Amarin Corporation Plc (NASDAQ:AMRN) H.C. Wainwright Global Investment Conference September 12, 2022 9:00 AM ET
Company Participants
Karim Mikhail – President, CEO & Director
Thomas Reilly – CFO & SVP
Conference Call Participants
Andrew Fein – H.C. Wainwright & Co.
Andrew Fein
Hello, everyone. I’m Andrew Fein, one of the biotechnology analysts at H.C. Wainwright. Thank you for coming. Glad to be back in person.
So the next company presenting will be Amarin, and presenting for the company will be its President and CEO, Karim Mikhail. Thank you.
Karim Mikhail
Thank you, Andrew. This is Karim Mikhail, President and CEO of Amarin. Today, my presentation may make some forward-looking statements. And of course, for all the list of risk factors, please do consult our SEC filing.
So at Amarin, we have a very focused growth strategy. Really, priority number one is growing the VASCEPA business by stabilizing the U.S., launching successfully in Europe and expanding to international. And — but also, we’re also focusing, obviously, on managing the life cycle of VASCEPA. We have an incredible asset that we want to extend its life cycle and diversifying with BD development, but also working obviously on evolving our operational model. So these are our 3 key priorities in terms of growth strategy.
Just to give you an update on where we are at the second quarter of 2022. Beginning of the year was a very challenging because we’ve had a third generic entrant to the market. So you’ve seen the U.S. business getting a hit despite the fact that we kept the business stable with 2 generics for a number of quarters.
Having said that, second quarter of 2022 was a stable quarter, where we’ve had 78% prescription drop, but at the same time, we benefited from some of the destocking that we’ve had in the first quarter. So we kept the revenue at $90 million in the U.S., which I believe was a significant step forward, considering the fact that we had a full quarter of the third generic on the market with Apotex being there.
During that quarter, we took some very important decision in terms of capital structure. We’ve had a very significant restructuring decision to basically save $100 million in our operational expenses over 12 months between third quarter of 2022 to the second quarter of 2023. So a very, very significant action there. And of course, we made progress on many other elements.
But to give you a bit of flavor on where we are on the third quarter, the most important element we want to highlight that for the last 10 to 12 weeks, we’ve actually seen very encouraging signs and trends in terms of the stabilization of the erosion in the U.S. market. So this is data that is — so far, we have not seen this trend in the last 2 years since the launch of generics. So definitely, it is encouraging now. Obviously, we have to continue to be vigilant over the next few quarters in case we have a new entrant, in case we have other events that will impact the market. But from a U.S. business stabilization, we’ve seen encouraging trends.
We have made progress with our cash preservation initiatives. You’ve heard me talking about the cost savings of the $100 million, but we also have had a number of renegotiations of our supply agreements, which, if all goes well towards year-end, that’s going to significantly reduce our inventory purchases, which is going to impact our cash positively. Of course, we stay committed to be very vigilant on the timing of investment in Europe.
So now that you’ve seen we have pricing reimbursement in the U.K., We are investing fully in the U.K. because we have a very positive price. However, in other countries, because we have not had a signature yet, we are still operating with a small core of people and not to invest ahead of time.
European reimbursement negotiations are progressing pretty well in general. In the last few weeks, we’ve had a country like The Netherlands issue a positive assessment with very clear guidance on what they expect in terms of price. It’s in line with the U.K. and with other prices. So that’s also very encouraging. I remind people The Netherlands is the sixth largest European country after the big 5. So it’s a significant player, it’s not a small market.
But also, we have progress in Spain, we have progress in France, and we have progress in the other markets, including, by the way, submitting some new files.
International expansion plans are on track in terms of regulatory approvals for the remaining of the year. We’ll talk about that a little bit more in detail.
And finally, we are still working pretty hard on the scientific evidence supporting our products. So at , we presented new data, and we will be obviously present also at AHA.
So just to remind you on where we are at the European level, we have 3 countries where we have pricing reimbursement. We have the U.K., we have Sweden and we have individual reimbursement in Denmark, at the price of close to $2,000 annually which, for an oral lipid-lowering drug, if you compare that to any benchmark, it’s a very positive pricing.
So far, as we said, negotiations are progressing in France, Spain, Netherlands and Austria. We have submitted new dossiers in Portugal, Switzerland. And we will be submitting very soon in Belgium.
As you may have seen also from our disclosures, we basically did not get to an agreement with in Germany, and we decided that we did not want to stay in Germany and basically risk the price in other European countries. So we decided to pull out of Germany for a period of time until we come back with a different submission that will get us the right price in Germany.
