Welcome to the Amrain’s second quarter 2008 conference call. (Operator Instructions) Mr. Cunningham you may begin the conference.
Joining me on this call from Amarin are Tom Lynch, Chairman and Chief Executive Officer; Alan Cooke, President and Chief Operating Officer; and Dr. Declan Doogan, Head of Research and Developments.
Earlier this morning Amarin announced its second quarter 2008 results and the company also announced a strategic business and pipeline update. If you have not received this new release or if you would like to be added to the company’s distribution list, please contact Amarin Investor Relations in Dublin at 3531-669-9020 or by email at firstname.lastname@example.org.
Before we begin I would like to caution that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of Amarin. I encourage you to view the company’s past and future filings with the Securities and Exchange Commission including without limitation, the company’s Form 20-F, 20-F(a) and 6-K, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.
Furthermore the content of this conference call contains time sensitive information that is accurate only as of the date of this live broadcast September 25, 2008. Amarin undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.
With that said I would like to turn the call over to Tom Lynch.
Amarin has now emerged from an extensive period of planning and transition to present what we believe to be the new opportunity for Amarin’s shareholders. We have successfully recapitalized the company and we strategically repositioned our research and development pipeline.
Amarin is now focused as a principle research and development program on cardiovascular disease, specifically AMR101, Amarin’s ultra-pure EPA product for hypertriglyceridemia. This is a near-term, low risk, high value development opportunity, where safety has been established and the efficacy of EPA based product has proven in multiple studies around the world.
In this quarter we met with the United States Food and Drug Administration and reviewed our development plans with the agency. We are now preparing to enter Phase III clinical trials next year. Following this period of intense and effective planning, we are moving into a period of execution.
We are building a purpose built, senior research and clinical development management team interest in our new location in Connecticut, United States of America to take the product forward into Phase III. We are building a team of highly experienced to our development personnel to ensure that we properly capitalize on this opportunity.
On completion of the announced $60 million funding, we look approximately two years cash available to us. So, I’m very pleased to report that Amarin has been successfully repositioned to take advantage of this very exciting and low risk opportunity in cardiovascular disease.
I’d like Alan perhaps to discuss the quarter and the market opportunity in hypertriglyceridemia.
Starting with the brief comments on the Q2 results and details of which are available in the press release we issued earlier today. Operating expenditure for the second quarter of 2008 was $5.8 million; this excluded non-cash share based compensation. Of the $5.8 million SG&A accounts to $3.8 million and R&D was $2 million. The SG&A has decreased from last quarter and this trend will continue in the coming quarters as the benefit of cost saving measures executed earlier this year takes effect.
We expect R&D expenditures to increase from these levels especially when we commence our Phase III program in cardiovascular disease. Net income in the quarter of $0.3 million is driven by a non-cash finance of credits of $6.3 million related to the option we granted to investors in our May financing and this is explained in detail in our press release.
Turning to our balance sheet, Amarin has approximately $26.3 million of cash at the end of the quarter and in shares we have $27 million ordinary in issue and options and warrants outstanding to purchase approximately $4.8 million shares.
So, turning to our new strategic direction; we announced this morning that we have repositioned the company to capitalize on our expertise in the field of lipid science and on the known therapeutic benefits of essential fatty acids in cardiovascular disease. Specifically, we are prioritized the development of AMR101 for hypertriglyceridemia and the related cardiovascular applications including mixed dyslipidemia. Over 100 million people in the U.S., dyslipidemia with over 10 million of those diagnosed with hypertriglyceridemia.
Amarin’s AMR101 is an ultra pure ethyl-EPA prescription grade Omega-3. Global annual sales of prescription Omega-3 products now exceed $1 billion and are expected to grow into a multibillion dollar market in the coming years. Growth has been driven by combination of strong safety and tolerability combined with established efficacy in treating cardiovascular disease.
At this time there is only one FDA approved prescription Omega-3 in the U.S. known as Lovaza. This product is currently on annualized global sales run rate of $700 million and is currently growing at over 60% year-over-year in the U.S. GSK acquired this product late last year when it bought Reliance Pharmaceuticals for $1.6 billion in cash. Lovaza is Reliance’s top selling drug. This drug is also available in Europe under the brand Omacor. Amarin estimates the peak global sales for the Lovaza/Omacor franchise could exceed $3 billion.
Given the size of the opportunity for AMR101 in hypertriglyceridemia and the related indications and the large prescriber population for these cardiovascular indications, we plan to ultimately secure a partner to commercialize this opportunity globally.
