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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 March 31, 2021

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  

394,771,523 common shares were outstanding as of April 23, 2021, including 394,574,581 shares held as American Depositary Shares (ADSs), each representing one Ordinary Share, 50 pence par value per share and 196,942 Ordinary Shares.

 


 

INDEX TO FORM 10-Q

 

 

 

 

 

Page

 

 

 

PART I – Financial Information

 

 

 

Item 1.

 

Financial Statements (unaudited):

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

 

3

 

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020

 

4

 

 

Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2021 and 2020

 

5

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

 

6

 

 

Notes to Condensed Consolidated Financial Statements

 

7

Item 2.

 

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

 

24

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

35

Item 4.

 

Controls and Procedures

 

35

 

 

 

PART II – Other Information

 

 

 

Item 1.

 

Legal Proceedings

 

36

Item 1A.

 

Risk Factors

 

36

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

78

Item 5.

 

Other Information

 

78

Item 6.

 

Exhibits

 

79

 

SIGNATURES

 

80

 

2


 

PART I

AMARIN CORPORATION PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share amounts)

 

 

 

 

March 31, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

290,994

 

 

$

186,964

 

Restricted cash

 

 

3,917

 

 

 

3,915

 

Short-term investments

 

 

223,742

 

 

 

313,969

 

Accounts receivable, net

 

 

151,275

 

 

 

154,574

 

Inventory

 

 

230,892

 

 

 

188,864

 

Prepaid and other current assets

 

 

29,696

 

 

 

30,947

 

Total current assets

 

 

930,516

 

 

 

879,233

 

Property, plant and equipment, net

 

 

1,862

 

 

 

2,016

 

Long-term investments

 

 

24,004

 

 

 

62,469

 

Operating lease right-of-use asset

 

 

7,958

 

 

 

8,054

 

Other long-term assets

 

 

456

 

 

 

432

 

Intangible asset, net

 

 

25,456

 

 

 

13,817

 

TOTAL ASSETS

 

$

990,252

 

 

$

966,021

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

94,262

 

 

$

105,876

 

Accrued expenses and other current liabilities

 

 

228,734

 

 

 

198,641

 

Current deferred revenue

 

 

2,773

 

 

 

2,926

 

Total current liabilities

 

 

325,769

 

 

 

307,443

 

Long-Term Liabilities:

 

 

 

 

 

 

 

 

Long-term deferred revenue

 

 

15,197

 

 

 

15,706

 

Long-term operating lease liability

 

 

9,015

 

 

 

9,153

 

Other long-term liabilities

 

 

5,660

 

 

 

6,214

 

Total liabilities

 

 

355,641

 

 

 

338,516

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Common stock, £0.50 par, unlimited authorized; 401,655,725 shares issued, 394,764,841 shares outstanding as of March 31, 2021; 398,425,000 shares issued, 392,538,081 shares outstanding as of December 31, 2020

 

 

292,360

 

 

 

290,115

 

Additional paid-in capital

 

 

1,831,388

 

 

 

1,817,649

 

Treasury stock; 6,890,884 shares as of March 31, 2021; 5,886,919 shares as of December 31, 2020

 

 

(58,334

)

 

 

(51,082

)

Accumulated deficit

 

 

(1,430,803

)

 

 

(1,429,177

)

Total stockholders’ equity

 

 

634,611

 

 

 

627,505

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

990,252

 

 

$

966,021

 

 

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 March 31,

 

 

2021

 

 

2020

 

Product revenue, net

$

141,383

 

 

$

152,204

 

Licensing and royalty revenue

 

787

 

 

 

2,789

 

Total revenue, net

 

142,170

 

 

 

154,993

 

Less: Cost of goods sold

 

28,326

 

 

 

34,807

 

Gross margin

 

113,844

 

 

 

120,186

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

 

105,798

 

 

 

133,937

 

Research and development

 

9,377

 

 

 

10,278

 

Total operating expenses

 

115,175

 

 

 

144,215

 

Operating loss

 

(1,331

)

 

 

(24,029

)

Interest income, net

 

471

 

 

 

1,208

 

Other expense, net

 

(142

)

 

 

(91

)

Loss from operations before taxes

 

(1,002

)

 

 

(22,912

)

Income tax (provision) benefit

 

(624

)

 

 

2,359

 

Net loss

$

(1,626

)

 

$

(20,553

)

Loss per share:

 

 

 

 

 

 

 

Basic

$

(0.00

)

 

$

(0.06

)

Diluted

$

(0.00

)

 

$

(0.06

)

Weighted average shares:

 

 

 

 

 

 

 

Basic

 

394,638

 

 

 

361,136

 

Diluted

 

394,638

 

 

 

361,136

 

 

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, 2020

 

 

 

 

 

398,425,000

 

 

 

(5,886,919

)

 

$

 

 

$

290,115

 

 

$

1,817,649

 

 

$

(51,082

)

 

$

(1,429,177

)

 

$

627,505

 

Exercise of stock options

 

 

 

 

 

783,320

 

 

 

 

 

 

 

 

 

536

 

 

 

1,523

 

 

 

 

 

 

 

 

 

2,059

 

Vesting of restricted stock units

 

 

 

 

 

2,447,405

 

 

 

(1,003,965

)

 

 

 

 

 

1,709

 

 

 

(1,709

)

 

 

(7,252

)

 

 

 

 

 

(7,252

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,925

 

 

 

 

 

 

 

 

 

13,925

 

Loss for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,626

)

 

 

(1,626

)

March 31, 2021

 

 

 

 

 

401,655,725

 

 

 

(6,890,884

)

 

$

 

 

$

292,360

 

 

$

1,831,388

 

 

$

(58,334

)

 

$

(1,430,803

)

 

$

634,611

 

 

 

 

 

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

 

Loss for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

 

 

 

See notes to condensed consolidated financial statements.

