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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 000-21392

 

Amarin Corporation plc

(Exact Name of Registrant as Specified in its Charter)

 

 

England and Wales

 

Not applicable

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

77 Sir John Rogerson’s Quay, Block C,

Grand Canal Docklands

 

Dublin 2, Ireland

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: +353 (0) 1 6699 020

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

American Depositary Shares (ADS(s)), each ADS representing the right to receive one (1) Ordinary Share of Amarin Corporation plc

AMRN

NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES      NO  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES      NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

 

  

 

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    YES      NO  

388,673,381 common shares were outstanding as of July 31, 2020, including 388,472,048 shares held as American Depositary Shares (ADSs), each representing one Ordinary Share, 50 pence par value per share and 201,333 Ordinary Shares. In addition, 2,385,078 ordinary share equivalents were issuable in exchange for outstanding preferred shares as of July 31, 2020, for a total of 391,058,459 ordinary shares and ordinary share equivalents outstanding as of July 31, 2020.

 


INDEX TO FORM 10-Q

 

 

 

 

 

Page

 

 

 

PART I – Financial Information

 

 

 

Item 1.

 

Financial Statements (unaudited):

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

 

3

 

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019

 

4

 

 

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the six months ended June 30, 2020 and 2019

 

5

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019

 

6

 

 

Notes to Condensed Consolidated Financial Statements

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

25

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

40

Item 4.

 

Controls and Procedures

 

40

 

 

 

PART II – Other Information

 

 

 

Item 1.

 

Legal Proceedings

 

42

Item 1A.

 

Risk Factors

 

42

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

84

Item 6.

 

Exhibits

 

85

 

SIGNATURES

 

86

 

   2


PART I

AMARIN CORPORATION PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share amounts)

 

 

 

June 30, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

214,007

 

 

$

644,588

 

Restricted cash

 

 

3,913

 

 

 

3,907

 

Short-term investments

 

 

336,273

 

 

 

 

Accounts receivable, net

 

 

124,985

 

 

 

116,430

 

Inventory

 

 

124,844

 

 

 

76,769

 

Prepaid and other current assets

 

 

23,589

 

 

 

13,311

 

Total current assets

 

 

827,611

 

 

 

855,005

 

Property, plant and equipment, net

 

 

2,316

 

 

 

2,361

 

Long-term investments

 

 

61,039

 

 

 

 

Operating lease right-of-use asset

 

 

8,291

 

 

 

8,511

 

Other long-term assets

 

 

1,074

 

 

 

1,074

 

Intangible asset, net

 

 

14,538

 

 

 

15,258

 

TOTAL ASSETS

 

$

914,869

 

 

$

882,209

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

86,757

 

 

$

49,950

 

Accrued expenses and other current liabilities

 

 

168,549

 

 

 

139,826

 

Debt from royalty-bearing instrument

 

 

22,455

 

 

 

50,130

 

Deferred revenue, current

 

 

5,706

 

 

 

2,342

 

Total current liabilities

 

 

283,467

 

 

 

242,248

 

Long-Term Liabilities:

 

 

 

 

 

 

 

 

Deferred revenue, long-term

 

 

14,507

 

 

 

18,504

 

Long-term operating lease liability

 

 

9,311

 

 

 

9,443

 

Other long-term liabilities

 

 

4,821

 

 

 

3,751

 

Total liabilities

 

 

312,106

 

 

 

273,946

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Series A Convertible Preferred Stock, £0.05 par, unlimited authorized; 51,603,780 shares issued and outstanding as of June 30, 2020 (equivalent to 5,160,378 ordinary shares upon future consolidation and redesignation at a 10:1 ratio) and 289,317,460 shares issued and outstanding as of December 31, 2019 (equivalent to 28,931,746 ordinary shares upon future consolidation and redesignation at a 10:1 ratio)

 

 

7,166

 

 

 

21,850

 

Common stock, £0.50 par, unlimited authorized; 391,589,312 issued, 385,847,517 outstanding as of June 30, 2020; 365,014,893 issued, 360,103,901 outstanding as of December 31, 2019

 

 

285,672

 

 

 

269,173

 

Additional paid-in capital

 

 

1,787,492

 

 

 

1,764,317

 

Treasury stock; 5,741,795 shares as of June 30, 2020; 4,910,992 shares as of December 31, 2019

 

 

(50,252

)

 

 

(35,900

)

Accumulated deficit

 

 

(1,427,315

)

 

 

(1,411,177

)

Total stockholders’ equity

 

 

602,763

 

 

 

608,263

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

914,869

 

 

$

882,209

 

 

See notes to condensed consolidated financial statements.

