Q3 2017 Earnings Call Transcript

Published: 1 Nov 2017

[Operator:]

Welcome to Amarin Corporation’s Conference Call to discuss the Third Quarter 2017 Financial and Operating Results. This conference is being recorded today, November 1, 2017. I would now like to turn the conference over to Elisabeth Schwartz, Senior Director Investor Relations for Amarin.

[Elisabeth Schwartz:]

Thank you all for joining us today. Please be aware this conference call will contain forward-looking statements that are intended to be covered under the safe harbor provided by the Private Securities Litigation Reform Act. Examples of such statements include, but are not limited to, our current expectations regarding our commercial and financial performance, including levels of Vascepa prescriptions, Vascepa product and licensing revenues, trends and wholesaler inventories, cost and other commercial metrics, gross margin, expenditures and the adequacy of our financial resources, our current expectations regarding our cardiovascular outcome study, such as timing of study completion, regulatory review and the likelihood of success, our plans and preparation for expanded promotion of Vascepa and related market positioning and potential. Our plan to purchase additional supply of Vascepa, our goals regarding the timing and scope of international expansion and our current expectations regarding the effect of our co-promotion agreement on our business. These statements are based on information available to us today, November 1, 2017. We may not actually achieve our goals, carry out our plans or intentions, or meet the expectations disclosed in our forward-looking statements. Actual results or events could differ materially. So you should not place undue reliance on these statements. We assume no obligation to update these statements as circumstances change. Our forward-looking statements do not reflect the potential impact of significant transactions we may enter into, such as mergers, acquisitions, dispositions, joint ventures or any material agreements that we may enter into, amend, or terminate. For additional information concerning the factors that could cause actual results to differ materially, please see the forward-looking statement section in today's press release and the risk factors section of our Quarterly Report on Form 10-Q for quarter ended September 30th, 2017. These documents had be filed with the SEC and are available through the Investor Relations section of our website at www.amarincorp.com. We encourage everyone to read these documents. This call is intended for investors in Amarin and is not intended to promote the use of Vascepa outside its approved indication. Please note that we are also providing slides to acCompany this morning’s call. These slides, which can be found on our website www.amarincorp.com in the Investor Relations section under the heading overview, summarize some of key updates discussed on today’s call. Finally, an archive of this call will be posted on the Amarin website also in the Investor Relations section. I will now turn the call over to John Thero, President and Chief Executive Officer of Amarin.

[John Thero:]

