-party payers;
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the timing, cost and level of investment in our sales and marketing efforts to support Vascepa sales and the resulting effectiveness of those efforts
with our new co-promotion partner, Kowa Pharmaceuticals America;
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additional developments regarding our intellectual property portfolio and regulatory exclusivity protections, if any;
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the results of our sNDA application for the ANCHOR indication and the results of the REDUCE-IT study or post-approval studies for Vascepa;
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outcomes of litigation and other legal proceedings, including recently initiated shareholder litigation, regulatory matters and tax matters; and
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whether we continue the REDUCE-IT study.
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We may require substantial additional resources to fund our operations. If we cannot find additional capital resources, we will have difficulty in operating as a going concern and growing our
business.
We currently operate with limited resources. We believe that our cash and cash equivalents balance of
$150.5 million at June 30, 2014 will be sufficient to fund our projected operations for at least the next twelve months.
In order to fully realize the market potential of Vascepa, we may need to enter into a new strategic collaboration or raise additional
capital. We may also need additional capital to fully complete our REDUCE-IT cardiovascular outcomes trial.
Our future
capital requirements will depend on many factors, including:
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revenue generated from the commercial sale of Vascepa in the MARINE indication and, subject to FDA approval, the ANCHOR indication;
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the costs associated with commercializing Vascepa for the MARINE indication in the United States and for additional indications in the United States
and in jurisdictions in which we receive regulatory approval, if any, including the cost of sales and marketing capabilities with our new co-promotion partner, Kowa Pharmaceuticals America, and the cost and timing of securing commercial supply of
Vascepa and the timing of entering into any new strategic collaboration with others relating to the commercialization of Vascepa, if at all, and the terms of any such collaboration;
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the continued cost associated with our REDUCE-IT cardiovascular outcomes study, if we continue that study;
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continued cost associated with litigation and other legal proceedings, including recently initiated shareholder litigation and patent litigation; and
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the time and costs involved in obtaining additional regulatory approvals for Vascepa;
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the extent to which we continue to develop internally, acquire or in-license new products, technologies or businesses; and
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the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
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If we require additional funds and adequate funds are not available to us in amounts or on terms acceptable to us or on a timely basis,
or at all, our commercialization efforts for Vascepa may suffer materially, and we may need to delay the advancement of the REDUCE-IT cardiovascular outcomes trial.
As a result of recent worldwide reductions in our workforce, we are in the process of reallocating certain employment responsibilities and may outsource certain corporate functions. As a result, we
may be more dependent on third parties to perform these corporate functions than we have been in the past.
As a
result of the recent worldwide reductions in our workforce, we have been required to outsource certain corporate functions. This has made us more dependent on third-parties for the performance of these functions. Our ongoing results of operations
could be adversely affected to the extent that we are unable to effectively reallocate employee responsibilities, retain key employees, maintain effective internal control over financial reporting and effective disclosure controls and procedures,
establish and maintain agreements with competent third-party contractors on terms that are acceptable to us, and effectively manage the work performed by any retained third-party contractors.
Continued negative economic conditions would likely have a negative effect on our ability to obtain financing on acceptable terms.
While we may seek additional funding through public or private financings, we may not be able to obtain financing on
acceptable terms, or at all. There can be no assurance that we will be able to access equity or credit markets in order to finance our current operations or expand development programs for Vascepa, or that there will not be a further deterioration
in financial markets and confidence in economies. We may also have to scale back or further restructure our operations. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our
research or development programs or our commercialization strategies.
Raising additional capital may cause dilution to
our existing shareholders, restrict our operations or require us to relinquish rights.
To the extent we are permitted
under our Purchase and Sale Agreement with BioPharma, we may seek additional capital through a combination of private and public equity offerings, debt financings and collaboration, strategic and licensing arrangements. To the extent that we raise
additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a shareholder.
As of June 30, 2014, there were warrants outstanding for the purchase of up to 9,772,276 ADSs each representing one of our ordinary
shares, with a weighted average exercise price of $1.41 per share. We may issue additional warrants to purchase ADSs or ordinary shares in connection with any future financing we may conduct. In addition, on January 9, 2012, we issued $150
million in aggregate principal amount of 3.50% exchangeable senior notes due 2032, or the notes. In the event of physical settlement, the notes would initially be exchangeable into a total of 49,214,841 ADS.
Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions
such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to
our technologies, Vascepa or product candidates beyond the rights we have already relinquished, or grant licenses on terms that are not favorable to us.
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Potential business combinations or other strategic transactions may disrupt our
business or divert managements attention.
On a regular basis, we explore potential business combination
transactions, including an acquisition of us by a third party, exclusive licenses of Vascepa or other strategic transactions or collaborations with third parties. For example, in March 2014, we entered into a co-promotion agreement with Kowa
Pharmaceuticals America related to the commercialization of Vascepa in the United States. The consummation and performance of any such future transactions or collaborations will involve risks, such as:
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diversion of managerial resources from day-to-day operations;
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exposure to litigation from the counterparties to any such transaction, other third parties or our shareholders;
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misjudgment with respect to the value;
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higher than expected transaction costs; or
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an inability to successfully consummate any such transaction or collaboration.
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As a result of these risks, we may not be able to achieve the expected benefits of any such
transaction or collaboration or deliver the value thereof to our shareholders. If we are unsuccessful in consummating any such transaction or collaboration, we may be required to reevaluate our business only after we have incurred substantial
expenses and devoted significant management time and resources.
Risks Related to Ownership of our ADSs and Common Shares
The price of our ADSs and common shares may be volatile.
The stock market has from time to time experienced significant price and volume fluctuations that may be unrelated to the operating
performance of particular companies. In addition, the market prices of the securities of many pharmaceutical and medical technology companies have been especially volatile in the past, and this trend is expected to continue in the future.
As of August 1, 2014 we had 174,598,451 common shares outstanding including 174,133,288 shares held as ADSs and 465,163
held as common shares (which are not held in the form of ADSs). In our October 2009 private placement we issued 66.4 million ADSs and warrants to purchase an additional 33.2 million ADSs. There is a risk that there may not be
sufficient liquidity in the market to accommodate significant increases in selling activity or the sale of a large block of our securities. Our ADSs have historically had limited trading volume, which may also result in volatility. If any
of our large investors, such as the participants in our October 2009 private placement, seek to sell substantial amounts of our ADSs, particularly if these sales are in a rapid or disorderly manner, or other investors perceive that these sales could
occur, the market price of our ADSs could decrease significantly.
The market price of our ADSs and common shares may also be
affected by factors such as:
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developments or disputes concerning ongoing patent prosecution efforts and any future patent or proprietary rights;
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regulatory developments in the United States, the European Union or other countries;
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actual or potential medical results relating to our products or our competitors products;
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interim failures or setbacks in product development;
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innovation by us or our competitors;
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currency exchange rate fluctuations; and
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period-to-period variations in our results of operations.
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A share price of less than $1.00 may impact our NASDAQ listing.
As
of the date of this Quarterly Report, our ADSs are currently trading above $1.00; however, recent market activity has resulted in a decrease in our stock price, and our stock price may fall below the $1.00 threshold. If our closing bid price is less
than $1.00 for 30 consecutive trading days, we would receive a NASDAQ staff deficiency letter indicating that we are not in compliance with the minimum bid price requirement for continued listing. Such a letter would trigger an automatic 180
calendar day period within which the company could regain compliance. Compliance is regained at any time during this period if the Amarin closing bid price is $1.00 per share or more for a minimum of 10 consecutive trading days. If we do not regain
compliance during this period, our ADSs could be delisted from The NASDAQ Global Market, transferred to a listing on The NASDAQ Capital Market, or delisted from the NASDAQ markets altogether. The failure to maintain our listing on The NASDAQ Global
Market could harm the liquidity of our ADSs and could have an adverse effect on the market price of our ADSs.
Actual or
potential sales of our common shares by our employees, including members of our senior management team, pursuant to pre-arranged stock trading plans could cause our stock price to fall or prevent it from increasing for numerous reasons, and actual
or potential sales by such persons could be viewed negatively by other investors.
In accordance with the guidelines
specified under Rule 10b5-1 of the Securities and Exchange Act of 1934 and our policies regarding stock transactions, a number of our directors and employees, including members of our senior management team, have adopted and may continue to
adopt pre-arranged stock trading plans to sell a portion of our common stock. Generally, sales under such plans by members of our senior management team and directors require public filings. Actual or potential sales of our ADSs by such persons
could cause the price of our ADSs to fall or prevent it from increasing for numerous reasons. For example, a substantial amount of our ADSs becoming available (or being perceived to become available) for sale in the public market could cause the
market price of our ADSs to fall or prevent it from increasing. Also, actual or potential sales by such persons could be viewed negatively by other investors.