   3


AMARIN CORPORATION PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Product revenue, net

$

133,724

 

 

$

100,366

 

 

$

285,928

 

 

$

173,097

 

Licensing and royalty revenue

 

1,593

 

 

 

426

 

 

 

4,382

 

 

 

973

 

Total revenue, net

 

135,317

 

 

 

100,792

 

 

 

290,310

 

 

 

174,070

 

Less: Cost of goods sold

 

28,797

 

 

 

22,770

 

 

 

63,604

 

 

 

39,910

 

Gross margin

 

106,520

 

 

 

78,022

 

 

 

226,706

 

 

 

134,160

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

92,395

 

 

 

73,406

 

 

 

226,332

 

 

 

145,039

 

Research and development

 

9,969

 

 

 

7,130

 

 

 

20,247

 

 

 

14,372

 

Total operating expenses

 

102,364

 

 

 

80,536

 

 

 

246,579

 

 

 

159,411

 

Operating income (loss)

 

4,156

 

 

 

(2,514

)

 

 

(19,873

)

 

 

(25,251

)

Interest income (expense), net

 

151

 

 

 

789

 

 

 

1,359

 

 

 

(908

)

Other income (expense), net

 

108

 

 

 

(95

)

 

 

17

 

 

 

(92

)

Income (loss) from operations before taxes

 

4,415

 

 

 

(1,820

)

 

 

(18,497

)

 

 

(26,251

)

Income tax benefit

 

 

 

 

 

 

 

2,359

 

 

 

 

Net income (loss)

$

4,415

 

 

$

(1,820

)

 

$

(16,138

)

 

$

(26,251

)

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.01

 

 

$

(0.01

)

 

$

(0.04

)

 

$

(0.08

)

Diluted

$

0.01

 

 

$

(0.01

)

 

$

(0.04

)

 

$

(0.08

)

Weighted average shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

384,663

 

 

 

330,863

 

 

 

373,300

 

 

 

329,793

 

Diluted

 

399,664

 

 

 

330,863

 

 

 

373,300

 

 

 

329,793

 

 

See notes to condensed consolidated financial statements.

   4


AMARIN CORPORATION PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited, in thousands, except share amounts)

 

 

 

 

Preferred

Shares

 

 

Common

Shares

 

 

Treasury

Shares

 

 

Preferred

Stock

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Treasury

Stock

 

 

Accumulated

Deficit

 

 

Total

 

December 31, 2019

 

 

289,317,460

 

 

 

365,014,893

 

 

 

(4,910,992

)

 

$

21,850

 

 

$

269,173

 

 

$

1,764,317

 

 

$

(35,900

)

 

$

(1,411,177

)

 

$

608,263

 

Exercise of stock options

 

 

 

 

 

412,465

 

 

 

 

 

 

 

 

 

269

 

 

 

1,037

 

 

 

 

 

 

 

 

 

1,306

 

Vesting of restricted stock units

 

 

 

 

 

1,951,448

 

 

 

(759,832

)

 

 

 

 

 

1,274

 

 

 

(1,274

)

 

 

(13,831

)

 

 

 

 

 

(13,831

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,591

 

 

 

 

 

 

 

 

 

10,591

 

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,553

)

 

 

(20,553

)

March 31, 2020

 

 

289,317,460

 

 

 

367,378,806

 

 

 

(5,670,824

)

 

$

21,850

 

 

$

270,716

 

 

$

1,774,671

 

 

$

(49,731

)

 

$

(1,431,730

)

 

$

585,776

 

Issuance of common stock under employee stock purchase plan

 

 

 

 

