Quarterly Report (10-q)

Date : 07/31/2019 @ 11:34AM
Source : Edgar (US Regulatory)
Stock : Amarin Corp PLC (AMRN)
Quote : 16.05  0.0 (0.00%) @ 9:00AM

Quarterly Report (10-q)

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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, 2019

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

 

2 Pembroke House, Upper Pembroke Street 28-32, Dublin 2, Ireland

Former name or former address, if changed since last report

 

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  

357,214,478 common shares were outstanding as of July 29, 2019, including 357,009,987 shares held as American Depositary Shares (ADSs), each representing one Ordinary Share, 50 pence par value per share and 204,491 Ordinary Shares. In addition, 28,931,746 ordinary share equivalents were issuable in exchange for outstanding preferred shares as of July 29, 2019, for a total of 386,146,224 ordinary shares and ordinary share equivalents outstanding as of July 29, 2019.

 


INDEX TO FORM 10-Q

 

 

 

 

 

Page

 

 

 

PART I – Financial Information

 

 

 

Item 1.

 

Financial Statements (unaudited):

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

 

3

 

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018

 

4

 

 

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the six months ended June 30, 2019 and 2018

 

5

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018

 

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 6.

 

Exhibits

 

76

 

SIGNATURES

 

77

 

2


PART I

AMARIN CORPORATION PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share amounts)

 

 

 

June 30, 2019

 

 

December 31, 2018

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

221,771

 

 

$

249,227

 

Restricted cash

 

 

1,503

 

 

 

1,500

 

Accounts receivable, net

 

 

95,398

 

 

 

66,523

 

Inventory

 

 

46,268

 

 

 

57,802

 

Prepaid and other current assets

 

 

7,103

 

 

 

2,945

 

Total current assets

 

 

372,043

 

 

 

377,997

 

Property, plant and equipment, net

 

 

858

 

 

 

63

 

Operating lease right-of-use asset

 

 

8,762

 

 

 

 

Other long-term assets

 

 

1,102

 

 

 

174

 

Intangible asset, net

 

 

7,157

 

 

 

7,480

 

TOTAL ASSETS

 

$

389,922

 

 

$

385,714

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

34,018

 

 

$

37,632

 

Accrued expenses and other current liabilities

 

 

103,495

 

 

 

84,171

 

Current portion of long-term debt from royalty-bearing instrument

 

 

45,410

 

 

 

34,240

 

Deferred revenue, current

 

 

1,962

 

 

 

1,220

 

Total current liabilities

 

 

184,885

 

 

 

157,263

 

Long-Term Liabilities:

 

 

 

 

 

 

 

 

Long-term debt from royalty-bearing instrument

 

 

23,202

 

 

 

46,108

 

Deferred revenue, long-term

 

 

17,775

 

 

 

19,490

 

Long-term operating lease liability

 

 

8,160

 

 

 

 

Other long-term liabilities

 

 

6,813

 

 

 

10,523

 

Total liabilities

 

 

240,835

 

 

 

233,384

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Series A Convertible Preferred Stock, £0.05 par, unlimited authorized; 289,317,460 shares issued and outstanding as of June 30, 2019 and December 31, 2018 (equivalent to 28,931,746 ordinary shares upon future consolidation and redesignation at a 10:1 ratio)

 

 

21,850

 

 

 

21,850

 

Common stock, £0.50 par, unlimited authorized; 335,149,425 issued, 331,307,810 outstanding as of June 30, 2019; 329,110,863 issued, 325,850,013 outstanding as of December 31, 2018

 

 

250,588

 

 

 

246,663

 

Additional paid-in capital

 

 

1,311,965

 

 

 

1,282,762

 

Treasury stock; 3,841,615 shares as of June 30, 2019; 3,260,850 shares as of December 31, 2018

 

 

(20,533

)

 

 

(10,413

)

Accumulated deficit

 

 

(1,414,783

)

 

 

(1,388,532

)

Total stockholders’ equity

 

 

149,087

 

 

 

152,330

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

389,922

 

 

$

385,714

 

 

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,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Product revenue, net

$

100,366

 

 

$

52,537

 

 

$

173,097

 

 

