Amarin Corporation plc (NASDAQ:AMRN)
Q2 2013 Earnings Call
August 08, 2013, 4:30 pm ET
Joe Bruno - Director of Investor Relations
Joe Zakrzewski - Chairman of the Board, Chief Executive Officer
Steven Ketchum - President - Research and Development, Senior Vice President
Fred Ahlholm - Vice President Finance
Chris Schott - JPMorgan
Thomas Wei - Jefferies
Greetings, and welcome to the Amarin's second quarter 2013 results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Joe Bruno, Director of Investor Relations for Amarin. Thank you Mr. Bruno, you may begin.
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 financial performance and plans for commercialization of our approved products and product candidates including supply related activities and levels of expenditures and revenues and the adequacy of our financial resources, our current expectations regarding regulatory filings, topics and responses to be covered in our upcoming FDA Advisory Committee Meeting, preparation for this meeting, government agency decisions, potential limitations and commercial success of our product and product candidates, our current expectations regarding our cardiovascular outcomes study and the potential implications of such study on our regulatory process, plans to protect the commercial potential of our product candidates and approved products through patents, regulatory exclusivity, trade secrets and existing manufacturing barriers to entry, our current expectations regarding potential strategic collaborations and our expectations for future publication and presentation of our study data.
These statements are based on information available to us today, August 8, 2013. We may not actually achieve our goals, carry out our plans or intentions or meet the expectations disclosed in our forward-looking statements. So 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, 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 factor section of our most recent Form 10-Q, each of which were filed today with the SEC and are available on 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 Amarin's Vascepa outside its approved indication. Finally, an archive of this call will be posted to the Amarin website in the Investor Relations section.
I will now turn the call over to Joe Zakrzewski, Chairman and Chief Executive Officer of Amarin.
Thanks, Joe, and thank you to everyone on the line for joining us today. During this call, we will begin with an overview of our recent accomplishments, including an update on the launch of Vascepa as well as other operational activities. This will be followed by some comments regarding our pending FDA advisory committee meeting and PDUFA date for the ANCHOR indication followed by discussion of Amarin's financial performance in the three and six months ended June 30, 2013. We will also fill questions from analysts and investors, if time permits.
I am joined on today's call by John Thero, Amarin's President, Steve Ketchum, our President of R&D, Joe Kennedy, our General Counsel, Fred Ahlholm, our VP of Finance and Joe Bruno, our Director of Investor Relations.
Since our Q1 results call in early May of this year, we have advanced key objectives in a number of areas including recognized GAAP Q2 revenue of $5.5 million for the first complete quarter of Vascepa sales. In addition to this, there is a $1.8 million difference that's above and beyond the $5.5 million.
We secured additional formulary access for Vascepa with over 190 million lives now covered by payers without restrictions, including earlier than expected Tier 2 coverage that now totals over 72 million lives. We advanced our planning in preparation for the launch of Vascepa for the ANCHOR indication for patients on statin therapy with mixed dyslipidemia and triglycerides to be between 200 and 499, as we progress towards anticipated FDA approval for the PDUFA date of December 20.
We continued to enroll patients in REDUCE-IT cardiovascular outcome study and mean and median base lines for triglyceride levels for patients in the study today are greater than 200 mg/dL, which is consistent with our target and higher than studied in recent Hoffmann studies of other lipid lowering therapies. We presented data at the annual scientific session of the National Lipid Association showing that Vascepa is similar to the effect shown in the MARINE study resulted in a reduction in lipoprotein particle concentration in Vascepa treated subjects in the ANCHOR study.
We have previously released data showing that Vascepa and the ANCHOR study had the effect compared to placebo of further reducing LDL-C on top of optimized statin therapy. This newly presented data also showed that particle concentration in Vascepa treated subjects was lowered in the ANCHOR study as well.
Increased patent issues were allowed 27 in the United States, having added 16 since the beginning of 2013. All but two of these have patent terms that extend into 2030 and beyond. We also have greater than 30 patent applications currently being prosecuted in the United States. We also received our first European patent in the past 30 days. We reported positive results from our Phase I pharmacokinetic study of the fixed dose combination of Vascepa, and a leading statin confirming the feasibility of such combination.
With respect to the commercial launch of Vascepa compared to other recent launches of cardiovascular drugs, Vascepa prescription levels are doing quite well, particularly when factoring in that many of these other launches involve sales forces, multiple times larger than Amarin, and that Vascepa is only being market for a patient population as much smaller than that of the anticipated ANCHOR indication. Nonetheless, we are not satisfied and are working hard to accelerate our progress.
