Amarin Corporation plc (AMRN) Earnings Call Transcript & Summary

Welcome to Amarin Corporation's conference call. I would like to turn the conference over to Jordan Zwick, Senior Vice President, Business Development and Investor Relations at Amarin.

Good afternoon, everyone, and thank you for joining us. Please be aware that this conference call will contain forward-looking statements that are intended to be covered under the safe harbor provided under federal securities law. We may not achieve our goals, carry out our plans or intentions or meet the expectations disclosed in our forward-looking statements. Actual results or events could differ materially, so you should not place undue reliance on these statements. We assume no obligation to update these statements as circumstances change. Our forward-looking statements do not reflect the potential impact of significant transactions we may enter into, such as mergers, acquisitions, dispositions, joint ventures or any material agreements that we may enter into, amend or terminate. For additional information concerning the risk factors that could cause actual results to differ materially, please see the Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2022, and our quarterly report on Form 10-Q for the quarter ended March 31, 2023, which has been filed with the SEC and is available through the Investor Relations section of our website at www.amarincorp.com. We encourage everyone to read these documents. An archive of this call will be posted on Amarin's website in the Investor Relations section. Turning to today's agenda. Here with us today, we have Aaron Berg, Amarin's Interim President and Chief Executive Officer; along with Tom Reilly, Amarin's Chief Financial Officer; and Patrick Holt, Amarin's newly announced President and Chief Executive Officer. Following brief prepared remarks, we will open the call to your questions. With that, I will now turn the call over to Aaron.