Overall, just a visual to see how far we’re progressing. You can already tell from this — from this slide that we have a number of countries where we are already in pricing and reimbursement negotiations. The most important ones, let’s face it, are France where they have given us a positive assessment and we are in price negotiation. We are also in price negotiation formally now in Spain, but also The Netherlands and a few other countries. So overall, very good progress, and we see all the negotiations converging closer to the U.K. price which, for everybody, is actually a net price visible to every other country. So the nice part of the negotiation is that a France or a Spain knows exactly what the U.K. government is paying and there is no guessing around that.
In terms of international expansion, as you remember, we’ve had a plan to go to 20 additional countries so that we are present in the 50 largest markets in the world. And for those submissions, we have 6 that we are getting this year, and we can confirm that things are — the regulatory approvals are progressing appropriately to receive approval for those 6 countries before end of the year. Then we have the second wave of 9 countries in 2023 and we finish with 5 countries in 2024. So by end 2024, we would be registered in the 50 largest cardiometabolic markets.
Although the REDUCE-IT study was published 3, 4 years ago, we continue to focus very much on generating new scientific evidence. We just came back from European Society of Cardiology in Barcelona, where Dr. Deepak Bhatt presented the new data on and the prevention with some very unique data where you reduce myocardial infarction by 40%. For clinicians that’s very, very significant data. And I can tell you for pricing and negotiation discussion, that’s also very valuable because you are able to demonstrate that you reduce the burden, the economic burden of such treatments on the European governments.
We also presented the data on the benefit for the smoker patient population, both of them are positive. So we continue to drive the scientific evidence, making sure we stand very strongly behind VASCEPA and VAZKEPA in Europe.
Just on my last slide, just a list of drivers for success for the second half of 2022 and beginning of 2023. The first one is really maintaining the stabilization of the U.S. business. And as you’ve heard in the last 10 weeks, we have had very limited erosion, if any. So that’s pretty significant. We hope we can keep it this way, if there are no new entrant, no additional challenges. We’ll see how that evolves over the remaining part of the year.
We’re making very good progress with reducing our operational spending, as outlined in the savings plan. You remember, cash burn first quarter was above $90 million. The second quarter was $65 million. So we’re very, very actively managing it. And we will definitely see the progress in the third quarter.
We are in the face of getting ready for commercialization in the U.K. We’ve hired all our specialty field force. We are not hiring a primary care field force in the U.K. because that would be a lot of money wasted. It takes 2 years to get primary care to prescribe in the U.K. But we have a full key account management team and very, very solid medical team.
Negotiations are progressing for pricing reimbursement in Spain, France, Italy, Netherlands, and we have new submissions. Achieving international regulatory approval in up to 6 countries before year-end is also progressing. We continue to generate data. We are going to have new data submitted at AHA to ensure that we keep supporting the evidence behind VASCEPA.
So with that, thank you all, to questions.
Question-and-Answer Session
Q – Andrew Fein
Feel free to jump in. But I guess a couple of questions. Yes, starting obviously with stabilization that you’ve seen to date in the third quarter. Do you attribute it simply to the lack of another generic entrant coming on board? Or are there active efforts on the part of the company that you think is leading to the stabilization?
Karim Mikhail
So clearly, we’ve had 1, 2, 3 generics, and let’s face it, we’ve never seen a slowing down of the erosion. I think we communicated publicly before that we’ve seen a steady trend of generic erosion from day 1 when Hikma came to the market until basically 10 to 12 weeks ago. And that erosion did not change whether they were 1, 2 or even 3 products. I’m talking prescription, of course, not talking value because there are price impacts. But in terms of prescription, we have seen a steady gradual erosion from month 1 until 2 months ago. But for the last 2 months, we’ve seen basically a slowing down and almost a stabilization of the erosion. So I don’t want to say it’s only attributed to us and our effort, but we’re very, very focused, obviously, today on fighting for the brand.
You remember when we took the decision to reduce our commercial infrastructure in U.S. significantly, we took also a decision at that point in time to say, okay, from now on, 0 investment on growing the molecule, we’re focusing only on the brand and on stabilizing the brand and making sure that we’re going to get the scripts. And we’ve seen encouraging times.
Andrew Fein
I guess turning to Europe for a second then. What’s Germany’s problem? I mean, given the totality of data that you’ve generated, given the seemingly attractive price point that you went through quite clearly, what’s the roadblock there? And I guess, are there lessons to be learned in terms of how you present things, how you pitch the totality of the evidence as you continue your conversations with other European countries there?
Karim Mikhail
Yes. So first of all, I want to start by saying what we’ve seen in Germany and what we faced in Germany has 0 impact on any other countries because the negotiation in Germany is very German, right? If you’re asking what is the problem with Germany, it’s really the way the negotiation is structured, the way prices are referenced.