Q2, the quarter that ended June 30, marked the end of the first full quarter and end of the first five months of selling Vascepa with our U.S. sales force of approximately 275 sales professionals.
For those of you who are new to the story, Vascepa is currently approved as an adjunct to diet to reduce triglyceride levels in adult patients with severe hypertriglyceridemia or triglycerides over 500 mgs per deciliter.
Our sales professionals are targeting a select group of clinicians, who are the highest prescribers of other lipid modifying therapies. This universe consist of slightly more than 30,000 prescribers, some of whom are lipidologists and cardiologists and many of whom are high prescribers of lipid modifying therapies in the primary care environment.
We are happy to report that the awareness, knowledge and utilization of Vascepa among our target customers, continues to strengthen and expand and a number of clinicians who prescribe Vascepa has more than doubled since the end of Q1 to over 9,000 today. Access to physicians continues to be strong and feedback regarding efficacy and safety profile of Vascepa remains quite positive.
Our managed care efforts continue to be well ahead of expectations, but as is typical for a newly launched drug, managed care access and clinicians perceptions of potential challenges to managed care access for new drug, continually drives on scripts levels as we do not yet have the same level of managed care coverage as our primary competitors. Again, these are typical challenges for our new drug launch. It is rare for drugs to get much if any Tier 2 access in the first six months of launch and we now have over 72 million lives covered on Tier 2.
In addition to continuing to advance managed care coverage, the two most important steps we can take to increase Vascepa script levels are to continue to educate clinicians on the benefits of Vascepa and the MARINE indication and get approval for Vascepa in the ANCHOR indication. For that indication, we believe, Vascepa is well positioned based on its efficacy and safety profile, including significant reduction in triglycerides and a host of other lipid markers without increasing LDL-C, a claim that can't be made by our competition, whether it'd be Lovaza or fenofibrate. We are winning new patient starts and conversions from existing therapies based on this profile.
We are seeking to educate physicians in multiple ways on the benefits of Vascepa. Our proven approach is through direct Vascepa detailing efforts of healthcare professionals by our sales force. For chronic conditions such as very higher triglycerides, clinicians tend to such patients once or twice a year. Any such visit presents an opportunity for Vascepa that is being prescribed either as a new drug treatment for a patient, or as a switch from Lovaza or fenofibrate. As a result, the early prescribers of Vascepa are just starting to see their first Vascepa patients back in our offices to review their results.
Positive anecdotes in these physicians continue to roll in, including multiple accounts of patients who had previously been on alternative therapies, witnessing their LDL-C levels drop after discontinuing those therapies and starting on Vascepa. Other anecdotes confirmed the belief that Vascepa is well differentiated in the marketplace based on its safety profile, which is similar to placebo and a spectrum of demonstrated lipid benefits, including not only a statistically significant reduction in triglycerides and lack of an increase in LVL-C, but reductions in Apo B and non-HDL-C and VLDL-C as well. We are also seeing anecdotally a number of patients doing quite well on the concomitant use of Vascepa and statin. Again, this is where the clinical data excelled over our competition.
Our valuable co-pay card program continues to be available to patients to eliminate their first month co-payment in fall up to $75. It then limits co-payments for script refills to $25 throughout 2013. While a number of patients successfully converted from Tier 3 to Tier 2 has been dramatically due to the tireless efforts of our managed care team, this program provides Vascepa to patients with Tier 3 coverage and out-of-pocket cost equivalent to those on a Tier 2 plan, which lead me to our Q2 managed care update.
We had no Tier 2 coverage on the launch, which is typical for a new pharmaceutical agent. Tier 2 coverage represents the lowest patients co-pay level for a branded drug. Tier 1 is reserved exclusively for generic agents.
Depending on state regulations and policy to payers, new branded drugs typically start out at as uncovered and then migrate to Tier 3. Then after a deliberate process, some of the payers can convert cover from Tier 3 to Tier 2. The patient co-pay cost for Tier 3 is typically considerably higher than that for Tier 2, resulting in higher out of pocket co-pays for patients.
This in turn can result in physicians being unwilling to write prescriptions for such drugs so as to not have their patients incur higher cost, or so as not to end up with patients that are unwilling to fill prescriptions of Tier 3 due to this higher cost. For those patients that rely still in Tier 3, our co-pay card program seeks to bridge the Tier 3 to Tier 2 cost differential.
In early May, we commented that we were well ahead of schedule in converting covered life from Tier 3 to Tier 2, with 40 million converting to Tier 2 through May of this year alone. Currently the six month post-launch of Vascepa, I am able to report that over the 190 million lives have been covered, we now have greater than 72 million lives in Tier 2 status, enabling a great deal of patients access to Vascepa for the cheapest branded co-pay available.