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We may be a passive foreign investment company, or PFIC, which would result in adverse
U.S. federal tax consequences to U.S. investors.
Amarin Corporation plc and certain of our subsidiaries may be
classified as passive foreign investment companies, or PFICs, for U.S. federal income tax purposes. The tests for determining PFIC status for a taxable year depend upon the relative values of certain categories of assets and the relative
amounts of certain kinds of income. The application of these factors depends upon our financial results, which are beyond our ability to predict or control, and which may be subject to legal and factual uncertainties.
We believe it prudent to assume that we were classified as a PFIC in 2012. We do not believe that we were classified as a PFIC in 2013.
Our status as a PFIC is subject to change in future years.
If we are a PFIC, U.S. holders of notes, ordinary shares or ADSs
would be subject to adverse U.S. federal income tax consequences, such as ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting
requirements under U.S. federal income tax laws and regulations. Whether or not U.S. holders of our ADSs make a timely QEF election or mark-to-market election may affect the U.S. federal income tax consequences to U.S.
holders with respect to the acquisition, ownership and disposition of Amarin ADSs and any distributions such U.S. Holders may receive. A QEF election and other elections that may mitigate the effect of our being classified as a PFIC are unavailable
with respect to the notes. Investors should consult their own tax advisors regarding all aspects of the application of the PFIC rules to the notes, ordinary shares and ADSs.
Failure to meet our obligations under our Purchase and Sale Agreement with BioPharma could adversely affect our financial results and liquidity.
Pursuant to our December 2012 Purchase and Sale Agreement with BioPharma, we are obligated to make payments to BioPharma based on the
amount of our net product sales of Vascepa and any future products based on ethyl-EPA, or covered products, subject to certain quarterly caps.
Pursuant to this agreement, we may not, among other things: (i) incur indebtedness greater than a specified amount, which we refer to as the Indebtedness Covenant; (ii) pay a dividend or other
cash distribution, unless we have cash and cash equivalents in excess of a specified amount after such payment; (iii) amend or restate our memorandum and articles of association unless such amendments or restatements do not affect
BioPharmas interests under the transaction; (iv) encumber any of the collateral securing our performance under the agreement; and (v) abandon certain patent rights, in each case without the consent of BioPharma.
Upon a transaction resulting in a change of control of Amarin, as defined in the agreement, BioPharma will be automatically entitled to
receive any amounts not previously paid, up to our maximum repayment obligation. As defined in the agreement, change of control includes, among other things, (i) a greater than 50 percent change in the ownership of Amarin,
(ii) a sale or disposition of any collateral securing our debt with BioPharma and (iii), unless BioPharma has been paid a certain amount under the indebtedness, certain licensings of Vascepa to a third party for sale in the United States. The
acceleration of the payment obligation in the event of a change of control transaction may make us less attractive to potential acquirers, and the payment of such funds out of our available cash or acquisition proceeds would reduce acquisition
proceeds for our stockholders.
To secure our obligations under the agreement, we granted BioPharma a security interest in our
rights in patents, trademarks, trade names, domain names, copyrights, know-how and regulatory approvals related to the covered products, all books and records relating to the foregoing and all proceeds of the foregoing, which we refer to as the
collateral. If we (i) fail to deliver a payment when due and do not remedy that failure within specific notice period, (ii) fail to maintain a first-priority perfected security interest in the collateral in the United States and do
not remedy that failure after receiving notice of such failure or (iii) become subject to an event of bankruptcy, then BioPharma may attempt to collect the maximum amount payable by us under this agreement (after deducting any payments we have
already made).
There can be no assurance that we will not breach the covenants or other terms of, or that an event of default
will not occur under, this agreement and, if a breach or event of default occurs, there can be no assurance that we will be able to cure the breach within the time permitted. Any failure to pay our obligations when due, any breach or default of our
covenants or other obligations, or any other event that causes an acceleration of payment at a time when we do not have sufficient resources to meet these obligations, could have a material adverse effect on our business, results of operations,
financial condition and future viability.