And let’s face it, this is not an Amarin-only challenge. I’m sure people follow the news in the last 2, 3 weeks that were very large pharmaceutical companies facing the same outcome. But by the way, that’s not new for Germany. People will remember that there was a time where Lipitor has to withdraw out of Germany, where CRESTOR never actually entered Germany. So it’s not like this is a discovery.
Now we went in very focused on our value-based pricing strategy. And we said, look, here’s why you need to reimburse this product. The way they reference prices just gets to numbers that I don’t think any pharmaceutical company will accept for the sake of every shareholder. And that’s why when you look at what Germany size could contribute to the overall European, every other company and Amarin says, “Well, I’m willing to sacrifice Germany if I know I’m going to make it in every other market with a superior price.”
So this is where we are. It doesn’t mean we’re giving up on Germany. We could just turn the page and say, forget it, we actually have a plan to come back. It’s going to take a bit more time. But for the moment, we are delivering very positive prices in other European countries, and we will continue to do so over the next few months.
Andrew Fein
I guess in the context of the cost savings initiatives that you’ve highlighted, how should we think about those driving with the presumed ongoing efforts to find additional — potentially find additional assets. Does cost savings then give you more flexibility from an asset allocation perspective, if you will, externally? Or should we think about perhaps you stepping back at the moment from an external seeking path and focusing more on the various efforts that you’ve highlighted?
Karim Mikhail
Look, I mean, this is a moment for companies in the market today to think very creatively, let’s face it. If this was all about to the 1 plus 1 equals 2, then you end up with very limited options. In reality, we’re saving costs because we want to be profitable ASAP, and we have a plan to do so, and Tom can go through the details of how we plan to do this and save cash in different parts. That, in any way, does not stop us from creatively thinking on how we bring in another asset commercially, because the U.S. market today has 75 very solid reps who really know the space very well. They are supporting a product against 3 generics over the last years and keeping 60% of the business. So we believe there is definitely room to do so.
Now what opportunity is out there? How are we going to go about them is a different story, but this could be definitely creating shareholder value if that opportunity [indiscernible]. But for the moment, we’re also focusing very much on contribution margin in the U.S., delivering all on our commitments because we’re using that money to invest in Europe to start with, right? That’s our priority before thinking that, that money is going to be used as well, obviously.
Andrew Fein
And Tom can address this, too. But I guess as you speak with your investor — your current investor base, how does it kind of divvy up in terms of those folks that would like to see you become profitable versus those that perhaps care a little bit less about that and would rather see you invest for additional top line growth?
Thomas Reilly
Want me to answer?
Karim Mikhail
Go ahead. I can also add. Okay.
Thomas Reilly
Yes, I think it’s a balance between both, right? So what Karim mentioned before, the cost initiatives is really for our operational investment to Europe. So from an investor perspective, to see the top line growth in Europe, we hear a lot of. And then we also hear from other companies or other investors about profitability. So it’s a combination of both.
Karim Mikhail
And again, at the end of the day, we went out and we disclosed that. I believe our investors who are staying with us believe that the opportunity in Europe is above 1 billion, right?
Now to get to that, you need to manage your short term. This is where the whole cash preservation cost structure effort become very, very important, right? And that’s why the 2 have to work together.
Andrew Fein
I guess in terms of business development, obviously, it’s something that you guys have been speaking publicly about for quite some time now. Nothing’s transpired yet. How should we think about that? Is it simply a matter of you not getting comfortable from a valuation perspective with assets that you’ve encountered? Have you been outbid in some previous efforts? I guess, how — what’s the right way to think about that?
Karim Mikhail
Well, the right way to think about it is that we set a definition that is very clear and focused. If we were out just to get anything, I think by now we would have landed somewhere. We are really targeting significant synergies from such a transaction. It’s not just about bringing an asset.
So we said we want to be in cardiovascular. We want to be in specialty rare cardiovascular or cardiometabolic. And there aren’t too many assets that are out there with that definition that will deliver business in the short term, right? Because it’s one of our criteria.
So once you put a list of requests, the number of products that are out there that can fulfill this is not a huge list. So that’s why we’ve been vigilant. We’re not trying to do anything. And again, this is about creating shareholder value. This is not about ticking a box to say, let’s do this or let’s do that. So if it takes time because we didn’t find the right opportunity, it takes time and we didn’t find the right opportunity.
At the moment, we are very focused on launching in Europe. We are very focused on getting the 20 additional countries. We’re very focused on stabilizing in the U.S. And when that opportunity will come up, we will address it, but we also cannot invent it, it has to be out there for us to brand at the right time.
