Amarin Corporation PLC (NASDAQ:AMRN)
Goldman Sachs 2014 Global Healthcare Conference
June 11, 2014 6:20 p.m. ET
Gary Nachman – Goldman Sachs
John Thero – Amarin Corporation PLC President and CEO
Hey everyone. Thanks for coming. I'm Gary Nachman, a Specialty and Big Pharma analyst at Goldman Sachs. And it's my pleasure to introduce John Thero, President and CEO of Amarin.
John has been with Amarin since 2009 and became CEO earlier this year. There was a bit of a restructuring at the end of last year, and has extensive experience in the pharma industry. So, thanks so much for joining us.
Gary, thanks for inviting us.
So before we start, just want to let everyone know, please check our agenda for a copy of the disclosures.
So, John, clearly the company has been going through some challenging times since the disappointing outcome with the Anchor indication and the stock has significantly underperformed. So let's start with, what's the overall mood there with the people at the firm? And how have you been able to retain top talent given some of these challenging times?
Just as a quick disclaimer, I will be making forward-looking statements and there are risks that are involved. So anybody considering these comments ought to review our risk factors before investing.
You know, in terms of Amarin and getting people, you know, motivated, we've got a terrific product. You know, clearly, you know, best-in-class product, we continue to hear very positive things from users of the product and from clinicians. And for employees who have been recruited largely based upon patient care, it's easy to get motivated around a product that works and works well.
I don't know whether you saw it, but just last night we had published data from the use of our product. The product's been out now for a little over a year, so patients are beginning to come back for checkups and a doctor in western New York who was affiliated with four different medical centers went back and told patients and they found 14 patients, all of whom had been on a different drug, Lovaza previously, and switched over to our drug Vascepa, and 12 out of those 14 patients had, you know, dramatic, I believe dramatic, improvements, in not only their LDL levels, and we've known that in this field Vascepa is the only drug that doesn't increase LDL, whereas all the competitive products do increase LDL. We also saw improvements in triglycerides as well.
So I believe our employees are rallying around the drug, the product and the ability to help patients.
Okay. It's great. So let's get into the dispute resolution with the FDA, and maybe you could just provide us with an update. Are you still expecting to hear from John Jenkins -- for those of you who don't know, he's the Head of the Office of New Drugs -- this summer, I think that was the target, last that you had said? And do you have a date set? And what can you do to prepare for that?
So for anybody who might be less familiar with the Amarin story, Amarin lead product Vascepa, which is used for lipid reduction, there's - there remains significant residual risk beyond what can be done with cholesterol reduction, we were approved for one indication. We had had a special protocol assessment with the FDA for a second indication, which would have changed the potential indication for Vascepa from about 1 in 50 adults in the U.S. to 1 in 5 adults in the U.S.
We conducted the phase three study there that was requested. We get all of the primary, all of the secondary endpoints. And, you know, during our review of it, there were no additional safety signals identified by the FDA. Nonetheless, the FDA, upon our -- upon their review of our request for that expanded labeling, have come back and said that, based upon results of other studies, that they would like to see our outcome study now completed before they would consider approving Vascepa for this expanded indication. Not because of anything specific to our drug, not because any other drug has been studied directly for this indication, but because of the fact that other drugs for other indications have surprised them on the outcome study side of things.
We don't think that that's an appropriate response in that patients are being treated today with drugs that should be less effective and have more limiting safety profiles. We think the right answer is for clinicians to have ready access to the label information about the results of our treatment of Vascepa for this patient population.
So we are in the process of appealing that decision with the FDA. And part of that process meant going back and having it reconsidered by the review division and by their immediate supervisors. We are now just to the policy level which is what we wanted to address the appeal to from the beginning. And there is a defined process that the FDA has. This is a relatively formal process. And based upon that process, along with saying we are on track for likely hearing back from the FDA in the, you know, if, you know, potentially, you know, most likely in the August -- early August timeframe, but potentially in late July.