5


AMARIN CORPORATION PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

  

 

 

Three months ended March 31,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(1,626

)

 

$

(20,553

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

150

 

 

 

146

 

Amortization (accretion) of investments

 

 

649

 

 

 

(151

)

Stock-based compensation

 

 

13,925

 

 

 

10,591

 

Amortization of debt discount and debt issuance costs

 

 

 

 

 

289

 

Amortization of intangible asset

 

 

361

 

 

 

360

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

3,299

 

 

 

(41,858

)

Inventory

 

 

(42,028

)

 

 

(15,352

)

Prepaid and other current assets

 

 

1,251

 

 

 

(7,416

)

Other long-term assets

 

 

(24

)

 

 

 

Interest receivable

 

 

118

 

 

 

(1,021

)

Accrued interest payable

 

 

 

 

 

(111

)

Deferred revenue

 

 

(662

)

 

 

961

 

Accounts payable and other current liabilities

 

 

6,479

 

 

 

79,285

 

Other long-term liabilities

 

 

(596

)

 

 

(1,033

)

Net cash (used in) provided by operating activities

 

 

(18,704

)

 

 

4,137

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Sale and maturities of securities

 

 

127,925

 

 

 

17,077

 

Purchases of securities

 

 

 

 

 

(310,648

)

Disposal of furniture, fixtures and equipment

 

 

4

 

 

 

 

Purchases of furniture, fixtures and equipment

 

 

 

 

 

(251

)

Net cash provided by (used in) investing activities

 

 

127,929

 

 

 

(293,822

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options, net of transaction costs

 

 

2,059

 

 

 

1,306

 

Payment on debt from royalty-bearing instrument

 

 

 

 

 

(13,330

)

Taxes paid related to stock-based awards

 

 

(7,252

)

 

 

(13,831

)

Net cash used in financing activities

 

 

(5,193

)

 

 

(25,855

)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND

   RESTRICTED CASH

 

 

104,032

 

 

 

(315,540

)

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

 

 

190,879

 

 

 

648,495

 

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

 

$

294,911

 

 

$

332,955

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

Interest

 

$

 

 

$

875

 

Income taxes

 

$

5

 

 

$

 

Supplemental disclosure of non-cash transactions:

 

 

 

 

 

 

 

 

Laxdale Milestone

 

$

12,000

 

 

$

 

 

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 United States Food and Drug Administration, or U.S. 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. In January 2013, the Company launched 1-gram size VASCEPA in the United States, or U.S., and in October 2016, introduced a smaller 0.5-gram capsule size. On December 13, 2019, the U.S. FDA approved an indication and label expansion for VASCEPA based on the results of the Company’s long-term cardiovascular outcomes trial, REDUCE-IT®, or Reduction of Cardiovascular Events with EPA – Intervention Trial. VASCEPA is approved by the U.S. FDA as an adjunct to maximally tolerated statin therapy for reducing persistent cardiovascular risk in select high risk patients. 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.  

On March 30, 2020, the United States District Court for the District of Nevada, or the Nevada Court, ruled in favor of two generics companies in Amarin’s patent litigation related to its abbreviated new drug applications, or ANDAs, that seek U.S. FDA approval for sale of generic versions of VASCEPA for the original indication of VASCEPA as an adjunct to diet to reduce TG levels in adult patients with severe (>500 mg/dL) hypertriglyceridemia. On May 22, 2020 and August 10, 2020, the two generics companies, Hikma Pharmaceutical USA Inc., or Hikma, and Dr. Reddy’s Laboratories, Inc., or Dr. Reddy’s, respectively, received U.S. FDA approval to market its generic versions of VASCEPA. On September 3, 2020, the U.S. Court of Appeals for the Federal Circuit, or the Federal Circuit, upheld the March ruling by the Nevada Court in favor of the two generics companies. On October 2, 2020, the Company filed a combined petition for panel rehearing or rehearing en banc. On November 4, 2020, the Company’s rehearing and en banc petitions were denied. On February 11, 2021, Amarin filed a petition for a writ of certiorari with the United States Supreme Court to ask the Court to hear the Company’s appeal in this litigation, which is pending.

In August 2020, the Company announced plans to launch icosapent ethyl under the brand name VAZKEPA, hereinafter along with the U.S. brand name VASCEPA, collectively referred to as VASCEPA, in major markets in Europe through the Company’s new European sales and marketing teams. On January 29, 2021, the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, adopted a positive opinion, recommending that a marketing authorization be granted to icosapent ethyl in the European Union, or EU, for the reduction of risk of cardiovascular events in patients at high cardiovascular risk. On March 26, 2021, the European Commission, or EC, approved the marketing authorization application for VAZKEPA in the EU to reduce the risk of cardiovascular events in high-risk, statin-treated adult patients who have elevated triglycerides (>150 mg/dL) and either established cardiovascular disease or diabetes and at least one additional cardiovascular risk event. On April 22, 2021, the Company announced that the Medicines and Healthcare Products Regulatory Agency, or MHRA, approved VAZKEPA in England, Scotland and Wales to reduce cardiovascular risk through MHRA’s new ‘reliance’ route following the end of the BREXIT transition period.

In November 2020, the Company announced topline results from the Phase 3 clinical trial of VASCEPA conducted by the Company’s partner in China. On February 9, 2021, the Company announced that regulatory review processes for approval of VASCEPA in Mainland China and Hong Kong have commenced. The Chinese National Medical Products Administration, or NMPA, has accepted for review the new drug application for VASCEPA based on the results from the Phase 3 clinical trial and the results from the Company’s prior studies of VASCEPA. The Hong Kong Department of Health is evaluating VASCEPA based on current approvals in the United States and Canada.

The Company currently has strategic collaborations to develop and commercialize VASCEPA in select territories outside the United States. Amarin is responsible for supplying VASCEPA to all markets in which the product is sold, including in Canada, Lebanon and the United Arab Emirates where the drug is promoted and sold via collaboration with third-party companies that compensate Amarin for such supply. Amarin is not responsible for providing any generic company with drug product. The Company operates in one business segment.

7


Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by the Company 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, or the Form 10-K, filed with the SEC. The balance sheet amounts in this report were derived from the Company’s audited consolidated financial statements included in the 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 months ended March 31, 2021 are not necessarily indicative of the results for 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.

At March 31, 2021, the Company had Total assets of $990.3 million, of which $538.7 million consisted of cash and liquid short-term and long-term investments. More specifically, the Company had Current assets of $930.5 million, including Cash and cash equivalents of $291.0 million, Short-term investments of $223.7 million, Accounts receivable, net, of $151.3 million and Inventory of $230.9 million. In addition, as of March 31, 2021, the Company had Long-term investments of $24.0 million. As of March 31, 2021, the Company had no debt outstanding. 

