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Edited Transcript of AMRN earnings conference call or presentation 31-Jul-19 11:30am GMT

Q2 2019 Amarin Corporation PLC Earnings Call

Dublin Aug 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Amarin Corporation PLC earnings conference call or presentation Wednesday, July 31, 2019 at 11:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Elisabeth Schwartz

Amarin Corporation plc - Senior Director of IR

* John F. Thero

Amarin Corporation plc - President, CEO & Director

* Michael W. Kalb

Amarin Corporation plc - CFO, Senior VP & Assistant Secretary

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Conference Call Participants

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* Joel Lawrence Beatty

Citigroup Inc, Research Division - VP & Analyst

* Louise Alesandra Chen

Cantor Fitzgerald & Co., Research Division - Senior Research Analyst & MD

* Michael Jonathan Yee

Jefferies LLC, Research Division - Equity Analyst

* Yasmeen Rahimi

Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Co-Head of Biotechnology Research

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Presentation

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Operator [1]

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Welcome to Amarin Corporation's conference call to discuss its financial and operating results for the second quarter of 2019. This conference call is being recorded today, July 31, 2019.

I would like to turn the conference over to Elisabeth Schwartz, Senior Director of Investor Relations of Amarin. Please go ahead.

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Elisabeth Schwartz, Amarin Corporation plc - Senior Director of IR [2]

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Good morning.

Please be aware that this conference call will contain forward-looking statements that are intended to be covered under the safe harbor provided by the Private Securities Litigation Reform Act. Examples of such statements include, but are not limited to, our current expectations regarding our commercial and financial performance, including levels of Vascepa shipments and prescription, Vascepa's product and licensing revenues, cost and other commercial metrics; gross margin, expenditures and the adequacy of our financial resources; our current expectations for scientific presentations, publications, regulatory reviews and related timing thereof; our expectations that REDUCE-IT results could lead to a new treatment paradigm in the patient population study; our plans and preparation for extended promotion of Vascepa and related market positioning and potential; our plans to purchase additional supply of Vascepa; our goals regarding the timing and scope of international expansion; and our current plans for sales force and other commercial expansion.

These statements are based on information available to us today, July 31, 2019. We may not actually 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 factors that could cause actual results to differ materially, please see the Forward-looking Statements section in today's press release and the Risk Factors section of our quarterly report on Form 10-Q for the quarter ended June 30, 2019. These documents have been filed with the SEC and are available through our Investor Relations section of our website at amarincorp.com. We encourage everyone to read these documents.

This call is intended for investors in Amarin and is not intended to promote the use of Vascepa outside its approved indication. Please note that we are also providing slides to accompany this morning's call. These slides, which can be found on our website, amarincorp.com, in the Investor Relations section, under the subcategory Events and Presentations, summarize some of the key updates discussed on today's call. Finally, an archive of this call will be posted on the Amarin website also in the Investor Relations section.

I'll now turn the call over to John Thero, President and Chief Executive Officer of Amarin. John?

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John F. Thero, Amarin Corporation plc - President, CEO & Director [3]

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Good morning. Thank you for joining us at this remarkable stage in Amarin's journey to introduce a new cost-effective treatment paradigm for lowering cardiovascular risk for millions of people.

We are changing health care for the better. In the next 15 minutes, I, followed by our CFO, will comment on Amarin's recent accomplishments and describe our near-term priorities. After these comments, we will hold a Q&A period. Some of you have sent in questions in advance, for which I am thankful, we tried to respond to many of these questions in our prepared comments.

Before jumping into the details, I want to give particular thanks to all of our shareholders for your support, commitment and vision. Whether you have invested in Amarin for an extended period or you are one of the many shareholders who are new to Amarin, please know that we are working hard to effectively execute on our plan. And we are making considerable progress.

We, of course, very much look forward to what we anticipate will be the FDA's approval in September of an expanded indication for Vascepa based upon the results of the REDUCE-IT study. We are preparing for a robust launch of Vascepa, based upon the expanded indications, including multiple pathways for communicating the cardioprotective benefits of Vascepa to health care professionals and consumers. The most pervasive question I hear from investors these days is whether the FDA will hold an advisory committee, or ADCOM, meeting to publicly discuss our sNDA. It is via this sNDA that we seek an expanded indication for Vascepa in the United States, based upon the results of the REDUCE-IT cardiovascular outcome study.

As of today, the FDA has not informed Amarin, if it plans to hold an ADCOM meeting. Nor has the FDA informed us of the subject matter intended to be the focus of a potential ADCOM meeting, if one were to be scheduled. We are assured by experienced regulatory affairs, advisers, including former senior FDA personnel that the FDA is not required to inform sponsored companies that it does not intend to hold an ADCOM. We are now less than 2 months from the September 28, 2019, PDUFA date for our sNDA. Our advisers believe that, while it is not impossible that an ADCOM could still be scheduled, it is unlikely that one will be convened at this late point in the PDUFA clock. The REDUCE-IT study was conducted under a special protocol assessment agreement with the FDA. The FDA is conducting its review of our sNDA under its priority review process. The FDA had 2 months to conduct its preliminary review of the sNDA before granting its priority review status. The scope of the full review now being undertaken by the FDA is not unique, and we expect that the FDA will be able to complete its review on time. In fact, the FDA review process, from our perspective, seems to be progressing in an orderly and timely manner.