Okay. And as you're waiting for this response, are there ongoing communications or meetings with the FDA in between these different levels of review or are you in sort of a limbo phase? You -- like you get their concerns and then you put together a package and you provide it to them and then you're just waiting for the response, or is there sort of a back-and-forth?
It's certainly not a back and -- well, it's not an everyday process. There is a legal appeal -- a legal-like appeal document that is submitted, you know, within FDA. They have an opportunity to ask us questions along the way. There's typically an opportunity for a face -- one face-to-face meeting and follow-up questions. And then there'll be a period after those occur that the FDA typically responds in roughly 30 days. And that's the general process. And today it appears that FDA is adhering to that process.
Okay. So let's get into the REDUCE-IT study, and before we talk about the different options of what could potentially happen, where are you now in terms of enrollment? And I don’t know if there's an update you could provide in terms of the mix of patients that are currently in the study, just how far along you are.
So REDUCE-IT is our cardiovascular outcome study. It is the first prospective outcome study done in a Western population of patients with high triglycerides. There was an outcome study done in Japan called the JELIS study with highly pure EPA, which is what Vascepa consists of, which showed, you know, in 18,600 patients significant improvement versus statin alone in treating the patient. And particularly when you had the enriched patient population of patients who had high triglycerides versus statin alone, it was a 53% reduction in cardiovascular events. So our REDUCE-IT study is designed around that enriched population of patients with high triglycerides.
And our enrollment to date, it's a trial designed around -- for 8,000 patients. We have over 6,800 enrolled, representing about 85% of the total. The mean and median baseline triglyceride levels for, you know, patients being enrolled in the study are north of 200 milligrams per deciliter, which is what we had wanted it to be. We think that that's the right pegging from a risk profile.
We are of course blinded to the results of the study. There is an independent data safety monitoring committee that regularly looks at the study from a safety perspective and regularly has, you know, gives us the thumbs-up for continuing the study.
It is a study that, if it goes to its completion, we believe that it will be completed in 2017. There's one interim look [ph] built into the study which is based upon 60% of the events and based upon the current event rate in the study and predictive event rates. Based upon other studies, we would anticipate that that 60% threshold will be reached somewhere in the 2016 timeframe.
Okay. What -- and I know this is like constantly in flux, but depending on the outcome of the Jenkins review, if it is indeed negative and you have to move to the next phase, do you continue with outcomes? Like, are you at a place now where you know in any definitive way what your response would be with respect to the REDUCE-IT study, depending on that next response from Jenkins?
You know, this is a very important patient population and we're scientifically committed to the study. Having said that, we had anticipated approval of the Anchor indication to help us fund the study. We are just now approaching our first back-and-forth communications, albeit formally, with the policy division of the FDA. And before we get that -- until we get that feedback at the policy level on the FDA, it's pretty immature for us to make any definitive judgments relative to the future of the REDUCE-IT study.
Again we are scientifically committed to the study. It's a huge opportunity. We think we're positioned for success. But it's also very expensive.
So on that, what is the remaining cost to complete the study? And is there a way, because you were hoping for the actual approval to help you fund the study, that you could find some outside financing potentially to allow it to continue and then share in the economics down the road if you ultimately get Anchor approved? Is that a possibility?
Well, the study is -- the study, we've talked about here, you know, significantly advanced. The most expensive phase of the study is the enrollment phase. And after taking it to completion of enrollment, that enrollment will be done in the first half of next year based upon current projections. During that expensive phase, the annual cost is between $30 million and $40 million per year for the study. We need to get further feedback from the FDA on this process that I just described, before making decisions with regard to the study.
You know, one of the things that could potentially be done is that there's a, you know, there is the existing 60% interim look. One could look at other opportunities for interim looks. We know that from the JELIS study in Japan, that about a year and a half into that study, that the controlled group versus the active arm began to separate meaningfully. We have no visibility into the current study as to whether that would be the truth here or not. But we can certainly look at those types of opportunities for potential ways getting to a result faster.