Much of this increase in Tier 2 coverage was recently achieved when we realized that it dose take time, sometimes two to three months, to be able to effectively pull through these managed care victories and city advancements and covers reflected in the prescription data. Importantly, many of these Tier 2 lives are in the Medicare Part D plan.
Medicare Part D plan, by law, do not permit co-pay card use. So we were witnessing a significant number of Vascepa scripts being written to Medicare Part D patients but not getting filled. Our Tier 2 progress in Med D plan helps mitigate these previously locked prescriptions. In fact, we now have 67% coverage in Medicare Part D.
With this background in mind, we hope you can see why are still pleased with our growing progress with respect to managed care wins for Vascepa. Much of this credit goes to the fact that Vascepa not only lowers triglyceride but also causes no LDL-C increase and shows consistent performance in diabetic and non-diabetic populations in the MARINE study. Many of these payers have been quicker than expected to move to cover Vascepa. We look to continue to this product on a payer-by-payer basis.
Before I move onto sales results and comment on our prescription growth, I remind everyone that it is still early in the launch of Vascepa. We continue to see strong progress in our efforts to sell Vascepa in it's current indication and as mentioned previously, we are also solidifying our managed care position and driving brand awareness which sets us up for success as we move closer to the ANCHOR indication in December of this year.
As our script levels grow, as predicted, we believe that third-party source as a script information are becoming more accurate. To best evaluate such data on a period-by-period basis, we look at monthly normalized TRx's or normalized total prescription, which conforms the definition of prescriptions to 120 capsules or one month supply of Vascepa. This helps correct the situation such as when prescriptions are filled by mail order for quantities of greater than one month supply.
As for Vascepa results for Q2, as previously reported in Q1, Vascepa was promoted during the month of February and March and generated 10,500 normalized TRx's approximately. As we announced today, for Q2, normalized TRx's for Vascepa rose to approximately 47,300. Our prescription trend line continues to track with or ahead of levels for other for other recent CV launches by big pharma including such examples as Brilinta, Xarelto and (inaudible).
Vascepa scripts are growing, based from both NRx's - as well as refills. Refills for Vascepa have been strong and consistent with grades for other drug launches.
With regard to revenue, as Fred will discuss we recognized $5.5 million in revenues for Q2 and $7.8 million year-to-date. As previously discussed, accounting for revenue recognition is quite complex for most early stage drug launches. As was true in Q1, the amount of revenue we recognized in Q2 does not reflect revenue for all of the products we ship to wholesalers but rather the amount of this product that we can substantiate was used for filling prescriptions nor does the amount intended to directly tie the scripts estimated by third party sources.
We believe our reported revenue reasonably and conservatively reflects the economics of our Q2 and year-to-date results in a matter that is consistent with our revenue recognition policy as described in our 10-K and 10-Q.
However, having said that, year-to-date through June 30th, the net value of Vascepa sold to wholesalers was approaching $10 million. Therefore, the company recorded deferred product revenue of $1.8 million as of June 30th under GAAP in addition to the $7.8 million in revenue recognized year-to-date under GAAP.
As I discussed in Q1, our gross to net price adjustments include certain launched share related factors which result in a lower net price for capsule approximately $1.25 net price for capsule that we anticipate achieving overtime.
Such net pricing factors and a number of customary and launch-related adjustments, including as discount the wholesalers the stocked Vascepa prior to launch and high level of utilization of co-pay cards as we work to migrate coverage to Tier 2.
On the topic of the ANCHOR indication, I will now turn the discussion over to Steve Ketchum, who runs our R&D Clinical, Medical and Regulatory Affairs teams.
Thank you, Joe. As you know, the FDA assigned Friday December 20th as the PDUFA date for our ANCHOR indication sNDA. In addition as previously announced, the FDA has scheduled on Wednesday October 16th an Advisory Committee meeting pertaining to our sNDA for the ANCHOR indication. We will be well prepared for the Advisory Committee meeting and we remain confident regarding the approval of Vascepa for the ANCHOR indication.
Some investors have asked us why we are having an Advisory Committee Meeting. I remind you that, Amarin had prepared from Advisory Committee Meeting for the MARINE indication, before it was informed that such a meeting would not be conducted. For the MARINE indication, Vascepa was the second drug and its class to be approved, Lovaza being the first and it is understandable why an Advisory Committee Meeting was not held for the severe hypertriglyceridemia indication.
For the ANCHOR indication, we got approval for Vascepa to be the first drug in its class to be approved for an indication in mixed dyslipidemia patients with triglyceride levels greater than reported 200 milligrams per deciliter and less than 500 milligrams per deciliter on top of optimized statin therapy.
