Amarin Corporation's CEO Discusses Q4 2012 Results - Earnings Call Transcript

| About: Amarin Corporation (AMRN)

Amarin Corporation PLC (NASDAQ:AMRN)

Q4 2012 Earnings Conference Call

February 28, 2013, 04:30 PM ET


Joseph S. Zakrzewski - CEO

John Thero - President

Steven Ketchum - President of R&D, SVP

Frederick Ahlholm - VP, Finance and Administration

Joseph Bruno - Senior Director, IR and Corporate Communications


Dewey Steadman - JP Morgan

Thomas Wei - Jefferies & Company, Inc.

Joseph Schwartz - Leerink Swann

Jonathan Eckard - Citigroup Inc.


Welcome to Amarin Corporation Conference Call to discuss its Fourth Quarter and Year-End 2012 Financial and Operating Results. This conference is being recorded today February 28, 2013.

I would now like to turn the conference over to Joe Bruno, Director of Investor Relations and Communications for Amarin.

Joseph Bruno

Welcome and thank you for joining us today. 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 regulatory filings, government agency decisions, potential indications and commercial success for our product candidates and approved products. Our current expectations regarding our cardiovascular outcome study and the potential implications of such study on a regulatory process, plans to protect the commercial potential of our product candidates and approved product per patents, regulatory exclusivity, trade secrets and manufacturing barriers to entry. Our current expectations regarding potential strategic collaborations, manufacturing efforts and preparations for commercialization of our approved product and product candidates, our expectations for future publication and presentation of our study data and our future expenses and the adequacy of our financial resources.

These statements are based on information available to us today, February 28, 2013. We may not actually achieve our goals, carry out our plans or intentions or meet the expectations disclosed in our forward-looking statements and you should not place undue reliance on these statements. Actual results or events could differ materially. 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 agreement that we may enter into 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 most recent Form 10-K, each of which were filed today with the SEC and are available on our website We encourage everyone to read these documents.

This call is intended for investors in Amarin and is not intended to promote the use of Amarin's Vascepa outside of its approved indication. In addition, please note these remarks will contain non-GAAP financial measures, as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found within our year-end financial results press release. Finally, an archive of this call will be posted to the Amarin website in the Investor Relations section.

I'll now turn the call over to Joe Zakrzewski, Chairman and Chief Executive Officer of Amarin.

Joseph S. Zakrzewski

Thank you, Joe, and welcome to everyone who is joining us today. During this call, we will briefly review our recent accomplishments, update you on Amarin’s operational and financial performance in the fourth quarter and the full-year 2012, and answer a few questions from those on the call.

I am joined on today’s call by John Thero, Amarin’s President; Steve Ketchum, our President of R&D; Fred Ahlholm, our VP of Finance; and Joe and Steve Schultz from Investor Relations.

Since our last quarter, we’ve advanced key objectives in a number of areas, including: the launching of Vascepa in the U.S. for the initial MARINE indication and we began (indiscernible) Commissions on January 28, 2013, our formal initial launch. We hired and trained our sales team, including 275 sale reps, all whom have had extensive selling experience and relationships with healthcare providers targeted for Vascepa.

The Stocked Vascepa at wholesalers and leading pharmacies as part of the initial launch. We’ve achieved greater than a $160 million lives covered by managed care and other payors. Submitted a supplemental sNDA seeking approval in the U.S. for Vascepa second indication, the treatment of high triglyceride levels between 200 and 499 per deciliter for adult patients on statin therapy, also known as the ANCHOR indication. We expect the PDUFA action date by the end of 2013.

We submitted two sNDAs for additional active pharmaceutical ingredient, BASF and Chemport, in addition to submission. We strengthened our supply chain by entering into an exclusive agreement with a consortium of companies, led by Slanmhor Pharmaceuticals, that includes Novasep and DSM to be our fourth supplier.

We increased patents issued or allowed to 18 in the United States, with a majority of the patent terms extending to 2030 and beyond. We are still prosecuting over 30 additional U.S. patent applications, completed dosing in a PK study or a fixed-dose combination of Vascepa and a leading statin. We published additional MARINE and ANCHOR Phase 3 trial results in The American Journal of Cardiovascular Drugs and strengthened our balance sheet through successful completion of a $100 million non-dilutive, hybrid debt financing resulting in a year-end cash balance of approximately $260 million.