While REDUCE-IT was a large and robust study, the FDA is accustomed to reviewing large studies. And Amarin is working hard to ensure that all of the FDA's inquiries are addressed promptly and thoughtfully. Amarin is advancing with the expectation that the FDA will complete its review by the PDUFA date in September. For avoidance of doubt, these comments and our assumption of a timely completion of the sNDA review process should not be read to suggest that the FDA is not conducting a comprehensive review of our sNDA or that they may have perspectives or concerns, which they have not shared with us. The FDA's review includes various inquiries, data analyses, site visits and other work, and all such work is, in our opinion, consistent with the nature of an FDA review for a first-in-class indication, such as we are seeking for Vascepa through the sNDA process.

As a reminder, it is traditional that label negotiations commence relatively late in the FDA review process. Often such negotiations are the focus during the last month of review. A final label is not available at this time. It would be unproductive for Amarin to speculate on the wording of such a label before a final determination on the sNDA. As you know, we are seeking a cardiovascular risk-reduction label for Vascepa, which is consistent with the REDUCE-IT study. The commercial progress we made in Q2 adds to our confidence as we prepare for the launch of Vascepa for cardiovascular risk reduction.

In Q2, we exceeded $100 million in quarterly product revenue for the first time. Hopefully, in the not-too-distant future this milestone will look small. However, it is important to note how we reached this milestone. Our sales team performed well, although it was half the size in Q2 2019 of the team we plan to have in Q4. We witnessed Vascepa prescription growth from past prescribers, and we continue to see many new writers. Growth continues to be led by cardiologists, endocrinologists and other data-driven physicians, reflecting the strong clinical results of the REDUCE-IT study. We witnessed increased prescription rates from physicians called on by our most tenured sales representatives and also by our newest sales representatives. The rate at which many of our new sales representatives are becoming productive is very encouraging. However, not only do we not yet have a cardiovascular risk-reduction label, which impedes prescription growth for some physicians and appears to limit medical coverage at some payers. But most health care professionals continue to have limited knowledge of Vascepa. We view this as an opportunity, which is consistent with our outlook for further revenue growth.

As I will discuss in a moment, after label expansion we will be able to more broadly discuss Vascepa and its clinical results. Currently, most of our promotion is based upon direct sales efforts with targeted physicians. As of the end of June, our sales representatives had reached about half of their approximately 50,000 target physicians, 5 or more times with the published results of the REDUCE-IT study. While this progress is consistent with our expectations, the prescriber visit frequency rate is lower than is optimal for a promotionally sensitive therapy, particularly as we are working to create a new standard of patient care. When we double the size of our sales force later this year, we will be increasing, but not doubling, the number of physicians targeted by our sales force. More importantly, we will be increasing the frequency of calls on physicians in an effort to more fully educate them and their offices on the cardioprotective effects of Vascepa.

We currently intend to increase our number of targets in the U.S. to between 70,000 and 80,000 physicians compared to slightly more than 50,000 currently. We will seek to reach other physicians who might prescribe Vascepa via multiple means, including sponsored medical education programs, presentations at medical meetings, peer-to-peer interaction, digital outreach and various forms of advertising and media. Regarding advertising, we are currently limited in consumer advertisement to promotion of Vascepa for treatment of triglyceride levels greater than or equal to 500 mg per deciliter, the current indication for which the primary treatment concern is the risk of pancreatitis.

Upon a simple label expansion, we will submit to the FDA's Office of Prescription Drug Promotion, OPDP, seeking its approval of consumer advertisement, based upon the new cardiovascular risk-reduction indication for Vascepa. This iterative process of review and refinement of messaging can take approximately 5 to 6 months. Such advertising can be expensive, but if well done, should be very impactful, given the millions of people at risk for major adverse event due to cardiovascular disease. With the rising number of annual deaths in the United States from cardiovascular disease and fear of events such as heart attacks and strokes, people should want to use Vascepa as a proven, effective, preventative therapy, which addresses risk beyond what is available with the current standard of care.

For avoidance of doubt, we are not seeking to replace the current standard of care, we are seeking to build upon it. For example, 65% to 75% of cardiovascular risk remains after cholesterol management. By adding on Vascepa to their treatment regiment, many patients with controlled cholesterol level may lower their cardiovascular risk significantly more. In the interim, while we are waiting on OPDP approval of consumer advertising based upon cardiovascular risk reduction, we can continue to run our existing advertisements, and we may run educational nonbranded advertising, reminding people of the significant risk which exists beyond cholesterol management. These advertisements will set the table for cardiovascular-focused advertisements we plan to launch to support further accelerated Vascepa prescription growth after OPDP approval. With regard to promotion of Vascepa to health care professionals, our talented marketing group is working to ensure that we have updated promotional materials and programs for health care professionals ready to launch promptly after label expansion.