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Our existing indebtedness could adversely affect our financial condition.
Our existing indebtedness consist of $150.0 million in aggregate principal amount of 3.50% exchangeable
senior notes due 2032, $31.3 million of which relates to the January 2012 notes with provisions for the notes to be put to us on or after January 19, 2017 while the balance of $118.7 million relates to the May 2014 notes with provision for the
notes to be redeemed by the Company on or after January 19, 2018 or put to us by the holders on or after January 19, 2019.
Our indebtedness and the related annual debt service requirements may adversely impact our business, operations and financial condition in the future. For example, they could:
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increase our vulnerability to general adverse economic and industry conditions;
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limit our ability to raise additional funds by borrowing or engaging in equity sales in order to fund future working capital, capital expenditures,
research and development and other general corporate requirements;
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require us to dedicate a substantial portion of our cash to service payments on our debt; or
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limit our flexibility to react to changes in our business and the industry in which we operate or to pursue certain strategic opportunities that may
present themselves.
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The accounting for convertible debt securities that may be settled in cash, such
as our notes, could have a material effect on our reported financial results.
Under the FASB Accounting Standards
Codification, or ASC, we are required to separately account for the liability and equity components of the convertible debt instruments (such as the notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects
the issuers economic interest cost. The effect of ASC on the accounting for our outstanding convertible notes may be that the equity component is required to be included in the additional paid-in capital section of stockholders
equity on our consolidated balance sheets and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the notes. As a result, we are required to record non-cash interest
expense as a result of the amortization of the discounted carrying value of the notes to their face amount over the term of the notes. We may be required to report higher interest expense in our financial results because ASC may require
interest to include both the current periods amortization of the debt discount and the instruments coupon interest, which could adversely affect our reported or future financial results and the trading price of our ADSs.
Servicing our debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to provide the
funds sufficient to pay our substantial debt.
Our ability to make scheduled payments of the principal, to pay interest on or
to refinance our indebtedness, including the notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in
the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional
equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage
in these activities on desirable terms, which could result in a default on our debt obligations, including the notes, and have a material adverse effect on the trading price of our ADSs.
We may be able to incur substantial additional debt in the future, subject to the restrictions contained in our future debt instruments,
if any, which would intensify the risks discussed above.
The conditional exchange feature of the notes, if triggered,
may adversely affect our financial condition and operating results.
In the event the conditional exchange feature of
the notes is triggered, holders of notes will be entitled to exchange the notes at any time during specified periods at their option. If one or more holders elect to exchange their notes, unless we elect to satisfy its exchange obligation by
delivering solely the ADSs (other than cash in lieu of any fractional ADS), we would be required to settle a portion or all of its exchange obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if
holders do not elect to exchange their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a
material reduction of our net working capital.
The change in control repurchase feature of the notes may delay or
prevent an otherwise beneficial takeover attempt of us.
The indenture governing the notes will require us to
repurchase the notes for cash upon the occurrence of a change in control of Amarin and, in certain circumstances, to increase the exchange rate for a holder that exchanges its notes in connection with a make-whole fundamental change. A takeover of
us may trigger the requirement that we purchase the notes and/or increase the exchange rate, which could make it more costly for a potential acquirer to engage in a combinatory transaction with us. Such additional costs may have the effect of
delaying or preventing a takeover of us that would otherwise be beneficial to investors.
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We do not intend to pay cash dividends on the ordinary shares in the foreseeable
future.
We have never paid dividends on ordinary shares and do not anticipate paying any cash dividends on the
ordinary shares in the foreseeable future. Under English law, any payment of dividends would be subject to relevant legislation and our Articles of Association, which requires that all dividends must be approved by our Board of Directors and, in
some cases, our shareholders, and may only be paid from our distributable profits available for the purpose, determined on an unconsolidated basis.
The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation.
We are incorporated under English law. The rights of holders of ordinary shares and, therefore, certain of the rights of holders of ADSs, are governed by English law, including the provisions of the
Companies Act 2006, and by our Articles of Association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations. The principal differences include the following:
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Under English law and our Articles of Association, each shareholder present at a meeting has only one vote unless demand is made for a vote on a poll,
in which case each holder gets one vote per share owned. Under U.S. law, each shareholder typically is entitled to one vote per share at all meetings.