Approximately 40 million adult Americans, or one in five, had triglyceride levels of at least 200 milligrams per deciliter. Given the first of a kind approval being sought and the size and scope of this population, it is understandable why the FDA would recommend in AdCom meeting.
Having an AdCom meeting is also consistent with trends that have influenced the FDA to seek greater input and allow greater visibility into its regulatory decision making. Our preparations include obtaining feedback and guidance from leading clinicians in the field and we have already conducted outcomes in an effort to prepare to answer a broad range of questions that could be asked during this meeting.
As is typical, the FDA has not yet informed us of the members of AdCom panel or the questions that they will ask. This has not hindered our ability to prepare. We and our advisors believe that we have appropriate and acceptable responses to a wide range of potential questions. These responses are aided by the favorable efficacy and safety profile of the Vascepa.
In the ANCHOR study, Vascepa demonstrated statistically significant reductions in a broad spectrum of lipid and inflammatory markers on top of optimized statin therapy, including significant reduction in LDL-C compared to placebo. As a reminder, the ANCHOR study was conducted under Special Protocol Assessment Agreement with the FDA.
This is an extra step that we took with the FDA before commencing the ANCHOR study to ensure that we had a written understanding with the FDA as to what they required for approval of the ANCHOR indication. We believe that we have achieved all that is required. More specifically, we achieved all of the primary and secondary clinical endpoints of the study.
Furthermore, the FDA had the results the results of the ANCHOR study when they reviewed and approved Vascepa for the MARINE indication and the safety profile of Vascepa from the ANCHOR study is reflected in our existing approved label.
We had various discussions with the FDA, leading up to our submission of the sNDA for the ANCHOR indication. Most of these discussions focus on whether or not we were substantially underway with the REDUCE-IT cardiovascular outcomes study.
Through our SPA and related regulatory discussions with the FDA, it was clear that until we were substantially underway with this outcome study, the FDA would not accept the ANCHOR sNDA for review.
For clarity, the SPA and corresponding regulatory discussions in no way require us to have the outcome study completed for the sNDA to be accepted for review or for the ANCHOR indication to be approved. We announced in Q1 that over 4,000 patients were enrolled in the REDUCE-IT study and that we submitted the sNDA for the ANCHOR indication. In Q2, the FDA accepted the sNDA for review.
As is typical, the FDA provided Amarin with a letter that notified us of this acceptance. This Day 74 Letter is in response within 14 days of the initial 60 day review period of the application is commonly used by the agency to preliminarily flag any early and potentially important review issues. The Day 74 Letter for the ANCHOR sNDA included no such surprises. In particular, the letter did not, in any way, suggest that the agency plans to reset its requirements for approval of the ANCHOR indication.
Some investors have interpreted the AdCom as implying that the agency intends to change the rules for Amarin with respect to the status of the REDUCE-IT outcome study. We have not seen evidence of such a change. We had considerable discussion with the agency over what constituted substantial underway for the outcome study and during these discussions, never did they suggest changing their requirements.
Rather, we believe that they appreciate the broad undertaking that we are pursuing with REDUCE-IT and the scientific seriousness with which we are conducting the study. At this point, FDA has accepted our sNDA for review, which reflects to us that they agree that the outcome study is substantially underway.
While we believe we do not need the REDUCE-IT study to be completed for approval of the ANCHOR indication, we do believe that this study is positioned for success. (inaudible) EPA and the JELIS study, albeit in a Japanese population demonstrated significant reduction in cardiovascular events over statin therapy alone.
Some investors have argued that because the AIM-HIGH study with Niacin failed, that the FDA will change its view on Vascepa. As a reminder, Niacin is an HPO raising drug not a triglyceride lowering drug and Niacin remains approved on the market. Some also argue the Fenofibrate failed the outcome studies and this will have a bearing on getting the FDA to reassess its requirement for Vascepa. Fenofibrate were not directly studied in a patient population with alleviated triglycerides in an outcome setting. In fact, any accord study of fenofibrates, the subgroup of patients who had alleviated baseline triglycerides showed improved outcomes.
This has not been widely publicized because this was not the pre-specified primary endpoint of the study and the study was not powered for this purpose, but it is supportive of the value of lowering triglyceride levels in patients with high triglycerides. In addition, Vascepa not only lowers triglycerides but lowers distraction of other lipid parameters including, compared to placebo, LDL-C, a well established marker of outcomes and Vascepa also lowered various other inflammatory biomarkers. Vascepa does this with a safety profile which is comparable to placebo.