In addition to our current sales and marketing efforts and our plans for expansion of those efforts upon label expansion, we are also making progress regarding managed care. Since the REDUCE-IT data was presented at American Heart Association last November, our medical affairs and managed care teams have visited nearly all top-tier managed care accounts to educate them regarding the REDUCE-IT results and regarding other data supporting Vascepa as a unique, cost-effective therapy, which deserves to be available to their covered patients. These top-tiered accounts, in aggregate, cover over 250 million lives in the United States. The data-driven story of Vascepa's cost-effectiveness is compelling. While managed care coverage of Vascepa is already good, holes remain. We have continued to see incremental improvements in managed care coverage during 2019, actually more than we expected prior to label expansion, including a couple of Blue's plans, that is Blue Cross Blue Shield. However, some payers continue to use as an excuse that Vascepa's label is not yet expanded to limit Vascepa insurance coverage. We will be back to those plans soon after the Vascepa label is expanded.

Last week, the nonprofit group, ICER, issued its draft report regarding the cost-effectiveness of Vascepa. The draft report concludes that Vascepa is cost-effective in all scenarios that ICER evaluates. They also assigned a high-quality rating to their analysis, which was much higher than it assigned to other cardiovascular therapies it evaluated in recent years, such as PCSK9. ICER does not evaluate the cost-effectiveness of all drugs, rather it attends to select drugs, which, I believe, are the most important for evaluation. Vascepa was clearly selected for review based upon the assumption that it will soon be approved for cardiovascular risk reduction, in indication for which it may be used to help millions of people.

It is notable that ICER reached its favorable conclusion using a base case cost-effectiveness model, which was limited to reductions in heart attacks, strokes and cardiovascular deaths. We, and our medical advisers, believe that they should have modeled the full 5 point MACE end point used in the REDUCE-IT study as cost savings from preventing patient revascularizations and hospitalizations for unstable angina add to the cost-effectiveness of Vascepa. Nonetheless, this favorable report from ICER should be useful in convincing stakeholders, including payers, of the cost-effectiveness of Vascepa and that Vascepa should be broadly covered by health care insurance for the treatment of at-risk patients as studied in REDUCE-IT.

Amarin's clinical, regulatory affairs and medical affairs teams continue to impressively advance multiple projects simultaneously. You witnessed some of this with the late-breaker presentation of REDUCE-IT results at the annual Scientific Sessions of AHA last November and ACC this past March, which were accompanied by simultaneous publication of results in the New England Journal of Medicine and the Journal of American College of Cardiology, respectively.

We are on track for submission in the European Union later this year, seeking approval of Vascepa as the first therapy in Europe to address the substantial residual cardiovascular risk that persists beyond cholesterol management as studied in REDUCE-IT. In coordination with our international commercialization partners, these teams continue to support targeted approval of Vascepa in Canada in Q4 as well as further approvals of Vascepa in the Middle East, with advancement of ongoing clinical study of Vascepa in China. Seemingly, every week, I hear feedback from medical conferences where Vascepa was discussed. For the most part, these discussions have evolved beyond an understanding of REDUCE-IT results and now focus on how Vascepa should be used in clinical practice.

In many of these forms, Vascepa is presented as the first therapy which should be used beyond statin therapy for the treatment of many high-risk patients. It is uplifting to witness physicians come to medical conferences with little knowledge of Vascepa and leave with such an enlightened perspective, generated by discussions amongst their peers. These observations speak to the value of the robust and unprecedented results of the REDUCE-IT study. The observations also speak to the fact that too few doctors currently know about Vascepa, but that they are happy to embrace the product once the data is made known to them. Similarly, it is gratifying to see physicians, some of whom are not well known to Amarin, write opinion pieces in various journals about the importance of considering Vascepa for the preventative cardiovascular care of their patients.

We have accomplished a lot so far, and yet we've only just begun. Much of the credit goes to our tremendously talented employees at Amarin and to the scientists and physicians who have served as partners in understanding and conveying the groundbreaking potential of Vascepa. Moreover, much credit goes to the thousands of patients who have participated in the broad clinical study of Vascepa. When we come together next quarter, we believe we will have received FDA approval of our expanded indication for Vascepa, and we look forward to sharing even more about the progress we're making to introduce a new era in cardiovascular health.

With that, I now turn the discussion over to Mike Kalb, our CFO.

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Michael W. Kalb, Amarin Corporation plc - CFO, Senior VP & Assistant Secretary [4]

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Thanks, John. As mentioned at the start of this call, both our Form 10-Q and today's press release can be found on our website. They contain discussion of our second quarter financial results, including details which go beyond the highlights we will cover in this morning's call.