In terms of additional funding for the study, we ended this past quarter with about $165 million in cash. We've been significantly reducing our overall burn rate while conducting the REDUCE-IT study. About this time last year, our quarterly burn rate was in the mid-40s millions for the quarters. By Q4 that was down to mid-30s. By Q1 it was 27. We believe that for this full year that our burn rate will be not more than 80. So we are looking for path forward that will allow us to use our continued -- our existing resources to get us to cash positive. If there are opportunities that come along the way that we can -- that we can improve our position and increase value to shareholders doing it, doing so we will be opportunistic in looking at those opportunities. But right now the focus is on getting clarity from the FDA and continuing to study in its current form until we have that added clarity.
Okay. So let's talk about the product itself and the prescription trends which had been flat for a while but have actually been gradually accelerating. So, first, where are most of those prescriptions coming from within the category? And then, what's the early read now on the impact from the Kowa sales force co-promoting that expanded the effort to 380 from 130 reps? And you might want to just describe to people how it's structured, for those who don't know.
So when we were -- so I believe we are in fact making progress here on accelerating prescription growth. The -- when we launched Vascepa last year, we did it with an expectation of having the Anchor indication approved. And as a result, we were working towards broad education of clinicians relative to the benefits of Vascepa. With the setback that we were talking about earlier of not getting approval for that broader indication, we have narrowed our focus and came into this year reducing the number of our sales reps but also focusing them very much on physicians who are high prescribers of Lovaza. And what we've been seeing is that of those physicians who have been high prescribers of Lovaza, we've seen very good script growth both in terms of TRX and NRX.
Unfortunately, with fewer sales reps, that's meant that we've been calling on fewer physicians and the increases that we've seen in the highest prescribers, which are of course important because they have the greatest upside potential, have been partially offset by declines in the folks that we're no longer calling on. Because this is a, you know, the scripts are directly related to the numbers of calls. To offset that, we have brought on Kowa Pharmaceuticals America to help co-promote Vascepa.
Now, Kowa, we've got -- roughly 130 reps in the United States, they have about 250 reps in the United States. They've been marketing two cardiovascular products, stopping the direct sales of one of those products to their sales force so that they'll be able to put Vascepa in P1 and P2 positions. So with them now marketing the product, and they've been in the field for about three weeks at this point in time, so it's still relatively early, what we can say is they're very active, they seem very enthusiastic. They went through the training process quite well. We think that they are prepared. But it's still very early.
When we put new sales reps into the field, it typically takes five to six months for a sales rep to get effective. Most co-promotion partners take about that same amount of time to really show effects. So we're not anticipating much of an impact here in the second quarter. We would expect to have more of an impact before the end of the year and to have that impact increase more dramatically next year.
It's a good deal I believe for both companies. This is a product that fits well with their sales force. And from the Amarin perspective, our cost of having them out there using their relationships to co-promote our product is cost-effective. They're covering the costs of their reps, they're covering the costs of the samples, they're covering the costs of the promotion materials. And in return, we are paying not a percentage of revenues but a percentage of gross margin. That's a number that begins in the high single digits, again of gross margin, not of revenues, and then grows over time over the five-year term of the agreement through the teens and into the low 20s as we anticipate that their contribution will continue to improve over the term of the agreement.
So, so far, so good. But obviously very early.
Right. Okay. If you want to ask questions, just raise your hand and we'll definitely get to you.
In terms of the competitive dynamics in the market, so let's start with the impact that you're seeing from generic Lovaza being available. Have there been any changes to formulary status of Vascepa as a result of that? What do we expect there?
So the two products that have been in the omega-3 space that are out there are Vascepa, which is new, and then there's Lovaza. Lovaza for the indication that were approved for before turning generic earlier this year was selling close to $1 billion. And as I've described earlier, they increased LDL in their approved indication, you know, 49%. So we think we've got the better product.