Today, patients with alleviated triglycerides are being treated on-label or off-label with a variety of drugs which increase LDL or have various other side effects. We find it difficult to believe that given this environment and the safety and efficacy profile of Vascepa, that Vascepa won't be approved for this expanded indication.
It is of course important to note that we do not yet know the focus of FDA and the AdCom panel. Our comments today reflect our recent assessment as the issues that will be presented and our view of our planned responses and readiness to address anticipated lines of enquiry. We will continue to assess potential topics and plan accordingly as we continue to prepare for and look forward to the AdCom on October 16.
Switching gears to the REDUCE-IT trial. Enrolment continues to progress in REDUCE-IT at our more than 400 clinical sites in 11 countries around the world. In addition to the precedent of the JELIS study, the reason to believe in the potential for success of the REDUCE-IT study, we believe that REDUCE-IT subjects will benefit from the following study design aspects.
The 4 gram per day dosing, which is higher than the approximately 1.8 gram per day JELIS dosing in the Japanese patient population. Also from the REDUCE-IT, median and mean base line triglyceride level in patients participating in the study today, which have greater than the 200 milligram per deciliter, which is higher than studies in recent outcome studies of other lipid modifying therapies and from the added benefits the Vascepa has been shown to provide with respect to anti-inflammatory markers such Lp-PLA2 and hs-CRP.
As we previously stated, the results for the REDUCE-IT study will not be available unit a specified number of cardiovascular events have been observed, the timing of which is not accepted until at least 2016.
On the topic of omega-3 studies, our medical team continues to assess various presentations and news articles on a range of topics, including paper which recently drew negative headlines regarding omega-3.
One such paper correlated high amounts of omega-3 and DHA in particular for patients with prostate cancer. While on the one hand it is convenient for us to be able to say that Vascepa uniquely, does not contain DHA, it is difficult to take that overall paper too seriously as it was not a perspective study, did not have any way of assessing whether or not the prostate cancer patient experiencing increased levels of omega-3s were taking an omega-3 product either dietary, supplemental or prescription, and it is contrary to a series of other studies, which suggested omega-3 to potentially beneficial to such patients.
Another paper earlier this year summarized med analyses data based on various omega-3 outcomes studies and concluded that omega-3 in low doses don't work. This is part of thesis for Vascepa that low dose omega-3s provide very little benefit. Vascepa delivers more than four times the omega-3 as was reviewed in the majority of the cited studies.
It is unfortunate that the authors of that med analysis did not identify that the one study which was successful with the JELIS study of our sister drug Epadel in which highly pure EPA was affected in improving cardiac outcomes on top of statin therapy in Japanese patient population.
Overall, we have seen nothing presented anywhere that has diminished our overall confidence in the clinical opportunity provided by Vascepa. Our advisors and thought leaders agree, and urge to be focused on more relevant topics such as reduced LDL particle concentration from Vascepa, the any inflammatory response of Vascepa and incremental efficacy of Vascepa on top of increased potency of statin therapy.
I now ask Fred Ahlholm Amarin's Vice President of Finance, to comment on Amarin's second quarter 2013 financial results.
Thank you, Steve. I will provide some commentary regarding our financial results. You will find a more detailed discussion of our results on our 10-Q and press release issued earlier today.
Amarin began recognizing revenue from the sale of Vascepa in the U.S. in January 2013, so detail any of the products will not begin until Vascepa's commercial launch on January 28, 2013.
We reported net product revenues for the quarter ended June 30, 2013 of $5.5 million as compared to revenue of $2.3 million for the quarter ended March 31, 2013. In accordance with U.S. generally accepted accounting principles, U.S. GAAP, until we have more operating history with the commercialization of Vascepa, we are recognizing revenue not on our sales to wholesalers, but on the retail of Vascepa for the purpose of billing prescriptions.
Through June 30th, the net value of the Vascepa sold to wholesalers was $9.6 million. And, as a result, in addition to $7.8 million in recognized revenue, we have recorded deferred revenue of $1.8 million at June 30, 2013.
Cash collections from the sale of Vascepa in the quarter ended June 30, 2013 were approximately $6.6 million for total of $9.4 million collected from wholesalers since the launch of Vascepa.
Consistent with industry practice, the net price of Vascepa for the six months ended June 30, 2013, reflected the deduction of one-time discounts paid to wholesalers to [sell] Vascepa in advance of Vascepa's launch in January 2013, as well as the cost of our co-payment rebate card program and customary payor rebates and allowances.
The net price also includes adjustment for other customary amounts. Cost of goods sold during the quarter ended June 30, 2013 was $2.8 million as compared to $1.3 million for the quarter ended March 31, 2013.