Good morning. Q3, 2017 was another positive quarter for Amarin both with respect to commercial growth and preparations for anticipated REDUCE-IT success. Product revenue in Q3 achieved a record high for Amarin. Our reported net product revenues of $47.1 million and $126.3 million for the three and nine-months ended September 30, 2017 respectively are consistent with our public guidance of $165 million to $175 million for the full-year 2017, which we provided analogous as an update to our previously issued guidance of $155 million to $165 million. Our potentially game changing cardiovascular outcome study REDUCE-IT which begin in 2011 is now less than a year from completion and reported results. In recent months, there has been considerable activity with respect to advancing REDUCE-IT study and preparing for expansion based upon its results. This activity includes completion of the second and last pre-specified interim efficacy and safely analysis, hiring our first Chief Commercial Officer, advancing planning for expanded commercialization based upon assumed positive REDUCE-IT results, witnessing positive results from studies of other therapies, which add confidence to our expectations regarding REDUCE-IT and observing increased attention to importance of triglyceride reduction and the REDUCE-IT study from the key opinion leaders are cardiology focused forums. The second interim efficacy and safety analysis also referred as an 80% interim look was completed in the August. As expected and consistent with our prior guidance, the recommendation of the independent Data Monitoring Committee from this analysis was to complete the REDUCE-IT study as planned without modification. While this was the expected results and the results, which we guided. I will comment to that further here to help ensure clarity. Amarin and the FDA remain blinded to the data from this interim analysis. The data as intended was only reviewed by the independent Data Monitoring Committee. After this most recent DMC review was completed similar to at the end of prior DMC reviews. They delivered to us a paper recommendation form in which the DMC had placed a check mark next to continue as planned. We are not provided any underlying data from their interim review and we do not receive an explanation for the recommendation. It is important for the integrity of this study that Amarin continue to be blinded to the trial results until study completion and that nothing is done to introduce bias. The operational objectives of having the interim analysis were achieved. As previously described, these objectives included ensuring that the data tables roll up affectively for the primary endpoints and for the numerous secondary and tertiary endpoints and subgroups and to identifying programming tweaks, which may be necessary to improve the reporting of these results. This operational validation and related improvements together with completion of documentation for nearly 80% to the target 1,612 primary major adverse cardiovascular events in the study will help us proceed with confidence into an efficient roll up and review of data at study completion. The interim look also helped confirm that our clinical sites could efficiently collect interim vital data from over 97% of the patients in the study. This results helps focus clinical site attention on getting vital status confirmation from the remaining 3% of the patients and on preparing for more rapid data collection in claiming prior to the end of the study. Furthermore, the waves of patient visits flowing into each interim look allowed clinical sites to meet again with patients in the study, reiterate the importance of the study and urge the patients to remain in the study until completion. We are very appreciative of the patients continued commitment to REDUCE-IT study. Some of these patients are approaching six years on study drug. Observations from other outcomes studies suggest that this added interaction between clinical sites and patients is helpful in keeping patients active in long-term studies, which is always a challenge and even more so when studying conditions which are asymptomatic to the patients. As a reminder, it was a very high bar to get over for the REDUCE-IT study to be stopped at the 80% interim look. Stopping early required achieving success against both high quantitative and high qualitative measures. We do not know if the quantitative threshold was surpassed or not. We cannot consult with members of the REDUCE-IT Data Monitoring Committee regarding their confidential interim data review. However, their peers within the medical community readily tell us that because REDUCE-IT is the first study ever of this large patient population and because the results of the study had the potential to significantly influence medical care for decades to come, it would have been very surprising if the DMC elected to stop to REDUCE-IT study early, particularly given that the DMC had a leeway under the qualitative assessment to continue the study to completion regardless of the quantitative result. “I am not saying that REDUCE-IT did or did not hit the target P value at the interim look. We won’t know this until the study ends. What I am saying is that Amarin has no read through from the interim look regarding the efficacy result in the study and we do not view we continue this plan recommendation from the Data Monitoring Committee as increasing or decreasing the likelihood of REDUCE-IT success at trial completion.” As we have commented in the past, it is unusual for cardiovascular outcome studies to stop early. Studies like JUPITER, which was a study of rosuvastatin also known as CRESTOR published in 2009 is still questioned and criticized today for having stopped early even though the early stop was in the wake of multiple prior studies demonstrating the statin therapy is effective in lowering cardiovascular events. More recent the FOURIER study, which was the first cardiovascular outcome study of a PCSK9 inhibitor has been criticized due to its average time of patient study had less than four years. The criticism is that more would have been answered regarding outcomes benefitted of this therapy had the study gone longer, as it would have provided greater time for separation between active and placebo arms of the study regarding cardiovascular related death, heart attacks and strokes. PCSK9 is not competitive with Vascepa. Mention of them here is intended to emphasize the view that the medical community want to see robust results from cardiovascular outcome studies. And running REDUCE-IT to completion whereby the average time in study for patient should be between four and five years increases the likelihood that study will provide answers needed to best inform treatment care decisions. For those of you appreciate the statistical details. You may recall that the statistical methods for analyzing results of the statin plus Vascepa arm compared to the statin plus placebo arm of the REDUCE-IT study involves a survival or Kaplan–Meier method of analysis using a stratified log grand test. Under this method, P values are subject to adjustments to reflect the actual number of adjudicated events. When the database for the second interim efficacy and safety analysis was locked. The number of adjudicated primary and major adverse cardiovascular events was approximately 76% of the 1612 events targeted for completion of the study. As a reminder, we targeted a wave of visits for the second interim look based upon an estimated timing of the onsets of the primary [mase] (Ph) events with adjudication of events being conducted in parallel. Because the interim look was conducted based upon 76% rather than 80% of the events, the P value at completion of the REDUCE-IT study, assuming exactly 1612 