$

96,313

 

Licensing revenue

 

426

 

 

 

106

 

 

 

973

 

 

 

248

 

Total revenue, net

 

100,792

 

 

 

52,643

 

 

 

174,070

 

 

 

96,561

 

Less: Cost of goods sold

 

22,770

 

 

 

12,846

 

 

 

39,910

 

 

 

23,494

 

Gross margin

 

78,022

 

 

 

39,797

 

 

 

134,160

 

 

 

73,067

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

73,406

 

 

 

53,944

 

 

 

145,039

 

 

 

97,350

 

Research and development

 

7,130

 

 

 

18,159

 

 

 

14,372

 

 

 

29,921

 

Total operating expenses

 

80,536

 

 

 

72,103

 

 

 

159,411

 

 

 

127,271

 

Operating loss

 

(2,514

)

 

 

(32,306

)

 

 

(25,251

)

 

 

(54,204

)

Interest income (expense), net

 

789

 

 

 

(1,773

)

 

 

(908

)

 

 

(4,025

)

Other expense, net

 

(95

)

 

 

(131

)

 

 

(92

)

 

 

(76

)

Loss from operations before taxes

 

(1,820

)

 

 

(34,210

)

 

 

(26,251

)

 

 

(58,305

)

(Provision for) benefit from income taxes

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(1,820

)

 

$

(34,210

)

 

$

(26,251

)

 

$

(58,305

)

Loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.01

)

 

$

(0.12

)

 

$

(0.08

)

 

$

(0.20

)

Diluted

$

(0.01

)

 

$

(0.12

)

 

$

(0.08

)

 

$

(0.20

)

Weighted average shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

330,863

 

 

 

293,662

 

 

 

329,793

 

 

 

289,458

 

Diluted

 

330,863

 

 

 

293,662

 

 

 

329,793

 

 

 

289,458

 

 

See notes to condensed consolidated financial statements.

4


AMARIN CORPORATION PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(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, 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

 

Loss for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

 

Loss for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

 

 

 

 

Preferred

Shares

 

 

Common

Shares

 

 

Treasury

Shares

 

 

Preferred

Stock

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Treasury

Stock

 

 

Accumulated

Deficit

 

 

Total

 

December 31, 2017

 

 

328,184,640

 

 

 

272,719,044

 

 

 

(1,697,033

)

 

$

24,364

 

 

$

208,768

 

 

$

977,866

 

 

$

(4,229

)

 

$

(1,271,869

)

 

$

(65,100

)

Cumulative-effect

   adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(218

)

 

 

(218

)

January 1, 2018

 

 

328,184,640

 

 

 

272,719,044

 

 

 

(1,697,033

)

 

$

24,364

 

 

$

208,768

 

 

$

977,866

 

 

$

(4,229

)

 

$

(1,272,087

)

 

$

(65,318

)

Issuance of common stock,

   net of transaction costs

 

 

 

 

 

20,616,438

 

 

 

 

 

 

 

 

 

14,635

 

 

 

55,372

 

 

 

 

 

 

 

 

 

70,007

 

Exercise of stock options

 

 

 

 

 

782,553

 

 

 

 

 

 

 

 

 

541

 

 

 

1,007

 

 

 

 

 

 

 

 

 

1,548

 

Vesting of restricted stock

   units

 

 

 

 

 

1,838,380

 

 

 

(675,242

)

 

 

 

 

 

1,302

 

 

 

(1,302

)

 

 

(2,553

)

 

 

 

 

 

(2,553

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,754

 

 

 

 

 

 

 

 

 

3,754

 

Loss for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,095

)

 

 

(24,095

)

March 31, 2018

 

 

328,184,640

 

 

 

295,956,415

 

 

 

(2,372,275

)

 

$

24,364

 

 

$

225,246

 

 

$

1,036,697

 

 

$

(6,782

)

 

$

(1,296,182

)

 

$

(16,657

)

Issuance of common stock

   under employee stock

   purchase plan

 

 

 

 

 

127,872

 

 

 

 

 

 

 

 

 

85

 

 

 

338

 

 

 

 

 

 

 

 

 

423

 

Exercise of stock options

 

 

 