Gross margin as a percentage of net revenues improved from 45% to 48% in the second quarter as compared to the first quarter. The majority of Vascepa capsules sold during the six months ended June 30, 2013, included API sourced from a single API supplier.
Amarin's purchase of the API from this supplier in 2012 and early 2013 are at a higher cost per kilogram level than expected future purchases from this supplier. The unusually high cost of goods, as a percentage of revenue, is attributable to a number of things, including the geographic location of our suppliers, exchange rate exposures and lower volume and less favorable economic turns than those with other manufacturers.
We expect our steady state gross margin percentage to close to the high 70s to low 80s as we increase purchase volumes towards lower cost API, as NDAs were approved at April 2013 for two API suppliers, BASF and Chemport. The API cost for BASF and Chemport are significantly lower than the cost previously incurred for purchases of API from our initial supplier.
Under U.S. GAAP, we reported a net loss of $39.8 million in the second quarter of 2013 for basic and diluted loss per share of $0.26. This net loss included $5.1 million in non-cash share-based compensation expense, $1 million in non-cash warrant compensation income and $18.8 million gain on the change in a fair value of derivatives.
Amarin reported cash and cash equivalents of approximately $149.4 million at June 30, 2013, a net decrease of $110.8 million from our reported $260.2 million in cash and cash equivalents at December 31, 2012. The net cash outflows in the six months ended June 30, 2013 included approximately $48.2 million paid for sales and marketing related expenses in conjunction with the initial commercial launch of Vascepa, approximately $16.7 million paid in support of the REDUCE-IT cardiovascular outcomes study and approximately $16.3 million for Vascepa API, purchased in conjunction with the build up of our commercial supply for clinical trial material.
In aggregate, net cash outflows from operations were $52.8 million in Q2 compared to $59.6 million in Q1. As stated previously, we anticipate Q1 to be our highest quarter for net cash outflows from operations, with Q3 and Q4 net cash outflows slightly below the level of both Q1 and Q2. During the six months ended June 30, 2013 we acquired approximately $16.3 million of Vascepa API of which $13.3 million was capitalized as inventory at June 30, 2013 and the balance of which was included as component of research and development expense.
That concludes my prepared comments and I will now turn the call back to Joe. Joe?
Thanks, Fred [ph]. Before we take questions, I want to make some comments regarding our July financing and our current stock price. With respect to the financing, there is never a good time to raise money and raising money through the sale of equity is expensive. Prior to financing, many investors were increasingly communicating to us, that they expected that Amarin would need to do a financing and expressed that they hesitated investing in front of such as transaction.
As a result, while we didn't like raising money at the price we did, we decided to get the financing behind us. Moreover, we decided to raise enough money, $121 million in net proceeds, rather than a lesser amount because we wanted to make it clear that we were financing the needs of the company to a level which under most scenarios, would prevent us from having to come back for additional support. Hopefully with this financing overhang removed, our stock price will begin to rebuild to reflect our operational progress, including drive prescription levels and anticipated approvals of the ANCHOR indication.
With respect to our stock price, it's trading as a price which does not, in our opinion, reflect that over the past we have gotten approval for the MARINE indication, launched Vascepa and have begun to see meaningful script growth, secured a nearly unprecedented 72 million lives on Tier 2 coverage of managed share, received 27 patents that go into at least 2030 and beyond and continue to diversify and lower cost of supply. We have now demonstrated the feasibility of a Vascepa statin combo. Our outcome study is substantially underway and our sNDA for the ANCHOR indication is accepted and is less than two months away from an AdCom and about four months away from its approval.
As Steve described, we believe that we are well-positioned for approval of the ANCHOR indication. While we appreciate that investors took the risk associated with approval of this indication, we believe that our likelihood of success is much, much higher than we appear to be given credit for by the Street. We are proud of successes we have had during first half of, and we believe that sticking to the five-point of light, if you will, that we have been talking about everything else will take care of itself.
Number one, get the launch right. Number two, get managed care which we have done quite well on. Number three, get the ANCHOR sNDA accepted and get the indication approved. Number four, drive IP, particularly ANCHOR. Number five, supply chain. We are also eager for the tremendous opportunity that exists in the ANCHOR indication.
I look forward to the positive catalyst that we believe will be the advisory committee and the PDUFA date. We look forward to the launch of Vascepa for the ANCHOR indication. When we do so, compared to the MARINE launch, we will be doing so with the advantage of significant managed care coverage and significant brand recognition amongst the highest prescribing physicians of other lipid lowering therapies. We will also have a first-in-class label with a very strong safety and efficacy profile.
Thank you for your time today and for your interest in Amarin. I would now like to open the call for a few questions. Operator?
Thank you. (Operator Instructions) Our first question is from the line of Chris Schott of JPMorgan. Please go ahead with your question.