With the prioritization of the cardiovascular programs and the corresponding allocations of our personal and finance resources to those programs, we will now seek to partner our CNS pipeline. This CNS pipeline contains a number of innovative and exciting development prospects, including product candidates, Huntington’s disease, myasthenia gravis, Parkinson’s disease and epilepsy.
With that I’ll hand you over to Declan.
I’d like to comment further in two specific areas in the call today; one our cardiovascular programs and two our R&D operations. Our cardiovascular programs comprise AMR101, which is entering Phase III for a hypertriglyceridemia, plus additional related indications in planning and a preclinical program for new lipid compounds.
Firstly, to AMR101 for hypertriglyceridemia; this is a condition in which patients have high blood levels of triglycerides, a component of dyslipidemia. As a treatment of dyslipidemia evolves, medical experts advocate that the attention be focused on triglyceride levels as they are an independent risk factor for cardiovascular disease. Hypertriglyceridemia does not usually occur in isolation and often together with elevated cholesterol. These mixed dyslipidemic stage require combinations therapy with other products such as statins.
The priority of our cardiovascular programs, particularly AMR101 for hypertriglyceridemia is premised on a number of important considerations. It utilizes our internal lipid science expertise, leverages some of the investments we have made to-date on AMR101 in preclinical and clinical studies.
AMR101 has been shown to have an excellent safety and tolerability profile in these studies and it also takes advantage of the established efficacy of the Omega-3 Fatty Acids platform, particularly EPA in reducing triglyceride levels and providing benefits for treating cardiovascular disease as demonstrated in multiple epidemiological studies and clinical trials around the world. Finally, it provides us with a near-term, low risk, Phase III candidate to target billion dollar markets.
Regarding the status of the hypertriglyceridemia program, we announced previously when we met with the FDA to discuss the development acquirement. This meeting was very productive and paves the way for the Phase III program which will commence next year. It is envisioned that the future development of the AMR101 in conjunction with the potential partner will target additional indications in cardiovascular disease.
Finally, our cardiovascular program also comprised an early preclinical component of new lipid compounds, which were created using our internal know-how and expertise. These compounds are designed to be multiple times more important than natural Omega-3 and we expect to commence preclinical testing of these candidates in the coming month.
Turning now to our R&D operations and capability; we’ve already established an assembled panel of experts comprising of internal and external members, focusing on progression of these cardiovascular programs. Key external members are Dr. Ian Osterloh and Dr. Pierre Wicker. Both were Senior Clinical Development Executives at Pfizer with relevant experience to Amarin’s cardiovascular programs.
Last week we announced the appointment of Dr. Paresh Soni as SVP and Head of Development; he will report to me. Dr. Soni, who joins us from Pfizer brings with him many years of leadership in drug development in a variety of the therapeutic area. His experience in progressing late-stage programs through NDA filing will be an invaluable addition to our team. Dr. Soni will be based in our new R&D headquarters in Connecticut.
The selection of Connecticut as our headquarters allowed Amarin to attract a large range of talented personnel required to ensure success for our development activities. These are indeed exciting times for Amarin. We are looking forward to a very productive time, which will see our Phase III program in hypertriglyceridemia up and running, our U.S. R&D office well established and starting to see results from preclinical studies with our next generation lipid compounds.
With that I’ll turn the call back to Tom Lynch.
I will now turn the call for questions.
(Operator Instruction) Your first question comes from Stephen Handley -h JM Dutton Associates.
Stephen Handley – JM Dutton Associates
Let me ask you whether with the new management and new investors now on the Board as well, have there been any important shifts in these development priorities? I mean I hear what your doing, but any shifts in these development priorities, are they going to impact the short-term cash flow significantly in one way or another from what you might have seen six months ago and secondly could you give us some preliminary thinking about next year in the financial or cash flow or cash burn basis? Thank you.
Well, as we have said in our earlier comments, we have approximately two year’s cash flow available to us as a result of the financing and it’s very clear from our perspective that we want to put the company in a position where we have the clinical trials substantially underway and we are going to try and work such that we can get to the point where we will not be selling any additionally shares in the marketplace hopefully before we have data; so that’s one of our key objectives and in raising the $60 million in the spring, we were focus very much on being able to execute fully on our programs.
Now, the strategic shift really arose from these decisions. In the second half of 2007, Declan was evaluating where the best opportunities were likely to be and we came to the conclusion towards the end of last year, that cardiovascular presented the greatest near-term opportunity in terms of low risk, high reward.
