As discussed in November, Amarin (NASDAQ:AMRN) had a decent chance of exceeding the high end of its net product revenue guidance range, and it has now indicated that it will modestly exceed the upper end of guidance. Net product revenues are expected to be above $125 million for 2016, although boosted by a few million due to changes in channel inventory.
For 2017, Amarin is guiding to around $155 million to $165 million in net product revenues. This represents a 25% to 33% increase over 2016's net product revenues (excluding the estimated impact of channel inventory). This guidance is somewhat less than what I expected before, although could be conservative given Amarin's results versus guidance in 2016.
With my new net product revenue expectations, and Amarin's guidance for moderate spending increases in 2017, I think that it is likely that Amarin will need to raise additional funds during 2017.
Q4 2016 Revenues
Based on Amarin's commentary plus a look at prescription numbers in Q4 2016, it appears that Amarin may have ended up with around $38.5 million in net product revenues during the quarter. This would bring its total net product revenue to around $129 million for the full year, modestly exceeding its $125 million upper end guidance range.
Amarin previously mentioned that it estimated that changes in channel inventory increased net product revenues by approximately $1 million during the first three quarters (increased by $1.7 million in the first half of 2016 and down $0.7 million in Q3 2016). For the full year it estimates that changes in channel inventory boosted net product revenues by around $3 million to $6 million, so without that boost, net product revenues would have been around $124.5 million, just within the upper end of its guidance. Excluding the effect of channel inventory in Q4 2016, Amarin's net product revenues may have been around $35 million for the quarter.
Percentage Growth May Slow In 2017
Vascepa was growing very strongly (50+%) year-over-year for much of 2016, but it appears that its percentage growth might be slowing somewhat now as the volume of prescriptions gets larger. The estimated adjusted net product revenues of $35 million for Q4 2016 is around 33% higher than Q4 2015's net product revenues. The midpoint of Amarin's guidance of $155 million to $165 million net product revenues in 2017 is an approximately 29% increase over the $124.5 million in estimated adjusted net product revenues for 2016.
Amarin's revenue guidance has been a bit conservative in the past, as adjusted net product revenues in 2016 are going to exceed the high end of its original $105 million to $120 million guidance. I have tweaked my expectations now to around $160 million to $175 million in net product revenue for 2017.
Additional Cash Raise Likely Needed
Amarin indicated that it ended 2016 with approximately $98 million in cash. It also indicated that it was expecting to increase spending slightly, with SG&A (excluding non-cash costs and Kowa co-promotion fees) going up by less than 10% while R&D remains flattish. It also intends to increase inventory levels and spend $3 million to $5 million preparing for a post-REDUCE-IT promotion and sales expansion.
With those spend items and my net product revenue expectations outlined above, I now expect Amarin to end 2017 with approximately $25 million to $35 million in cash. That relatively low projected cash balance may require Amarin to raise additional funding in 2017. An early stop of REDUCE-IT with the second interim analysis in Q3 2017 would allow Amarin to raise additional funding on better terms. However, given the uncertainty on whether REDUCE-IT will be stopped early or continue to completion, there is a significant chance that Amarin will seek additional funding prior to the second interim analysis.
While Vascepa's net product revenue growth may be slowing from 50+% now, it is still expected to continue growing significantly through 2017.
However, Amarin is planning on moderately increasing spending in 2017 to support a post-REDUCE-IT expansion, which may push its cash balance down to around $25 million to $35 million by the end of 2017. This may necessitate another capital raise for Amarin, potentially before the second interim analysis for REDUCE-IT, which is expected in Q3 2017.
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Disclosure: I am/we are 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.