Chris Schott - JPMorgan
Great. Thanks, guys, for the questions. Just on lipid molecule front. First, you saw obviously nice uptake in access for Vascepa. Can you elaborate a little bit more on the typical lag you would anticipated between these formulary wins and when we should see this in prescriptions? I am just trying to understand when you are expecting that you will see script growth that properly reflect this coverage expansion and is that something that's happening this quarter or something we should think about later in the year?
The second question, similarly on access, will the majority of these 72 million Tier 2 lives and 190 million overall lives also be covered for the ANCHOR indication, similar label expansion, or is that going to be a separate negotiation process? Than the third quarter was just any thoughts you might have on Astra acquisition of Omthera. What that means for the space and competitively what that means for Amarin? Thanks very much.
Hi, Chris. This is Joe. Thanks for the questions and thanks for your support. Regarding the now 72 million lives we have covered on Tier 2, I think I am advised by both that usually takes two months to three months before you start to see real traction. I would like to see it faster, but that's the reality of the business we are in and a lot of that is you are going after the doctors, you are not seeing the patients all the time all the time. It just takes a while to get build up, but two to three months is what estimate.
On ANCHOR, I think all the managed care that we have will translate over. In fact, we are being told by a number of the managed plans that once what we get the approval, there will be in many cases, restrictions placed on the competition, because we will be only one with this indication, and by the way any restriction we might have which says, it's only a 500 and above, will go away and all restrictions will go to the competition. So, we expect there to be quite a landslide, if you will, in our favor.
Regarding Astra and Omthera. AstraZeneca, you would have to ask those two folks what happened. What we saw was really about a very small $260 million enterprise value of acquisition that was most likely really geared towards Crestor protection rather than triglyceride lowering, but again that's just speculation on our part, but thanks for the question.
The next question is coming from the line of Ritu Baral with Canaccord. Please go ahead with your question.
Hi. This is Kevin for Ritu. Thanks for taking the question. I actually have a follow-up on Chris' question. I was wondering if you can talk a little bit about the breakdown between specialists, say, cardiologists, lipid and pct and how does that breakdown. Also, what are you thinking about ownerships or other BTE activities as PDUFA dates comes around.
I wasn't sure I got the first question.
Sure, is there any trends you see in the prescribing behavior of specialists? Say cardiologist versus methodologist? Or just PCPs?
No, we are seeing access growth and capture across the lipid folks, the endocrinologists and just everyone that's out there. Cardiologists, PCPs. It's not really one group or the other. What I can tell you is, as we look at that's out of 7 to 10 which we are accessing over 30,000 target physicians, we think we got the right reach and we have got the right frequency. It's also important to note that that's the very same group that you are going to for ANCHOR as well.
In terms of partnership, no partnership, what we might or might not do. We are still evaluating that as a group, I would also tell you that our position is, that if we continue to focus on the five things I talked about, that's what's really going to drive our success, right. It's going to be, make it happen with initial launch throughout managed care, drive ANCHOR to approval, drive the patent, especially ANCHOR and drive the supply chain. Everything else will take care of itself whether we partner or we don't partner, but those are things we continue to look at as we approach the launch.
Just a clarity on that answer. When Joe said 30,000 patients, I think he meant 30,000 target physicians that we were rolling out.
Yes, I did. Thank you.
Got it, and then a follow-up on REDUCE-IT. I was wondering, if you can tell us where you are in terms of the enrollment?
I am sorry. Can you say that again, please?
For REDUCE-IT, where are you guys in enrollments?
We are well beyond 4,000. Again, we are not prepared to update further at this time for competitive reasons, but well beyond 4,000.
Our next question is from the line of Thomas Wei of Jefferies. Please go ahead with your question.
Thomas Wei - Jefferies
I just wanted to ask about, if for some reason the FDA or the panel did want to see something on cardiovascular safety, this particular branch of the FDA has looked at diabetes obesity drugs, they sometimes have required a cardiovascular safety analysis to be done, looking at MACE hazard ratios in the upper bound to the 95% confidence interval. So if the FDA, for some reason, wanted you to look at that, could you revise the REDUCE-IT protocol to include an interim analysis for cardiovascular safety and do you know when you might actually have enough data from the trial to rule out a 1.8 or 2.0 upper bound?
Thomas, this is Joe. I am going to let Steve Ketchum our President of R&D take that. But I wanted to just take a minute to make sure everybody knows about Steve's background. Steve has very intimate experiences with the endocrin and metabolism division we are going into. He had several NDAs approved and has worked with this group closely and frankly Steve is, in most of his career, has always been a regulatory expert. So we feel blessed to have Steve on our team in driving that. So, above and beyond all the great data, when you’ve got someone who has dealt with the very group and the very people for so many years, that really goes to our favor.