(2)

Significant Accounting Policies

     Revenue Recognition

In accordance with Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, or Topic 606, 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 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 8—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

8


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 March 31, 2021 and December 31, 2020:

 

In thousands

 

March 31, 2021

 

 

December 31, 2020

 

Gross trade accounts receivable

 

$

220,215

 

 

$

203,875

 

Trade allowances

 

 

(54,708

)

 

 

(36,242

)

Chargebacks

 

 

(13,287

)

 

 

(12,114

)

Allowance for doubtful accounts

 

 

(945

)

 

 

(945

)

Accounts receivable, net

 

$

151,275

 

 

$

154,574

 

 

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.

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 provision for income taxes, 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 Company is currently under audit by the IRS for the Company’s 2018 U.S. income tax return and by the New Jersey Department of Treasury for the years 2012 to 2015. 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 these audits will have a material adverse effect on its consolidated financial position or results of operations.

Loss per Share

Basic net loss per share is determined by dividing net loss by the weighted average shares of common stock outstanding during the period. Diluted net loss per share is determined by dividing net loss by diluted weighted average shares outstanding. Diluted weighted

9


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 preferred stock and convertible notes using the “if-converted” method. In periods with reported net operating losses, all common stock options and preferred stock outstanding are deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal.

The Company’s preferred stock, of which none is outstanding as of March 31, 2021 and December 31, 2020, was 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 was considered a participating security and the Company was 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 in a net loss position for the periods presented and is therefore not required to present the two-class method, however, in the event the Company was historically in a net income position, the two-class method was applied by allocating all earnings during the period to common shares and preferred stock based on their contractual entitlements assuming all earnings were distributed.

The calculation of net loss and the number of shares used to compute basic and diluted net loss per share for the three months ended March 31, 2021 and 2020 are as follows:

 

 

Three months ended March 31,

 

In thousands

 

2021

 

 

2020

 

Net loss—basic and diluted

 

$

(1,626

)

 

$

(20,553

)

Weighted average shares outstanding—basic and diluted

 

 

394,638

 

 

 

361,136

 

Net loss per share—basic and diluted

 

$

(0.00

)

 

$

(0.06

)

 

For the three months ended March 31, 2021 and 2020, the following potentially dilutive securities were not included in the computation of net loss per share because the effect would be anti-dilutive:

 

 

 

Three months ended March 31,

 

In thousands

 

2021

 

 

2020

 

Stock options

 

 

19,372

 

 

 

17,207

 

Restricted stock and restricted stock units

 

 

10,252

 

 

 

7,033

 

Preferred stock (if converted)

 

 

 

 

 

28,932

 

 

Stock options are anti-dilutive during periods of net earnings when the exercise price of the stock options exceeds the market price of the underlying shares on the last day of the reporting period. Restricted stock and restricted stock units are anti-dilutive during periods of net earnings when underlying performance-based vesting requirements were not achieved as of the last day of the reporting period.

 

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents, short-term and long-term investments, and accounts receivable. The Company maintains substantially all of its cash and cash equivalents and short-term and long-term investments, in financial institutions believed to be of high-credit quality.

A significant portion of the Company’s sales are to wholesalers in the pharmaceutical industry. The Company monitors the creditworthiness of customers to whom it grants credit terms and has not experienced any credit losses. The Company does not require collateral or any other security to support credit sales. Three customers individually accounted for 10% or more of the Company’s gross product sales, Customers A, B, and C accounted for 27%, 35%, and 31%, respectively, of gross product sales for the three months ended March 31, 2021, and represented 35%, 36%, and 24%, respectively, of the gross accounts receivable balance as of March 31, 2021. Customers A, B, and C accounted for 24%, 35%, and 32%, respectively, of gross product sales for the three months ended March 31, 2020 and represented 32%, 27%, and 30%, respectively, of the gross accounts receivable balance as of March 31, 2020. The Company has not experienced any significant write-offs of its accounts receivable. 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.

Concentration of Suppliers

The Company has contractual freedom to source the API for VASCEPA and to procure other services supporting its supply chain and has entered into supply agreements with multiple suppliers. The Company’s supply of product for commercial sale and clinical trials is dependent upon relationships with third-party manufacturers and suppliers.

The Company cannot provide assurance that its efforts to procure uninterrupted supply of VASCEPA to meet market demand will continue to be successful or that it will be able to renew current supply agreements on favorable terms or at all. Significant alteration to or disruption or termination of the Company’s current supply chain, including as a result of COVID-19, or the Company’s failure to

10


enter into new and similar agreements in a timely fashion, if needed, could have a material adverse effect on its business, condition (financial and other), prospects or results of operations.

The Company currently has manufacturing agreements with multiple independent U.S. FDA-approved API manufacturers and several independent U.S. FDA-approved API encapsulators and packagers for VASCEPA manufacturing. Each of these companies has qualified and validated its manufacturing processes and is capable of manufacturing VASCEPA. There can be no guarantee that these or other suppliers with which the Company may contract in the future to manufacture VASCEPA or VASCEPA API will remain qualified to do so to its specifications or that these and any future suppliers will have the manufacturing capacity to meet potential global demand for VASCEPA.