 

123,608

 

 

 

 

 

 

 

 

 

76

 

 

 

772

 

 

 

 

 

 

 

 

 

848

 

Conversion of Series A Convertible Preferred Stock, net

 

 

(237,713,680

)

 

 

23,771,368

 

 

 

 

 

 

(14,684

)

 

 

14,684

 

 

 

(238

)

 

 

 

 

 

 

 

 

(238

)

Exercise of stock options

 

 

 

 

 

148,290

 

 

 

 

 

 

 

 

 

92

 

 

 

260

 

 

 

 

 

 

 

 

 

352

 

Vesting of restricted stock units

 

 

 

 

 

167,240

 

 

 

(70,971

)

 

 

 

 

 

104

 

 

 

(104

)

 

 

(521

)

 

 

 

 

 

(521

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,131

 

 

 

 

 

 

 

 

 

12,131

 

Net Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,415

 

 

 

4,415

 

June 30, 2020

 

 

51,603,780

 

 

 

391,589,312

 

 

 

(5,741,795

)

 

$

7,166

 

 

$

285,672

 

 

$

1,787,492

 

 

$

(50,252

)

 

$

(1,427,315

)

 

$

602,763

 

 

 

 

Preferred

Shares

 

 

Common

Shares

 

 

Treasury

Shares

 

 

Preferred

Stock

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Treasury

Stock

 

 

Accumulated

Deficit

 

 

Total

 

December 31, 2018

 

 

289,317,460

 

 

 

329,110,863

 

 

 

(3,260,850

)

 

$

21,850

 

 

$

246,663

 

 

$

1,282,762

 

 

$

(10,413

)

 

$

(1,388,532

)

 

$

152,330

 

Exercise of stock options

 

 

 

 

 

3,838,739

 

 

 

 

 

 

 

 

 

2,496

 

 

 

12,960

 

 

 

 

 

 

 

 

 

15,456

 

Vesting of restricted stock units

 

 

 

 

 

1,416,124

 

 

 

(526,708

)

 

 

 

 

 

929

 

 

 

(929

)

 

 

(9,080

)

 

 

 

 

 

(9,080

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,596

 

 

 

 

 

 

 

 

 

6,596

 

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,431

)

 

 

(24,431

)

March 31, 2019

 

 

289,317,460

 

 

 

334,365,726

 

 

 

(3,787,558

)

 

$

21,850

 

 

$

250,088

 

 

$

1,301,389

 

 

$

(19,493

)

 

$

(1,412,963

)

 

$

140,871

 

Issuance of common stock under employee stock purchase plan

 

 

 

 

 

47,358

 

 

 

 

 

 

 

 

 

30

 

 

 

807

 

 

 

 

 

 

 

 

 

837

 

Exercise of stock options

 

 

 

 

 

619,404

 

 

 

 

 

 

 

 

 

396

 

 

 

1,492

 

 

 

 

 

 

 

 

 

1,888

 

Vesting of restricted stock units

 

 

 

 

 

116,937

 

 

 

(54,057

)

 

 

 

 

 

74

 

 

 

(74

)

 

 

(1,040

)

 

 

 

 

 

(1,040

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,351

 

 

 

 

 

 

 

 

 

8,351

 

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,820

)

 

 

(1,820

)

June 30, 2019

 

 

289,317,460

 

 

 

335,149,425

 

 

 

(3,841,615

)

 

$

21,850

 

 

$

250,588

 

 

$

1,311,965

 

 

$

(20,533

)

 

$

(1,414,783

)

 

$

149,087

 

 

See notes to condensed consolidated financial statements.

