Amarin Corporation plc (AMRN) Earnings Call Transcript & Summary

Good morning. We'll continue with the next session. I'm Paul Choi, SMID-Cap biotechnology analyst here at Goldman Sachs. It's my pleasure to introduce the management team from Amarin. With us today, we have John Thero and Karim Mikhail. What we'll do is continue with the standard format. We'll let -- have John kick it off with some introductory remarks, and then we'll get into the Q&A. If clients along the way have questions, please feel free to e-mail them through the research portal here or to e-mail them to me directly, and time permitting, I will ask the management team the questions. And with that, I'll turn it over to John.

Thanks, Paul, and thanks, everybody, for joining us here today. First, let me just state, I -- during this presentation, both Karim and I will be making forward-looking statements. There are risks involved with any such forward-looking statements, and investors should review our SEC filings before investing. This is an exciting year for Amarin. We've had a 4-stage strategy, which started with sort of getting the nose under the tent with a niche indication and then getting the outcomes data. Last year, we launched in the United States. We're now into the global expansion mode, which will then be followed by diversification. We see multibillion-dollar opportunities for our lead product, VASCEPA, in the United States, where we just launched it last year. Had, of course, some headwinds from COVID. There 8has been a generic launch, albeit with a skinny label and a year after losing the court case, about 9% of that market is generic today. We believe that we can grow the U.S. faster than generics can supply the market, particularly with their label limitation. In Europe, we got approval for the European Union at the end of March, that would expand it to -- for the Brexit countries in April. We're preparing for a launch there. The number of patients on statin therapy in Europe is greater than in the United States. There's a huge opportunity. I'm sure Paul will have questions about our launch plans there, which we're excited about. And this, of course, is a global opportunity. And with our partner in China, for example, we've been accepted for regulatory review and have regulatory reviews going on in China and in Hong Kong, where we're anticipating approval before the end of this year. I mentioned Karim Mikhail. On August 1st of this year, I am scheduled to retire. I have been with Amarin, as many of you know, for 12 years at this point in time. Very pleased with what -- proud of what's occurred over those 12 years, gone through a lot of R&D work. We've launched product and over $600 million in revenues last year. And now the next stage of the company's growth is commercial. So while I'm ready to retire, I'm very pleased to be able to turn the business over to the team of people here at Amarin, but in particular, to Karim Mikhail. Karim, we hired a year ago. He comes with a terrific background of international sales growth, most recently, having run a $4 billion franchise for Merck in their lipid business, which is predominantly cardiovascular. But I was particularly impressed by how quickly Karim has come up to speed on VASCEPA or VAZKEPA for European purposes. His ability to create strong relationships with members of the Amarin team, how people from other companies have wanted to come and work with him, and his overall vision. And I feel very excited about handing over the reins to Karim here in -- come August. And while I've committed to helping Karim if needed afterwards, I really don't think he's going to need a lot of help. It's going to be exciting going forward, which is important to me because I care about the company, but of course, it's also important to me because I'm a big investor in the company. So with that, Paul, I'm sure you have questions. I'll be quiet for a moment and listen to what you want to talk about.

Sure. Sounds good, John. So maybe you mentioned in your opening comments the impact from COVID and the headwinds. Could you maybe provide an update for us on what your field force, your sales force is hearing with regard to the return to office and patients coming back to their doctors' offices? Where are we relative to maybe pre-COVID levels? And just kind of what is the pace of return to office here?