So, Steve, you want to take Thomas' question?
Yes, briefly, Thomas. Obviously the Amarin team was in dialogue on the REDUCE-IT study design across multiple years through IND dialog leading into the SPA. These other therapeutic areas that you were mentioning, in terms of diabetes and obesity where you are obviously aware of the evolution of the requirements over the time and that did overlap some of these other regulatory conversations. So, at no point in time does that factor in to our SPA or other regulatory conversation. So that's not an expectation.
Thomas Wei - Jefferies
And maybe just a second question. I am sorry I think I have been hoping back and forth between calls here. I missed a little bit of what you said in terms of partnership for ANCHOR. Have you more shifted now towards thinking that you have got that you could do it yourself? How should we think about the different possibilities and where things stand?
I think the possibilities are all the same. So, Thomas, I think if we continue to get to know this market pretty darn well. We are seeing that we have got the right reach and penetration as well as the decile 7 to 10 we are [reaching frequently.] I think we have not made any decisions. We continue to have dialog and we are spending a lot of time both, as a management team and as Board thinking about these. We have got time, we are trying to do the right thing. What we don't want to do is, get into something that doesn't provides the right value if we do that.
For example, there are companies out there that are getting a small fraction of what the economics are. This is got to be the right thing for us and any potential partner. I think other than that, I will go back to, we are still working those five things. And if we do those right, everything else will take care of itself, including whether we end up with a partner or not, but we are still sort of thinking about that and working through it. And if and when there is a change, we will make sure that everyone on this call is first to know.
Thomas Wei - Jefferies
Ladies and gentlemen, we are nearing the end of our monitored question-and-answer session for today and we have time for one more question. That question is coming from the line of [Joel Viti] with Citi. Please go ahead with your question.
Hello. So, this is for [Joel Viti] calling in for Jon. Thanks for taking my question. My first question is, what are the physician metrics that we should focus on the most and would be the most compelling for the commercial impact? Is it total number of prescribers or patient growth position or refill rate or it's something else. Then my second question is, what are the thresholds for improvements to the gross margins and if the ramp is slower than expected with this impact that's having for improvements to these mergers.
I think all those metrics that you mentioned are ones that we look at regularly, number of physicians repeats, NRx's rebuild normalized TRx's, refills, normalized TRx's. What are we doing in terms of target physicians writing versus non-target, super target? So, it's really hard to pin point one or two things. We are really looking at all of them.
I think what we like out of it the most is, we continue to see the growth. We continue to see ready access to the physicians' office. There is not a physician out there that's turning this away. We like the anecdotal things, the data things that we are seeing from the physicians where there -- and I got one physician who put himself on the drug. He was on Lovaza. He couldn't get his trigs below 300, they went on our drug and his trigs were below 150. Time and time their datasets like that that are out there and we continue to build momentum, but it is hard to say it's one specific thing you want to measure or look at.
I think it's the enthusiasm of our sales professional team, which are doing a great job. And then just really driving into the marketplace, we also look at, how we are doing – we said on the call relative to Eliquis – how you are doing relative to Xarelto and Brilinta and again we there. We are ahead of those, so for that part we feel pretty good.
On thresholds or the cost of goods, as we start bringing online the other two to three manufacturers, we will see an instantaneous shift in cost of goods once we get through the inventory of the high cost first supplier. In some way it's volume-driven, because we have certain inventory, but once you get beyond that inventory you are automatically talking about the higher margin products -- higher margin producers.
Now once we get to higher and higher volumes, we will continue to drive even further in these efficiencies and one could argue that some of our margin projections that we shared in high 70s to low 80s could actually end up being conservative depending on where we get on volume. So, again, I am not going to give any forecast with what we are going to hit and what our margin is going to be next quarter or the quarter after, but I think the important thing is we now have two very low cost suppliers approved in addition to the first one and we have just submitted last week the fourth supplier. This is the Novasep/Slanmhor/ONC/DSM consortium. So, we are pretty excited about that one and we think our higher margin days are ahead of us.
Thank you. I will now turn the floor back to management for any closing or further comments.
Well, look everybody, it's been great to have everyone on the call today. We are grateful for the commitment and for people sticking with us. I know I will be talking to a number of you over the next couple of days. In fact several of you starting this evening. We are excited and ecstatic and hopefully the next time we are on a call we will be talking about a very, very positive AdCom study. Thank you and good evening.
Thank you. This concludes today's teleconference. You may now disconnect your lines at this time. We thank you for your participation.
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