   5


AMARIN CORPORATION PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

 

 

 

Six months ended June 30,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(16,138

)

 

$

(26,251

)

Adjustments to reconcile loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

296

 

 

 

6

 

Amortization of investments

 

 

33

 

 

 

 

Stock-based compensation

 

 

22,722

 

 

 

14,766

 

Amortization of debt discount and debt issuance costs

 

 

490

 

 

 

878

 

Amortization of intangible asset

 

 

720

 

 

 

323

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(8,555

)

 

 

(28,875

)

Inventory

 

 

(48,075

)

 

 

11,534

 

Prepaid and other current assets

 

 

(10,273

)

 

 

(4,158

)

Other long-term assets

 

 

 

 

 

(928

)

Interest receivable

 

 

(1,312

)

 

 

 

Accrued interest payable

 

 

(240

)

 

 

(81

)

Deferred revenue

 

 

(633

)

 

 

(973

)

Accounts payable and other current liabilities

 

 

65,530

 

 

 

14,765

 

Other long-term liabilities

 

 

1,159

 

 

 

(3,186

)

Net cash provided by (used in) operating activities

 

 

5,724

 

 

 

(22,180

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Sale and maturities of securities

 

 

131,440

 

 

 

 

Purchases of securities

 

 

(527,479

)

 

 

 

Purchases of furniture, fixtures and equipment

 

 

(251

)

 

 

(801

)

Net cash used in investing activities

 

 

(396,290

)

 

 

(801

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of transaction costs

 

 

848

 

 

 

837

 

Proceeds from exercise of stock options, net of transaction costs

 

 

1,658

 

 

 

17,344

 

Payment of transaction costs for conversion of preferred stock

 

 

(238

)

 

 

 

Payment on debt from royalty-bearing instrument

 

 

(27,925

)

 

 

(12,533

)

Taxes paid related to stock-based awards

 

 

(14,352

)

 

 

(10,120

)

Net cash used in financing activities

 

 

(40,009

)

 

 

(4,472

)

NET DECREASE IN CASH AND CASH EQUIVALENTS AND

   RESTRICTED CASH

 

 

(430,575

)

 

 

(27,453

)

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF

   PERIOD

 

 

648,495

 

 

 

250,727

 

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

 

$

217,920

 

 

$

223,274

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

Interest

 

$

1,193

 

 

$

14,982

 

Income taxes

 

$

20

 

 

$

71

 

Supplemental disclosure of non-cash transactions:

 

 

 

 

 

 

 

 

Initial recognition of operating lease right-of-use asset

 

$

 

 

$

8,995

 

 

See notes to condensed consolidated financial statements.

   6


AMARIN CORPORATION PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For purposes of this Quarterly Report on Form 10-Q, ordinary shares may also be referred to as “common shares” or “common stock.”

(1)

Nature of Business and Basis of Presentation

Nature of Business

Amarin Corporation plc, or Amarin, or the Company, is a pharmaceutical company focused on the commercialization and development of therapeutics to improve cardiovascular health and reduce cardiovascular risk.

The Company’s lead product, VASCEPA® (icosapent ethyl), was first approved by the U.S. Food and Drug Administration, or FDA, in July 2012 for use as an adjunct to diet to reduce triglyceride, or TG, levels in adult patients with severe (>500 mg/dL) hypertriglyceridemia. On December 13, 2019, the FDA approved a new indication and label expansion for VASCEPA based on the landmark results of our cardiovascular outcomes trial, REDUCE-IT®, or Reduction of Cardiovascular Events with EPA – Intervention Trial. VASCEPA is the first and only drug approved by the FDA as an adjunct to maximally tolerated statin therapy for reducing persistent cardiovascular risk in select high risk patients. VASCEPA is available in the United States, or the U.S., by prescription only. In January 2013, the Company began selling and marketing 1-gram size VASCEPA capsules in the United States, and in October 2016, introduced a smaller 0.5-gram capsule size. VASCEPA is also available for sale by prescription only in Canada, Lebanon and the United Arab Emirates through collaborations and is also in development in other jurisdictions.