primary mase events will be peak less than 0.0436 compared to the prior threshold of the less than 0.0422. The lower number of adjudicated events compared to our estimates at the time appears to reflect that primary mase events are occurring slightly slower in the late stage of the REDUCE-IT study than we predicated. We do not know if the slowdown is on the active or placebo arm of the study or in both arms. The database lock for the interim look was months ago. Since then we have moved beyond 80% of the target mase events. Based upon current data, we believe that the 1,612 primary mase event, the number targeted for completion of the study will be reached before the end of the first quarter of 2018. This should position us to have results of the study to report before the end of the third quarter of 2018. We continue to believe that REDUCE-IT is a robustly designed study and we are excited that we will have the results from the study to share with you less than a year from now. Results of the study could be a major breakthrough in preventative care for patients at risk for cardiovascular events for which there is a large unmet need. The second update that I mentioned regarding reduce it was the hiring of Amarin’s first Chief Commercial Officer, Mark Salyer. This hire should benefit our current business as well, but was largely made with an eye towards more significant growth after REDUCE-IT. It should be noted that this addition is to further strengthen our commercial growth, which has been strong since launch despite limited resources in keeping the size of our sales force flat. Our vision is to create a brand with revenues measuring in the billions of dollars. As described in our press release on September 13, Marc has an exceptional record of accomplishment with valuable experience at companies small and large including Altana, Teva and Glaxo Smith Kline. Mark has grown business units that were smaller than when he arrived at Amarin to over $1 billion in annual revenues. And he wants to do the same again with sites set even higher. We are excited to have him in this position and look forward to his contributions. “hiring Mark is additive to our existing commercial team. We have a very dedicated commercial team who deserve tremendous credit for growing Vascepa revenues with limited resources. I look forward to that team augmented by Mark to help us reach new heights both before and after REDUCE-IT results.” The third update I mention regarding REDUCE-IT was advanced planning for expanded commercialization, our preparations including having to find additional sales territories for physician targeting to be implemented in the U.S. assuming REDUCE-IT success. We are also conducting research with respect to consumer promotion initiatives. Our analysis of sales force size is primarily a footprint expansion after REDUCE-IT results. Such size could be influenced by the level of relative risk reduction demonstrated in REDUCE-IT. We currently assume that if REDUCE-IT is as successful as we expect, we will increase Amarin’s U.S. sales force from its current size of approximately 135 sales representatives to between 400 and 500 sales representatives. Prior to REDUCE-IT results we will make some tweaks to our sales team. In particular, we plan to hire approximately 10 to 20 sales representatives in Q4 or early 2018. And we also plan to add a small number of regional sales managers prior to REDUCE-IT results. We do not expect these additions to have a major impact on Q3 product revenues. As we have stressed in the past, the vast majority of our planned sales force expansion will occur after REDUCE-IT results assuming success. Because an estimated one in three adults in the United States have above normal triglycerides levels. And many of these patients have elevated triglyceride after statin therapy. Assuming REDUCE-IT success, Vascepa should become a well known consumer product. We are conducting research regarding consumer marketing with an eye to launching direct-to-consumer based upon the Vascepa 's current indication, following REDUCE-IT results and prior to label expansion. We are also conducting research into whether an initial piece of this promotion should begin prior to REDUCE-IT results to create further brand recognition and growth opportunities. At this time, we have not committed to launch direct-to-consumer promotion. I mentioned it here, because some investors periodically ask about this and because I want to affirm that we are preparing to make the Vascepa much more visible. Assuming REDUCE-IT success, the Vascepa with its unique clinical profile will be the only product with the successful outcome study for the large population being targeted. After Mark Salyer has been here a bit longer, we will have more of an update that we can provide on the potential timing and scope of such initiative. The fourth and fifth updates that I mentioned regarding REDUCE-IT, we are witnessing positive results from studies of other therapies which add confidence to our expectation regarding REDUCE-IT and observing increased attention to the importance of the triglyceride reduction and REDUCE-IT study from key opinion leaders are cardiology focused forums. As you may recall, Vascepa has many biological effects and is much more than triglyceride lowering drug. For example, in the JELIS study, EPA the active ingredient Vascepa demonstrated 19% relative risk reduction in treating patients in the study group, which study group did not have elevated triglyceride levels. The clinical and biological effects of EPA reported in the peer reviewed scientific literature abroad. There is data suggesting that EPA has benefit effect on many aspects of the atherosclerosis product pathway for the improved and endothelia cell function the plaque formation, to plaque rupture. One of these steps is inflammation. In two separate Phase III studies, the Vascepa demonstrated significantly lower levels of some measures in the nation such HSCRP and LPPLA2. While the exact mechanism of inflammation causing atherosclerosis is not known, the role of at least one pathway of information has recently received more attention. The CANTOS study showed that the use of a specific inhibitor of IL-1 beta led to a reduction of a number of inflammatory biomarkers and a reduction in mase events. While there are many differences between CANTOS study and REDUCE-IT, for the first time the data from the CANTOS study provide evidence that inhibition of an inflammatory pathway can lead to reduction in mase. The CANTOS study, the FOURIER study and REVEAL study which was a study of another CTAP inhibitor have all contributed to increased recent discussion among the medical community of the need to address the significant residual cardiovascular risk remaining despite statin therapy. These and other studies appear to confirm that lower is better regarding LDL cholesterol, but that even with very low LDL cholesterol significant residual cardiovascular risk remains. These studies also demonstrated that changing HDL cholesterol levels except when also changing LDL cholesterol are other biomarkers appears to have little or no impact on reducing the incidence of cardiovascular events. A consensus within the medical community is building that the next study frontier in lipid management is triglyceride levels. For example, at the recent CMHC meeting in Boston, physicians such as Paul Richter pointed to data suggesting that triglyceride levels should be more proactively treated. We anticipate that the REDUCE-IT study results will help create more of a consensus on this topic, as we realize that many physicians want to see outcomes data. At this point, Mike Kalb, our SEP and Chief Financial Officer will speak to the details of our financial and prescription results.