Before I continue my remarks, I want to make a point of saying that launching Vascepa is a combination of many years of hard work and commitment by our dedicated team of professionals in Amarin, input from key opinion leaders, and significant investment by our shareholders. We are very optimistic about the future of Vascepa and I want to thank everyone who has helped us get to this stage.

With its launch on January 28, 2013, Vascepa became the first available FDA approved prescription medication for the treatment of very high triglyceride for a demonstrated and published control clinical trial, significant reductions in triglyceride without significant increases in LDL-C and with a tolerability and safety profile similar to placebo. LDL-C is commonly referred to as bad cholesterol and as a primary cardiovascular risk factor.

Vascepa (indiscernible) significantly improved many other important list of parameters including apo B, non-HDL-C total cholesterol and the LDL-C. We estimated one in 50 or approximately 4 million U.S. adult Americans had very high triglyceride. We launched Vascepa with a highly experienced sales team, who has strong relationships with many of the physicians, whom we’re targeting to introduce to Vascepa. The sales team has now been in the field for several weeks, meeting with clinicians. While it is too early in the process for retaining conclusions about our initial launch, we’re pleased to-date with the progress that our sales representatives are making out in the field.

We expect that our label for Vascepa will position us well in the marketplace, both with patients that have not been on triglyceride therapies previously as well as those that are been on triglyceride lowering therapies that unfortunately increased LDL-C or have negative side-effects. Our sales team is highly energized to introduce Vascepa to physicians. This dynamic is augmented by numerous clinicians and physicians who express interest in helping educate their peers about Vascepa.

We are confident in the Vascepa sales potential and are already beginning to see script data being reported through the standard channels. Amarin has not provided specific guidance regarding Vascepa sales targets and it is too early to make accurate assessments on the sales [front] of the product. However, script data will continue to be available for all to see.

Amarin sales organization has the full support of our marketing and medical liaison teams that are implementing numerous initiatives to support our launch. These initiatives are focused on clinical education about Vascepa’s clinical trials and results. These results allow clinicians to assess the differentiation of Vascepa to other triglyceride lowering drugs for the treatment of very high triglycerides. Vascepa provide the spectrum of benefits, including lowering triglycerides without increasing LDL-C or bad cholesterol and its proven reductions and other important lipid targets such as apo B and non-HDL-C with a safety profile similar to placebo.

Through efforts of our managed care team, we’ve established relationships with managed care and government payors that we estimate cover Vascepa on Tier-3 for over 160 million lives. While Vascepa begins its commercial life with Tier-3 unrestricted coverage of the majority of managed care plan, our goal is to migrate the drug to Tier-2 on many of those plans as quickly as possible. That migration has already begun. In the mean time, as we work to achieve this migration, we don’t want consumers to face decision to pay more for Vascepa when the drug is the right choice for them, especially with increasing LDL-C as a concern for these consumers and their physicians.

Accordingly, we implemented a co-pay reduction program that offers Vascepa to patients for a co-pay cost equivalent to Lovaza. Participations to receive this co-pay reduction are available through their physicians at the pharmacy and to the Vascepa website at In parallel with the commercial launch of Vascepa, Amarin is highly focused on ensuring that our supply chain is ready to meet future demand for Vascepa.

Amarin currently utilizes two approved encapsulators and one active pharmaceutical ingredient supplier, mission to produce Vascepa. At the end of 2012, Amarin submitted sNDA for BASF and Chemport, seeking FDA approval with these companies as additional qualified suppliers of API for Vascepa.

We anticipate FDA responses on these sNDAs in the second half of 2013. In addition, in late 2012 we announced that we entered into an exclusive agreement with a fourth API supplier for Vascepa. This agreement is with the consortium of companies led by Slanmhor Pharmaceuticals for which we plan to seek to submit an sNDA during the first half of 2013. While we’ve been working to qualify these additional suppliers, mission has been fairly producing Vascepa to meet our anticipated 2013 demand.

In addition to the commercial launch of Vascepa, we’re also progressing in our efforts to expand the commercial indication, both with respect to submission of an sNDA seeking approval of the indication study in the ANCHOR trial and advancing the REDUCE-IT cardiovascular outcomes study. The results of which could lead to an even broader indication for Vascepa.