The Company, since inception, has devoted substantial resources to research and development efforts, most significantly, the development and conduct of a long-term cardiovascular outcomes study of VASCEPA, REDUCE-IT. The Company announced topline results from REDUCE-IT on September 24, 2018. On November 10, 2018, the Company presented primary results of REDUCE-IT at the 2018 Scientific Sessions of the American Heart Association, or AHA, and the results were concurrently published in The New England Journal of Medicine. REDUCE-IT met its primary endpoint demonstrating a 25% relative risk reduction, or RRR, to a high degree of statistical significance (p<0.001), in first occurrence of major adverse cardiovascular events, or MACE, in the intent-to-treat patient population with use of VASCEPA 4 grams/day as compared to placebo. REDUCE-IT also showed a 26% RRR in its key secondary composite endpoint of cardiovascular death, heart attacks and stroke (p<0.001). On March 18, 2019, the Company publicly presented the total cardiovascular events results, and the method of calculating such events, of the REDUCE-IT study at the American College of Cardiology’s, or ACC, 68th Annual Scientific Session and such results and methods were concurrently published in the Journal of the American College of Cardiology.

The FDA granted Priority Review designation to the Company’s March 2019 supplemental new drug application, or sNDA, seeking an expanded indication for VASCEPA in the United States based on the positive results of the REDUCE-IT study. In November 2019, the FDA held an Endocrinologic and Metabolic Drugs Advisory Committee, or EMDAC, meeting to review the REDUCE-IT sNDA. The EMDAC voted unanimously (16-0) to recommend approval of an indication and label expansion for VASCEPA to reduce cardiovascular events in high-risk patients based on the REDUCE-IT results. On December 13, 2019, the FDA approved a new indication and related label expansion based on REDUCE-IT. Reflecting the robust results of the clinical development program for VASCEPA, no additional post-approval clinical study or other special post-approval requirement (as often seen with other drug approvals) was requested by the FDA in conjunction with its approval of VASCEPA.

In the United States, the Company sells VASCEPA principally to a limited number of major wholesalers, as well as selected regional wholesalers and specialty pharmacy providers, or collectively, its distributors or its customers, that in turn resell VASCEPA to retail pharmacies for subsequent resale to patients and healthcare providers. The Company markets VASCEPA in the United States through its direct sales force. Prior to the REDUCE-IT results topline announcement in September 2018, the Company’s commercialization of VASCEPA was somewhat limited. Subsequent to learning the positive cardiovascular outcomes results of the REDUCE-IT study, the Company increased its promotional efforts. Based on the positive REDUCE-IT results, in early 2019, the Company increased the size of its sales force to approximately 440 sales professionals, including approximately 400 sales representatives. As a result of the FDA’s newly approved indication and label expansion, in early 2020 the Company completed the expansion of its direct sales force to approximately 900 sales professionals, including 800 sales representatives. In addition to promotion of VASCEPA in the United States, based on REDUCE-IT, the Company has increased focus on expansion of the Company’s development efforts for VASCEPA to major markets outside the United States. The Company currently has strategic collaborations to develop and commercialize VASCEPA in select territories outside the United States. The Company operates in one business segment.

On March 30, 2020, the United States District Court for the District of Nevada, or the Nevada Court, ruled in favor of two generic companies in Amarin’s patent litigation related to its abbreviated new drug applications, or ANDAs, that seek FDA approval for sale of generic versions of VASCEPA. On May 22, 2020, one of the two generic companies, Hikma Pharmaceutical USA Inc., or Hikma, received FDA approval to market its generic version of VASCEPA. To date, Hikma has not launched a generic version of VASCEPA. The Company disagrees with the Nevada Court’s decision that its patents are invalid and is vigorously pursuing an appeal. If generic

   7


companies determine to launch generic versions of icosapent ethyl in the United States, such competition could have a material and adverse impact on our revenues and our operations.

VASCEPA is not yet known to most healthcare professionals and generics companies rarely invest in product or disease state related market education. Furthermore, VASCEPA is relatively expensive to manufacture and already sold at an affordable price as documented by third-party analysis such that saving, if any, on the price of generic VASCEPA is likely to come at the expense of reduced market education and development. Thus, the Company believes that the launch of a generic version of VASCEPA in the United States at this early stage in the life cycle of VASCEPA is potentially harmful to patient care and discourages new product development, including for identifying and pursuing additional indications that could be treated with VASCEPA.