[Michael Kalb:]

Thanks, John. As mentioned at the start of the call both our most recent 10Q and today’s press release can be found on our website. In them you can find a more detailed discussion of our third quarter and year-to-date financial results and the highlights I’m speaking to now. As John stated, overall, the third quarter was another strong quarter for the Company. In Q3 2017, estimated normalized prescriptions for Vascepa grew 44% over the same period last year as reported by both Symphony Health Solutions and IMS Health. As is likely true for results at other companies this growth might have been even stronger had it not been for the devastation caused by hurricanes Harvey and Irma. A sizable number of Vascepa prescriptions are in regions heavily affected by these hurricanes. While we may see some lingering impact of these storms on Vascepa prescriptions in Q4. Our most recent data suggests that for the most part the sales teams from these impacted territories by the end of October successfully brought prescriptions back to pre-hurricane levels. We will continue to assess growth trends to determine if there are any longer term affects. Our sympathies throughout to residents of the areas affected by these storms including Puerto Rico. I’m proud to say that Amarin employees have been actively involved in contributing to the rebuilding efforts at impacted areas. We recorded net product revenue of $126.3 million and $90.6 million during the nine-months ended September 30, 2017 and 2016 respectively, an increase of $35.8 million or 40%. This increase in revenue was driven primarily by an increase in estimated normalized total Vascepa prescriptions. There appears to have been little impact on our 2017 results from changes in channel inventory levels. Licensing revenue during the nine-months ended September 30, 2017 and 2016 was $900,000 and $800,000 respectively. Licensing revenues was primarily from the amortization of a $15 million upfront payment received in February 2015, $1 million milestone payment achieved in March 2016, both associated with a Vascepa licensing agreement for the China territory, as well as a small amount of amortization of $5 million upfront amount associated with the Vascepa licensing agreement for Canada received in September 2017. We received half of this payment amount in Q3 2017 once another half due on 2018. The upfront payments are being recognized over the estimated period in which we are required to provide regulatory and development support and clinical and commercial supply under the respective agreements. The amount of licensing revenue recorded maybe variable from period-to-period based on changes in estimates of the timing and level of support required. We are continuing to evaluate potential, strategic partners for the promotion of Vascepa in other global markets. However as previously described, we believe that the best regulatory and reimbursement strategies in markets which have an earlier generation prescription Omega-3 product approved maybe to leverage to REDUCE-IT trial results for potentially broader labeling and higher reimbursement. Our gross margin on product sales for the nine-months ended September 30, 2017 and 2016 was 75% and 73% respectively. This modest, but valuable improvement was primarily driven by lower unit cost to API purchases. Selling, general and administrative expense for the nine-months ended September 30, 2017 and 2016 was $98.9 million and $80.1 million respectively, an increase of $18.8 million or 23%. This increase is due primarily to increased promotional activities including commercial spend for anticipated expansion following successful REDUCE-IT results. Increased total promote fees associated with higher revenues and increased legal costs. Research and development expenses for the nine-months ended September 2017 and 2016 was $35.2 million and $39.8 million respectively, a decrease of $4.6 million or 12%. This decrease is mainly due to timing of REDUCE-IT and related costs. As we have stated in the past, our SG&A and our R&D expense levels tend to vary from quarter-to-quarter based on the timing of various initiatives. Amarin reported cash and cash equivalents of $79.1 million as of September 30, 2017 representing a decline of $6.4 million from the end of the prior quarter. For the nine-months ended September 30, 2017, cash outflows relating to research and development the majority of which are REDUCE-IT related were approximately $31.7 million and cash paid for interest and royalties in aggregate was approximately $12.5 million. Excluding these R&D costs, which should substantially decline after the REDUCE-IT study is complete and excluding finance related cash flows relating to the debt refinancing we announced in Q1, interest and royalties our net cash flows from our commercial business was positive for both the three and nine-months ended September 30, 2017. We've referenced net cash flow without cost of REDUCE-IT, interest and royalties as a measure of the progress of our commercial business. As of September 30, 2017, the Company had $34.6 million in net accounts receivable and $28.6 million in inventory. Both of these balances have grown during 2017, reflecting increased revenues and anticipation of future increases in revenues. The reported accounts receivable are current. As of quarter end, we had accounts payable and accrued expenses of $67.4 million. These balances have grown during 2017,primarily due to the timing of rebates, co-promotion fees and supplier payments. As of September 30, 2017, Amarin had approximately $270.9 million American Depository shares and ordinary shares outstanding, 32.8 million common share equivalents of Series A convertible preferred shares outstanding and approximately 23.6 million equivalent shares underlying stock options at a weighted average of such price of $3.26 as well as 11.9 million equivalent shares underlying restricted or deferred stock units. Outside the U.S. our partner for China, Eddingpharm is working to commence a clinical trial for Vascepa in China before the end of 2017. This study similar to our MARINE Study will evaluate the triglyceride lowering effect on patients with triglyceride levels which are 500 mg/dL or greater. CD disease has been growing in China and about 11.9% of adults in China have elevated triglycerides. Our partner for the Middle East, Biologix, anticipates that they will receive weight this year early in 2018, the first of an anticipated series of country-by-country approvals allowing for promotion of Vascepa. For Canada, as announced in September, we entered into an agreement with HLS Therapeutics for commercialization Vascepa. We seek to make Vascepa the first prescription omega-3 fatty acid product available in Canada. We are in the early stages of working with HLS on the regulatory strategy for Vascepa in Canada which will then inform the commercial strategy. We are very pleased to be working with HLS and its experience management team. I will now turn the call back over to John for closing remarks. John.