Regarding ANCHOR, two days ago we announced that we submitted the sNDA to the FDA seeking approval for market and sell Vascepa for the treatment of patients on statin therapy with multiple lipid disorders, including triglyceride levels of at least 200 mgs per deciliter ANCHOR indication. The indication study in the ANCHOR trial represents significantly larger opportunities in the initial indication for MARINE launched last month as approximately 40 million Americans or one in five adult have triglyceride levels of at least 200 mgs per deciliter. This group of patients represents a broader primary care target market. In addition, as we submitted this, it was under a Special Protocol Assessment agreement with the FDA as was our original MARINE indication.

The ANCHOR sNDA submission is based on the results of the ANCHOR clinical study in which as previously announced we achieved all the primary and secondary end points, including the reduction of LDL-C by a significant 6.2%. The safety information from the ANCHOR trial were to similar to placebo is already referenced in the existing approved label for Vascepa. In accordance with our Special Protocol Assessment that I mentioned earlier, we announced the sNDA for ANCHOR two days ago, once the REDUCE-IT outcome study was substantially underway.

To remind everyone this was the last requirement under the SPA that needed to be met prior to the approval of the ANCHOR indication, which we expect PDUFA date by the end of 2013. The ended year of PDUFA date for the ANCHOR sNDA is anticipated assuming the FDA assigned a standard 10-month renew cycle. Its interesting the result for the ANCHOR trial were published and are available for viewing in the publication section of our corporate website.

Regarding intellectual property, Amarin’s strategy to protect the commercial potential of Vascepa has progressed significantly with a total of 18 U.S. patents issued or allowed. Included in these patents are claims covering both the MARINE and ANCHOR indications. With our current coverage from patents with terms that expire in 2013 and expanded additional claims now in prosecution, we continue to see our expanded patent protection as the most significant factor in protecting the Vascepa franchise in the long-term. Importantly, we also remind you the protection afforded by our trade secrets and a significant manufacturing barriers to entry that we’re able to leverage.

At this time, we do not have any further indication from the FDA as to when they will make a determination on Vascepa’s regulatory exclusivity protection. Given the strengthening of our patent portfolio, as I said before, we see the NCE determination as much less important to the protection of Vascepa that has been historically.

I now ask Fred Ahlholm, Amarin’s Vice President of Finance, to comment on Amarin’s fourth quarter and year-end 2012 financial results.

Frederick Ahlholm

Thank you, Joe. As noted, earlier today Amarin filed its annual report on Form 10-K with the SEC for the year ended December 31, 2012. While we provide some comments here regarding our financial results, you will find a more detailed discussion of our results in the 10-K and in our press release issued earlier today.

Amarin reported cash and cash equivalents of approximately $250.2 million at December 31st, an increase of $45.1 million from our reported $215.1 million in cash and cash equivalent at September 30, 2012. The increase in cash and cash equivalents in Q4, 2012, reflects the proceeds of a $100 million of hybrid debt financing transaction through Pharmakon Advisors. For more detailed description of this transaction, please refer to our form 10-K.

This $100 million increase was offset by cash outflows of approximately $55.4 million in Q4, 2012 including a $12.1 million milestone payment paid to the shareholders Laxdale related to the NDA approval of Vascepa and $16 million paid to suppliers in conjunction with the build up of Vascepa’s inventory levels and advance the commercial launch.

Net of these amounts, Q4, 2012 cash outflows were approximately $27.3 million, including $6.1 million paid to a clinical research organization in connection with the REDUCE-IT cardiovascular outcome study. Also included in Q4 cash outflows were costs associated with recruiting our sales team and costs associated with preparing for the commercial launch of Vascepa.

We believe that our cash and cash equivalents of $250.2 million at December 31, 2012 are sufficient to fund our projected operations for at least the next 12 months, including commercialization of Vascepa for the MARINE indication, advancement of the REDUCE-IT cardiovascular outcome study and general corporate purposes.

As December 31, 2012 we capitalize inventory approximately $21.3 million in API purchases from our approved supplier. This amount excludes $7.1 million for API, the repurchase prior to our NDA approval on July 26, 2012 and $5.8 million from other suppliers not yet approved, all of which have included as a component of research and development expense.

The Company’s liabilities as of December 31, 2012, excluding the fair value of the non-cash warrant derivative liability, totaled approximately $260 million, which includes $134.3 million for the carrying value of the exchangeable debt and $85.2 million for the carrying value of the hybrid debt financing that we entered into in December 2012.

