Amarin Corporation plc (NASDAQ:AMRN) 41st Annual J.P. Morgan Healthcare Conference January 10, 2023 8:15 PM ET
Company Participants
Karim Mikhail – President and Chief Executive Officer
Tom Reilly – Chief Financial Officer
[Call Starts Abruptly] — in Europe. And the Board took upon itself to refresh itself also. So, they have initiated a process, in October, of 2021. And for now, we basically have 75% of new board members. So, you see on the list here all the new board members who were added to the list who, again with the same concept, are coming with the skill set that is required, needed, necessary for the future of the company, which is international commercial expertise, they know what it is to negotiate with Australia, with many of these markets, but also at a European level where we’re working very hard to ensure that we are successful there.
Now, if I move on to the third part of my presentation, which is really the next chapter, so what are we set out to do for the next phase. Our priorities and our goals are very clear; we have to continue to geographical expansion. This is the key to shareholder creation, right? We know that the U.S. is the U.S. We have generics; they’re not going to be less, they are going to be the same or more. And we can hold on to the revenue for as long as we can, but let’s face it, we’re going to see price erosion, we’re going to see additional pressure. So, we have to continue to make progress quarter-after-quarter at the European level. So, that’s with the geographic expansion, and of course, beyond that, to the international markets.
The second part that we have to focus on and we should not stop at VASCEPA. There is huge value of bringing VASCEPA with rosuvastatin and atorvastatin, because that gets you to gain years in adoption, right? If you put a very familiar molecule with a still new molecule, you just gain, and we’re going to talk about that again in a few seconds. And finally, we have to do those two while we continue to be very disciplined in terms of financial management and our operating expenses.
So, on Europe, we have steps one, two, three of pricing reimbursement in all of our countries completed. We are only focusing really now on pricing reimbursement negotiations in the remaining markets. And we believe we’re going to get the vast majority of these, getting price reimbursement in 2023. Beyond Europe, we need to continue the international journey, we have six approved, but we need to get to the 14 remaining by the end of 2024. And we have to do this while we continue the focus on operational excellence. So, in terms of operational excellence, priority number one is profitability in the U.S. As you know, we have adapted our plans as we went along; we actually have cumulative revenue of $1 billion in the U.S. since generic introduction.
If we had pulled just immediately I don’t know if we would have had this revenue by now, right? So, we continue to look and anticipate what’s going to happen in the market. If we see a hit, we will react, right? Very are very clear that if we see an additional fit from Teva, who listed but is not on the market yet, if we see an additional threat we will be the first to act to preserve the profitability because we need that cash to launch in Europe, and we’re very conscious of it. So, that’s first area of focus. The second one is maintaining financial discipline just across the line, right? And I can tell you, big part of this is the sequenced investment in Europe.
If you look at how we are working our investment base at European level, we do not hire commercial headcount unless we see somebody holding the pen and signing a reimbursement in a country. So, today in the U.K., we are building a full team that is fit for purpose, right, meaning sized appropriately to what is needed. We have not inherited a feel for size from a prior launch, and we have to have people that we don’t really need, we only hire what we need with the expertise that we need. And all of them are coming with the business acumen and the expertise in cardiometabolic that is required for the job. And we will continue to do that.
One might say, but why don’t you find the way of just throwing everything at it and maybe you’re going to get a lot more out of that? The realty is the market has changed dramatically, even before COVID. Today, we are not in the market where you are in carpet-bombing and just throwing everything at a launch. You need to know what you need to do. And I can tell you, for this product it’s about scientific engagement, okay. If physicians are convinced of the value they will prescribe. Going there and repeating a message every day without people believing the evidence is not of value, right?
So, that’s what we are doing, we are putting the right investments, and will sequence them appropriately so that we do not waste resources without real value early on in the launch phases.
Now, moving on to the next chapter in terms of diversification, we actually have three key areas where we have true strengths. So, we have a commercial team in the U.S. that’s holding on to 60% market share despite three to four generics, and they are a very, very capable team. Most of them have been with the company for the last eight to 10 years, so very significant experience in the field. And at the same time, we are building a world-class team in Europe that is delivering on the pricing reimbursement that you’ve seen that is launching in the U.K. and in other markets in a capable way, so very strong commercial capability, but we also have the R&D engine that we have preserved because we believe that this is of real value, and that expertise, there need to be preserved.