The -- in the April timeframe, Teva began marketing a generic Lovaza. They have taken a fairly solid chunk of GSK's share. This is not a typical generic situation, and I say that -- I'll start with pricing as an example of that. The waft [ph], the wholesale price for a monthly supply of branded Lovaza is $230. The price of branded Vascepa is $195. The price of Teva's generic is $198. So they've actually priced it above the price of our product, which then if you adjust for the rebates to managed care and copay amounts, means that managed care is paying considerably more for generic Lovaza than they would be for our product.
Having said that, the two products are not -- the two products, namely Vascepa and Lovaza, are not AB rated. We've not been seeing switches from Vascepa to Lovaza. Certainly we've continued to see script growth since that product came out in the market. We've also continued to see managed care improvement. We've added additional tier 2 lives since that product has come on to the market. And we're not anticipating any trend reversal based upon that.
We did see that the GSK sales team in the April and May timeframe dumped a bunch of samples into the marketplace. Perhaps this is what remaining samples they had on hand and they're now moving on to other things, or perhaps because Teva has a limited supply, they're choosing to stay in the marketplace. That remains to be seen. But the generic Lovaza at this point in time we've not seen have much effect, if any, on Vascepa. And if GSK does remove themselves from marketing their product, which would make sense, that would give us sole share of voice for at least a period of time.
So some of those new tier 2 wins, or maybe for the broader coverage in general, have you had to take more significant discounts in order to have that favorable positioning? Or -- I mean it sounds like because of the pricing dynamic, you're in a pretty good position.
We, you know, we have guidelines that we work within for our managed care and all of our wins have been within those guidelines.
And I would just give some background to people on that. You know, we're a little over a year into the launch of Vascepa. We have over 200 million lives on formulary in the United States. We have over 100 million lives on tier 2 coverage, which is increasing. Managed care appears to appreciate both the effect of Vascepa on cholesterol, which is one of their key focuses, and the fact that a lot of the patients who were studied in our trials for diabetic patients and Vascepa works well both in diabetic and non-diabetic population. So as they're looking at safety, which they -- in the populations that they're most concerned with, diabetics and cardiovascular risk patients, performed well. And as a result, we're, in terms of coverage, we're -- with coverage today, we're about a little over one year into the launch of Vascepa, we're about -- where Lovaza was three years or so into their launch. So, moved along quite well.
Okay, good. So the next big competitive dynamic which is down the pike is the launch of AstraZeneca's Epanova. So what are your expectations in terms of the profile of that product, how it could potentially change the market? Are you hearing any buzz, chatter on the type of effort from AstraZeneca that they're going to put behind this?
So Epanova is now the fourth approved product in the omega-3 space, all with the same indication. Of those approved products, Vascepa, our product, is the only product that is EPA-only, and we know that products that include DHA result in increases in bad cholesterol LDL and EPA-B [ph]. So we're distinguished from all those products.
At this juncture, it's our understanding that AstraZeneca is not planning to train its sales force for that product until somewhere after Labor Day. There's rumor that that may be supply-related [indiscernible]. In any case, they've not priced the product nor trained their sales force at this juncture.
One of the hallmarks of omega-3 is that the product be both well-tolerated and safe. And in the case of Epanova, I think that there will be some interesting differentiation. The, you know, in terms of the tolerability, Vascepa in our -- for the indication that we're approved for which is our MARINE study, you know, we had zero dropouts in the 12-week study as a result of tolerability, whereas for Epanova which is AstraZeneca's product, they had 5% to 7% dropout as a result of tolerability over just a 12-week period.
And then also from a safety perspective, in addition to the fact that their product increases bad cholesterol, they also had double-digit GI effect. And if you've got a patient who's taking chronic med and you've got nausea and diarrhea in double digits, 4 gram dose, which is where, you know, these are sick patients, you ought to be trying to get maximum dose to these patients, they're up over 25% GI adverse events.