Geographies outside the United States in which VASCEPA is sold and under regulatory review are not subject to this U.S. patent litigation and judgment. No similar litigation involving potential generic versions of VASCEPA is pending outside the United States. VASCEPA is currently available by prescription in Canada, Lebanon and the United Arab Emirates. In Canada, VASCEPA has the benefit of eight years of data protection afforded through Health Canada (until the end of 2027), in addition to separate patent protection with expiration dates that could extend into 2039. Amarin is pursuing additional regulatory approvals for VASCEPA in Europe, China and the Middle East. In China and the Middle East, Amarin is pursuing such regulatory approvals and subsequent commercialization of VASCEPA with commercial partners. In Europe, Amarin is preparing to self-launch VASCEPA, although it may engage commercialization partners for certain of the smaller countries of Europe. Ten to eleven years of market protection is anticipated due to regulatory exclusivity in the European Union subject to an approval recommendation by the European Medicines Agency, or EMA, in early 2021 and associated European Community, or EC, approval expected promptly thereafter, in addition to pending patent protection that could extend into 2039.

Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by the Company, without audit, in accordance with accounting principles generally accepted in the United States and pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC. Certain information in the footnote disclosures of the financial statements has been condensed or omitted where it substantially duplicates information provided in the Company’s latest audited consolidated financial statements, in accordance with the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, or the 2019 Form 10-K, filed with the SEC. The balance sheet amounts at December 31, 2019 in this report were derived from the Company’s audited 2019 consolidated financial statements included in the 2019 Form 10-K.

The condensed consolidated financial statements reflect all adjustments of a normal and recurring nature that, in the opinion of management, are necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods indicated. The preparation of the Company’s condensed consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles, or GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results for the entire fiscal year or any future period. Certain numbers presented throughout this document may not add precisely to the totals provided due to rounding. Absolute and percentage changes are calculated using the underlying amounts in thousands. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying condensed consolidated financial statements of the Company and subsidiaries have been prepared on a basis which assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business, as well as the current global pandemic, COVID-19.

As of June 30, 2020, the Company had Current assets of $827.6 million, including Cash and cash equivalents of $214.0 million, Short-term investments of $336.3 million, Accounts receivable, net, of $125.0 million and Inventory of $124.8 million. In addition, as of June 30, 2020, the Company has Long-term investments of $61.0 million. The Company’s condensed consolidated balance sheets also include a royalty-bearing instrument which is expected to be fully paid during 2020 based on projected VASCEPA net revenues. As of June 30, 2020, the Company had no other debt outstanding.

(2)

Significant Accounting Policies

Revenue Recognition

In accordance with Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an

   8


entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For a complete discussion of accounting for net product revenue and licensing revenue, see Note 9—Revenue Recognition.

     Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash, deposits with banks and short-term highly liquid money market instruments with remaining maturities at the date of purchase of 90 days or less. Restricted cash represents cash and cash equivalents pledged to guarantee repayment of certain expenses which may be incurred for business travel under corporate credit cards held by employees.

Accounts Receivable, net

Accounts receivable, net, comprised of trade receivables, are generally due within 30 days and are stated at amounts due from customers. The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of any recoveries. The allowance is based primarily on assessment of specific identifiable customer accounts considered at risk or uncollectible, as well as an analysis of current receivables aging and expected future write-offs. The expense associated with the allowance for doubtful accounts is recognized as Selling, general, and administrative expense. The Company has not historically experienced any significant credit losses. All customer accounts are actively managed and no losses in excess of amounts reserved are currently expected; however, the Company is monitoring the potential negative impact of COVID-19 on the Company’s customers’ ability to meet their financial obligations.

The following table summarizes the impact of accounts receivable reserves on the gross trade accounts receivable balances as of June 30, 2020 and December 31, 2019:

 

In thousands

 

June 30, 2020

 

 

December 31, 2019

 

Gross trade accounts receivable

 

$

173,186

 

 

$

149,567

 

Trade allowances

 

 

(36,826

)

 

 

(29,261

)

Chargebacks

 

 

(10,430

)

 

 

(3,876

)

Allowance for doubtful accounts

 

 

(945

)

 

 

 

Accounts receivable, net

 

$

124,985

 

 

$

116,430

 

 

