(This article is the second part of a two-part series discussing Amarin's recent 8k, conference call, and my previous articles. Part I can be found here.)
Positive Takeaways Regarding Future Prospects from the Call
For those that kept the volume all the way up and listened to the entire Amarin (NASDAQ:AMRN) Q2 2013 Results conference call, I thought the company really did a nice job on Thursday. For starters, the positive energy and discussion about the upcoming ANCHOR advisory panel and PDUFA data was extremely encouraging. The company is not only feeling good about their chances for success based on everything they have seen thus far or discussed with the FDA, but they have also been actively preparing to handle a vast array of questions at the advisory panel. This proactive approach is what I personally want to see leading into such an advisory panel, as I think a reactive approach is a recipe for things to go wrong.
Another great takeaway from the call, and something I have been looking for the company to say - paraphrasing - they believe the share price is currently not reflective of the value of the company or its product. Although I have personally thought this for a good while, it was nice to hear the support and declaration from the company. I believe in terms of market sentiment that it is important that conviction be heard in the voices of company management, and I thought the company did an excellent job in regards to this.
More talk (building on the discussion of the finances earlier) about the additional suppliers and what this could mean for the cost of goods during the Q&A, without being too specific, was also a plus. Saying that "our higher margin days" are ahead of us is great in terms of the bottom line, and the positive talk around this (without being specific in terms of forecasting), led me to believe that the cost of goods will see some dramatic improvements.
I was also pleased to hear the company acknowledge a couple of important things about prescriber behavior and knowledge change beyond the Tier status of Vascepa, and this was discussed both in terms of the amount of detailing that needs to take place to effectively influence behavior change, and perhaps more importantly, the fact that many of these very high trig patients are not being seen more than twice a year. When you combine the lack of patient office visits, the fact that Vascepa probably was not on Tier 2 for many patients 6 months ago, and the time it takes to change prescriber behavior - well then I think it only makes sense to see slow and steady growth at this point. I was pleased to hear the company reference other drug launches, and how Vascepa is doing in comparison to them as well. One issue that I have had with those that want to compare Vascepa's launch with Lovaza's launch is the failure to differentiate that entering a wide open market with no competitors is very different than entering one with an established (albeit not as effective) competitor, and thus slower results should be expected.
I really liked several other items from the Q&A. First, I liked how Joe addressed the formulary wins and the length of time that it takes to see traction. Talking about the 2-3 months estimation for traction gain and habit change was important in managing expectations, plus the discussion of how the ANCHOR approval would provide a huge win in terms of subsequent restrictions that would be placed on competition/removed from Vascepa.
The final thing I was impressed with was Joe's ability to play it smart and let Dr. Steve Ketchum jump in and speak when a topic arose that should have gone to someone with specialty knowledge. The REDUCE-IT study has large implications for the company's future, and it was nice that the company let their expert speak. Dr. Ketchum spoke with confidence and knowledge, always a positive, and more importantly, he made a good deal of sense in answering a potentially complex question. It was nice to see the teamwork amongst management.
The Negatives from the Conference Call
Most every conference call has something that I do not like taking place during it, and Amarin's was no exception. Here are a few areas that caught my ear.
I really did not like the dismissive nature that Joe took in discussing the AztraZeneca-Omethera acquisition. Although I do believe that Epanova is not a true competitor for Amarin, I found it a bit irritating to hear Joe talk about a "very small $260 million enterprise value acquisition" that was likely geared towards Crestor protection. In particular, on a personal level, I found this annoying because for investors that are currently underwater or pondering Amarin's slide in stock price over the last year, speaking about $260 million as if it was chump change (especially after the revenues the company reported) was a bit crass. On an investor level, I thought that this brief mention of protection for Crestor (speculatively as a combination drug) ignored the very real possibility of future competition from AZN that could come into play via a Crestor-Epanova combo drug, and I thought this might be worth addressing a bit more.
I would have also liked to hear a bit more about "capture" as it relates to the reach and frequency with the sales force that Amarin has in place. Unfortunately, a very positive gloss-over was shared, and no real details or particulars were given. On a positive note, this is probably smart in terms of competition, but I definitely would have been eager to hear a bit more. One bit that did irritate me - I found the comment that no physicians were turning representatives away to be a gross exaggeration, as representatives often get turned away based on time constraints or get signature-no/brief detail visits - it's the nature of being a pharmaceutical representative. I appreciated the confidence, but this particular comment seemed a bit out of touch with reality.
When it comes to the ever-hanging, overarching partnership question, I was not particularly pleased with Joe's answer. Saying that everything else will take care of itself if they focus on Joe's five areas of concern left me scratching my head. This was perhaps the most ludicrous moment of the entire call, as it left me asking exactly how things will just "take care of themselves?" Either a buy-out or partnership is something that is being worked towards, or it isn't, but acting as if simply focusing on the launch and sale of Vascepa would take care of all of the other speculation left me unsatisfied. The management may have been attempting an appearance of strength, but again I did not like the runaround (although the answer during the Q&A was better than the pause/stumble during the main call).
The particular question-and-answer about going it alone and partnership towards the end of the Q&A bothered me the most because the answer was a bit different than I have heard previously. Last quarter, the prospect of going it alone for the ANCHOR indication was basically off the books, and the company seemed to dance back and forth. Saying that "we're sorta still thinking about that" was not the kind of definitive answer that I was hoping to hear, as it seemed to take a step back regarding the confidence that I felt was expressed in the Q1 call. I will say that I was happy with the reference to economics, as I think that many investors are concerned with reach, and I think the idea that the company is looking at this in terms of long-term value is the best move. (I should note here that I am less and less unopposed to the company pursuing a GIA route from a long-term perspective, as I think it could unlock the most value. However, I can also understand that many will not want to wait the three plus years this could take to be seen.)
Last, but not least, I would have liked to hear a bit more about any plans for future marketing efforts geared directly towards the consumer, but it may be too early in the company's game plan for that. It is possible they are waiting until after the ANCHOR indication approval in order to more effectively differentiate themselves from competitors.
The conference call to me was full of positive indicators. I liked the very upbeat nature that I heard from management, and I was filled with confidence in a way that I have not been on the previous conference calls. It felt like the company was very aware of where it is, where it wants to go, and what it will take to get there, and I would have to say the management was more eloquent this time than they have been in the past. I was glad that management moved away from "exciting news" type language, and stuck with some hard numbers and data, with a focus also on upcoming binary events. All and all, a very successful call, and I expect the market to react positively, especially with the ANCHOR advisory committee and PDUFA date on the near horizon. I continue to maintain that any price under $5.60 (the secondary offering price) should be seen as a buying opportunity.
Disclosure: I am long AMRN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.