Fair Value of Financial Instruments

The Company provides disclosure of financial assets and financial liabilities that are carried at fair value based on the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements may be classified based on the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities using the following three levels:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3—Unobservable inputs that reflect the Company’s estimates of the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

The following tables present information about the estimated fair value of the Company’s assets and liabilities as of March 31, 2021 and December 31, 2020 and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

 

 

 

March 31, 2021

 

In thousands

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Asset:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market Fund

 

$

177,426

 

 

$

177,426

 

 

$

 

 

$

 

U.S. Treasury Shares

 

 

31,673

 

 

 

31,673

 

 

 

 

 

 

 

Corporate Bonds

 

 

130,114

 

 

 

 

 

 

130,114

 

 

 

 

Commercial Paper

 

 

47,517

 

 

 

 

 

 

47,517

 

 

 

 

Agency Securities

 

 

20,708

 

 

 

 

 

 

20,708

 

 

 

 

Repo Securities

 

 

10,000

 

 

 

 

 

 

10,000

 

 

 

 

Asset Backed Securities

 

 

5,411

 

 

 

 

 

 

5,411

 

 

 

 

Certificate of Deposit

 

 

6,124

 

 

 

 

 

 

6,124

 

 

 

 

Non-US Government

 

 

5,234

 

 

 

 

 

 

 

5,234

 

 

 

 

 

Total

 

$

434,207

 

 

$

209,099

 

 

$

225,108

 

 

$

 

 

 

 

December 31, 2020

 

In thousands

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Asset:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market Fund

 

$

88,266

 

 

$

88,266

 

 

$

 

 

$

 

U.S. Treasury Shares

 

 

48,356

 

 

 

48,356

 

 

 

 

 

 

 

Corporate Bonds

 

 

179,864

 

 

 

 

 

 

179,864

 

 

 

 

Commercial Paper

 

 

106,650

 

 

 

 

 

 

106,650

 

 

 

 

Agency Securities

 

 

20,782

 

 

 

 

 

 

20,782

 

 

 

 

Repo Securities

 

 

10,000

 

 

 

 

 

 

10,000

 

 

 

 

Asset Backed Securities

 

 

8,599

 

 

 

 

 

 

8,599

 

 

 

 

Certificate of Deposit

 

 

6,125

 

 

 

 

 

 

6,125

 

 

 

 

Non-US Government

 

 

5,240

 

 

 

 

 

 

5,240

 

 

 

 

Total

 

$

473,882

 

 

$

136,622

 

 

$

337,260

 

 

$

 

11


 

 

 

The carrying amount of the Company’s cash and cash equivalents approximates fair value because of their short-term nature. The 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 the purchase of 90 days or less.

 

The Company’s held-to-maturity investments are stated at amortized cost, which approximates fair value. The Company does not intend to sell these investment securities and the contractual maturities are not greater than 24 months. Those with maturities greater than 90 days and less than twelve months are included in short-term investments on its condensed consolidated balance sheet. Those with remaining maturities in excess of twelve months are included in long-term investments on its condensed consolidated balance sheet.

 

Unrealized gains or losses on held-to-maturity securities are not recognized until maturity, except other-than-temporary unrealized losses which are recognized in earnings in the period incurred. The Company evaluates securities with unrealized losses to determine whether such losses are other than temporary. The unrealized gain or loss for the three months ended March 31, 2021 and 2020 was a gain of $0.2 million and a loss of $0.7 million, respectively. Interest on investments is reported in interest income.

 

      

Segment and Geographical Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources to an individual segment and in assessing performance of the segment. The Company currently operates in one business segment, which is the development and commercialization of VASCEPA. A single management team that reports to the Company’s chief decision-maker, who is the Chief Executive Officer, comprehensively manages the business. Accordingly, the Company does not have separately reportable segments.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, and are early adopted by the Company or adopted as of the specified effective date.

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, the recognition of deferred tax liabilities for outside basis differences, among other simplifications. The Company adopted this standard effective January 1, 2021, which did not have an impact on the Company’s condensed consolidated financial statements.

The Company believes that the impact of other recently issued but not yet adopted accounting pronouncements will not have a material impact on the Company’s condensed consolidated financial position, results of operations, and cash flows, or do not apply to the Company’s operations.

(3)

Intangible Asset

Intangible asset consists of milestone payments to the former shareholders of Laxdale related to the 2004 acquisition of the rights to VASCEPA, which is the result of VASCEPA receiving marketing approval in the U.S. for the first indication in 2012, the expanded label in 2019 and marketing approval in Europe in 2021. Upon approval of the marketing authorization application for VAZKEPA in March 2021, a milestone for £7.5 million was achieved, which resulted in the Intangible asset increasing by $12.0 million. Refer to Note 5 – Commitments and Contingencies for further details. In accordance with ASC 350, the Company evaluates the remaining useful lives of the intangible asset at each reporting period to determine if any events or circumstances warrant a revision to the remaining period of amortization. As of March 31, 2021, the Company determined the useful life of the intangible asset, which had a remaining useful life of 9.3 years, has been extended to 10.0 years due to the approval of VAZKEPA in Europe and the related period of market protection. The carrying value as of March 31, 2021 and December 31, 2020 is as follows:

 

In thousands

 

March 31, 2021

 

 

December 31, 2020

 

Technology rights

 

$

32,081

 

 

$

20,081

 

Accumulated amortization

 

 

(6,625

)

 

 

(6,264

)

Intangible asset, net

 

$

25,456

 

 

$

13,817

 

 

12


 

(4)

Inventory

The Company capitalizes its purchases of saleable inventory of VASCEPA from suppliers that have been qualified by the U.S. FDA. Inventories as of March 31, 2021 and December 31, 2020 consist of the following:

 

In thousands

 

March 31, 2021

 

 

December 31, 2020

 

Raw materials

 

$

69,463

 

 

$

50,657

 

Work in process

 

 

36,094

 

 

 

30,388

 

Finished goods

 

 

125,335

 

 

 

107,819

 

Total inventory

 

$

230,892

 

 

$

188,864

 

 

 

(5)Commitments and Contingencies

Litigation

The active pharmaceutical ingredient in VASCEPA is difficult and time consuming to manufacture, often requires considerable advanced planning and long-term financial commitment to ensure sufficient capacity is available when needed. The Company has invested over a decade to develop with individual members of its third-party, active pharmaceutical ingredient supply chain the technical knowhow, manufacturing processes and related regulatory approvals that have helped enable the Company’s suppliers to supply the Company’s need for clinical and commercial supply globally. Based on statements made by generic competitors, Hikma and Dr. Reddy’s, the active pharmaceutical ingredient of VASCEPA needed to manufacture their generic versions of VASCEPA is in short supply to them. The Company believes this may be due to their lack of adequate planning, investment, knowhow and expertise regarding this fragile active ingredient.