Sure. Let me address that from a U.S. perspective. And then because we're getting ready for launching in Germany here soon, I'll ask Karim to talk a little bit about the preparations for Germany and COVID -- and Europe as well. So in the United States, we have seen some early signs of COVID headwinds abating a bit, but things are clearly not yet back to normal. We see that for our product and we see that for other drugs in the sector. I'd say the sector because there is no other product with the indication that VASCEPA has. We cited, not long ago, that of the physicians we target, about 50% of them are now accepting direct sales calls, which is -- wish it was 100%, but 50% is 9% or so better than it was just at the beginning of the year, for example. We are seeing more new physicians writing prescriptions of VASCEPA, but it's still a bit too early to assess how physicians will treat patients as they begin to come back. We've seen from IQVIA data that patients coming back to physicians are roughly 70 -- coming up on 80% of what they were pre-COVID, and we've seen sort of similar levels for blood test. This is very significantly in different geographies of the country. So -- and when we had a limited selling effort, we focused those selling efforts in concentrated areas of the country like New York and Southern California. Fortunately, some -- those areas are some of the slower areas to come back. But we are encouraged. We're trying to assess the -- how will physicians treat these patients when they come back? Will they look at the patients and say, "Hey, you were sick before COVID. I haven't seen you in 18 months or 16 months or 15 months, I need to be aggressive on treatment to get you back to good health." Or will they take a more staged approach and check their reflexes and listen through a stethoscope and say, "Hey, go off and get a lab test and come back and see me in 6 to 8 months." It's really too early to say on that. As a result, we're still in a mode where we're holding back a bit on some of our promotional efforts here in the United States. As I mentioned, we just launched for cardiovascular risk reduction at the beginning of last year, we then pulled the field force out at the end of March and have been on and off with that ever since. In September of last year, we thought that COVID was receding. We began to build up some of our promotional efforts, and we saw some response to that. But then COVID came back, and our efficiency and that spending turned out to be not what we had anticipated. So we continue to be in the somewhat conservative mindset on promotional spending right now in the United States, which doesn't mean that we're not spending money, but we want to see a bit more evidence of opening before we reinitiate some of our launch type of programs, and really managing that business was profitable in the first quarter, managing that business to not only grow it, but to grow it in a way that is profitable. So we are certainly convinced that the opportunity in the United States is very large, but when it's going to come back remains tricky to predict and certainly without precedent. Karim, you want to talk briefly about Germany in particular?

Sure. So from a COVID perspective, to start with, I think, Europe in general and Germany, is maybe like a quarter behind the U.S. in terms of time line, with the rates of vaccination and so on. So what we have seen so far is that access to cardiologist is still quite restricted, specifically those who are in the hospital. However, access to cardiologist in the retail sector and to GPs is better. Based on our launch time line, which we already disclosed as the end of Q3 after summer vacation, we hope -- we believe that the market is going to be close to accessible, not quite as it was prior to COVID, obviously, because it's coming back gradually, but we're pretty set now. As a reminder, our journey to Europe started with the communication on August 5, I believe, to say we're going direct in Europe. Our first 2 employees in Germany joined us last week of November, first week of December, the Head of Medical and the GM. And at this point in time, we have more than 160 employees in Germany between direct employees and outsourced field force. We have 150 reps deployed on the field, 30 of them visiting cardiologists and specialists and 120 visiting the GPs. So we're looking forward to a strong launch and, as we stated, by the end of the summer.

Okay. Great. Thanks for that characterization of the setup here in Europe, Karim. Maybe turning back to the U.S. for a moment. John, you brought up, obviously, what is a key focus for investors here with regard to the market development, which is the impact of generics. So I was wondering, can you characterize for us what your sales force is hearing with regard to physician interest and/or uptake on the generic that's available out there? And just how you're thinking about that with regard to patient access, both from a supply and a payer perspective?