Second quarter total revenue was $100.8 million. This is at the upper end of the range we estimated in our July 2, 2019, mid-2019 update press release of between $97 million and $101 million, and the first time Amarin has reached $100 million in quarterly revenue. Included in this amount is $100.4 million in net product revenue. We recorded total revenue of $174.1 million and $96.6 million during the 6 months ended June 30, 2019, and 2018, respectively, an increase of $77.5 million or 80%.

Product revenue represents most of Amarin's total revenue, Amarin's net product revenue for the second quarter of 2019 was $100.4 million compared to net product revenue for the second quarter of 2018 of $52.5 million. Net product revenue for the 6 months ended June 30, 2019, and 2018 was $173.1 million and $96.3 million, respectively. The increase in net product revenue was primarily attributable to increases in new and recurring prescriptions of Vascepa as net selling price remained relatively unchanged for the 6 months ended June 30, 2019, as compared to the same period in 2018.

Based on data provided by Symphony Health Solutions and IQVIA, estimated normalized total Vascepa prescriptions during Q2 2019 increased by approximately 326,000 and 289,000, respectively, to 756,000 and 683,000 as provided by Symphony and IQVIA, respectively, over the 3 months ended June 30, 2018. This calculates to associated growth of approximately 76% and 73%, respectively, over Q2 2018.

In addition to net product revenue, licensing revenues recognized by the company were $1 million and $200,000 for the 6 months ended June 30, 2019, and 2018, respectively, related to timing of milestones and other factors impacting revenue recognition for licensing fees under agreements for the commercialization of Vascepa outside the United States. As a reminder, Amarin recognizes this product revenue based on sales to regional wholesalers and specialty pharmacy providers in the United States, or collectively its distributors or its customers and not based on prescription levels estimated by Symphony Health or IQVIA. We referenced the data from Symphony Health and IQVIA in response to request for such information from investors.

Channel inventory, meaning the amount of Vascepa held at independent distributors, varies from quarter-to-quarter based on the ordinary course of business. At the end of June, it was estimated to be within the normal business range of approximately 2 to 3 weeks of Vascepa supply on hand at distributors. Such channel inventory is separate from inventory held by Amarin. As discussed at the beginning of 2019, Amarin has placed orders for increased purchases of Vascepa inventory, which exceeded the amount of product we expect to sell in 2019. Many of those incremental orders are anticipated to be received in the third and fourth quarters of 2019. These increased inventory levels will give us added cushion in the event that Vascepa revenues begin to accelerate upwards faster than expected following label expansion. And these increased inventory purchases are separate from the steps we are working on with our suppliers to further increase their production capacity of Vascepa to support the potential of multiple billions of dollars in annual Vascepa product revenue in coming years.

Gross margin on net product revenue for the 3 and 6 months ended June 30, 2019, and 2018 was 77% and 76%, respectively. Selling, general and administrative, or SG&A, expenses in the 6 months ended June 30, 2019, and 2018 were $145.0 million and $97.4 million, respectively, an increase of 49%. This increase was due primarily to increased promotional activities, including commercial spend for expansion following successful REDUCE-IT results as well as added sales force cost, reflecting our expansion of our sales force to 400 sales representatives at the start of 2019. These cost increases were partially offset by elimination of expenses associated with the company's prior co-promotion partner. As previously disclosed, we anticipate that the level of anticipated SG&A spending will increase further as we prepare for and launch Vascepa for the cardiovascular reduction indication currently under review by the FDA. As John described, these costs will include increasing our sales force to 800 sales representatives in the United States as well as advertising and other forms of increased promotional and educational spending for Vascepa in conjunction with the anticipated label expansion.

Research and development expense for the 6 months ended June 30, 2019, and 2018, was $14.4 million and $29.9 million, respectively, a decrease of $15.5 million or 52%. This decrease was mainly due to a decline in REDUCE-IT clinical trial cost after the successful results were reported late last year. Following the completion of the REDUCE-IT trial, R&D cost consist primarily of the clinical studies, wrap up activities, regulatory support and publications. As previously disclosed, we anticipate that our level of spending on R&D will continue to decline further after we secure label expansion for Vascepa in the United States.

Under U.S. GAAP, Amarin reported a net loss of $1.8 million in the second quarter of 2019 or basic and diluted loss per share of $0.01. This net loss included $7.9 million in noncash stock-based compensation expense. Amarin reported a net loss of $34.2 million in the second quarter of 2018 or basic and diluted loss per share of $0.12. This net loss included $3.6 million in noncash stock-based compensation expense. Excluding noncash gains or losses for stock-based compensation, non-GAAP adjusted net income was $6.1 million for the second quarter of 2019 or non-GAAP adjusted basic and diluted earnings per share of $0.02 compared to non-GAAP adjusted net loss of $30.6 million for the second quarter of 2018 or non-GAAP adjusted basic and diluted loss per share of $0.10. As of June 30, 2019, Amarin reported cash and cash equivalents of $221.8 million, net accounts receivable of $95.4 million and $46.3 million in inventory. The company was net cash flow positive in the quarter ended June 30, 2019, however, we anticipate that the cost the company will incur to prepare for and launch Vascepa in the United States for the cardiovascular risk-reduction indication will result in cash flows exceeding cash inflows for at least the balance of 2019.