Andrew Fein
One last question for me and then I’ll pass it over to my colleague, Matt Coffield. And that’s — I think the past year, maybe 18 months has certainly seen a burdening of the obesity space as an area of specialty. Now physicians and training can do fellowships. They can become obesity specialists, which is something that hadn’t existed before. And it seems like a core group of endocrinologists have redefined themselves, if you will, partly driven by the success of the and Eli Lilly drugs.
I guess where do you fit into that? As you look at the data in terms of who’s prescribing VASCEPA in the U.S., are you seeing increased proportionality of folks who define themselves as obesity specialists? Is that something you can survey from the data? And how does that kind of play into your thinking in terms of positioning the drug going forward?
Karim Mikhail
Sure. So this is a very attractive space. Let’s be very — whether it’s reimbursed or out of pocket, people pay a lot of money to ensure that they get their weight to be the way they’re looking for. So it’s a very attractive space, right? And it’s a space that we’ve been looking at. But again, with the very same criteria, right? The criteria is it’s something that needs to be very close to our footprint. We are not intending to add resources to address this. This needs to drive synergies, right?
Number two, is it going to deliver income very quickly? Is it within — so overall, I believe this market is attractive. It’s going to become even more attractive. It is a specialty play at this point in time. in the future, this space may move from a specialty play to primary care. We don’t believe that that’s going to happen in the next 2 to 3 years. This is going to happen from the next 5 to 7 years.
So we continue to follow all the different players in that space, but in other areas, too, where we believe we can even have a stronger “step forward.” So thank you.
Andrew Fein
Great. So maybe slightly changing gears. When can we anticipate to see progress on the fixed-dose combination program? And is that something you continue to be encouraged about and looking towards the future?
Karim Mikhail
So fixed dose combination is a very significant initiative. It is supporting the diversification element on our side. When you get a product like VASCEPA with 25% or 30% outcome benefit, it would be a shame not to imagine a full portfolio of products around it.
If you took a product like ezetimibe, which was launched 20 years ago, that had 3 statin combinations. Until today, by the way, very, very highly used everywhere. So for us, this is a model to follow, right? We are going to build a portfolio.
Now because of the cost reduction, and we are very, very cash prudent today, we decided to focus on 1 statin in terms of development and really go sequential in terms of planning, meaning not take risks to run different phases in parallel because you can do that and save time.
But we are encouraged by the progress we’re making. So far, we have made very, very little — very few public statements because we believe the minute we talk about this, there is competitive risk. But some time in 2023, we will talk not only about the product, what it will bring and the value, but what sort of protection can come with it and so on.
So we are very encouraged with the fixed-dose combination, and it’s a significant part of our future fixed-dose combinations in general.
Unidentified Analyst
That’s very helpful. And then you’ve mentioned that you’re taking steps to renegotiate various agreements to reduce your purchase obligations for inventory, which would reduce or help reduce cash burn. Can you update us on this progress with any further specifics or perspective?
Karim Mikhail
Tom, do you want to go ahead?
Thomas Reilly
Yes, sure. So the product had a very long lead time. When the third generic came in, we had purchased commitments that we had to renegotiate on. So during our Q2 earnings call, we gave an update on some progress we’ve made. We had a restructuring charge of $15 million related to the negotiations. We’re continuing to make progress in Q3, and we’ll see the benefits or yield the benefits in the future related to that.
Unidentified Analyst
Okay. And then maybe just in our remaining minute or 2 here, there are some interesting recent data at ESC. What kind of data can we expect for AHA?
Karim Mikhail
I mean there are submissions that are made at AHA, there are no decisions yet. They are all late-breakers. So up to now, we cannot really communicate. But what I can say is we are very committed to stand behind VASCEPA in every way. Today, this product has probably the most significant type of outcome benefit that you have on the market, including 20% cardiovascular mortality benefit, right?
I mean 2 or 3 weeks ago, there was a lot of noise about the that delivers 33 or something like that. This is a one product that by itself does 20%. So we will continue to focus on that space. We stand very much behind the science.
And let me tell you, it’s actually very challenging that your study ended literally 4 or 5 years ago and you’re still generating science. We have a slide that has how many subgroups were studied after REDUCE-IT. It’s maybe 15 subgroups, all of them coming very positive and very significant. So let’s see what we’re going to have at AHA. We’ll see.
Unidentified Analyst
We look forward to it. Thank you. Well, in the interest of time, I think we’ll part ways there. But thank you very much to Amarin. This has been very informative. Really appreciate it.
Karim Mikhail
Thank you very much.
Thomas Reilly
Thank you.
Unidentified Analyst
Thank you, guys. Thank you.
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