And now we are building that very significant medical affair team that has the cardiovascular network. So, that allows us to do beyond VASCEPA, but at the same time, we want to say that the first thing we want to focus on is actually our own fixed-dose combination because we believe that this could be a very significant opportunity in the marketplace, right? And again, I have personal experience with launching multiple portfolios with line extensions. I can tell you it makes a very, very big difference, especially if you are a new paradigm. And in our case, there is not a clearer new paradigm than us; we’re the first non-LDL asset that demonstrated cardiovascular outcome on top of a statin, we’re the first, right?
And remember, there were so many failures before us. You know, I see ETP inhibitors try to demonstrate that and failed on top of a statin. Other molecules tried to demonstrate that and failed; we are the first, but we are launching in Europe with pre-marketing, right? With no initial market development, we wish we had that luxury, but what situation we are inheriting just — we didn’t have that. We had to do Europe because of the challenge in the U.S. So, to do that, right, associating yourself with some of these molecules can be very important. We already initiated a process to seek guidance from EMEA on the regulatory pathway.
And we are hopeful that we’ll be able to share more details with our investors in the next quarters, but this is a very, very significant step in our diversification. So, to try to close on our priorities, 2023, look, our work is carved out for us very clearly. We have to continue to make progress on the reimbursements. This is probably the number one priority to create incremental additional shareholder value for the company, is more reimbursement in more countries in 2023, and doing that while maintaining profitability in the U.S. We already communicated that we believe we are sufficiently funded to launch in Europe, but big part of that is maintaining that profitability.
And as we said, we are ready for whatever scenario that can come our way to ensure that we continue to deliver that contribution margin and that U.S. profitability that is needed for the launch. We will, and we will continue to work on obtaining additional international regulatory approval, very critical. We do not plan to do this ourselves. Hopefully, 2023 is going to be a year where we can communicate some of the partnerships that we will have in many of these markets that will still allow us flexibility for the future of the company, which is very important for us.
So, it’s not about just partnering, it’s making sure that we maintain the flexibility, and at the same time advance the fixed-dose combination which we believe will have a significant impact on the lifecycle of the product, while exploring, obviously, other VD opportunity. Finally, do all of that with a very, very, very strong focus on financial discipline, and making sure we do more with less.
I just want to finish by saying, look, we have a bold ambition. Our bold ambition, and the reason why we all joined Amarin in the last two years is the following. Many of us launched cardiometabolic molecules across the world. Our experience says that you can have a 50-50 split between U.S. and ex-U.S. business, right? Lipitor had that, at least [indiscernible] franchise that I know very well had that 50-50 split between U.S.-ex-U.S. Well, if you look at the potential of VASCEPA is the U.S., the lowest estimates were that this product was going to sell $3 billion in the U.S. So, if we say that the European opportunity is a billion plus and the international market is maybe close to a billion, then we are not far off from that assumption. We are here because we believe we can recreate this potential. And the path to that is to get pricing reimbursement in Europe, launch successfully in Europe, expand to international. And, we to continue to maintain the profitability in the U.S. to ensure we are going to be self-funded for that.
So, I want to thank you all for your attention. I know it’s a long day, but pleasure to be here in person with you all in San Francisco, and thank you.
Unidentified Analyst
Great.
Karim Mikhail
I want to invite Tom Reilly, my CFO to join me for questions. Thank you.
Question-and-Answer Session
Q – Unidentified Analyst
[Operator Instructions]
Unidentified Analyst
Can I ask a question about the material because I saw a report from the Dr. Reddy’s? They said, okay, maybe in the next few years we got maybe several generic drug trials to come, and in a few years, maybe the raw material, I mean the EPA — the raw material, the price could be up like they will sell it over 50%. That influences a lot. So, what do you think about that?