Sure. So this is a very atypical generic market in a typical generic launch. Fairly shortly after launch, 90-plus percent would already be generic. We're here a year after the court case, and 9% is generic. And through this period, there is limited supply of generic. There have been 3 generic ANDAs approved. One has launched. There's another one that's talking about launching here soon, although they've been talking about that for a while. The supply decisions relative to this space generally need to be made, in many cases, 2, 3 years in advance. And it's not evident to us that the generics have made the investment in supply similar to the way that Amarin has. And the -- an ideal product for generic companies tends to be one that they can take into their own manufacturing facilities and produce efficiently. Production of VASCEPA or generic icosapent ethyl requires a dedicated manufacturing facility. And right now, what generics have are both a skinny label limited to our original indication for triglycerides greater than 500 mg per deciliter, which is about $40 million of our over $600 million in revenues last year, together with -- by their own accounts, limited supply and fairly costly supply. We benefited from over a decade of investment in efficiencies and know-how in terms of trying to get the cost down, although even after that long investment, our gross margins were only in the 70%, 90% range, not at the higher levels we often see for pharmaceutical product. So if we break things down by the -- really the 4Ps, right? So there's the physician, there's the payer, there's the pharmacist, and there's the patient. The physician, in many cases, is not aware of the generic or not generic. Some who are aware are writing on prescriptions don't substitute. Some of the complaints from patients about being -- that there are being shortages on the generic, the generic being more expensive. But for the most part, the physicians are not all that involved. On the payer side, the payers have found that the generic, in many cases, is more expensive than the branded product. And the -- at a wholesale price, the generic product is about a 12% lower than the branded product. But after rebates, which, in many cases, are greater than 12% for a payer, the generic product is more expensive. And as a result, we've seen payers, since generics have launched, increasingly move to putting VASCEPA branded in a preferred position. And I think they'd prefer to see the branded product used rather than the generic product use, but they're not really the direct decision-makers here. That tends to be the pharmacist, who's seeing on their screen that the generic is available, they would be doing the substitution. We are educating pharmacists relative to the label distinction between what a generic is approved for and what the branded product is approved for, the branded being approved for cardiovascular risk reduction, whereas the generic is not. I think the pharmacist has also begun to recognize that the generic has limited supply availability. And probably we've also had patient complaints about the cost of it being higher to the patients. And that's the last piece, which is that the patients are -- we get lots of complaints about patients going in, being told they're going to get a product, the generic not being available, having to wait, having to wait again and then getting it, having a co-pay that's often higher than what they were having for the branded product. So it's a very atypical generic situation. And behind all this is that because we've just launched last year in the United States, a minority of physicians currently know about VASCEPA and very few at-risk patients know about VASCEPA. Historically, generics -- the place for generics have generally been in situations where you had a mature product that the market perceived to be highly priced and substitution would make sense. Here, you've got a product where most people don't know about it. Promotion is necessary. When I say promotion, we're talking about education in a responsible way about this life-saving therapy. And generic companies just don't make that kind of investment. I worry that if this product does become too much generic about the number of patients, who will never get treated with the drug because they just won't know about it. So right now, our analysis suggests that there is considerably more valuable -- more value for Amarin shareholders and for society for Amarin to continue to promote the drug in the United States, huge upside potential there and to grow the market. And we believe we can grow faster once COVID headwinds remove themselves here more fully than what generics will supply the market. If we're wrong on that, we can always compete with our own form of a generic, but we don't think we're anywhere close to needing to make that kind of a decision at this point.

Got it. Okay. That makes sense. Maybe on the payer and access front, can you maybe talk about, given your launch for the CV indication a year ago, what has changed or how has access and reimbursement improved over the last, call it, 12 to 18 months?