As has been a practice in the generic pharmaceutical industry, on April 27, 2021, Dr. Reddy’s filed a complaint against the Company in the United States District Court District of New Jersey (case no. 2:21-cv-10309) alleging various antitrust violations stemming from alleged anticompetitive practices related to the supply of active pharmaceutical ingredient of VASCEPA. Damages sought include recovery for alleged economic harm to Dr. Reddy’s, payors and consumers, treble damages and other costs and fees. Injunctive relief against the alleged violative activities is also being sought by Dr. Reddy’s. Amarin believes it has valid defenses and will vigorously defend against the claims. Amarin has also received a civil investigative demand from the U.S. Federal Trade Commission and a subpoena from the New York Attorney General with respect to information on the same topic. The Company believes such contact from the governments may have been prompted by a generic competitor. Amarin is cooperating with the government agencies. Such litigation and investigations can be lengthy, costly and could materially affect and disrupt the Company’s business. The Company cannot predict when these matters will be resolved, their outcome or their potential impact on the Company’s business. If a government determines that Amarin has violated antitrust law, the Company could be subject to significant civil fines and penalties.

On February 22, 2019, a purported investor in the Company’s publicly traded securities filed a putative class action lawsuit against Amarin Corporation plc, the chief executive officer and chief scientific officer in the U.S. District Court for the District of New Jersey, Debendra Sharma v. Amarin Corporation plc, John F. Thero and Steven Ketchum, No. 2:19-cv-06601 (D.N.J. Feb. 22, 2019). On March 12, 2019, another purported investor filed a substantially similar lawsuit captioned Richard Borghesi v. Amarin Corporation plc, John F. Thero and Steven Ketchum, No. 3:19-cv-08423 (D.N.J. March 12, 2019). On May 14, 2019 the court consolidated the cases under the caption In re Amarin Corporation PLC Securities Litigation, No. 3:19-cv-06601 and appointed two other purported shareholders, Dan Kotecki and the Gaetano Cecchini Living Trust, as Co-Lead Plaintiffs. Co-Lead Plaintiffs filed a consolidated amended complaint, or Amended Complaint, on July 22, 2019 that added as defendants the Company’s current chief medical officer and the Company’s former chief executive officer, who is a current director. The Amended Complaint alleged that from September 24, 2018 to November 9, 2018 the Company misled investors by releasing topline results for the REDUCE-IT study without disclosing data on biomarker increases in the placebo group as compared with baseline measurement. The Amended Complaint alleged that these data suggest that the mineral oil placebo used in the REDUCE-IT study may have interfered with statin absorption in the placebo group, which they alleged may have increased adverse outcomes in the placebo group. The Amended Complaint further alleged that these purported misrepresentations and omissions inflated the share price. Based on these allegations, the suit asserted claims under the Securities Exchange Act of 1934 and sought unspecified monetary damages and attorneys’ fees and costs.

On March 29, 2021, the court granted the Company’s motion to dismiss this litigation for failure to state a valid claim. The litigation was dismissed without prejudice, giving the plaintiffs the right to file an amended complaint. We intend to vigorously defend against any future complaint in this matter.

In September and October 2016, the Company received paragraph IV certification notices from four companies contending to varying degrees that certain of its patents are invalid, unenforceable and/or will not be infringed by the manufacture, use, sale or offer for sale

13


of a generic form of VASCEPA as described in those companies’ ANDAs. The Company filed patent infringement lawsuits against three of these four ANDA applicants. In October 2016, Amarin filed a lawsuit against Roxane Laboratories, Inc. and related parties (collectively, “Roxane”) in the Nevada Court. The case against Roxane was captioned Amarin Pharma, Inc. et al. v. Roxane Laboratories, Inc. et al., Civ. A. No. 2:16-cv-02525 (D. Nev.). According to a stipulation filed with the Nevada Court, in December 2016, Roxane transferred its ANDA to West-Ward Pharmaceuticals International Limited, which then designated West-Ward Pharmaceuticals Corp. (or together with West-Ward Pharmaceuticals International Limited, West-Ward) as its agent for U.S. FDA communications. In view of the ANDA transfer, in February 2017, West-Ward replaced Roxane and related parties as Defendants in the above-referenced case. The case against West-Ward was then captioned Amarin Pharma, Inc. et al. v. West-Ward Pharmaceuticals Corp. et al., Civ. A. No. 2:16-cv-02525 (D. Nev.). In November 2016, the Company filed a lawsuit against Dr. Reddy’s Laboratories, Inc. and Dr. Reddy’s Laboratories, Ltd. (collectively, “DRL”) in the U.S. District Court for the District of Nevada. The case against DRL is captioned Amarin Pharma, Inc. et al. v. Dr. Reddy’s Laboratories, Inc. et al., Civ. A. No. 2:16-cv-02562 (D. Nev.). In November 2016, the Company filed a lawsuit against Teva Pharmaceuticals USA, Inc. and Teva Pharmaceuticals Industries Limited (collectively, “Teva”) in the Nevada Court. The case against Teva was captioned Amarin Pharma, Inc. et al. v. Teva Pharmaceuticals USA, Inc. et al., Civ. A. No. 2:16-cv-02658. In all three lawsuits, the Company sought, among other remedies, an order enjoining each defendant from marketing generic versions of VASCEPA before the last to expire of the asserted patents in 2030.

The fourth ANDA applicant referenced above is Apotex Inc., or Apotex, which sent the Company a paragraph IV certification notice in September 2016. The notice reflected that Apotex made a paragraph IV notice as to some, but not all, of the patents listed in the Orange Book for VASCEPA.

In October 2016, the Company introduced to the market a 0.5-gram dose strength of VASCEPA. In August 2017, as anticipated, the Company received a paragraph IV certification notice from Teva contending that certain of its patents are invalid, unenforceable and/or will not be infringed by the manufacture, use, sale or offer for sale of a generic form of the 0.5-gram dose strength of VASCEPA, as described in the Teva ANDA. This Teva ANDA was filed as an amendment to the 1-gram Teva ANDA and is related to patents already at issue in the 1-gram VASCEPA patent litigation. This certification followed the related listing in the Orange Book of patents associated with the 0.5-gram product in June 2017. This June 2017 listing was within the five-year, post NDA-approval period during which the Hatch-Waxman Amendments require a paragraph IV certification of patent invalidity or non-infringement under the Hatch-Waxman, five-year, NCE regulatory scheme. Accordingly, in October 2017, the Company filed a patent infringement lawsuit against Teva in the U.S. District Court for the District of Nevada. The case was captioned Amarin Pharma, Inc. et al. v. Teva Pharmaceuticals USA, Inc. et al., Civ. A. No. 2:17-cv-2641 (D. Nev.). In this lawsuit, the Company sought, among other remedies, an order enjoining Teva from marketing generic versions of the 0.5-gram dose strength of VASCEPA before the last to expire of the asserted patents in 2030.