Karim Mikhail
Look, so first of all, I am not a manufacturing expert, so I will not be — claim for that, but look, you know the manufacturing of this product is very, very complex. If it was not, okay, you would have seen very different volumes on the market. A rate limiting step is the cost of the raw material, but let me tell you, that’s not the only rate limiting step. The other limiting step is the technology that is needed to transform the raw material into 96% pure EPA. And for that, there are multiple technologies on the market. Some of them have very different yield from one another, right. So, some of them can turn this much raw this much pure, or you need to have three times more. So, this is not as simple as it sounds.
Having said that, look, if the cost of goods is going to cheaper, which is going to get the product to be at a lower base, we are going to benefit from that probably more than anyone because we believe we have the best set-up in terms of supply chain at this point in time. So, I don’t know if this is going to be a competitive advantage to the generics.
And on top of that, remember that Europe has regulatory exclusivity until 2031. And we have plans to extend that in many ways. So, we are not going to face any generic challenges in Europe or in the international market. So, this may be valid where we are in the U.S. Let’s face it. If this is coming in 2025, we would be way ahead from where we need to be in terms of driving E.U. business, but good question, thank you.
Unidentified Analyst
Thank you.
Unidentified Analyst
Maybe I’ll ask a question in relation to that. You’re currently undergoing renegotiations for supplier agreements. So, can you maybe comment on that? And what does the process involve for that renegotiation?
Karim Mikhail
Sure. So, we have not disclosed many of the details obviously on these renegotiations, because their nature is obviously very confidential. All what we communicated before was basically this is a product where you have dedicated manufacturing facilities, right. This is not a simple solid form manufacturing facility where they can produce 10 different products. They only work to produce 96% EPA. So, the way they operate, they have to dedicate their effort to you. And for them to do so, you have to commit for a long-term arrangement, usually three to five years at least. And you have to commit to volumes that you are going to purchase at least for 18 months. So, to get in or to get out of this working relationship is not a simple procedure.
The real value that we have with our partners from a supply perspective is that they see us building a market in Europe, right. This is the big advantage that we have is that they see us opening country after country after country. They see us continue to pursue Asia. They see us working to get the China approval, right. So, they understand that if there is any future volume that’s going to come, let’s face it. Amarin will continue to be the key customer for those suppliers. They want to work with us, and they understand what happened in the U.S. What happened in the U.S. was out of our control, right. That was an IP situation. We lost volume. We had to act on it. So, they are understanding, they are collaborative in most cases to try to see how we can arrive to an arrangement where we can continue to work together, but that’s really what we disclosed up to now. And we will continue to work on that. Look, supply chain is an important advantage in this business, and consistency and quality of supply is a critical priority in the business.
Unidentified Analyst
Maybe focusing on the o-U.S. launch with VASCEPA, with national reimbursements now secured in five countries, how would you characterize the size of the collective market in this regions and the potential revenue in 2023?
Karim Mikhail
Sure. So, we currently have national reimbursement in the U.K., Sweden, and Finland. We have individual reimbursement in Austria and Denmark. Individual reimbursement actually means something similar maybe to prior authorization in the U.S. which means the physician will have to get an approval from the authority to get the product reimbursed. It’s an electronic procedure where they have to take. And you start with that in many countries until you get national reimbursement.
Now, if you look at the size of these markets, the U.K. is obviously the largest. If you look at the E.U. business split by country, between the four to five large markets, you cover 50% to 60% of the business. And then, the remaining markets are really 40%. So, today we have the U.K. The U.K. will be a significant contributor of revenue in 2023. We believe we are going to have other larger markets where we are going to get pricing reimbursement in 2023 that they are not on the list. We are working to get them first, second, third quarter as we go along. And together, they are going to be really the big contribution for the business, but overall if you add these up, they would be maybe 20%, 25% of what the business is.
Unidentified Analyst
Do you expect to have more physical versus digital presence in Europe? And with that in mind, how much larger should we expect your sales force to grow in that region as you gain reimbursements in 2023?
Karim Mikhail
So this is one of the benefits we have of building the business bottom up which is to say what is really necessary for us. We know today that in the U.K. by law, you can only visit the physician twice a year in an unsolicited visit. Meaning you just cannot do that by law unless they invite you, it’s a different story, but uninvited, you can only see them twice. So, if you are in a launch mode and you don’t have a digital capability, it’s going to take you a very long time to get to the exposure level that you get physicians to truly prescribe.
