Amarin Corporation(AMRN) - 2023 Q3 - Quarterly Report

PART I – Financial Information Item 1. Financial Statements The unaudited financial statements reflect a net loss, decreased assets, and the ongoing impact of generic competition, offset by a significant improvement in operating cash flow from restructuring efforts Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $270,814 | $217,666 | +$53,148 | | Total current assets | $717,511 | $689,098 | +$28,413 | | Total Assets | $839,031 | $886,179 | -$47,148 | | Liabilities & Equity | | | | | Total current liabilities | $266,691 | $259,479 | +$7,212 | | Total liabilities | $285,883 | $290,846 | -$4,963 | | Total stockholders' equity | $553,148 | $595,333 | -$42,185 | - The company's total assets decreased by $47.1 million from year-end 2022, primarily driven by a reduction in long-term inventory and investments, although cash and cash equivalents increased[12] - Total stockholders' equity declined by $42.2 million, largely due to an increase in the accumulated deficit from net losses incurred during the period[12] Condensed Consolidated Statements of Operations Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenue, net | $66,056 | $89,878 | $232,198 | $278,948 | | Gross margin | $29,822 | $62,859 | $120,417 | $178,880 | | Operating loss | $(21,451) | $(5,144) | $(62,751) | $(96,283) | | Net loss | $(19,311) | $(5,140) | $(53,331) | $(106,659) | | Diluted loss per share | $(0.05) | $(0.01) | $(0.13) | $(0.27) | - Total net revenue decreased by 26.5% in Q3 2023 and 16.8% in the first nine months of 2023 compared to the same periods in 2022, primarily due to lower product revenue[15] - The company incurred a significant cost of goods sold for restructuring inventory, amounting to $12.7 million in Q3 2023 and $39.2 million for the nine-month period, impacting gross margin[15] - Despite lower revenues, the net loss for the nine months ended Sep 30, 2023, narrowed to $53.3 million from $106.7 million in the prior year, driven by lower operating expenses[15] Condensed Consolidated Statements of Cash Flows Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $7,525 | $(181,644) | | Net cash provided by investing activities | $45,477 | $203,107 | | Net cash provided by (used in) financing activities | $147 | $(417) | | Net Increase in Cash | $53,149 | $21,046 | - Cash flow from operations improved significantly, becoming a source of cash ($7.5 million) in the first nine months of 2023 compared to a large use of cash (-$181.6 million) in the same period of 2022[19] Notes to Condensed Consolidated Financial Statements - The company's lead product, VASCEPA, faces generic competition in the U.S. for its MARINE indication, with six generic versions having entered the market as of September 2023[22][23] - In July 2023, the company implemented an Organizational Restructuring Plan (ORP), eliminating its entire U.S. sales force and reducing non-sales positions by 30%, resulting in restructuring charges of $10.7 million for the nine months ended Sep 30, 2023[44] - The company recognized a $15.1 million positive adjustment to revenue for the nine months ended Sep 30, 2023, due to a change in estimate for the Medicaid rebate provision[64] - Licensing revenue was significantly impacted by changes in estimates for performance periods with partners Edding and HLS, resulting in the recognition of an additional $5.0 million and $5.3 million, respectively, during the nine months ended Sep 30, 2023[68][73][77] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the impact of U.S. generic competition, the strategic shift to international expansion, and significant cost reductions from its organizational restructuring Overview - The company is focused on commercializing VASCEPA but faces significant U.S. generic competition, prompting a strategic pivot to international expansion in Europe, China, and other regions[90] - In July 2023, Amarin implemented an Organizational Restructuring Program (ORP) to reduce operating costs by approximately $40.0 million annually by eliminating its U.S. sales force and redesigning European operations[91] - As of September 2023, six generic versions of VASCEPA have launched in the U.S., increasing competitive pressure and shifting strategic priorities to maximizing U.S. cash flow and international expansion[91][94] - The company has secured national reimbursement and launched commercially in several European countries, including England/Wales, Spain, and Sweden, and is pursuing market access in others[99] Results of Operations Revenue Comparison (in millions) | Period | Q3 2023 | Q3 2022 | % Change | 9 Months 2023 | 9 Months 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Product Revenue, Net | $64.9 | $89.2 | -27% | $214.7 | $277.0 | -22% | | U.S. Product Revenue | $62.4 | $87.9 | -29% | $209.0 | $272.0 | -23% | | Licensing & Royalty Revenue | $1.2 | $0.7 | +76% | $17.5 | $1.9 | +798% | | Total Revenue, Net | $66.1 | $89.9 | -27% | $232.2 | $278.9 | -17% | - The decrease in U.S. product revenue was primarily due to a decline in net selling price from generic competition, with Amarin's market share decreasing from ~62% in Q3 2022 to ~58% in Q3 2023[118] - Cost of goods sold increased, driven by restructuring inventory charges of $12.7 million in Q3 2023 and $39.2 million in the first nine months of 2023[121][134] Operating Expense Comparison (in millions) | Expense Category | Q3 2023 | Q3 2022 | % Change | 9 Months 2023 | 9 Months 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Selling, General & Admin | $45.5 | $58.7 | -23% | $156.0 | $236.3 | -34% | | Research & Development | $5.1 | $5.8 | -11% | $16.4 | $25.2 | -35% | - The significant decrease in SG&A expenses was primarily due to cost reductions from the ORP, including the elimination of the U.S. sales force and reduced promotional activities[124][136] Liquidity and Capital Resources - As of September 30, 2023, the company had total liquidity of $321.1 million, consisting of $271.3 million in cash and $49.8 million in short-term investments, with no outstanding debt[143] Cash Flow Summary (in millions) | Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Operating activities | $7.5 | $(181.6) | | Investing activities | $45.5 | $203.1 | | Financing activities | $0.1 | $(0.4) | - Management believes that its current cash, cash equivalents, and short-term investments are sufficient to fund projected operations for at least one year from the financial statement issuance date[145] Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to the company's market risk disclosures as reported in its 2022 Annual Report on Form 10-K - There have been no material changes with respect to market risk disclosures from the company's 2022 Annual Report[147] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal controls during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2023[148] - No changes occurred in the company's internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[149] PART II – Other Information Legal Proceedings The company is involved in various legal proceedings, with details provided in Note 5 of the financial statements - Information regarding legal proceedings is detailed in Note 5 of the financial statements, which discusses antitrust lawsuits from generic competitors, antitrust class actions, and a shareholder class action lawsuit[53][54][150] Risk Factors The company faces significant risks from its dependence on VASCEPA, including U.S. generic competition, European reimbursement challenges, and restructuring execution - The company is substantially dependent on its single product, VASCEPA, and faces increasing competition from generic versions in the U.S., which could materially and adversely affect revenues[152][153][155] - Commercialization in Europe is contingent on securing favorable pricing and reimbursement on a country-by-country basis, a process which may not be successful[153][158] - The July 2023 Organizational Restructuring Program (ORP), which eliminated the U.S. sales force, may not be successful in mitigating risks and could impact employee morale[153][171] - The company relies on third-party manufacturers, is subject to minimum purchase commitments that may exceed supply needs, and faces related competitor litigation[153][179][202] - In October 2023, the company received a deficiency letter from NASDAQ because its ADS trading price fell below the $1.00 minimum bid price requirement, which could lead to delisting[231] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 235,344 shares during Q3 2023 to satisfy employee tax withholding obligations related to equity awards Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2023 | 101,388 | $1.19 | | August 2023 | 123,047 | $1.18 | | September 2023 | 10,909 | $1.05 | | Total | 235,344 | $1.18 | - The shares were withheld to satisfy tax withholding obligations related to employee equity awards and were not part of a publicly announced repurchase plan[253] Other Information An executive officer adopted a Rule 10b5-1 trading plan for the potential sale of up to 1,598,749 shares of common stock - Dr. Steven Ketchum, President of R&D and Chief Scientific Officer, adopted a Rule 10b5-1 trading plan for the potential sale of up to 1,598,749 shares of common stock, ending December 31, 2025[254] Exhibits This section lists exhibits filed with the Form 10-Q, including a new CEO employment agreement and Sarbanes-Oxley certifications - Key exhibits filed include the employment agreement for new CEO Patrick Holt and certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[256]