[John Thero:]

Thank you, Mike. We are looking forward to continue to provide you with updates regarding Amarin’s progress. We are scheduled to present three investor conferences in coming months, including Jefferies London Healthcare conference in two weeks, City’s Global Healthcare Conference in December and the JP Morgan Healthcare Conference in January. We will webcast any podium presentations we make at these conferences. Hopefully for your comments today have helped to better understand the progress Amarin has reported in the significant upside potential we seek to capture. We now conclude our prepared remarks. We would like to open up the lines for questions. Operator?

[Operator:]

Thank you. At this time, we will be conducting a question and answer session. [Operator Instructions]. Our first question is from Louis Chen with Canter Fitzgerald. Please proceed with your question.

[Louis Chen:]

Hi. Thanks for taking my questions. I had a few here. The first question I had was if you could tell us what percentage of patients with elevated triglycerides are treated and why the percentage might be so low and what is that percentage [indiscernible]?

[John Thero:]

Louis, good morning, this is John. If I understand your question, you are asking about the overall treatments of the patients who have elevated triglyceride. So we know from data out there depending upon sorts of the data that one in three to one in four patients in the United States have elevated triglyceride levels. The guidelines break those triglyceride levels treating different stride with 150 below being considered normal, 150 to 200 being considered borderline high which particularly deserves treatment for patients are up. Diabetic 200 to 500 being considered high and 500 and above being considered very high with particular no pancreatitis risk. Currently, the data suggest that only about 4% of patients with elevated triglyceride are treated. And we think that that's due to a number of factors not the least of which is that there has never been an outcome study perceptively conducted in this space. The development in science has for the last couple of decades predominantly focuses on good and bad cholesterol and fortunately the advances in study of LDL or bad cholesterol have proven to be quite fruitful starting with statin and then progressing to a point where it’s generally recognize that lower is better on the LDL side of things. But we know that LDL even when real control per say below 70 is still there is a significant residual risk remaining. And it had been thought that addressing HDL, so to bring bad cholesterol down to brining a good cholesterol which is associated with clearing out of bad cholesterol would be helpful. Multiple studies done there from [indiscernible] CTAP inhibitors. All of which have failed. Underlying from that failing data is suggestive data the sub-populations within certain of those studies were the therapies not only increase HDL but also lower triglyceride provided benefit. And as a result of that subset data, a variety of different genetic studies, [clinic logical] (Ph) data the JELIS study of course, the shift has occurred or is some positions are sort of looking at and presenting above [indiscernible]. It used to HDL focus now has shifted to triglyceride is being the focus [Peter Levy] (Ph) out of the bigram in particular has been sort of champion of that here. Really over the past year, so this is a growing emphasis and we are being [indiscernible] given accolades for being out of the forefronts of it. But I think the predominant reason why patients aren't treated with elevated triglyceride is that this just hasn't been area of medical attention, it was elsewhere, it shifting in this direction, physicians even those who believe IN the need for proactive treatment of triglyceride are still longing for outcomes data. And we are very pleased that our REDUCE-IT study which will be the first respective study of this population will now have results less than a year from now. And as a robust study, we think that will be both very meaningful to patient care and quite meaningful to Amarin and its investors as well.

[Louis Chen:]

Okay, thank you. And then my second question here is, why do you think that the adoption of Vascepa outcomes studies are positive will be faster than what we have seen with the PCSK9 and other CD therapies?

[John Thero:]

That’s a good question. So, yes, I think, when we think about our product, I think, it’s probably more analogous to what we saw with statin therapy than it is with more of a specialty therapy like PCSK9. So we see Vascepa as being much more of a pragmatic therapy. It’s got broad effect, which we have seen and demonstrated in Phase III studies and look forward to having more broadly expressed based upon the outcome study. It’s safe, its affordable. PCSK9s have lots of reimbursement issues at $14,000 per year. It’s oral, so it’s not an ingestible product. It’s intended for the massive. So Amarin’s product, we have got a fairly narrow indication today, but if we were to look at scripts and essentially say put Vascepa at the same starting point at PCSK9 despite there being two players out there on the PCSK9 side of things, the script rates for Vascepa is probably our narrow with the indication and much more limited marketing budget as eclipsed sort of work the level of prescriptions of PCSK9s. So PCSK9s are valuable drugs, they are providing instrumental LDL reduction beyond statin therapy, we are advancing a new paradigm in treatment, they are going further with LDL reduction. We are advancing a new paradigm in treatment trying to address that significant residual risk that exists beyond what can be achieved with LDL reduction, we think with positive outcome results combined with that pragmatic care that we are talking about, pragmatic drugs affective, say, tolerable, affordable, available, all should be helpful. Not to mention that we have got coming up on five years of real experience with the drug. So lots of physicians and patients already have witnessed success with that and that had something to build upon.