So, the way we built our model is that we are digitally native. Digitally native means we actually start with digital. We start with digital. We start the awareness with digital. And when it’s time to bring the headcount, we bring the headcount. Because let’s face it, digital costs a lot less. You can optimize the value. Meaning you can take something that develop for the U.K. and use it in Sweden. Use it in other markets where you cannot do that with a rep. So, there are so many advantages of going digital compared to going face-to-face. And we are using all of that as we are working through our launches in the markets.
Unidentified Analyst
Continue. Given what has happened in Germany last year, can you maybe outline for us the path and timeline towards pricing and reimbursement in Germany for VESCEPA? And what that would involve?
Karim Mikhail
Sure. So, the price and negotiation with Germany arrived to a point where we just agreed to disagree somehow. I mean the price point that they were proposing was just lower than our cost of goods, as simple as that. So, it was not something that we could entertain. Unfortunately, it’s not uncommon in Germany that this is happening because just as a reminder, Lipitor from Pfizer did withdraw because of a price challenge at the time of simvastatin going generic. Crestor never launched in Germany. Many other valuable molecule had to withdraw out of Germany because of the way the process is structured.
Having said that, there were factual mistakes that happened in the evaluation, in the scientific evaluation of the product in Germany. So, we do intend to explore every legal avenue to challenge the GKV decision. So, we are a company that does not give up easily. I think we’ve shown that from the first two chapters of the company and how we just don’t let go. So, because we’ve seen that the treatment of the dossier was not as you would expect, right? So we plan to challenge that. But at the same time, we found at least one precedent where there was a rejection, and the company came back with different data, like real-world evidence to demonstrate the value, and it succeeded. So, because we have this precedent we plan to pursue a similar approach. And we still believe that German patients are worth us continuing to try, right? And we have German scientific leaderships who are very big believers in the product. So, we will continue to make the effort.
And by the way, a pricing reimbursement in the U.K. helps, pricing reimbursement in the Nordics countries helps because the Germans still look around them and see what is going on, what are other governments paying. And as a reminder, our price in the U.K. is net visible to everybody. So, unlike many of the recent launches, we do not have confidential discounts. Recent PCSK9 launches have discounts up to 90% of the list price. Most of the cardiometabolic launches have these confidential discounts that range from 20% to 40%. The price you see in the U.K. is the price what the U.K. government pays, EUR5.-something a day. So, this is visible to Germany, this is visible to France.
This is part of our strategy to say, “Look, we don’t have time to play games, we’re not here to try to play smart and just get the maximum out of you. This is the value of this product. This is how much we save in MIs, this is how much we save in hospitalization. This is how much we save in stroke.” And that’s why you see the Nordic U.K. markets very successful in pricing reimbursement because these guys go by the book, right? They look at the models, they look at the value and they say, “Yes, I cannot push you back, it’s true you are saving me money. Yes, I’m going to pay.” Now, there are markets where other parameters are involved, so your budget impacts, other situations.
So, Southern Europe gets to be more nuanced, so we have to do additional efforts in many of these markets, but we are doing them one by one. I’ll take the example of France. France is a country where you have to demonstrate that you’re creating value for local economy. We have a supplier in France. We have an encapsulator in France. So beyond our business and going, establishing ourselves in France, we are fueling French economy. And we are using this argument with the Ministry of Health to say, “Look, this is not just about helping the patients, we are also helping the economy at the same time, indirectly, via our supply chain.” So, that’s some of the efforts that we are doing in U.K. or beyond.
Unidentified Analyst
So, keeping that all in mind, can you walk us through your projection of $1 billion-plus peak opportunity without Germany? And what would that peak opportunity increase if you actually include Germany?