As announced late last week and earlier this week, we completed a follow-on equity offering raising $460 million before fees and expenses. These proceeds, when added to our June 30 cash balance, bring total cash and equivalents to over $600 million, which provides us with the financial resources needed to robustly and confidently execute on our commercial launch plans aimed at helping millions of patients. With the success of our launch of Vascepa for this important new indication, we believe that Amarin will create growth and significant shareholder value. We elected to complete this financing prior to label expansion in order to not be restrained or unnecessarily vulnerable on our launch of Vascepa, while also removing what we believe was a growing financing overhang which -- overhang, we believe, was likely to grow as we got closer to label expansion, if it had not been addressed.

As of June 30, 2019, prior to the above-described financing, Amarin had approximately 331.3 million American Depository Shares, or ADSs, and ordinary shares outstanding, 28.9 million common share equivalents of Series A convertible preferred shares outstanding and approximately 15.6 million equivalent shares underlying stock options at a weighted average exercise price of $5.86 as well as 9.3 million equivalent shares underlying restricted or deferred stock units. The equity offering added approximately 25.5 million ADSs to these amounts.

I will now turn the call back over to John for closing remarks. John?

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John F. Thero, Amarin Corporation plc - President, CEO & Director [5]

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Thank you, Mike. Before beginning the Q&A portion of this call, I remind you that for reasons we have described previously, we do not plan to comment on our ongoing ANDA litigation, except to acknowledge that 2 ANDA filers remain active in the litigation from the original 4 filers. In this matter, we plan to vigorously defend our patents. While core schedules can change, our trial is scheduled to begin on January 13, 2020.

With that, we conclude our prepared comments, and we'd like to open the line to some questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Thank you. The first question today comes from the line of Louise Chen with Cantor.

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Louise Alesandra Chen, Cantor Fitzgerald & Co., Research Division - Senior Research Analyst & MD [2]

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Congratulations on the quarter. So I had a few questions here. First question I had was that we often get asked how you're going to be able to support and grow a potentially multibillion-dollar drug like Vascepa on your own. It would seem like it's a large-cap pharma endeavors, would you potentially partner with someone? Or do you think you can go it alone? And what are your thoughts there? The second question I had was, when in 2020 do we expect your expanded sales efforts to really hit its stride and accelerate growth? What is the correlation between each additional rep and sale? And then last question is just on your pharmacoeconomic analysis. You noted another one coming later on this year. Just curious, who is doing that analysis? And what do you expect to come of it? And what is the timing on that?

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John F. Thero, Amarin Corporation plc - President, CEO & Director [3]

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Louise, thanks for the comments. Interesting questions. With regard to this undertaking, at this point in time, we've got terrific clinical results. We've got good, and we believe improving managed care coverage. We've got strong and proven supply. We've got great support from opinion leaders, and we've got fantastic employees. And we just put resources in the bank, which allow us to approach the upcoming launch quite robustly. So from the company's perspective, we are focusing on that which we can control, which is the aggressive growth of this business. And we are confident that we can do this on our own. Now this is a public company, we're all -- we'll always review what choices exist, but I don't see there's anything that's preventing us from growing this into a multibillion-dollar opportunity with the clinical results that we have and the people and other support that I've just referenced. So I have no guidance on partnering.

I will remind people that our metric here is not the metric of how do you maximize revenues. We could put 3,000 sales reps out there and maximize revenues, but lose money. Our metric is, how do we maximize value per share? And we are approaching, what we're doing from a launch perspective, very, we believe, strategically, thoughtfully, analytically, which sort of gets a bit into your second question, from a sales rep perspective, the -- any time you're doing something entirely new and not all this is going to be predictable, we're seeing with many of the new sales reps we put in place at the beginning of this year, that they're getting faster results and more access to physicians than what we are expecting, all which is encouraging. But we don't yet have the new label. So it's a bit difficult to get into a more detailed forecast without having the label. We would expect some sales reps, of course, to be more productive than others.

We do have an internal set of benchmarks as to what -- how quickly we expect sales reps to pay for themselves, and then how quickly we expect sales reps to contribute to multiples of what they are costing. And we expect that to happen relatively quickly. And I think the results we've seen off of the new salespeople would be added, contributed to our deciding to double the sales force and move to do that here to start off October, rather than doing it in a more phased approach. After we have label expansion and a little bit of runway with the expanded sales team, we'll have more to say on that topic. I think we will see significant uptick in our growth based upon label expansion, based upon the increased sales force, I think we'll get a further uptick or inflection in our growth after we're able to -- the advertisement based upon cardiovascular risk reduction, which, as we've discussed, has to go through the OPDP process and probably won't be kicking off in full until somewhere around the second quarter of next year.