Almost around the time that decision was made, it seemed to us to be endorsed by Glaxo’s decision to buy Reliant to acquire Lovaza. Lovaza is a combination of the EPA plus DHA and indeed the growth in that product this year has been almost exponential upon looks of the script trajectory, so that seemed to endorse commercially our decisions.
With bringing on the new sophisticated investors, I think they were very interested and particularly focused on the cardiovascular opportunity, but we see that as essentially the near term driver for the company, for its growth, for its financial success and in terms of delivering shareholder value, as the most effective means of doing that.
Now in terms of next year, what will be critical next year is we will start to ramp up research and development expenditures significantly next year because we will be starting the clinical trial program. So, we are not going to be able to give precise guidance as to the level of cash burn because as you can understand we are in detailed discussions with a variety of clinical research organizations over the cost extent and duration of the trials, but we do see that we’re funded for the next two years based on conservative assumptions of trial costs and we think we are in a very good position, as of where we stand today.
Stephen Handley - JM Dutton Associates
Okay, but the degree of quarterly ramp up and in terms of an R&D specifically, it’s kind of hard to quantify at this point or is there a range of increase that you might expect?
Well, I think we sort of worked our ballpark numbers. It would seem that the registration trials required for hypertriglyceridemia should come in around $15 million to $20 million over the next three years and obviously that burn will start next year and extend over a period thereafter depending on the time and pace of enrollment to volunteer that it’s all somewhat difficult to quantify at this point as we’re detailed planning.
Obviously we will be building the Connecticut team, as we wind down the infrastructure and experts and we’re bringing in essentially experienced clinical and regulatory personnel, because this is a very big opportunity and is one we definitely are committed to getting right first time.
Stephen Handley - JM Dutton Associates
Just to ask sort of a follow-on; what was the size of the Connecticut team once everything is in place over the near-term?
We are still planning it, but I think it’s going to be eight to 12 personnel based in Connecticut depending on how much we decide to deal with and obviously, we will be focused very much on that opportunity in that location, but also we’ll have some resource dedicated to the follow-on compounds as well which in our view offers some very long-term opportunity in this field if we were successful in their development.
Your next question comes from the line of [Vishal Daga] - IMSL.
Vishal Daga - IMSL
I had a question regarding the partner opportunities. Are you looking for partners with future cardiovascular indications with AMR101 or the current on hypertriglyceridemia indication?
Well, let me deal with that question. Clearly to successfully market and introduce the cardiovascular drug and you require large sales and marketing infrastructure, we will want to work with the partner with standing and reputation in the cardiovascular space and it will be very important to work with that partner to develop a Phase IIIB, Phase IV program to build out the indication. So, that is something in terms of our partnering decisions we would expect to commence next year with a view to having a partner on board at some point over probably earliest would be the second half of next year, first half of 2010.
Vishal Daga - IMSL
At that time the Phase III B study will start once the partner is secure?
Well, we may consider developing what we would do in Phase III B, Phase IV, but it’s critical for the partner to be part of that decision making process, because introducing components in this particular indication, this particular space would acquire significant investment and we would much prepare the partner to plan the Phase III B program with us and obviously fund it.
Vishal Daga - IMSL
And one last question, the Phase III say that you had discussions with the FDA starting next year and do you anticipate as far as what type of duration that is or when it might be complete?
Well, as I said in the earlier answer to Stephen, we are still pretty much working on that with CRO and we maybe able to give guidance next year, but as of right now we’re very much focus and getting these trials performed efficiently, effectively and I’m getting it right first time. So, we’re going to make conservative assumptions, but I can’t really say more than that at this stage, but you can expect further guidance from us probably next year.
At this time there are no further questions.
Let me summarize very briefly. Firstly, thank you all for listening today and I know it’s been frustrating for some of you who’ve been investors in the company that we’ve been in this extended quiet period, but I think you’ll now see what we’ve done today is the culmination of work over the last 12 months and we are not focused in cardiovascular disease specifically in AMR 101 for hypertriglyceridemia. We see this as the near-term low risk high value development opportunity, where safety has been established and efficacy is well recognized in multiple studies around the world.
So, I’ll see the path is now clear as we move into execution mode with an expanded research and development infrastructure, with an experienced management team to execute in this opportunity and to take advantage of what analysts now see as a multibillion dollar market opportunity. We will provide further updates to you over the next six to nine months and thank you again for listening and have a good day. Thank you.
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