Amarin: Prescription Growth For Vascepa Remains Solid

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About: Amarin Corporation plc (AMRN)
by: Elephant Analytics
Summary

Amarin's Q1 2019 report was basically as expected, although it didn't increase its revenue guidance for 2019.

I believe that Amarin is still being fairly conservative with that guidance and that $400 million is a reasonable expectation for 2019.

Total prescription growth is starting to catch up to new prescription growth (with around +70% and +80%, respectively, year-over-year in April).

Amarin may not report a profit until Q4 2019, though, as it needs around $106 million in revenues to reach breakeven by my estimate.

Amarin (AMRN) reported Q1 2019 results that were in line with my expectations, although there appears to be some disappointment that Amarin didn't increase its revenue guidance from $350 million. I still believe that Amarin is quite likely to beat $350 million and that it is being fairly conservative with its guidance, although it seems more likely to end up closer to $400 million than $450 million (I discussed a $400 million to $450 million range in my last report). This assumes that any expanded label for Vascepa doesn't affect 2019 revenues.

Notes On Revenue

Amarin reported $73.3 million in total revenue ($72.7 million in net product revenue) in Q1 2019 which was a 66% increase in total revenue and a 67% increase in net product revenue compared to Q1 2018. Q1 2019 net product revenues were down -6% compared to Q4 2018, but this can be attributed to seasonality as Q1 2018 net product revenues decreased -18% compared to Q4 2017 and Q1 2017 net product revenues went down by -11% compared to Q4 2016.

Based on Symphony's estimated numbers, Vascepa would need to generate approximately another 2,225,400 normalized prescriptions during the last three quarters of 2019 in order to meet its current $350 million net revenue guidance. This assumes just over $2 million in licensing revenue along with average revenue of $123.61 per normalized prescription (based on Symphony Health's estimates). This average revenue per normalized prescription is identical to Vascepa's average during the past five quarters.

Net Product Revenue ($)

Normalized TRx (Symphony)

Normalized TRx (IQVIA)

Rev/Norm. TRx (Symphony)

Rev/Norm. TRx (IQVIA)

Q1 2018

$43,777,000

391,000

356,000

$111.96

$122.97

Q2 2018

$52,537,000

430,000

430,000

$122.18

$122.18

Q3 2018

$54,973,000

458,000

457,000

$120.03

$120.29

Q4 2018

$77,085,000

539,000

538,000

$143.01

$143.28

Q1 2019

$72,731,000

618,000

553,000

$117.69

$131.52

Last 5 Quarters

$301,103,000

2,436,000

2,334,000

$123.61

$129.01

To get to 2,225,400 normalized prescriptions during the last three quarters of 2019 would require around 56% year-over-year growth. This is close to the 58% year-over-year growth in normalized prescriptions (Symphony Health) reported in Q1 2019.

Looking at it by revenue alone (and ignoring the prescription estimates), net product revenue would need to grow by around 49% year over year during the last three quarters of 2019 for Amarin to end up with $350 million in revenue.

Amarin notes that Symphony Health and IQVIA's numbers are estimates, and that these estimates have been historically less accurate at times where there has been significant change in growth rates for a drug. As well, new prescriptions increased by 80% year over year according to Symphony Health.

To get to $400 million in net revenue during 2019 instead, net product revenue would need to grow by around 76% year over year during the last three quarters of 2019. Normalized prescriptions would need to grow by 84% (based on the calculation method mentioned above) to reach $400 million in net revenues if revenue averaged $123.61 per normalized prescription in the last three quarters of 2019.

Growth Trends

New prescription growth is greater than total prescription growth right now (80% versus 58% according to Symphony Health in Q1 2019), and this gap should close as the large influx of new Vascepa users start refilling their prescriptions. We can see this in the weekly data from Q2 2019 which shows new prescriptions still up around 80+% year over year, but with total prescription growth at around 70+% year over year now.

I'd expect Vascepa to be able to maintain a high (such as 70% to 100%) growth rate in total prescriptions over the remainder of the year since its growth rate was relatively modest during 2018 (at +22% in Q2 2018, +19% in Q3 2018 and +25% in Q4 2018 according to Symphony Health).

Achieving that growth rate Amarin would end up somewhere around $400 million in net revenue, with +70% growth putting Amarin at around $375 million in total revenue and +100% growth putting Amarin at nearly $430 million in total revenue.

About Profitability

Amarin probably needs above $106 million in revenues per quarter in order to start showing a profit on its income statement. Amarin's guidance suggests roughly $80 million per quarter in operating costs, while interest expense was $1.7 million in Q1 2019.

If Vascepa gross margins are around 77%, then $105.5 million in net product revenue would result in $81.2 million in gross margins. The remaining $0.5 million can be made up with licensing revenues.

Amarin is likely to achieve that level of net product revenue by Q4 2019. It could do it in an earlier quarter, but may fall a bit short. For example, +92% net product revenue growth would be needed in Q3 2019 to reach $105.5 million, while the required growth rate would be around +101% to reach that revenue level in Q2 2019.

Conclusion

Amarin's Q1 2019 results were basically as expected, although it did not increase its full-year revenue guidance when there was some anticipation that it might. I continue to believe that Amarin is being fairly conservative with its guidance and that Vascepa's sales growth trends point to company revenues potentially ending up at somewhere around $400 million for the year.

Amarin needs to continue driving prescription growth while it attempts to get an expanded label for Vascepa. Prescription growth trends have been fairly good so far, although it is still too early to be fully confident on which side of $400 million Amarin's revenues will end up at.

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.