We do look at our sales rep performance very closely. Not all sales reps make it, that's the nature of it out there. Most do, and those who don't, we are quick to...

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Michael W. Kalb, Amarin Corporation plc - CFO, Senior VP & Assistant Secretary [4]

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Quick find.

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John F. Thero, Amarin Corporation plc - President, CEO & Director [5]

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Upgrades to. The -- and what was your -- pharmacoeconomics, sorry. So I should report, I've referenced -- hopefully, they will take some of the comments that we have provided them relative to their limited approach of looking at the -- produce results. We do think the results were -- their analysis is favorable relative to the cost-effectiveness of Vascepa, but I think it really ought to really reflect the fulsomeness of the Vascepa results.

In terms of other analyses that's being done, that's being done by -- to our knowledge, that's being done by a party that is looking for presentation and/or publication of those results. And I don't believe that they've made themselves known at this juncture. So out of respect for them, we'll continue to provide data to them to support whatever analysis. But we can't control their timing, and I think that's probably subject to their accepting at a measurable congress and/or in a publication. So hopefully those comments are helpful. We are hoping that, that would be this year. I believe that, that group is trying to do it, get it done this year. But again, some of that's outside their control as well.

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Operator [6]

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The next question is from the line of Michael Yee with Jefferies.

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Michael Jonathan Yee, Jefferies LLC, Research Division - Equity Analyst [7]

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John, thanks for update. Appreciate it. Lots of good information. I guess two questions. One was, maybe you could clarify your comments around what you implied by speculation on wording of a label? In other words, I guess, it would be assumed you're seeking a cardiovascular risk-reduction label. So are there different scenarios under which a label could result? I mean I guess if you look at PCSK9, they kept all the indications, and they just add a CV risk-reduction bullet. So I just wanted to understand what you meant by that? And what are the different scenarios for how a label plays out? And then the second question was regarding your growth in your sales force and your metrics. I thought that the increased 800 was pretty rapid. Do you envision a scenario looking at metrics over, say, the next 12 months, that there'd be scenario actually go up more than that? Just to gauge expectations and think about OpEx and all that kind of stuff.

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John F. Thero, Amarin Corporation plc - President, CEO & Director [8]

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Michael, thanks for the comments. With regard to label, again, I can't get into specifics, it would be unproductive for us to speculate on what a label might be. You mentioned PCSK9, I think that's an interesting case study, and they were studied on top of statin since -- and some of their label serve reflects use, not on top of statin. So I'm not predicting that here again, not speculating on what our -- what label is here.

And quite frankly, I think, for the most part, with payers, with the cost-effectiveness of where our drug is priced. I think the most important is that we get approved in the market for cardiovascular risk-reduction label and the new ones, whether it's on stat or not on stat or whether it's trigged at a certain level, I think, are probably less important as it just has not been a highly managed class in the past. But we'll see. It is the cardiovascular risk-reduction indication we are seeking, and we are seeking that indication based upon the consistency with what we studied in the REDUCE-IT study. And I think if we get that, based upon the reactions that we're getting from physicians who are educating in the results and feedback we're getting from managed care, I think we'll be in very good shape.

With regards to sales force metrics, I'd be happy to be surprised to the upside, along the lines of what you've mentioned, I think, 800 sales reps is a robust sales force. And we'll support, without any growth beyond 800, are getting to revenues in the multiple of billions of dollars in the United States. That being said, if the expanded sales team, combined with all the other promotion that we're doing shows that we're growing faster than what we're expecting. And if the -- on a marginal basis, meaning that if that 800 sales rep is paying for him or herself relatively rapidly, we will look to see whether there is 801 or 802 sales reps. But what we don't want to do is get in a situation where we're just growing revenues without growing profits. And we will continue to evaluate that.

But at this point in time, we are rapidly moving towards the hiring of additional 400 sales reps, not to mention most of the managers we've hired at this point in time for that expansion. We've had thousands of resumes come in for the sales reps that we're hiring, and we are actively working towards getting this new team on board for the launch of Vascepa, shortly after the September 28 PDUFA date. But I do not have any guidance for any further expansion beyond what I've just described.

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Michael Jonathan Yee, Jefferies LLC, Research Division - Equity Analyst [9]

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You would expect the DTC campaign to be a key part of anything first? And you're committing to having that kick off, generally speaking, for first part of 2020 or whenever it's approved by the FDA, is that fair to say?

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John F. Thero, Amarin Corporation plc - President, CEO & Director [10]

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I would say that it's fair to say that a big portion of what we will be relying on to catalyze our growth is the DTC program. And that DTC program, we would expect to occur in waves. There is a wave that we're most looking forward to, which is ability to promote, to consumers, the cardiovascular risk reduction shown in the REDUCE-IT study, that has to go through OPDP and we're expecting that, that will be a 5- to 6-month process, including the time that OPDP takes for its review, which is typically about 90 days and our ability to incorporate any changes that they might have into that commercial. And I think we've seen with other therapies, if you have an effective commercial, and I think we'll be the one that they're able to talk about things like reductions in cardiovascular death as a benefit, not as a risk factor. So I think that, that commercial and we start pilot testing of that commercial in focus groups is very encouraging.