Thank you, Jordan. Good afternoon, and thank you, everyone, for joining us today. This afternoon, we announced a number of strategic actions we're taking to position the company for the future, including an organizational restructuring program as well as our new CEO, Pat Holt, who I'm pleased to joining us today. Over the last several months, our new Board of Directors and executive leadership team have been working closely together on a thoughtful review of the business, evaluating where we stand today against the execution of the current strategy and assessing what we see as the greatest opportunities to drive shareholder value given the company's size, resources and challenging operating environment. VASCEPA and VAZKEPA are supported by a wealth of clinical data backed by strong science, addressing a significant unmet patient need, and Amarin continues to generate revenue in the U.S. to maintain a strong cash position. We're also clear about the challenges we face given the current operating environment and market dynamics. This includes pricing and reimbursement hurdles in Europe and pricing pressure in the U.S., which are reflected in the preliminary financial results we announced earlier today. So let me begin there. Turning to the next slide. In connection with today's announcement, we released our preliminary unaudited financial results for the second quarter of 2023, including product revenue of approximately $65 million, which includes $600,000 of revenue in Europe, compared to $85 million in the first quarter of 2023. For the quarter, the company had positive cash flow of $9 million, which includes a $5 million milestone payment, following the recent very high triglyceride regulatory approval in China. The second quarter end cash position was $313 million versus $304 million at the end of the first quarter. While we've maintained our U.S. prescription volume for VASCEPA and our overall cash position remains stable, we're experiencing increasing net pricing pressure in the U.S., driven largely by increased competition from generics as well as increased contract rebates within our current business. Adding to this pressure, we've also experienced lower-than-expected revenue growth and prolonged pricing and reimbursement negotiations in key markets in Europe. Given the reality of our business and the macro environment, it became clear to the Board and leadership team that decisive and significant actions were needed to maximize our cash position and put Amarin on the right path to capture the value in the business. Turning to the next slide. The organizational restructuring program we announced earlier today is designed to rightsize and strengthen Amarin and is focused on 3 core areas: maximizing cash flow in the U.S. through a streamlined model, redesigning Europe, and expanding upon international partnerships. Let me now give an overview of each priority. In the U.S., Amarin plans to maintain VASCEPA as a cost-effective option to generics while implementing a reduction in force of all U.S. sales force positions and approximately 30% of nonsales roles. This will enable Amarin to execute on its U.S. strategy with payers to ensure access while maximizing its cash flow opportunity. To support these efforts, we'll retain our managed care and trade organization. In Europe, we are redesigning and improving the efficiency of our commercial infrastructure to better align with pricing and reimbursement status and commercial potential and progress to date, as well as streamlining certain cross geographic functions and better leveraging learnings across countries. In addition, Amarin will continue to advance its pricing and reimbursement activities to drive access in remaining geographies, including those where progress has been delayed. As a result, we'll either reduce or eliminate our presence in certain countries which have lower sales potential and/or limited current reimbursement. We intend to continue the pricing and reimbursement processes that are currently underway and will maintain our existing commercial presence in key European countries where we're in the early stages of the commercial launch. And we will also continue exploring options for reimbursement in Germany. As we engage these discussions, we will evaluate and pursue a thoughtful strategy for VASCEPA to enhance its value and deliver its benefits to the greatest number of high-risk patients globally. In international markets, we will work on generating revenue from partnerships in key international markets, including Canada, Mainland China and Australia & New Zealand, and we'll continue exploring additional partnerships. In total, this program will bring with it a restructuring charge of $10 million and is expected to deliver annual cost savings of approximately $40 million. The restructuring includes a reduction in force of approximately 120 of 385 physicians or about 1/3 of our organization, most of which are in the U.S. The organizational restructuring program will support our strategic efforts to continue pricing and reimbursement processes underway in Europe, maintain our ICE leadership position in the U.S. and maximize our cash flow opportunity. While decisions that affect good people are very difficult to make, they're the right ones for the business, the right ones for our shareholders, and the right ones to enable us to continue to bring VASCEPA and VAZKEPA to patients around the globe who could benefit from its proven science and ability to help reduce cardiovascular risk. I want to extend my deepest thanks to everyone in Amarin who's worked tirelessly, some for many years to advance our mission in the U.S. and globally. We're incredibly grateful for their efforts in serving our patients. We're now entering a new chapter of more efficient, focused actions and value creation. Before I introduce our new President and CEO, I want to dive into a bit more detail on our European and international commercialization progress. We already have reimbursement in several European countries and are well into the negotiation process in key countries, including Spain, Italy and the Netherlands. These negotiations have been challenging as a result of the market dynamics, broadly impacting the prescription drug industry in many European countries. However, we're working to bring a number of these negotiations to conclusion. Within other international markets, we've recently received 2 additional approvals. A new indication and label expansion for VASCEPA was approved in the Kingdom of Saudi Arabia in June, where we're working with our commercial partner Biologix. Also in June, we received regulatory approval for VASCEPA in Mainland China. We've submitted regulatory dossiers for cardiovascular risk reduction in several other countries in Asia that could bring potential revenue as well, and we plan to commercialize with partners in these countries. We expect more updates on those submissions over the next several months. We know we have an outstanding product with a very strong data set. We're negotiating aggressively, and our goal is to obtain pricing and reimbursement access, maximize the value, get on the market and drive revenue. Turning to our final slide. I'm excited to share that today we've announced the appointment of Pat Holt, who's Amarin's Group President and Chief Executive Officer and as a member of the Board effective immediately. Pat brings more than 25 years of leadership in the life sciences industry and significant international operating experience. He most recently served as President of Cordis, Cardinal Health's global interventional cardiovascular business. In that role, he led a successful turnaround that included a return to revenue growth and a refocused R&D strategy as well as sustained enhancements and operational effectiveness, delivering margin expansion. Following the turnaround, he led the transaction process, which resulted in the successful sale of Cordis for an enterprise value of more than $1 billion. Pat is supportive of the actions we're taking now to capitalize on the opportunity that remains for VASCEPA and VAZKEPA. As he takes all the CEO position, I'll continue to collaborate with the Board and management team in a senior leadership role as we work together to chart Amarin's path for the future. VASCEPA and VAZKEPA is supported by a wealth of clinical data and has the opportunity to help millions of at-risk cardiovascular patients globally. Our mission remains to give millions of patients the opportunity to benefit from this tremendous product in a world where cardiovascular disease remains the #1 killer globally. And with our new organizational plan and focus, we're going to do that in a more efficient way that maximizes the opportunity ahead to drive value for all shareholders. With that, I'd like to turn the call over to Pat to provide our investors with a more detailed introduction. Pat?