Karim Mikhail
Yes. So, first of all, you know we haven’t given the guidance on European numbers of the split of $1.5 billion. But you’re talking about a product that is priced today at EUR5.00 a day. If you look at all the other cardiometabolic products that have launched, overall, you’re talking about the range of EUR1.5 a day to EUR2.5-EUR2.8, right? So, we have a price advantage that will allow us to bridge any gap in penetration. If I just compare myself to a product that I launched myself a number of years ago, but the [indiscernible] franchise, the product was sold at EUR1.5 a day and it peaked at EUR1.4. It peaked at EUR1.4 with a third of the price of — was used on top of a statin. So, very similar patient population, and it had a negative enhanced student that impacted. So, I’m not trying to say, “Use that as a benchmark, that’s exactly what we’re doing.” I’m just trying to give examples of the eligible population and what you can deliver and demonstrate.
Now, Germany or any large market, as we said before, is going to be somewhere between 10% to 15% of the overall. So, if we go back to Germany, you should expect a 10% to 15% on top of that number. But for the moment, we stay to about $1 billion in terms of revenue for Europe. And if Germany comes our way, and let’s face it, this is going to be a tough one to crack, where we don’t want to in any way say that this is going to be easy; this is going to be a very challenging one, but we will continue to work on it.
Unidentified Analyst
And maybe moving to the U.S. side, how are you thinking about the potential gross margin for VASCEPA in 2023? And do you — should we expect it to be similar to 2022?
Tom Reilly
Sure, thanks, Sammy, for the question. So, we haven’t given forward-looking guidance related to revenue in 2023. So, obviously, without doing that we don’t have the gross margin. What we have stated is that we do expect to see some price decrease in the top line, so it would impact the margins, but not substantially.
Unidentified Analyst
Just quickly, going back out of — back off the U.S., you’ve recently announced the approval of VASCEPA in Australia. How large is that market opportunity relative to the U.S. and EU?
Karim Mikhail
So, if you look at the products that made it to Australia, Australia tends to be a very challenging market from a pricing reimbursement perspective, just as tough as the U.K. and some of the European. They would be, in terms of size, immediately after the big five in Europe, right? So, usually, when you have a successful franchise, and I had many of these, you would have Australia in your top 10 markets, right? So, you have U.S., and you have the big five, and you have Australia there; some molecules delivered $200 million and $250 million of revenue in Australia and New Zealand. But you need to get pricing reimbursement appropriate with the right price level with no caps.
They’re very, very famous for capping the products, that’s another one that you have to deal with. The potential is definitely there. They’re very tough. We have a very good label, and we have scientific support in Australia. And we’re starting the journey now that we have the regulatory approval.
Unidentified Analyst
Maybe can you give a little — give us a little color on the fixed-dose combination as a lifecycle management for VAZKEPA? And I believe you’re only doing it for VAZKEPA, not for VASCEPA?
Karim Mikhail
Yes, so we are obviously prioritizing the work for Europe for very obvious reasons, right? We are protected in Europe for the next 10 years. So, bringing a fixed-dose combination for Europe makes a lot of sense because you’re really protecting the value. But also remember, many of these markets, after three to five years of being on the market, they usually want to re-evaluate your price, right, and basically bring you down. One of the ways of giving them a true value at that point in time is to say, “Look, I’m willing to give you a fixed-dose combination, it has a statin, okay? And I’m going to give you the statin for free. So, instead of you impacting my price everywhere, I’m going to offer that, and you keep the price of your main molecule, and you keep going.”
So, this is one of the strategies that key portfolios apply to ensure they keep the price because, remember, in Europe, prices only go down, they don’t go up. That’s why if you put all your effort to be at this highest possible point this is where you start, right? So, the highest you can get there, within logic. Don’t get me wrong, it has to be documented, you have to demonstrate the value, then the better it’s going to be. In terms of, as I said, the adoption, it’s of real value, right? How long will it take you to get the familiarity of VAZKEPA to be similar to Crestor or Lipitor? It’s going to take time. You put them together; you saved two years of adoption.
So, that’s a big part of the plan. And we believe it may have also impact on the protection, but we will talk to this — about this at the right time.
Unidentified Analyst
I think with that we’re out of time. Thank you very much, Karim. Thanks, Tom.
Tom Reilly
Sure, thank you.
Karim Mikhail
Thank you. Thank you all.
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