We look forward to any drug that's going to launch that brings attention to the need for the treatment of these patients. And if the AstraZeneca sales force, which is formidable, through their marketing of Crestor, can help increase the education of docs with regard to the need for treatment of triglycerides in these patients, we think that those doctors, if properly education and if they take a step back and look at the efficacy and safety of Vascepa versus Epanova, albeit there are no head-to-head studies, but if you look at that data based upon the clinical results, I think that that is going to overall help in terms of the raising the overall tide, but in particular, leading to increased prescriptions for Vascepa.
So given all these changing dynamics in the market, where you are today? Have your peak sales projections, outlook, and I don’t know -- I forget if you've actually thrown numbers out there, but maybe you could just speak directionally with or without the Anchor indication, if your view has changed over the last six to nine months in terms of how big of a product Vascepa could be.
The, you know, I made reference earlier to the fact that with limited market penetration that Lovaza product was selling in the U.S. alone, nearly $1 billion. And that's with a product that increases LDL 49% compared to placebo, whereas we don't increase it at all. We believe that the market opportunity here is in the billions. We think that there's significant new education of docs that is required. We believe that the indication opportunity that we have today is quite significant.
And we believe that if we can get our indication expanded, whether that be through the appeals process with the FDA, whether that be through First Amendment, freedom of speech opportunities, which by the way there was an article in the Pink Sheet this morning where the FDA was speaking of acknowledging that there have been various cases, some with the Supreme Court, some with other high court levels, speaking to the fact that companies should be in positions that if they have factual information that, under freedom of speech, that those -- that that information should be able to be communicated to the public, and the FDA is committed to advancing its guidelines as to what could be allowed there. But that is certainly a backup strategy for us for the appeal.
And then of course, the whole REDUCE-IT trial. We know what would happen with statins. You know, statins had an important role in the marketplace before they had outcome studies. Then they had positive outcome studies. And the market grew to $38 billion before it turned to be generic.
We think that the number of patients who could benefit from triglyceride, other lipid-lowering, is somewhat analogous to what is happening in the statin side. I'm not predicting that we're going to sell $38 billion worth of Vascepa, but it is a very large opportunity.
In terms of the durability of the product, so when we think about the intellectual property, how confident are you in the patent protection of it post the three-year exclusivity period, how you view generic risks? I think Teva's generic Lovaza came sooner than expected. But how do you see that playing out?
So we feel very positive about our patent position. We have now 40 patents covering Vascepa, the majority with expiry in 2030. This was a, for some of you I see in the audience who followed Amarin for a while, probably recall that the patent opportunity for Vascepa was highly public there for a while. And because it was highly public with multiple patent going through prosecution, the patent office took extra scrutiny. There were three different teams of reviewers, and those reviewers had patents go through a, not just the reviewer, but a supervisor, then a quality control person, and in some cases even higher level than that.
So there are -- there's very substantial prosecution on these patents. In many cases there are prior art [ph] sent in by others that were considered in terms of that prosecution. And these patents have survived all of that. So, feel very good about the patent protection of Vascepa.
Now this is a large opportunity, so we anticipate that companies will try to make inroads relative to a generic when there were originally I believe eight different companies that filed for generic Lovaza that whittled to five, and then four, and now it appears to be three that are still active, one of which is in the marketplace. We'll see what happens with the other two.
There was a lot of expectation early last year that we would see a generic Lovaza, and then last summer there were expectations of seeing a generic Lovaza. We finally saw one here this year. People have been speculating all over the place when we'd eventually see one.
This is not a -- this is not a typical generics market as we've described, you know, the ability to price at significant discounts, or even the ability to manufacture the product is somewhat limited. But I think our patent production is pretty strong, and actually very strong, and feeling very good about it.
Okay. In terms of your balance sheet, how much flexibility do you have? Obviously there's some uncertainties here and you got to monitor your cash burn very carefully, but you still have this one product, you have the sales force. You'd probably like to leverage that infrastructure a little bit better. But do you have flexibility at this point if you wanted to go out and bring on some additional assets? Or is that something that's going to have to wait?