Prior to getting there, we will be doing DTC, although spending considerably less than we might be on that cardiovascular risk-reduction commercial. I think that the general awareness commercials that we're doing right now in certain geographies, are having a positive effect. Again, not as much as we think we'll get from the cardiovascular risk reduction one, but the positive effect and, as mentioned, we may do some disease awareness advertising. And potentially as part of that, emphasizing the limitations of existing therapies that are out there. But the spending for that and the impact of that will be much less than what we would see, say, in the second quarter from the cardiovascular risk reduction. But yes, that's a -- we want to see that kick in before we would have any other significant expansion of the sales force.

And right now, we're not contemplating significant sales force expansion beyond the -- moving it to 800 that we're working on right now. We will continue to evaluate, and we are looking forward to significant growth in doing what it takes to support that significant growth.

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Operator [11]

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Our next question is from the line of Yasmeen Rahimi with ROTH Capital.

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Yasmeen Rahimi, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Co-Head of Biotechnology Research [12]

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Congrats on the continued progress. So two questions for you, John. Question number one is, can you tell me what is left to do in order to get your application in for the EU at year-end? Have you done any market research in regards to the physician's perception of Vascepa in EU versus the U.S.? And then the question on commercialization is, I mean you have said currently with your current sales force, it may take about 5x more physicians to change their prescription behavior. So let's fast forward, you put your surround sound commercial plans in play. You have the commercial, you have every bill on vessel built in, what are you trying to achieve as well as the label expansion? Are you trying to reduce that number of 5x to 3 to 2? What's sort of a goal that you believe is sort of ideal as we're moving forward in the upcoming months?

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John F. Thero, Amarin Corporation plc - President, CEO & Director [13]

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Regard to Europe, this has been largely a prioritization issue. We did not go to Europe initially with our trigs greater than 500 indication for a couple of reasons. One is, the market was a bit cluttered over there. And we're fortunate that, that has cleared up here subsequent to Lovaza, which is marketed as Omacor, they're having failed now in 2 recent outcome studies and the EMA removing the recommendation for that being used after heart attack, for example. So that sort of clears a pathway.

But -- and fast forwarding to the -- sort of the second part of your question a bit, there is 10 years of regulatory exclusivity you get in Europe. And by waiting and not going into Europe for the trigs greater than 500 mg per deciliter indication, we preserve that 10 years of regulatory exclusivity to be used when we launch and -- or get approved more specifically, when we get approved in Europe, and we think that, that's to be here for the cardiovascular risk reduction indication that we're going after. In addition, of course, to that regulatory exclusivity, this patent protection in Europe, but that 10-year regulatory exclusivity differs in what is available in the United States.

With respect to the EU filings for cardiovascular risk reduction, the prioritization was to get the filing done. In the U.S. first, and then we've got partners in certain geographies that we've supported. Now that the submission is in the U.S., we are taking the steps necessary in Europe to get ready for filing. There was a -- for example, there was a pediatric waiver that we needed to get that this drug is not intended for pediatric use. And we, a short period of time ago, ended up getting that particular waiver, which clears the path for our moving forward in Europe. We needed for central filing purposes to be able to have assigned a designated body for reviewing our submission, and that's been sorted at this point in time. So all of this puts us on a pathway towards the European market. We've hired some medical affairs support in Europe. We'll be continuing to do education in Europe and on our -- the second largest enrolling country in the REDUCE-IT study was in the Netherlands. So there is significant support for and knowledge of Vascepa in Europe. But it's really a prioritization process for those reasons that has not going to Europe earlier. But we do believe we are on track to get our submission in the late part of this year, consistent with what we've said previously.

In terms of the behavior, so we are introducing Vascepa to physicians and really trying to change the practice medicine. The good news is that physicians haven't had a game-changing preventative cardiovascular care therapy introduced to them since that statin for cardiovasculars really, which was what 25-plus years ago. The bad news is they haven't had a new therapy introduced to them in 25 years. So how quickly they will actually change behaviors remains to be seen. We have seen that when they are educated on the data, they find the data to be impressive. And at various paces, doctors change their behavior. The more analytical ones moving faster. Some do make excuses, some are certainly looking for -- when I say excuses, I don't mean that in a negative way their clinical judgments, some want to see the label expanded and some just haven't had enough chance to have visibility into the results yet. So it's growing.

We have, historically, referred to what's been stated by other drugs and other companies launching drugs that you generally need to be in front of somebody sort of 5 to 7x before you begin to change behavior patterns. And what we're saying here is that we're getting good access to docs. We're actually getting more access to docs than we were expecting. In some cases, we're getting in to see docs, who would be, otherwise, characterized as no-see docs, which means reps will begin to get in, in many cases, we're getting into them. The result of that is that -- in the overall picture, we're spending a lot of time with a lot of docs, but not enough time with the docs. So going essentially 3 quarters of the year before you get to docs sort of 7-plus times. And we're only -- again, I would talk about 50% of our docs, we've got 5 or more times. I mean 50%, we didn't. We think we need to do that. We need to get there faster. So frequency is important. You're trying to get into -- trying to educate people.