Sure. On the -- in the U.S., payer access was good a year ago. It's gotten better. Today, on managed care side, on Medicare Part D, I think we're at about 96% coverage, of which about 70% or so is in preferred brand status, which means that for the lowest -- very low co-pay for patients. And on the commercial side of things, it's over pretty much on formulary every place, but in terms of being -- on Tier 2 and minimum restrictions, it's about 80%. That has moved increasingly to preferred coverage as well. So it's not just enough to be on formulary, being on formulary without restrictions, or if there are restrictions, having those restrictions just be restrictions to the label that's -- which isn't all that tricky to prove that somebody has risk factors for cardiovascular disease. So because of the -- there's now 17 medical societies that recommend use of this drug for cardiovascular risk reduction. The results have been broadly published. Groups like ICER which is an independent arbiter of whether drugs are cost-effective or not and rarely find drugs to be cost effective, have suggested that VASCEPA could double its price and still be cost effective. Like thanks for all those kinds of factors and the fact that there's no other drug to treat these patients and costs of heart attacks and strokes and revascularization or even death is very high, both in terms of the immediate costs, but if you've had a stroke, for example, those costs can go on for many, many, many years in terms of cost of care, but also loss of productivity and impact on families, et cetera. So I think the arguments are there for managed care coverage. And for the most part, payers are putting us on equal footing with the generic. In some cases, they put us ahead of the generic. In other cases, they put the generic slightly ahead of us. But for the most part, we're on parity with the generic product at this point.

Okay. Great. Thanks, John. You brought up an interesting point, which is VASCEPA is well recognized and recommended by leading medical and cardiovascular societies in terms of their recommendations guidance. But you also talked earlier about product awareness, which, given the patient population, I guess you've characterized as somewhat lower or not in terms of broadly known. So can you maybe talk about how you're thinking about brand awareness increasing over time? How you plan to drive that? And what makes sense for you to do in terms of improving awareness?

Yes. So regarding the United States, which I'll comment on, obviously, each market is separate. So there's other activities going on in Europe and other places in the world. But in the United States, which I -- you are correct that the medical societies, the key opinion leaders have seen the data. I think they get it. They've -- and just for context, I think you know this Paul, but I'm not sure everybody does, 17 medical societies globally, including multiple large societies here in the U.S., the 2 largest societies in Europe, multiple societies of China, this just doesn't happen for every drug and particularly doesn't usually happen this quickly after the drug was approved. It was only approved in the United States in December of 2019 and just was approved in Europe within the last 2 to 3 months. So KOLs get it. The data is very strong. But in the United States, we just launched for cardiovascular risk reduction in January 2020. And in March 2020, we had to pull our field from the -- our force from the field due to COVID. And our last survey data that I recall seeing, wasn't that long ago, suggests that on an unaided awareness basis, if you ask doctors about therapies to reduce cardiovascular risk beyond statin therapy, about 1/3 of them would -- VASCEPA would come up. And if you ask patients, who are at high risk, less than 5% of them were aware of VASCEPA. So the data is great on VASCEPA, both -- I encourage people to look at it. It's broadly published, robust. It's consistent -- the statins provider. Our cholesterol-lowering provides roughly a 25% to 35% relative risk reduction, which is terrific, but that, of course, leaves 65% to 75% of the risk. Our drug shows on top of patients with well-controlled LDL, an additional 25% risk reduction. That's significant lowering of heart attacks and strokes, in fact, and include recurring events. It's one fewer major cardiovascular event per -- on average for 6 patients treated over a 5-year period. They're just unparallel results with the number needed to retreat -- again, there's no direct competitor to our product, but with number needed to treat of 21, which is lower than that of statins, about 1/3 of that from, say, PCSK9. So it's a remarkable results for people who dig in, but we just haven't had a chance to get the word out, but -- largely because of COVID, but the opportunity remains. There are 4x as many people taking older generation therapies like fenofibrates and niacin that have failed to show cardiovascular benefit, but people use them because they were the only things available than there are VASCEPA. There are tens of millions of people using fish oil dietary supplements for what they believe to be cardiovascular protection. And yet studies of omega-3 mixtures have repeatedly shown no benefit. And when the industry for dietary supplements asked the FDA a few years ago for labeling for cardiovascular risk reduction, the FDA very politely said you just -- you don't have any evidence. You don't have evidence for it. So not only is there a lack of awareness of VASCEPA and the large opportunity that presents for us, but there are also these myths out there about therapies that are -- people think are helpful, but have through multiple studies not proven to be effective. And that's both the opportunity and the challenge for us. And we see that the need is very large, but there's education to be done. And had it not been for COVID, I think our numbers last year would have been significantly higher than $600 million in revenues. I think that opportunity still is out there. We just need to get back to the education. So we need COVID to recede first.