Our press release and Form 10-K describe our 2012 expenditures as compared to our 2011 expenditures. I don’t plan to repeat that discussion here, however, in our Form 10-K we provided some comments regarding our anticipated operations for 2013 which I will touch upon here and hope that its useful to you.

First, we do not believe that we can provide a reasonably accurate forecast of Vascepa revenues at this time and accordingly just consistent with the disclosures of most companies launching their first product we provide no quantifying guidance at this time with respect to anticipated 2013 revenue levels for Vascepa. Because the level of Vascepa revenues could vary significantly in 2013, we plan to continue to aggressively purchase Vascepa supply during 2013. We received $31.5 million of Vascepa API during 2012 to prepare for the launch of Vascepa.

The majority of these supply purchases were received in the second half of 2012. On an annualized basis, we anticipate continuing to spend for supply throughout 2013 at levels which are similar or potentially higher in the levels we spend in the second half of 2012. Each time over the past two years that we’ve added an API supplier, the negotiated cost of API has gone down. In addition, certain of our API contracts have obtained more for supply at lower purchase volumes than a higher purchase volumes.

The result of these factors is that as we move to 2013, we anticipate supply volume to increase, even if the actual dollar spent on a quarterly basis remain somewhat consistent. In addition, in order to help ensure the wholesalers and select pharmacies were adequately stocked with Vascepa, prior to our commercial launch, we offer these wholesalers and select pharmacies special stocking discounts. And as discussed earlier, we’re offering cards to patients that reduce their co-pay amounts to $25 per retail during 2013, as we were to move fair coverage from Tier-3 to Tier-2.

For these reasons we anticipate that our gross margin for Vascepa sales will be significantly lower in 2013 than in subsequent years assuming that sales volumes increased. With respect to R&D expenses in 2013, the largest component is likely to be the REDUCE-IT study cost. We anticipate the REDUCE-IT cost will continue to increase in 2013 as we seek to continue to enroll patients in the study, while continuing to monitor patients who are previously enrolled in the study.

In 2013 we anticipate incurring expenses of $30 million to $40 million through our CRO, relating to the REDUCE-IT study. Similar to 2012, when certain of our supply purchasers were charged to research and development because they received by us prior to NDA approval. In 2013 we plan to purchase supply from BASF, Chemport and the consortium led by Slanmhor. To the extend of these purchases are received by us prior to approval of the sNDA for the suppliers, the purchases will be charged to research and development expense. The amount of plus charges cannot be reasonably estimated at this time, that depends on the timing of supply delivery and the timing of related sNDA approvals.

We anticipate sales, marketing and G&A expenses to increase in 2013. We believe that the market opportunity for Vascepa is large and we have a plan to address it accordingly. In late 2012 and early 2013, we hired our sales team including 275 sales representatives to launch Vascepa for the MARINE indication. We intent to augment the efforts of the sales team with expanded medical education programs, various forms of promotion, continued market research and product infrastructure and business development. That concludes my prepared comments. I will now turn the call back to, Joe. Joe.

Joseph S. Zakrzewski

Thanks, Fred. As you can tell we remain very excited by Vascepa’s potential in the marketplace. For the MARINE indication we’re also looking forward to even greater opportunity presented by the ANCHOR indication. We continue to hear great things about Vascepa’s profile from physicians and clinicians, particularly its non-LDL-C raising effect, the benefits of biomarkers, the lack of the side effect profiles and any other label constraints.

I’ve been asked many times, what will make a successful year for Amarin in 2013, and where do we go from here? My answer is simple. If we do the following five things the rest will take care of itself. First; good initial sales data on Vascepa and the initial launch. Two, managed care, continued migration from Tier-3 to Tier-2. Number three, which we’ve already accomplished somewhat of the ANCHOR patents. Number four, the ANCHOR submission which again we announced two days ago, and number five, continuing to excel and deliver on our supply chain commitment.

Thank you for your interest in Amarin. I would now like to open the call for a few questions. Operator?

Question-and-Answer Session


Thank you. (Operator Instructions) Our first question comes from Dewey Steadman of JP Morgan. Caller, please proceed with your question.

Dewey Steadman - JP Morgan

Thanks, guys for taking my question and congratulations on the end of a great year. Can you compare the early days for the launch of Vascepa to the early days that you’ll have had reliant for Lovaza and what lessons from the Lovaza launch are you applying to the Vascepa launch, and also can you comment on the absolute level of sampling and the potential timeline for the samples to covert today in script, and what would you consider to be a successful conversion rate for sampling in this first year? Thanks.