Education process is iterative, it's not just educating the physician, but it's educating others within the office. And different specialties have different interests as well. So if you're calling on a cardiologist, they tend to be very data driven. That's -- those tend to be easier targets for us because they suck up the information. If you're talking about endocrinologists, one of the conferences I was referring to earlier, where, at the end, many of the docs were talking about using Vascepa as the first drug beyond statin. It was actually a diabetes conference, and it was interesting to see them talking about using Vascepa before some of the new diabetes meds, we don't see ourselves as being competitive with those meds. They're really addressing different risk, but seeing docs sort of move towards using Vascepa as the next therapy beyond statin is reassuring. But that's the value of data, and that's the value of having extended period of time with those physicians.

So as we are talking about increasing our sales force, it's not an attempt to lower the number of times we have to call on them to 3 or 2, it's to get to them -- get to physicians more frequently in shorter periods of time, so that Vascepa is on the minds of physicians, and that they -- physicians have the information about Vascepa clear enough. And they've had all their questions answered, so that they don't have hesitancy in using the product.

So it's a just a recognition that in a promotion sensitive drug, frequency matters. And therefore, we're not just going to be calling on more docs, but I think as, or more importantly, we're increasing the frequency with which we're calling on the existing physicians. So we can get to them more often in a shorter period of time to build on the momentum that we think we've already created. Hopefully, that helps.

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Operator [14]

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Our next question is from the line of Joel Beatty with Citi.

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Joel Lawrence Beatty, Citigroup Inc, Research Division - VP & Analyst [15]

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Two questions. The first one is related to the ICER report. It looks like the drug would be considered cost-effective at prices that are significantly higher than the current net price. Are there any opportunities to capture more of the value that has been demonstrated by the REDUCE-IT results? And then the second question is related to the recent offering in the regulatory filings. It mentions that one potential use of the proceeds would be to acquire strategic assets. Could you discuss what types of assets would be strategic?

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John F. Thero, Amarin Corporation plc - President, CEO & Director [16]

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Joel, thanks for the questions. With regard to ICER, we're appreciative that they, across their full range of analysis, concluded that Vascepa is cost-effective. We saw some of the media accounts coming out, showing that -- wow, a low price, cost-effective drug. So that's all reassuring. We continue to believe that the opportunity with Vascepa is one based on volume rather than on price. And we think our current pricing is somewhat similar to where atorvastatin Lipitor would benefit remained in the marketplace of the branded product, and adjusted for inflation. Below, say, a rosuvastatin Crestor, but further around where the Lipitor levels are, which supports Lipitor about well over $10 billion in revenues, we think that there's a significant opportunity there with millions of patients we could potentially help.

We have had some net price erosion in recent years, based upon how our net price went flat. We've taken some price increases and sort of put when -- it's sort of all gone back to the payers or that channel. We're opening that with these results and with the sort of the analysis being done, that this drug is cost-effective. That we haven't made money yet on this product. Our gross margins are in the 70s. We're hoping that this would give us some defense to avoid that creep in rebates that we don't think should be necessary going forward, at least to the extent that we've seen in the past. But we do see this as a volume play, not a pricing play.

With respect to use of proceeds, we raised a considerable amount of money in this most recent financing. The primary use of proceeds, it's listed in order. Our primary use of proceeds was to prepare for and robustly launch Vascepa based upon what we expect to be a expanded label. And that includes the promotion of the product, but it also includes continuing to build inventory. We had -- we talked about, at the beginning of this year, ending up spending $50-plus million this year on inventory. Over and above the amounts that we would be buying based just on the -- our commercial forecast. We also are taking all steps necessary to ensure that our suppliers can support multiple billion dollars in aggregate that they can support multiple billion dollars in potential revenues as we look forward to growing. That's the primary use of proceeds, but we raised money here with the idea of this money, continuing to build Amarin.

And we've discussed in the past a 4-stage strategy for Amarin, the third phase of which was the outcomes results, which we have, and then we're building a very formidable company around that. As we are growing, we're regularly approached by companies that would like us to either sort of co-promote their product or license their product or buy those companies, that's not our top priority. Today -- our top priority today is getting approval for our drug and launching it effectively. But with 800 sales reps out there, we will, over time, look for ways to leverage that sales force in a cost-effective way. We just don't want to do anything right now that would undermine the effective launch of the drug. So nothing immediate do we have lined up in that regard. If something comes up, we'll look to be opportunistic. Right now, the focus is approval and successful launch.

And with that, I'm told that we're an hour into this. I do appreciate all the interest. I appreciate the questions. And I very much look forward to updating you on continued progress of Amarin. Thanks again. Bye, folks.

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Operator [17]

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This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.