Got it. Maybe a similar question for Karim just in terms of product and brand awareness in Europe here. The data has been published for a while, but just kind of what is the level of familiarity among cardiologists and physicians generally in Europe in terms of the major geographies.

Sure. So there has been a consistent effort by Amarin over the last 2 years in terms of presence in all the medical congresses at a European level. So European Society of Cardiology, EAS and so on. So there is very strong foundation of scientific leader support and knowledge of the data. I think the phase we're in today is that we're moving from sort of top regional scientific leader support to more local, right? And if you take a country like Germany, where we've had already significant engagement, we've been present in the 2 largest cardiovascular conferences already in Germany in the last 2 to 3 months with significant participation. Now if you look at the awareness, we did test as a baseline in Europe, specifically in Germany, where do we stand. And as you know, in Europe, you cannot even use the brand name until you have the approval. So the brand named VAZKEPA, we could only use after the approval end of March. What we've seen in the way we tracked in February was that there was significant recognition by cardiologists for the REDUCE-IT study. And obviously, the brand was not recognized because there was no promotion, no activity and no knowledge of the brand name, but we are very encouraged by the level of recognition of the REDUCE-IT study. We will be running a systematic awareness, also, waves, especially prior to the launch, just to make sure we see where we stand. We are at the time of COVID. Access is limited to physician. We are trying to have multiple contacts with our key prescribers or potential key prescribers prior to the launch date to ensure that there is awareness, adoption and intention to prescribe, which, as you know, is not a 2 to 3 contact is definitely longer than that, but we want to make sure we don't delay bringing this product to market so that we can benefit as many patients as possible in Germany and in the other regions.

Okay. Great. Maybe as a follow-up, Karim, as you guys work on your prelaunch activities and thinking about your commercial plan here, how do you think about the market size and adoption? You've focused on, obviously, the major geographies, the larger countries in Europe. But just, I guess, Europe is a big place, a lot of potential patients there. How do you think about the market size there? And then I have a follow-up.

Sure. So as you've heard from John just a few minutes ago, the opportunity in Europe is a multibillion euro opportunity. If you look at the number of treated patients with statin is as high, if not higher, than the number we have in the United States. So there is a very significant market opportunity. The way we looked at it is that, obviously, we have a 10-year regulatory exclusivity, and we have patents until 2033 and then hopefully extended until 2039. So we do not want to lose 1 month without bringing this product to patients in Europe. Consequently, we are submitting, and we did disclose this information before 10 countries, reimbursement dossier, not just the big 5. So those 10 include the big 5, but include what we call the next 5 of the cardiometabolic market. And they tend to be the markets where there is significant market opportunities. These are some of the Nordics countries and some of the Benelux countries also. So that's going to be in the first wave of our submissions.

Okay. Great. One last thing you've been doing in addition to REDUCE-IT on the clinical front is that increasing exploratory studies on the mechanism of action here. That data has been out for a little bit, not as long as REDUCE-IT, but how is that data resonating with clinicians?

Well, first of all, the label we have in Europe, in a much clearer way, articulated the mechanism of action of the product. This very specific information is very critical to the European scientific audience. Prescribers in Europe would want to know why they're getting the 25% relative risk reduction. Why do you have a cardiovascular death benefit? How is it all coming together? So there has been good acceptance of the mechanism of action data. As you know, there has been a lot of evidence generated from the U.S. We're also now looking at interest from many scientific leaders in Europe to generate similar data or complementary data at the European level because everybody believes that the mechanism of action is a critical component. Having said that, we are very privileged that we're bringing to the market at the time of launch, a product that has evidence. It is very rare in Europe that, that happens. Most of the time, you negotiate your price based on a promise of a positive outcome study that will materialize 3, 5 or more years, while in our case, we have the evidence. So in a way, the mechanism of action helps explain, but it's not as critical as if you didn't have the evidence we have with REDUCE-IT itself.