Joseph S. Zakrzewski

Hi, Dewey, thanks. This is, Joe. While comparing this to Lovaza I think we’ve got the one thing on the benefit side coming out that, we’re going out with a much more superior product. So that goes in our favor. I think on the other side you’ve got Lovaza had the benefit when we launched it of being the first Omega-3 to go out in the market. Again I think it's too early to really characterize and compare them beyond that, but we are pretty encouraged. Again we’ve been out for several weeks.

The anecdotal data which again doesn’t convert the scripts with the revenue is very positive and we’re going to need to see the scripts and the revenues, and again I would encourage us for those of us who have done this before the week later on was interesting, sometimes they go in your favor, sometimes they don’t, it's probably the monthly, because IMS and Symphony go back and correct all the data and really do an update.

I think as we get through the second quarter, into the second quarter at the end of the first quarter I think we’ll get a real better handle there. The lessons there is plenty, for competitive reasons I can’t comment on those, because there are others out there both following us and ahead of us and I want to make sure we’re protecting that. And then in terms of sampling, we’ve done a lot, there’s a lot of sampling out there. We’re spending a lot of time with docs and patients and getting them introduced to the product. So it's hard to figure out what the conversion rate is, but we expect it to be pretty high.

The other thing I'll say about sampling, the amount of sampling is don’t forget a lot of times patients have to have the [document], the scripts when they come into the office and patients particularly in this day and age they want to not only take the samples but they also probably are finishing up their old drug too, again that’s sort of the business we’re in. But for the most part again, early indications anecdotal feel pretty good, but it's going to be a while before we know. And at the end of the day anecdotes don’t deliver. We got to see TRX’s and sales.

Dewey Steadman - JP Morgan

Great. Thank you.


Our next question is from Thomas Wei of Jefferies. Caller, please proceed with your question.

Thomas Wei - Jefferies & Company, Inc.

Thanks. I wanted to follow-up a little bit on the sampling commentary. The early script numbers so far is very early days, but it looks relatively modest and I guess, I wanted to understand to what degree do you think the actual underlying demand for Vascepa maybe geared by sampling, and can you just describe the sampling program a little bit? Is it – are you giving these one-month long samples to your high prescribing cardiologists and what the samples look like for other doctors and should we think of this as being a very heavily sampled product initially where the script trends could be misleading?

Joseph S. Zakrzewski

Yeah, I mean, Thomas thank you all, good to hear from you. I got to be careful what I say about the sampling, the sizes, the pieces et cetera for competitive reasons. One look, and again I think if you look at the IMS data you compare the weekly you’ll see that Vascepa at least for now is ahead of where Lovaza was initially in the first three weeks, not that, that means anything, again it's got to be the months, okay. I’ll also tell you that I think when we look at where we see the samples – I’m sorry the samples, the scripts we’re also feeling pretty good that they’re on track with what we would expect at this time. It's just, it's hard – again this is why I’m going back and forth between the anecdotal data which again when I talk to some of my sales teams who have launched 10, 20 products, and some of these have launched products with me before, they’re tell me that they’ve never seen a feedback from the physician group that they’re saying.

So, you try not to come to too many early sort of, this means that, this means this et cetera, but again it all feels about right. We’ve got different types of samples out there. We’ve got different types of programs out there and again it feels right. Again I think when we’re having this discussion I guess, it will be at the end of probably May-ish for the first quarter where again we’ll have month and half or two month of sales. Again I want to remind everybody the first quarter will be those first two months. I think we’ll have a better picture, even then I think you’re going to need to actually continue to see where this sales trajectory goes. And I don’t know Tommy, if there was something else in there that I missed.

Thomas Wei - Jefferies & Company, Inc.

That’s helpful. I also had a separate unrelated question about, NCE actually (indiscernible) in the past you had talked about it's importance to perspective pharma companies maybe from an acquisition standpoint, I guess, I wanted to just understand if you think that, that is still true, how things changed with patents coming through and should we think of it is being a different scenario when they’re considering something like an acquisition versus something like a licensing deal or a profit sharing partnership?