[Louis Chen:]

Just on the opportunity for Vascepa outside the U.S. and how that compares to the U.S. opportunities, I think you have been making some positive developments in those kinds of relationships. I was just curious how you speak about it.

[John Thero:]

So heart disease is major throughout the world, I mean, in most geographies. It is number one, number two cause of death. It’s expensive everywhere. Amarin has taken the approach of promoting Vascepa on its own. We have co-promotion partners here in the Kowa pharmaceuticals in the United States, but leverage third-parties elsewhere. We started off in geographies where predominantly there is very limited competition. We see ourselves potentially being the first prescriptions [EPA] (Ph) products in China, for prescription EPA product in Canada and similarly are advancing ourselves to an unique space in the Middle East. In markets where - our marketed drugs outside of the U.S. predominantly as [indiscernible] is out there. We continue to see significant opportunity as well, but we have looked at those spaces and considered to go into those markets based upon our current indication and studies and go sort of country-by-country or do we wait and look at REDUCE-IT results and try to go for a broader label than what that earlier generation therapy has. And this goes to the end of the REDUCE-IT study I think our current leanings are to wait for the REDUCE-IT study and pursue that broader opportunity which should not only gear us potential broader labeling, but also better reimbursement than the earlier generation therapy. So hard to see it's a major issue worldwide, we are prioritized to what we think the biggest opportunity is that we can manage which is the U.S., we are working on partners elsewhere, but the partners elsewhere has a strategic element to it, which I hope you pick from my most recent comments.

[Elisabeth Schwartz:]

Operator?

[Operator:]

Okay. Our next question is from Joel Beatty with Citi. Please state your question.

[Sean Levin:]

Hi this is Sean calling in for Joel. I would like to thank you for taking my questions. My first question is regarding your new sales force. Could you talked a little bit about why you decided to grow that sales force now, territories of interest and estimated committed growth in the U.S. coverage?

[John Thero:]

Good morning Sean. So notably, we've been planning and talked for a while about planning towards expanding our sales force significantly after the REDUCE-IT results. So also notably is that we haven't changed sales force size over the last three plus year. So I'm very proud that the team has held, plus very much in control and has grown through increased productivity of that existing team significantly. In our analysis of expansion after REDUCE-IT results, which we've got down to not only geographies, but physician targets. We identified certain geographies where we found sufficient enough physicians targets based upon our current marketing. And again, we've expect that the opportunity will be much broader after REDUCE-IT. But based on our current marketing, where we didn't have to rearrange sales territories of existing reps where we didn't have to bring in an additional sales management to add additional reps. And sales as though given the nature of those territories that those sales reps within a year’s time should be covering their cost. Now sales reps and after REDUCE-IT we would expect to cover the costs even potentially faster, but these were territories that didn't require reorganization of what we are doing elsewhere and while our cash flow coming out of our operating business which Mike described as being positive soon the R&D cost and interest and royalty that’s been modestly positive. We thought it was a decent return on investment by spending it at a limited number of sales reps here in the fourth quarter or early part of the coming year. We don’t expect to see significant impacts from those sales reps in the fourth quarter, but as we get later in 2018 and particularly with REDUCED-IT should be 10 to 20 more sales territories that will be up running. And with good momentum when the REDUCED-IT results come out before the end of the third quarter next year. So hope that makes sense.

[Sean Levin:]

Yes. That’s very helpful. Thank you so much. And as a follow-up, in your previous earnings REDUCED-IT guidelines, I guess, the trial come in either Q2 or Q3, but today it’s kind of a narrow to be Q3. How should we think about it, is there opportunity to read out in Q2 or are the new projections decreased cardiac events kind of trending towards Q3. How should we look at that?

[John Thero:]

Yes, so in our comments we tried to explain that when we do estimates throughout predicting timing of when people are going to have heart attacks and strokes or die or other adverse cardiovascular events is a bit tricky. We are actually quite pleased that in a trial that’s now - some of the patients are coming on six years in this study that are number of events is tracking pretty close, particularly close for a long-term cardiovascular outcome study against our expectations. So when we do the interim analysis, which requires a locking down of a database. We found that where we thought it might be by that point in time 80%. We found it to be closer to 76%. Percentage wise not a big difference, but it does mean that rather than 1,612 events are occurring for a near the end of 2017 or early 2018, it looks like guidance are sort of before the end of the first quarter, which is a little bit of a slip, not a huge slip, but a little bit of a slip on finding again. I think slip may not be the right word, because we are trying to get a robust result. And if we get to the 1,612th events in not the very beginning of Q1, it makes getting the results in the second quarter somewhat unlikely. After we get to the 1,612th event, we need to notify all the clinical sites, they need to bring in all the patients who are still living back to get their vital data collected. That’s a period that in many clinical trials is sort of three months in length. And then we get the data all into the tables and independently viewed and scrubbed and rolled up reviewed by an independent community. They need to write a report on it and then Amarin sees it and then we quickly make the results known publicly. So we are thinking it's much more of a Q3 rather than a Q2 event at this point in time. Hope those comments help.