Inventory

The Company states inventories at the lower of cost or net realizable value. Cost is determined based on actual cost using the average cost method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. An allowance is established when management determines that certain inventories may not be saleable. If inventory cost exceeds expected net realizable value due to obsolescence, damage or quantities in excess of expected demand, changes in price levels or other causes, the Company will reduce the carrying value of such inventory to net realizable value and recognize the difference as a component of cost of goods sold in the period in which it occurs. The Company capitalizes inventory purchases of saleable product from approved suppliers while inventory purchases from suppliers prior to regulatory approval are included as a component of research and development expense. The Company expenses inventory identified for use as marketing samples when they are packaged. The average cost reflects the actual purchase price of VASCEPA active pharmaceutical ingredient, or API.

Income Taxes

 

Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts and tax bases of assets and liabilities and operating loss carryforwards and other tax attributes using enacted rates expected to be in effect when those differences reverse. Valuation allowances are provided against deferred tax assets that are not more likely than not to be realized. Deferred tax assets and liabilities are classified as non-current in the condensed consolidated balance sheet.

   9


The Company provides reserves for potential payments of tax to various tax authorities and does not recognize tax benefits related to uncertain tax positions and other issues. Tax benefits for uncertain tax positions are based on a determination of whether a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized, assuming that the matter in question will be decided based on its technical merits. The Company’s policy is to record interest and penalties in the income tax provision, as applicable.

The Company regularly assesses its ability to realize deferred tax assets. Changes in historical earnings performance, future earnings projections, and changes in tax laws, among other factors, may cause the Company to adjust its valuation allowance on deferred tax assets, which would impact the Company’s income tax expense in the period in which it is determined that these factors have changed.

Excess tax benefits and deficiencies that arise upon vesting or exercise of share-based payments are recognized as an income tax benefit and expense, respectively, in the condensed consolidated statement of operations. Excess income tax benefits are classified as cash flows from operating activities and cash paid to taxing authorities arising from the withholding of shares from employees are classified as cash flows from financing activities.

The Company’s and its subsidiaries’ income tax returns are periodically examined by various tax authorities, including the Internal Revenue Service, or IRS, and states. The IRS began an examination of the Company’s 2018 U.S. income tax return in the first quarter of 2020. Although the outcome of tax audits is always uncertain and could result in significant cash tax payments, the Company does not believe the outcome of this audit will have a material adverse effect on its consolidated financial position or results of operations.

Earnings (Loss) per Share

Basic net earnings (loss) per share is determined by dividing net income (loss) by the weighted average shares of common stock outstanding during the period. Diluted net earnings (loss) per share is determined by dividing net income (loss) by diluted weighted average shares outstanding. Diluted weighted average shares reflects the dilutive effect, if any, of potentially dilutive common shares, such as common stock options calculated using the treasury stock method and convertible preferred stock using the “if-converted” method. In periods with reported net operating losses, all common stock options are deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal.

The Company’s preferred stock is entitled to receive dividends on an as-if-converted basis in the same form as dividends actually paid on common shares. Accordingly, the preferred stock is considered a participating security and the Company is required to apply the two-class method to consider the impact of the preferred stock on the calculation of basic and diluted earnings per share. The Company is currently in a net income position for the three months ended June 30, 2020 and therefore the two-class method must be applied for this period by allocating all earnings during the period to common shares and preferred stock based on their contractual entitlements assuming all earnings are distributed. The Company is in a net loss position for all other periods presented below and is therefore not required to apply the two-class method for those other periods.

The calculation of net income (loss) and the number of shares used to compute basic and diluted net earnings (loss) per share for the three and six months ended June 30, 2020 and 2019 are as follows:

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

In thousands

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income (loss)—basic and diluted

 

$

4,415

 

 

$

(1,820

)

 

$

(16,138

)

 

$

(26,251

)

Weighted average shares outstanding—basic

 

 

384,663

 

 

 

330,863

 

 

 

373,300

 

 

 

329,793

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

6,372

 

 

 

 

 

 

 

 

 

 

Restricted stock and restricted stock units

 

 

1,640

 

 

 

 

 

 

 

 

 

 

Preferred stock, if converted

 

 

6,989

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding—diluted

 

 

399,664