And I would add just for emphasis that the mechanism of action data continues to roll out. So I mean, there's clearly big pieces of that, like the EVAPORATE study, which showed 17% flat regression over an 18-month period. But just in the last month, we've had over half -- I think half a dozen, maybe 7 different presentations on related mechanism of action. So the story keeps getting better and better as we dig through it, which is important. But as Karim speaks to, it's really about the clinical evidence. There the results in terms of efficacy and safety are robust, consistent and broad.

We're coming up on time here. So I want to maybe squeeze in a couple of corporate questions. And first is, Karim, you mentioned that you have patents protection to 2033 in Europe. But you are also facing potential additional generic launches here in the U.S. And so for either for you or for John, how are you thinking about maybe the topic of business development given that the company's focus for -- in recent years has primarily been on clinical trials and clinical trial development and now commercialization.

Sure. John, do you want to go first or...

No, go ahead, Karim. Go ahead.

So to me, it's clear. I mean, today, we have an asset with unmatched evidence. So priority #1, we need to make it happen for the launch in Europe, and we need to make sure that we continue to grow in the U.S. because we're just scratching the surface, right? $600 million for the U.S. market based on the opportunity is still very much the beginning. Having said that, what we're doing today is we're establishing a very strong foundation for a go-to-market model and an infrastructure that can definitely handle far beyond VASCEPA or VAZKEPA in Europe, right? So things will go in sequence, but more importantly, today, we need to make sure that we deliver on the promise of the launch. We're getting very close to some significant milestones. We're going to have a public price very soon. So the different investors are going to see how that fares compared to what we communicated before, which is we believe we are going to have a price in Europe that is similar net-net to what we have in the U.S. or higher. But definitely, diversification will be a priority moving forward once we have that initial step established.

Just a bit of a bitter-sweet question since I've worked with John as a counterpart for several years now, but John, you did mention you're stepping down here in the late summer. And so as you and Karim work on transitioning -- transitioning the role here, can you maybe talk about what are your priorities during the transition and early stages of post transition here?

Yes. So Karim when he was hired, he was brought in with tremendous experience that he has brought in to run our European side. And as I mentioned, I was so impressed with him that I thought he should be running the whole thing going forward. So we've been focusing in on hiring a replacement for Karim for Europe. We've been focusing in on introducing Karim to investors, which he's historically a commercial guy, so the Wall Street side, while he now has considerable experience. So we've been trying to make sure people know who he is. So conferences like this are important in that regard. So thank you. To learn and get ready for the launch in Europe, Karim was already having a lot of interaction with the U.S. colleagues, but building those relationships further have been important. So just making sure it's ready. I am planning to retire. There wasn't a magic date that it had to be month x versus month y. We decided, okay, here's sort of laid out the plans of what needed to be accomplished, and we're marching along on those plans. And I think actually, Karim's picked up things faster than I thought he would. So he's probably ready today, but I'll hang around until August and then remain in the background, if needed beyond that. Karim, if you care to add anything?

No. I mean, it is a phenomenal opportunity for me. I am really excited to take over John's place. I really believe there are huge opportunities. But it was also critical for me to get much closer to the U.S. In prior lives, I had turnarounds in the U.S. business and so on, but I had left this for a while, and I had full focus on my European mission. So I was interacting, but not so close, but now it's the time to spend a lot more time with the U.S. team, the U.S. organization and really planning what to do over the next steps. We have an important asset, but we have a very strong team that we definitely want to capitalize on and further develop.

We'll have to end it on that note. My thanks to John and Karim for joining us today. Thank you very much, guys.

Thank you, Paul.

Thanks, Paul. Thanks, everybody, for listening.

Thank you.