[Sean Levin:]

You know that’s very helpful. Are there any additional granularity on where you expect to file sort of file for revenue guidance with increased sales quarter-over-quarter but possible an impact on degrees in hurricanes even?

[John Thero:]

So the hurricane is an interesting question. It seems like natural disasters are abundant with fires in parts of California for example. But as you probably recall, Amarin doesn't have sales reps throughout the entirety of the country. We with limited resources have sales reps in concentrated areas. Some of those concentrated areas are areas that have been hit by natural disaster. So Texas, Florida, California [indiscernible] areas. We have seen disruption in those areas, we saw our sales reps displaced for a bit. We have seen pharmacies closed, we saw scripts declined in those areas. As we got to certainly end of October in the Florida and Texas areas, we begin to see prescriptions come back to levels in those areas that were sort of levels where they had been in say August, sort of prescriptions. So that's a as a troth that occurred there and coming back to where you were two months earlier doesn't mean that you are ahead. So hopefully the majority of that impact is behind us, but we are still aware of pharmacies that are closed and the people are struggling with in getting their homes back and worry and they are they spending money medical care versus homes, et cetera. We still need to see where that impact is. I think we have seen enough growth elsewhere in the country to continue to feel comfortable with our existing guidance for the year of $165 million to $175 million. But we do anticipate seeing some continued impact of the hurricanes and fires here in the fourth quarter. we are still evaluating the overall magnitude of that impact.

[Sean Levin:]

Thank you so much for answering all my questions. Have a good day. Thanks.

[John Thero:]

Thank you.

[Operator:]

Our next question is from John Borris with SunTrust. Please state your question.

[John Borris:]

Thanks for taking the questions. First question John, when you look at the most recent trials that reported out for example, you mentioned one of REVEAL, IMPROVE-IT. Merck gave commentary that the majority of the benefit at least in those trials occurred towards the very end of the trial. Are you benchmarking against those trials and what conclusions can you draw from benchmarking against some of these outcome studies based on the events and the slowing of the progression of the events. Just second question related to the 76% that you've mentioned. Just can you reiterate the timing for when you think you will hit the 100% of events based on the pace at which they are coming in? And then is it a couple of quarters that you need for scrubbing of the data, is that the reason that you pushed it out to 3Q. obviously it seems as though it's a positive because of the slowing that’s occurring. But if you can just give some better clarity around that, that would be real helpful. That's first question.

[John Thero:]

Thanks, John. Let me take your second piece first, which is dealing with the timing and then I will ask our Chief Medical Officer, Craig Granowitz to jump in a little bit on studies from others that you referenced. So with regard to timing of events in the REDUCE-IT study, we currently anticipate - this is an estimate based upon experience and modeling that based upon our own experience as well as experiences from other studies. We currently anticipate the 1612th primary mase events, which is a target for completion of the study being reached somewhere before the end of the first quarter. After we reach that event, we will notify either the clinical sites, they will invite remaining living patients in the study back in for their blood work and another updates of data. That’s the process that in outcome studies typically around a three month process and then data gets rolled up into databases, scrubs presented to an independent data committee may write a report and then present it to Amarin. And we anticipate that the sum of all of that activity, which also includes the final adjudication of events, et cetera gets us to having data to report somewhere before the end of the third quarter of 2018. Hope that makes sense. Craig, do you want to jump in on the topic of other studies and impact.

[Craig Granowitz:]

Yes, thank you, John, and thank you for the question. I think there is a sweet spot for follow-up duration in these studies, there is too long and too short. And I think you pointed on one of the studies that went too long which would IMPROVE-IT. And the follow-up period IMPROVE-IT if you look at most experts that are involved the fact that they had increased enrollments several times that they miscalculated the event rates significantly, I think, created some of the quality problems that the Company creates actually in closing out and cleaning up the study. So I think having to make multiple changes to the protocol, reopen enrollment and open additional sites multiple times, which for the patients on therapy as longer and longer follow-ups has an overall deleterious effect on the quality of the study, and actually the relevancy of the study. I think the other extreme that it’s too short and I think the most recent example of that is FOURIER trial where I think everybody acknowledges including the sponsor of the study acknowledges that the follow-up period wasn’t long enough to collect the number of events needed to demonstrate a clinically meaningful difference in event rates between the active arm and the control arm. I do think as it’s been mentioned previously by Amarin, we are looking at a median follow-up period of between four and five years. If you look at many of the most successful large CVOTs particularly the statin trial that is essentially what the median follow-up is. Similar median follow-up period in a number of diabetes outcome studies that have recently come through and for [indiscernible] also had median follow-up periods of around that time. So we feel comfortable that the follow-up period and I’m talking to our steering committee of the physician experts who are overseeing the study that we have about the right sweet spot in terms of duration of follow-up.