On May 24, 2018, the Company entered into a settlement agreement with Teva that resolved its ANDA patent litigation as it relates to Teva’s as amended ANDA for both the 1-gram and 0.5-gram dose strengths of VASCEPA. As part of the settlement agreement, Teva may, subject to procurement of product supply, sell a generic version of VASCEPA in the United States now that the U.S. Federal Circuit Court of Appeals issued its mandate following our Nevada Court trial appeal lost at the level. The settlement agreement with Teva also substantially resolved litigation with Teva that could have ensued related to the December 2019 cardiovascular risk reduction indication of VASCEPA based on the REDUCE-IT study.

In July 2018, as anticipated, the Company received a paragraph IV certification notice from DRL contending that certain of its patents are invalid, unenforceable and/or will not be infringed by the manufacture, use, sale or offer for sale of a generic form of the 0.5-gram dose strength of VASCEPA, as described in the DRL ANDA. This DRL ANDA was filed as an amendment to the 1-gram DRL ANDA and is related to patents already at issue in the 1-gram VASCEPA patent litigation. This certification followed the related listing in the Orange Book of patents associated with the 0.5-gram product in June 2017. This June 2017 listing was within the five-year, post NDA-approval period during which the Hatch-Waxman Amendments require a paragraph IV certification of patent invalidity or non-infringement lawsuit against DRL in the U.S. District Court for the District of Nevada. The case is captioned Amarin Pharma, Inc. et al. v. Dr. Reddy’s Laboratories, Inc. et al., Civ. A. No. 2:18-cv-01596 (D. Nev.). In this lawsuit, the Company sought, among other remedies, an order enjoining DRL from marketing generic versions of the 0.5-gram dose strength of VASCEPA before the last to expire of the asserted patents in 2030. In light of the overlap between the cases, DRL and the Company have stipulated that the final judgment on the merits of the parties’ contentions in the consolidated 1-gram action shall also be binding in the 0.5-gram case.

The trial for the ANDA patent litigation against defendants DRL and Hikma, and certain of their respective affiliates, or the Defendants, took place in the Nevada Court (case no.: 2:16-cv-02525-MMD-NJK (consolidated with 2:16-cv=02562=MMD-NJK). Following conclusion of the trial in late January 2020, the Nevada Court, on March 30, 2020, decided in favor of the Defendants, ruling that the relevant patents are invalid due to obviousness. Amarin appealed this decision to the Federal Circuit (case no.: 20-1723).

In June 2020, the Company entered into a settlement agreement with Apotex that resolved patent litigation that was expected to result from the ANDA filed by Apotex with the U.S. FDA, which ANDA was amended in May 2020, seeking approval of a generic form of VASCEPA capsules based on the MARINE study. As part of the settlement agreement, Apotex may, subject to U.S. FDA approval of

14


its ANDA and procurement of product supply, sell a generic version of VASCEPA with MARINE indication labeling in the United States now that the U.S. Federal Circuit Court of Appeals issued its mandate following our Nevada Court trial appeal loss at the level (the same such date provided for under the 2018 settlement agreement with Teva). The settlement agreement with Apotex also substantially resolved litigation with Apotex that could have ensued related to the December 2019 cardiovascular risk reduction indication of VASCEPA based on the REDUCE-IT study. Apotex may amend its label under our settlement agreement to include the REDUCE-IT indication after expiration of the associated Hatch-Waxman Act regulatory exclusivity expires in December 2022.

On September 3, 2020, the U.S. Court of Appeal for the Federal Circuit upheld the March 2020 trial ruling by the Nevada Court in favor of Hikma and DRL. On October 2, 2020, the Company filed a combined petition for panel rehearing or rehearing en banc (case no.: 20-1723-1901), which was denied. On February 11, 2021, the Company filed a petition for a writ of certiorari with the United States Supreme Court to ask the Supreme Court to hear the appeal in this litigation (case no.: 20-1119). That petition is pending.

In November 2020, the Company filed a new patent infringement lawsuit against Hikma in the United States District Court in Delaware. The complaint alleges that Hikma has induced the infringement of VASCEPA-related cardiovascular risk reduction U.S. Patent Nos. 9,700,537 (Composition for preventing the occurrence of cardiovascular event in multiple risk patient), 8,642,077 (Stable pharmaceutical composition and methods of using same), and 10,568,861 (Methods of reducing the risk of a cardiovascular event in a subject at risk for cardiovascular disease) by making, selling, offering to sell and importing generic icosapent ethyl capsules in or into the United States. The Company is seeking remedies including a permanent injunction against Hikma’s unlawful inducement of infringing uses of its generic product to reduce cardiovascular risk and monetary damages in an amount sufficient to compensate the Company for such infringement.

In January 2021, the Company expanded the scope of the VASCEPA CV risk reduction patent infringement lawsuit against Hikma to include a health care insurance provider in the United States, Health Net, LLC. Through insurance coverage and economic incentives the Company alleges that Health Net, LLC has actively induced pharmacies to dispense, and patients to use, Hikma generic icosapent ethyl capsules in infringement of the related patents. In the complaint, the Company is seeking remedies including a permanent injunction against the unlawful inducement by Hikma and Health Net, LLC of infringing uses of the Hikma generic product, i.e., uses to reduce cardiovascular risk as detailed in the patents, and monetary damages in an amount sufficient to compensate the Company for such infringement. The Company is considering its legal options against parties similarly situated to Health Net, LLC and Hikma and acting in concert with either by making or selling any drug product or component thereof covered by the subject patents, or inducing others to do the same.