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Under English law, it is only on a poll that the number of shares determines the number of votes a holder may cast. You should be aware, however, that the voting rights of ADSs are also governed by the
provisions of a deposit agreement with our depositary bank.
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Under English law, subject to certain exceptions and disapplications, each shareholder generally has preemptive rights to subscribe on a proportionate
basis to any issuance of ordinary shares or rights to subscribe for, or to convert securities into, ordinary shares for cash. Under U.S. law, shareholders generally do not have preemptive rights unless specifically granted in the certificate of
incorporation or otherwise.
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Under English law and our Articles of Association, certain matters require the approval of 75% of the shareholders who vote (in person or by proxy) on
the relevant resolution (or on a poll shareholders representing 75% of the ordinary shares voting (in person or by proxy)), including amendments to the Articles of Association. This may make it more difficult for us to complete corporate
transactions deemed advisable by our board of directors. Under U.S. law, generally only majority shareholder approval is required to amend the certificate of incorporation or to approve other significant transactions.
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In the United Kingdom, takeovers may be structured as takeover offers or as schemes of arrangement. Under English law, a bidder seeking to acquire us
by means of a takeover offer would need to make an offer for all of our outstanding ordinary shares/ADSs. If acceptances are not received for 90% or more of the ordinary shares/ADSs under the offer, under English law, the bidder cannot complete a
squeeze out to obtain 100% control of us. Accordingly, acceptances of 90% of our outstanding ordinary shares/ADSs will likely be a condition in any takeover offer to acquire us, not 50% as is more common in tender offers for corporations
organized under Delaware law. By contrast, a scheme of arrangement, the successful completion of which would result in a bidder obtaining 100% control of us, requires the approval of a majority of shareholders voting at the meeting and representing
75% of the ordinary shares voting for approval.
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Under English law and our Articles of Association, shareholders and other persons whom we know or have reasonable cause to believe are, or have been,
interested in our shares may be required to disclose information regarding their interests in our shares upon our request, and the failure to provide the required information could result in the loss or restriction of rights attaching to the shares,
including prohibitions on certain transfers of the shares, withholding of dividends and loss of voting rights. Comparable provisions generally do not exist under U.S. law.
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The quorum requirement for a shareholders meeting is a minimum of two shareholders entitled to vote at the meeting and present in person or by
proxy or, in the case of a shareholder which is a corporation, represented by a duly authorized officer. Under U.S. law, a majority of the shares eligible to vote must generally be present (in person or by proxy) at a shareholders meeting in
order to constitute a quorum. The minimum number of shares required for a quorum can be reduced pursuant to a provision in a companys certificate of incorporation or bylaws, but typically not below one-third of the shares entitled to vote at
the meeting.
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U.S. shareholders may not be able to enforce civil liabilities against us.
We are incorporated under the laws of England and Wales, and our subsidiaries are incorporated in various
jurisdictions, including foreign jurisdictions. A number of the officers and directors of each of our subsidiaries are non-residents of the United States, and all or a substantial portion of the assets of such persons are located outside the United
States. As a result, it may not be possible for investors to affect service of process within the United States upon such persons or to enforce against them judgments
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obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised by our English solicitors that there is doubt as
to the enforceability in England in original actions, or in actions for enforcement of judgments of U.S. courts, of civil liabilities to the extent predicated upon the federal securities laws of the United States.
U.S. holders of the ADSs or ordinary shares may be subject to U.S. federal income taxation at ordinary income tax rates on
undistributed earnings and profits.
There is a risk that we will be classified as a controlled foreign corporation,
or CFC, for U.S. federal income tax purposes. If we are classified as a CFC, any ADS holder or shareholder that is a U.S. person that owns directly, indirectly or by attribution, 10% or more of the voting power of our outstanding shares may be
subject to U.S. income taxation at ordinary income tax rates on all or a portion of our undistributed earnings and profits attributable to subpart F income. Such 10% holder may also be taxable at ordinary income tax rates on any gain
realized on a sale of ordinary shares or ADS, to the extent of our current and accumulated earnings and profits attributable to such shares. The CFC rules are complex and U.S. Holders of the ordinary shares or ADSs are urged to consult their own tax
advisors regarding the possible application of the CFC rules to them in their particular circumstances.