Thank you, Aaron, for that great introduction, and thank you all for joining us on the call today. Let me begin by saying that it is an honor to join Amarin, and how excited I am to be here at this time. Amarin has a truly compelling asset, VASCEPA/VAZKEPA, that is aligned with significant unmet need and with the ability to make a profound impact for patients, for physicians and for payers, a product that can reduce cardiovascular events as significantly as VASCEPA/VAZKEPA is a rarity in medicine and highly valuable for patient care. That is why I am here and why I have joined the company. I'm confident in the value we will create for all our stakeholders. With that said, decisive action is needed to achieve our full potential. Alongside the entire Amarin team, I'm committed to realizing the opportunities that lie ahead of us in order to maximize value for patients, physicians, payers and shareholders. Over the next several weeks, I look forward to meeting with our leadership, colleagues, customers, shareholders and other stakeholders as we evaluate and execute on all the opportunities to deliver value. Before I close, I would like to thank the Amarin Board of Directors for entrusting me with the leadership of the company as we work together to shape the future of Amarin. I would also like to thank Aaron for his outstanding work as our Interim President and CEO and the executive leadership team who bring a tremendous wealth of knowledge about the company and cardiovascular care. Finally, I would like to thank all our Amarin colleagues for their passion, commitment and resilience. The organization has been through a tremendous range, but through it all, the teams here at Amarin have remained focused and committed to the mission of helping patients. I look forward to speaking with and getting to know many of you in the coming days and weeks. Thank you.

And with that, operator, we are ready to take questions.

[Operator Instructions] Your first question is coming from Michael Yee from Jefferies.

This is Jiajun on the line for Michael Yee. So I have two questions. First one, it seems like there is some discordance between the actual sales numbers and what we estimated from the script. So maybe if you can provide us with some color like how much of the sales were impacted by the price cuts and how much was due to rebates, et cetera? And eventually, what should we expect for the price down the road for the rest of this year? And second one, I think from a cost perspective, how should we think about the cadence of the $40 million SG&A cuts to happen? Is it more like a linear process? Or is it more like a step function? And then I'm still seeing about $230 million SG&A for the rest of -- for the full year. So is there any room for more cost cutting in SG&A? It would be helpful if you comment on that as well.

Thank you for the questions. I'm going to have Tom Reilly, our Chief Financial Officer, address those questions. Tom?

Sure. Thanks for the questions. You asked three questions. Let me go through all of them. So when you -- for the U.S. stock price related to managed care, maintaining our managed care access and the pricing impact. When compared to Q1, we saw high teens price decline versus Q1 of '23 on the price. We did have some impact related to trade as well for the wholesaler channel in the quarter. So even though our script volume was up as you indicated, in the mid-single digit, it was impacted by the price decline and the wholesaler inventory trade decline. On the second question, you asked about the $40 million operating expense savings that we place as part of this restructuring. You can expect that to be linear when you're thinking about it from a modeling approach. So you should expect approximately $10 million or so per quarter over the next 12 -- or excuse me, over the next 4 quarters on a linear approach. And the third component is related to operating expense, and I think what you're asking for is more guidance. We do see operating expense in the range between $240 million to $250 million for the remainder of the year. That does not include the $10 million of the restructuring charge that we will incur. I hope I answered all your questions.

Your next question is coming from Louise Chen from Cantor.

This is Carvey on for Louise from Cantor. Our question goes to Patrick. Congratulations on a new role. Out of 3 strategic priorities announced today, what are your most immediate action as the CEO? And what is the potential quick wins for the company?

Thank you very much for your call. Obviously, I'm delighted to be here at the company. Today is day 1. So naturally, I'll be taking time to listen to colleagues, listen to stakeholders across the whole business to then really plot our pathway forward. But firstly, I'd like to reinforce that really, we have a fantastic asset in VASCEPA and VAZKEPA, also long-term data. And really, our opportunity is to firstly ensure that we're maximizing our opportunities to bring value to patients and therefore, maximize the value we're bringing to shareholders. And that's the part that I'll be taking.

Got it. Sounds good. Congratulations again.

Yes, I'll just [Technical Difficulty] -- and for Pat thrown into the fire here on day 1, but we'll continue to focus on core priorities that I mentioned in the prepared remarks. One is we'll continue to drive revenue in the U.S. We still have significant revenue to generate, we'll build more profitably and efficiently as we go forward here. Regarding Europe, as mentioned, we have a number of pricing reimbursement negotiations ongoing. We need to bring those to conclusion and we need to get on the market and drive revenue and where we're on the market we need to be able to drive revenue at a more accelerated rate in particular, places like the U.K. It's a major market, and we need to get that going quicker. And then, of course, rest of the world, we've got partnerships in place, we've got approvals and now comes down to an increased focus on driving revenue in those other countries as well. And where we can get approved or secure additional partnerships, we'll do that.

Your next question is coming from Paul Choi from Goldman Sachs.