The Company intends to vigorously enforce its intellectual property rights relating to VASCEPA, but cannot predict the outcome of these lawsuits or any subsequently filed lawsuits.

In addition to the above, in the ordinary course of business, the Company is from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements and other matters.

Milestone and Supply Purchase Obligations

The Company entered into long-term supply agreements with multiple U.S. FDA-approved API suppliers and encapsulators. Certain supply agreements require annual minimum volume commitments by the Company and certain volume shortfalls may require payments for such shortfalls.

These agreements include requirements for the suppliers to meet certain product specifications and qualify their materials and facilities with applicable regulatory authorities including the U.S. FDA. The Company has incurred certain costs associated with the qualification of product produced by these suppliers.

Pursuant to the supply agreements, there is a total of approximately $213.0 million that is potentially payable over the term of such agreements based on minimum purchase obligations. The Company continues to meet its contractual purchase obligations.

On March 26, 2021, the EC approved the marketing authorization application for VAZKEPA. Under the 2004 share repurchase agreement with Laxdale, upon receipt of marketing approval in Europe for the first indication for VASCEPA (or first indication of any product containing intellectual property acquired from Laxdale in 2004), the Company must make an aggregate stock or cash payment to the former shareholders of Laxdale (at the sole option of each of the sellers) of £7.5 million. The Company recorded a liability of $12.0 million in Accrued expenses and other current liabilities on the condensed consolidated balance sheet as of March 31, 2021.

Also under the Laxdale agreement, upon receipt of a marketing approval in Europe for a further indication of VASCEPA (or further indication of any other product acquired from Laxdale in 2004), the Company must make an aggregate stock or cash payment (at the sole option of each of the sellers) of £5 million (approximately $6.9 million as of March 31, 2021) for the potential market approval.

The Company has no provision for any of these obligations, except as noted above, since the amounts are either not paid or payable as of March 31, 2021.

15


Marketing Obligations

As of March 31, 2021, the Company had certain marketing commitments, consisting of communication costs related to the direct-to-consumer activities, totaling approximately $14.2 million.

(6)

Equity

Preferred Stock

In March 2015, the Company entered into subscription agreements with both existing and new investors, or the Purchasers, for the private placement of a total of 391,017,970 restricted American Depositary Shares, or ADSs, each representing one share of Amarin’s Series A Convertible Preference Shares, par value £0.05 per share, in the capital of the Company, or Series A Preference Shares. For each restricted ADS, the Purchasers paid a negotiated price of $0.15 (equating to $1.50 on an as-if-converted-to-ordinary-shares basis), resulting in gross proceeds to the Company of approximately $58.6 million before deducting estimated offering expenses of approximately $0.7 million. At the request of the holders and provided certain conditions were met, each ten Series A Preference Shares were able to be consolidated and redesignated as one ordinary share, par value £0.50 per share, in the capital of the Company, each ordinary share to be represented by ADSs. During the years ended December 31, 2020, 2018, and 2015, the Company issued 28,931,746, 3,886,718, and 6,283,333 ADSs, respectively, upon consolidation and redesignation of Series A Preference Shares at the request of the holders, such that no Series A Preference Shares remained outstanding as of March 31, 2021 and December 31, 2020. Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for a more complete background.

Common Stock

There was no common stock activity during the three months ended March 31, 2021 and 2020 except as described in Incentive Equity Awards below.

Incentive Equity Awards

As of March 31, 2021, there were an aggregate of 19,371,777 stock options and 10,251,564 restricted stock units, or RSUs, outstanding, representing approximately 5% and 2%, respectively, of outstanding shares on a fully diluted basis.

During the three months ended March 31, 2021 and 2020, the Company issued 783,320 and 412,465 common shares, respectively, as a result of the exercise of stock options, resulting in gross and net proceeds of $2.1 million during the three months ended March 31, 2021 and $1.3 million during the three months ended March 31, 2020. During the three months ended March 31, 2021 and 2020, the Company issued 940,977 and 1,109,600 common shares, respectively, related to the vesting of RSUs, of which 365,463 and 406,042 shares, respectively, were retained as treasury shares as settlement of employee tax obligations. During the three months ended March 31, 2021 and 2020, in connection with the achievement of certain regulatory and sales performance conditions associated with the REDUCE-IT clinical trial and subsequent revenue growth, the Company issued 1,506,428 and 841,848 common shares, respectively, upon vesting of performance-based RSUs granted in 2017 and 2018, of which 638,502 and 353,790 shares, respectively, were retained as treasury shares as settlement of employee tax obligations. These performance-based RSUs will continue to vest ratably monthly through August 2021.

On January 4, 2021, the Company granted a total of 3,265,700 RSUs and 3,100,200 stock options to employees under the Amarin Corporation plc 2020 Stock Incentive Plan, or the 2020 Plan. The RSUs vest annually over a three-year period and the stock options vest quarterly over a four-year period with a one-year cliff vesting. Also on January 4, 2021, the Company granted a total of 1,345,800 RSUs to certain employees under the 2020 Plan that vest upon the achievement of specified operational performance conditions.

On March 2, 2020 and February 3, 2020, the Company granted a total of 821,950 RSUs and 1,875,000 stock options, respectively, to employees under the Amarin Corporation plc 2011 Stock Incentive Plan, or the 2011 Plan. The RSUs vest annually over a three-year period and the stock options vest quarterly over a four-year period. Also on February 3, 2020, the Company granted a total of 1,253,400 RSUs to employees under the 2011 Plan that vest upon the achievement of specified sales performance conditions.

(7)

Co-Promotion Agreement

On March 31, 2014, the Company entered into a Co-Promotion Agreement, or the Agreement, with Kowa Pharmaceuticals America, Inc. related to the commercialization of VASCEPA capsules in the United States. The Company and Kowa Pharmaceuticals America, Inc. intentionally designed the Agreement to naturally end as of December 31, 2018 and mutually agreed not to renew the Agreement.

During 2018, which was the last year of the co-promotion of VASCEPA by Kowa Pharmaceuticals America, Inc., the Company incurred expense for co-promotion tail payments which are calculated as a percentage of the 2018 co-promotion fee, which was eighteen and a half percent (18.5%) of VASCEPA gross margin in 2018. The accrued tail payments are paid over three years with

16


declining amounts each year. Kowa Pharmaceuticals America, Inc. was eligible to receive $17.8 million in co-promotion tail payments, the present value of which $16.6 million, was fully accrued as of December 31, 2018.