Joseph S. Zakrzewski

Yeah, I think probably on the NCE I think to simply put, it's a heck of a lot less important than it was a year ago. We were having discussions with people and people wanted to know when we were going to get the first patent. Now we’re sitting on 18 with several others, even more broad than the ones we have now coming. And I think rightly or wrongly, I think what I said about NCE in the past is it, it was an uncertainty, it wasn’t so much I got to have a yes or no, it was an uncertainty. I think those times are going away. As we’ve already made the decision to hide the sale force.

We’ve now launched the product and again we’re out with the patent. So I don’t really, as we continue those discussions with people it's really less and less about NCE than it's ever been. Don’t get me wrong, but I love to have NCE in addition to all the patents and the trade secrets and everything else we have yes, but it's just we’re now heading into spring again. I am going to be dyeing Easter Eggs with my kids. And when we got the NDA approval I was in flip flops and a bathing suit so, it's just – I think people get what it is. There have also been other people that are in the same NCE sort of conundrum that we’re and I think people are getting more and more comfortable that it's about the patents and that’s really going to drive where this goes ultimately.

And as I said earlier in the prepared script, people say you’re still in the process, what are doing, are you doing this or that? And my answer is, once we hired the sales force and we began to launch the drug, we got together and felt lucky. Lets focus on what matters in this business, these five things and the rest takes care of itself, and those are basically have a good initial launch, drive managed care Tier-2, get the ANCHOR patent, get the ANCHOR indications submitted which we’ve now done and get it approved and then finally (indiscernible) nail supply. And if we can do those five things well everything else will take care of itself. It won't matter what path we go down.

Thomas Wei - Jefferies & Company, Inc.

Great. Thanks.


Our next question comes from Joseph Schwartz of Leerink Swann. Caller, please proceed with your question.

Joseph Schwartz - Leerink Swann

Great, thanks you. I was wondering if you could give us any insight into the mix of Tier-2 and 3 coverage. At present how you see that evolving over time, and what will that do by your expectations for helping revenue trajectory? Thanks.

Joseph S. Zakrzewski

Hi, Joe. I think Tier-2 it's probably the most important thing we’re going to see coming up here on the trajectory. Even though we’ve got this great coupon program out there and we’ve got a lot of folks utilizing it. Once you flip a switch in a major firm, whether that be an Express Scripts or CVS Caremark or Aetna or anyone else or WellPoint or United it's a totally different beast. It's not the coupons are getting off the internet at the pharmacy, at the doctors office et cetera. It's just in the system and in the switch. So, I think that’s really, really important to us. As I stated in my prepared comments we’ve already begun the migration. I would tell you that, we’re still -- it's still almost all Tier-3, but there are a couple of major ones that are in what I’d call the signing phase and if they go through the way we expect very, very shortly we’ll be there. So, this isn’t something by the way that we’re going to be announcing in press releases or updates. We’ll give you updates on the quarterly calls, but I would tell you that our shifting Tier-2 is happening at a more rapid rate than we originally expected, but again right now it's where we’ve been at the beginning. We're starting to see the migration, but I hope of the Q1 conference call to be able to give a more substantive update with the Tier-2 percentages.

Joseph Schwartz - Leerink Swann

Okay, great, thanks. How should we think about your relative spending on the various components of SG&A like I think we can sort of figure out what selling expense should be, but you’ve mentioned that this is a big opportunity for you to promote and do that meaningfully as well. So, what are your thoughts on how we might model that?

Joseph S. Zakrzewski

Yeah, Joe, no real guidance but I’m going to let John Thero give you a couple of comments. I think some of these that Fred mentioned already but …

John Thero

Hey, Joe. So, right now our focus is on introducing this product to the clinician. It's a lot of varied record program to the extent that we were to do something more broadly in particular, start looking at consumer it now will now be much more towards the second part of the year. So, I think you could – you pick up a spending program to being first half of the year, lot of drop sales for us, a lot of it that has secret programs, a lot of it's – there is sampling involved, but the bigger spend would be the second half of the year.

Joseph Schwartz - Leerink Swann

Okay, great. Thank you.


Our next question comes from Jonathan Eckard of Citigroup. Caller, please proceed.

Jonathan Eckard - Citigroup Inc.

Thank you for taking my question. Regarding the coupon program, are there any limitations regarding income raising regarding, who is eligible for the coupons?