 

 

173,679

 

 

 

 

 

 

 

 

 

116

 

 

 

162

 

 

 

 

 

 

 

 

 

278

 

Vesting of restricted stock

   units

 

 

 

 

 

90,937

 

 

 

(41,252

)

 

 

 

 

 

60

 

 

 

(60

)

 

 

(127

)

 

 

 

 

 

(127

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,606

 

 

 

 

 

 

 

 

 

3,606

 

Loss for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34,210

)

 

 

(34,210

)

June 30, 2018

 

 

328,184,640

 

 

 

296,348,903

 

 

 

(2,413,527

)

 

$

24,364

 

 

$

225,507

 

 

$

1,040,743

 

 

$

(6,909

)

 

$

(1,330,392

)

 

$

(46,687

)

 

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,

 

 

 

2019

 

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(26,251

)

 

$

(58,305

)

Adjustments to reconcile loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

6

 

 

 

11

 

Stock-based compensation

 

 

14,766

 

 

 

7,381

 

Amortization of debt discount and debt issuance costs

 

 

878

 

 

 

1,140

 

Amortization of intangible asset

 

 

323

 

 

 

323

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(28,875

)

 

 

(4,991

)

Inventory

 

 

11,534

 

 

 

(9,833

)

Prepaid and other current assets

 

 

(4,158

)

 

 

577

 

Other long-term assets

 

 

(928

)

 

 

 

Accrued interest payable

 

 

(81

)

 

 

(58

)

Deferred revenue

 

 

(973

)

 

 

(248

)

Accounts payable and other current liabilities

 

 

14,765

 

 

 

24,146

 

Other long-term liabilities

 

 

(3,186

)

 

 

5,614

 

Net cash used in operating activities

 

 

(22,180

)

 

 

(34,243

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of equipment

 

 

(801

)

 

 

 

Net cash used in investing activities

 

 

(801

)

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of transaction costs

 

 

837

 

 

 

70,430

 

Proceeds from exercise of stock options, net of transaction costs

 

 

17,344

 

 

 

1,826

 

Payment on long-term debt from royalty-bearing instrument

 

 

(12,533

)

 

 

(6,713

)

Taxes paid related to stock-based awards

 

 

(10,120

)

 

 

(2,680

)

Net cash (used in) provided by financing activities

 

 

(4,472

)

 

 

62,863

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND

   RESTRICTED CASH

 

 

(27,453

)

 

 

28,620

 

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF

   PERIOD

 

 

250,727

 

 

 

74,237

 

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

 

$

223,274

 

 

$

102,857

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

Interest

 

$

14,982

 

 

$

10,251

 

Income taxes

 

$

71

 

 

$

805

 

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 (“Amarin” or the “Company”) is a pharmaceutical company with expertise in omega-3 fatty acids and lipid science focused on the commercialization and development of therapeutics to improve cardiovascular health and reduce cardiovascular risk. Since its inception, the Company has devoted substantial resources to research and development.

The Company’s lead product, Vascepa ® (icosapent ethyl) capsules, is approved by the U.S. Food and Drug Administration, or FDA, for use as an adjunct to diet to reduce triglyceride levels in adult patients with severe (TG > 500 mg/dL) hypertriglyceridemia. Vascepa is available in the United States (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. In August 2015, in addition to marketing Vascepa for severe hypertriglyceridemia, the Company commenced marketing Vascepa for use in adult patients with mixed dyslipidemia, as an adjunct to diet and an add-on to statin therapy in patients who despite statin therapy have high triglycerides (TGs > 200 mg/dL and <500 mg/dL), which the Company also refers to as persistently high triglycerides. This expanded promotion of Vascepa commenced pursuant to a federal court order and is continuing pursuant to an agreement among the Company, the FDA and the U.S. government.