As of March 31, 2021, a net payable to Kowa Pharmaceuticals America, Inc. of $2.5 million was classified as current on the condensed consolidated balance sheet, representing the remaining accrued co-promotion tail payments. As of December 31, 2020, a net payable to Kowa Pharmaceuticals America, Inc. of $3.8 million, of which $3.2 million was classified as current on the condensed consolidated balance sheet, represents the remaining accrued co-promotion tail payments.

(8)Revenue Recognition

The Company sells VASCEPA principally to a limited number of major wholesalers, as well as selected regional wholesalers and specialty pharmacy providers in the United States, or collectively, its distributors or its customers, that in turn resell VASCEPA to retail pharmacies for subsequent resale to patients and healthcare providers. Patients are required to have a prescription in order to purchase VASCEPA. In addition to distribution agreements with distributors, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of the Company’s product.

Revenues from product sales are recognized when the distributor obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the distributor. Payments from distributors are generally received 30-60 days from the date of sale. The Company evaluates the creditworthiness of each of its distributors to determine whether revenues can be recognized upon delivery, subject to satisfaction of the other requirements, or whether recognition is required to be delayed until receipt of payment. The Company calculates gross product revenues generally based on the wholesale acquisition cost that the Company charges its distributors for VASCEPA.

 

Reserves for Variable Consideration

Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from (a) trade allowances, such as invoice discounts for prompt pay and distributor fees, (b) estimated government and private payor rebates and chargebacks and discounts, such as Medicaid reimbursements, (c) reserves for expected product returns and (d) estimated costs of incentives that are offered within contracts between the Company and its distributors, health care providers, payors and other indirect customers relating to the Company’s sales of its product. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the distributor) or as a current liability (if the amount is payable to a party other than a distributor). Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company adjusts these estimates, which would affect net product revenue and earnings in the period such variances become known.

Trade Allowances: The Company generally provides invoice discounts on VASCEPA sales to its distributors for prompt payment and fees for distribution services, such as fees for certain data that distributors provide to the Company. The payment terms for sales to distributors generally include a 2% discount for prompt payment while the fees for distribution services are based on contractual rates agreed with the respective distributors. Based on historical data, the Company expects its distributors to earn these discounts and fees, and deducts the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized.

Rebates, Chargebacks and Discounts: The Company contracts with Medicaid, Medicare, other government agencies and various private organizations, or collectively, Third-party Payors, so that VASCEPA will be eligible for purchase by, or partial or full reimbursement from, such Third-party Payors. The Company estimates the rebates, chargebacks and discounts it will provide to Third-party Payors and deducts these estimated amounts from its gross product revenues at the time the revenues are recognized. The Company estimates these reserves based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability, which is included in Accrued expenses and other current liabilities on the condensed consolidated balance sheets. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program. The Company estimates the rebates, chargebacks and discounts that it will provide to Third-party Payors based upon (i) the Company’s contracts with these Third-party Payors, (ii) the government-mandated discounts applicable to government-funded programs, (iii) information obtained from the Company’s distributors and (iv) information obtained from other third parties

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regarding the payor mix for VASCEPA. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period.

Product Returns: The Company’s distributors have the right to return unopened unprescribed VASCEPA during the 18-month period beginning six months prior to the labeled expiration date and ending twelve months after the labeled expiration date. The expiration date for VASCEPA 1-gram and 0.5-gram size capsules is currently four years and three years, respectively, after being converted into capsule form, which is the last step in the manufacturing process for VASCEPA and generally occurs within a few months before VASCEPA is delivered to distributors. The Company estimates future product returns on sales of VASCEPA based on: (i) data provided to the Company by its distributors (including weekly reporting of distributors’ sales and inventory held by distributors that provided the Company with visibility into the distribution channel in order to determine what quantities were sold to retail pharmacies and other providers), (ii) information provided to the Company from retail pharmacies, (iii) data provided to the Company by a third-party data provider which collects and publishes prescription data, and other third parties, (iv) historical industry information regarding return rates for similar pharmaceutical products, (v) the estimated remaining shelf life of VASCEPA previously shipped and currently being shipped to distributors and (vi) contractual agreements intended to limit the amount of inventory maintained by the Company’s distributors. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in Accrued expenses and other current liabilities on the condensed consolidated balance sheets.

Other Incentives: Other incentives that the Company offers to indirect customers include co-pay mitigation rebates provided by the Company to commercially insured patients who have coverage for VASCEPA and who reside in states that permit co-pay mitigation programs. The Company’s co-pay mitigation program is intended to reduce each participating patient’s portion of the financial responsibility for VASCEPA’s purchase price to a specified dollar amount. Based upon the terms of the program and information regarding programs provided for similar specialty pharmaceutical products, the Company estimates the average co-pay mitigation amounts and the percentage of patients that it expects to participate in the program in order to establish its accruals for co-pay mitigation rebates. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in Accrued expenses and other current liabilities on the condensed consolidated balance sheets. The Company adjusts its accruals for co-pay mitigation rebates based on actual redemption activity and estimates regarding the portion of issued co-pay mitigation rebates that it estimates will be redeemed. 

The following tables summarize activity in each of the net product revenue allowance and reserve categories described above for the three months ended March 31, 2021 and 2020:

 

In thousands

 

Trade

Allowances

 

 

Rebates,

Chargebacks

and Discounts

 

 

Product

Returns

 

 

Other

Incentives

 

 

Total

 

Balance as of December 31, 2020

 

$

36,242

 

 

$

141,201

 

 

$

7,797

 

 

$

5,587

 

 

$

190,827

 

Provision related to current period sales

 

 

29,134

 

 

 

148,241

 

 

 

828

 

 

 

13,122

 

 

 

191,325

 

Provision related to prior period sales

 

 

 

 

 

(854

)

 

 

 

 

 

 

 

 

(854

)

Credits/payments made for current period sales

 

 

(3,582

)

 

 

(16,136

)

 

 

 

 

 

(9,807

)

 

 

(29,525