Joseph S. Zakrzewski

Hi, [Chris], good to hear from you. No, there’s no limitation’s to anyone. What we’ve tried to set it up is that pretty broadly that hopefully you can get them from your pharmacy, you can get them from your physician, you can get them off the website and we tried to be pretty fair. I think if there’s any limitation there are certain patients that are going through Tier-2, this happens, right? So, if you’re already gone through a Tier-2 you’re not going to get it. I would tell you that from time-to-time I’ve been told that on some of these programs, different managed care organization look at the coupons differently, different pharmacies though, but that’s actually part of the beast that we deal with and everyone deals with but there’s no income limitation’s, and we’re pretty set. I think we’re also in the process of working through what I call an Indigent Patient Program for those folks who can’t afford drug period. So, just like any other biotech specialty or pharma company we’re trying to help those folks out that need the drug, but frankly either don’t have insurance or can’t even afford their copays, that may be going with different level with where you’re at, but right now the coupons are open to everybody as John (indiscernible).

Jonathan Eckard - Citigroup Inc.

Yeah, the reason why I asked this because you made a comment earlier that you have a lot of people on the coupon program, and I’m just wondering how affective that is, a tracking mechanism to the actual scripts that you guys are getting.

Joseph S. Zakrzewski

It's an interesting mechanism. The folks internally tell me that the coupon program can have significantly differing multiples from lets say you have x; x in sales or x is coupons, the coupons can go anywhere from a multiple of 3 to 10x, but the TRX is going to be 3x to 10x anything your coupons are, and they move rapidly week-to-week and I am told they’re not a perfect predictor. Although we’re looking at them, and we’ve been looking at them for the past, for the three weeks of data that we have and we’ll continue to, but the folks that have been doing this a lot longer than I have say, that it's not a great predictor because of the variability.

Jonathan Eckard - Citigroup Inc.

Okay. And then the last question I have is regarding this pre-launch stocking. Could you just describe how that’s going to be accounted for next quarter? Would that be something that is showed up in the top-line or is it at a level that probably would pass through and maybe kind of work it's way out throughout the remainder of the quarter?

Joseph S. Zakrzewski

I think first of all we had a good stock in and we think it will tie pretty well to how we sold et cetera what we’re going to sell. As you know this is a big, big topic with auditors and with pharma companies these days, so what we’ll do is we’ll look at what we shift, we’ll look at the trend of sales and we’ll continue to look at that trend of sales even beyond the first quarter of what’s moving and what's not moving, and then we’ll make for lack of a better word I’m going to call it a reserve decision or a crediting decision to say, all right here were your scripts, here was your revenue. What's the reasonable run rate and what can you really count as real sales that people would have booked in advance versus what people would just, to avoid anybody being perceiving is anything like stuck in the channel. So, we’re working closely from an accounting perspective on that. I think it's going to end up just towards being pretty straight forward, but when you go through this for the first or second quarter after launch you got to be very sensitive. John, or Fred do you want to add anything.

Jonathan Eckard - Citigroup Inc.

For the first quarter, by that time – by the time in May you might be able to have some idea about where that stands like when you …

Joseph S. Zakrzewski

You can sort of go beyond the first quarter I think and even say well what's your script rate and you’re sort of sitting here with your auditors making sure that you’re not. The key here is to be conservative, not to be overly aggressive, right? And so, to really and to take adjustments or to let things go as appropriate. But I think the most important thing is when we report Q1 we’ll be pretty straight forward with how we got to where we got to and why it is.

Jonathan Eckard - Citigroup Inc.

Very good. Thank you very much.


Ladies and gentlemen we have reached the end of our question and answer session. I would now like to turn the floor back to management for closing comments.

Joseph S. Zakrzewski

Well everyone, thank you for your attention and we’re delighted to have everyone on the phone today. I think we’re well over 300 or so attendees, and I know I’ll be talking to a number of folks over the coming weeks. Well, I think everything is going according to plan. I think the team is doing a great job. We ultimately believe that Vascepa is now with the paradigm shift in therapy and we’re just going to keep plugging away and we’ll look forward to the updates we all get from various public sources and to updating you on our other progress throughout the year regarding other IT, other potential opportunities we’ve got regarding the sNDA, our data we’re going to have coming out I think on the combo product before the end of the first half, additional sNDAs for the suppliers been [approved]. So we will just continue to plug away here and again we appreciate everyone’s support, and we look forward to future discussion.


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