The Company also developed Vascepa for FDA approval of potential additional indications for use. In particular, the Company conducted a cardiovascular outcomes study of Vascepa, titled REDUCE-IT™ (Reduction of Cardiovascular Events with EPA—Intervention Trial). The REDUCE-IT study, which commenced in 2011 and completed patient enrollment and randomization of 8,179 individual patients in 2016, was designed to evaluate the efficacy of Vascepa in reducing major cardiovascular events in a high-risk patient population on statin therapy. The REDUCE-IT study topline results were made public in September 2018, and the primary results of the REDUCE-IT study were presented at the 2018 Scientific Sessions of the American Heart Association (AHA) in November 2018 with such results concurrently published in The New England Journal of Medicine . The total (first and subsequent) cardiovascular events results of the REDUCE-IT study were presented at the American College of Cardiology’s (ACC) 68 th Annual Scientific Session in March 2019 and concurrently published in the Journal of the American College of Cardiology. The Company submitted a supplemental new drug application (sNDA) in March 2019 to the FDA seeking revised labeling for Vascepa based on results of the REDUCE-IT study and, upon such expanded labeling, subject to FDA approval of such label, to further expand its promotion of Vascepa in the United States. In May 2019, the FDA accepted the sNDA for filing and granted Priority Review designation with a Prescription Drug User Fee Act (PDUFA) goal date of September 28, 2019.

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, which prior to the REDUCE-IT results topline announcement in September 2018 consisted of approximately 170 sales professionals, including sales representatives and their managers. In early 2019, the Company increased its sales team to approximately 440 sales professionals, including approximately 400 sales representatives. The Company’s direct sales force remained at approximately this level through June 30, 2019 and is currently being increased to a planned total of approximately 800 sales professionals. Prior to 2019, the Company also engaged a co-promotion partner to help promote Vascepa in the United States which co-promotion by mutual agreement was not extended beyond December 31, 2018. Outside of the United States, the Company has entered into agreements with third party companies in select geographies for purposes of pursuing regulatory approval and commercialization of Vascepa. The Company operates in one business segment.

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, 2018, or the 2018 Form 10-K, filed with the SEC. The balance sheet amounts at December 31, 2018 in this report were derived from the Company’s audited 2018 consolidated financial statements included in the 2018 Form 10-K.

7


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 (“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, 2019 and 2018   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 of June 30, 2019, the Company had current assets of $372.0 million, including cash and cash equivalents of $221.8 million, accounts receivable, net, of $95.4 million and inventory of $46.3 million. The Company’s condensed consolidated balance sheets also include long-term debt from royalty-bearing instrument which is anticipated to be repaid quarterly calculated as a percentage of Vascepa net revenues until fully satisfied. As of June 30, 2019, the Company had no other debt outstanding.

 

(2)

Significant Accounting Policies

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.

The following table summarizes the impact of accounts receivable reserves on the gross trade accounts receivable balances as of June 30, 2019 and December 31, 2018:

 

In thousands

 

June 30, 2019

 

 

December 31, 2018

 

Gross trade accounts receivable

 

$

116,262

 

 

$

86,133

 

Trade allowances

 

 

(18,512

)

 

 

(19,495

)

Chargebacks

 

 

(2,352

)

 

 

(115

)

Accounts receivable, net

 

$

95,398

 

 

$

66,523

 

 

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 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.

8


The Company provides reserves for potential payments of tax to various tax authorities or 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.

The Company regularly assesses its ability to realize deferred tax assets. Changes in historical earnings performance, future earnings projections, and changes in tax laws and tax rates, 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 (IRS) and states. The Company recently completed the audit by the IRS for the years 2013 to 2014 with no material changes to the filed income tax returns. 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 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 notes 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 loss position and is therefore not required to present the two-class method, however, in the event the Company is in a net income position, the two-class method must be 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 and six months ended June 30, 2019 and 2018 are as follows:

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

In thousands

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss—basic and diluted

 

$

(1,820

)

 

$

(34,210

)

 

$

(26,251

)

 

$

(58,305

)

Weighted average shares outstanding—basic

   and diluted

 

 

330,863

 

 

 

293,662

 

 

 

329,793

 

 

 

289,458

 

Net loss per share—basic and diluted

 

$

(0.01

)

 

$

(0.12

)

 

$

(0.08

)

 

$

(0.20

)

 

For the three and six months ended June 30, 2019 and 2018, 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 June 30,

 

 

Six months ended June 30,

 

In thousands

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Stock options

 

 

16,585

 

 

 

25,282