So we have a healthy balance sheet for what we're trying to do right now. And as I described earlier, I think there's multiple paths to cash flow positive using our existing resources. And we're focusing on three key things this year: continuing to grow scripts, which means continuing to grow revenues; look for expansion of our indication; and do the sell on a cost-effective way. We're certainly going to look to be opportunistic along the way.
There will, you know, hidden amongst our assets, there are things like, in fact they were an Irish company, Irish convergence [ph] have been a popular topic. You know, we have also significant loss carry-forwards which on a tax-affected basis, you know, the Irish tax rates are north of $80 million. We can look at those as being strategic opportunities. We can look at those as opportunities for, you know, whether that be through future strategic relationships or bringing future products in to help release some of that value, are all possibilities.
Having said that, the opportunity with Vascepa today, based upon its current indication, and hopefully soon based upon expanded indication, is very large. And we would not want to be doing anything in the immediate term that would dilute our focus from that. So as you talk about bringing in additional products, there's considerable merit for that. I just don't believe there's merit for doing that immediately. We need to -- that we need to grow revenues based upon our current indication, see where this next indication goes. And then we can review those -- we can review other product opportunities in the future. There will be a time for that. It's just not now.
And relative to the question that's I think implied there on strategic opportunities, we believe that good companies are bought, not sold. So our focus is on execution. We work for our shareholders. If companies approach us because we are unique and one of the few remaining standalone Irish tax domiciled companies, we're certainly willing to explore those possibilities. But the piece that we can control is through execution and the aim here isn't to try to get M&A speculation going but just to speak, in response to your question, about how we see the world. And we can focus in on execution, that's what we're doing.
Right. I mean it seems like tax inversion is such a hot topic in the space, how are people not taking it, or look at you and considering the different options. But from your perspective, I mean you still have all this uncertainty with the Anchor indication, there's a lot of potential value here. It seems that you would need pretty significant clarity on that in order to try and get what you think, you know, some sort of attribution for Anchor, for REDUCE-IT. I mean there's value to what you guys have been trying to build. Until you get clarity on that, it seems like it would be tough.
We do think that we're undervalued. I think the cloud that's been created by this unprecedented move by the FDA, which is a move that not only affects Amarin but broadly, not -- the process of rescinding an SPA late in the process, particularly for a drug that hit all endpoints and is deemed safe, is, you know, adds uncertainty to drug development overall. But I will point a number of investors who like the product profile, believe that we're best-in-class product, but have a hard time -- having hard time expecting, you know, judging what's going to come out of the FDA, probably why our valuation is where it is.
We would hope that through the interactions with FDA that we talked about earlier, and if needed, through the courts, which by the way is likely about a six-month process, assuming that a case like that could be accepted, we are aiming for clarity on this one way or another before the end of this year, which would free ourselves up to better address some of the broader strategic questions that you're talking about.
That being said, when we're doing a co-promotion deal, we already got this year a number of people said, and myself said, you know, which is without Anchor clarity, can we do that or can't we do that? And there was some doubt there. And we ended up doing a very good deal with a structure that has a royalty that declines if we get approval for the Anchor indication. So, you know, never say never.
Okay. And if you do ultimately get the Anchor indication, and just remind us what type of effort you think you need behind that. And is it enough to have Kowa, the 380 reps, or would you need to think of something bigger than that?
Well, the largest prescribers of triglyceride reduction or lipid reduction drugs tend to be the same docs that we're calling on today. The combination of our 130 reps and their 250 reps puts us north of what GSK has been using for marketing of Lovaza. It would be a nice problem to have. It would certainly expand our indication to 1 in 5 adults in the United States. It would add further differentiation to our product, would I think cause us to be more aggressive than some of the things we're doing on the marketing side. In terms of quantification as to what additional number of sales reps are needed to be added or might consider to be added, we'd be -- we'd look at those opportunistically. Again we've got to make the cash last.
Well, good luck with the appeals process. And thank you so much for coming. Appreciate it. And thanks everyone --
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