[John Borris:]

That's great, thanks for that. Moving on to one around Vascepa sales for 4Q in particular. If I look at the lower end of your implied range and the upper end, you are looking at 1% growth up to high 20s in terms of growth if you actually looking at TRX trends. There are high-20s low-30s, you factor in price, an assumption of what you realize of that price increases you have taken which were in around the 9% range. It certainly seems as though your guidance seems to be conservative in the fourth quarter, we qualify in that correctly. And then is that because of some assumptions around wholesaler buyouts in the fourth quarter or the impact of the hurricanes from Texas in the upcoming quarter. And then related to that hurricane effect, one would think that since you know the zipcodes and get sales data and volume data on those zipcodes. Can you quantify what the impact since you indicated it was deleterious on your sales. what the impact was in the quarter?

[John Thero:]

So you have asked a lot there. So relative to our overall guidance for the fourth quarter. We are obviously pleased with our third quarter results, the results in the third quarter were particularly strong. And July and August not as impressive in September, which we think is was impacted by hurricanes. We are still assessing what that impact what was script data comes in on a degree in a granular level of zipcodes that comes in to us on a delayed basis. So it's a something we are still evaluating. And the continued impact of that is something that we are still evaluating as well. We did see in fourth quarter of last year some channel impact and the fourth quarter impact to the upside. We've seen enough quarters in the past where it's gone up or gone down I can't totally be predictive we are not counting on it one way or the other. But on a comparative basis, there were some uptick for channel in the fourth quarter of the last year, we are pleased with this year channel inventory levels of wholesalers has been pretty consistent on a days of sales on hand basis. So we feel as though our guidance of 165 to 175 is the right range based upon what we know today. We are continuing to evaluate and we will always look to do our best to maximize the revenue opportunity.

[John Borris:]

Thanks for that. Last question just as to I think you initiated a lawsuit about fish oil being imported. Can you just give us some color on why you did that?

[John Thero:]

So our General Counsel Joe Kennedy is here. I will let him comment on that with the one provides all that [indiscernible] that that particular complaint is against a subset of dietary supplement that are modified and synthetically to which we believe make them drug. This is not a matter that pertains to the majority of dietary supplement of fish oils but Joe, if you want to provide some context.

[Joseph Kennedy:]

Sure, yes. Thanks for the question, John. So as John laid out there is overwhelming majority of omega-3 supplements out there or fish-oil supplements, and those are legal supplements. But as we look and field over the years we have seen a lot of products that synthetically alter their products to concentrate EPA in the fish-oil, the DHA and fish-oil together, a higher level of that. And as we look back at the regulatory scheme and FDA’s interpretation that we believe that those products should be classified as drugs under the regulatory scheme. So we see those practice essentially competing in a way that’s unfair. And so we looked at the available options to us and ITC provided an option to exclude from import into the U.S. products that are important things based upon unfair trade competition. We filed our complaint, we recently found out that the ITC decided not to institute the complaint and we are assessing which way to proceed. It is a procedural setback, but I think the genuine substance of the matter we remain confident on and that if you look at the FDA’s interpretation of the statute itself, the FDA’s interpretations over a period of 15 years points to the conclusion that synthetically altered natural products become drugs under the regulatory scheme. And while the FDA weighed in say that they might change that view in the future, it’s clear based upon their multiple interpretations that today a fair interpretation of about the [indiscernible] and regulations that those products should not be out in market without going to FDA drug approval. So, but as John said there is an overwhelming minority segment in the market and as we look forward to the opportunity to REDUCE-IT and the competitive here, we think it’s just simply not appropriate for any parties to be competing with us on the basis of violations of applicable law. And so when we see that we are going to go after them and we will continue to aggressively defend franchise in any way we can, obviously, through patents and in this case through availing ourselves through appropriate regulations and tightening statutes and there are several of them. And we will continue to look around the regulatory schemes to do everything we can to protect the franchise going forward.

[John Borris:]

Thanks for that and again, congratulations on the results John.

[John Thero:]

Thanks much. Appreciate it. I think we are probably at a point where we have going beyond what we had set out as being the schedule for this call. So I cut the questions off at this point. Thank you everybody for your interest we look forward to updating you on our further progress and to talking with you soon. Have a wonderful day. bye.

[Operator:]

Thank you. This concludes today’s conference. You may disconnect your lines at this time. And thank you for your participation.