Q4 2017 Earnings Call Transcript

Published: 27 Feb 2018

[Operator:]

Welcome to Amarin Corporation's Conference Call to discuss its Financial and Operating Results for the Fourth Quarter and Full Year of 2017. This conference call is being recorded today, February 27, 2018. I would like to turn the conference call over to Elisabeth Schwartz, Senior Director of Investor Relations of Amarin. Please go ahead.

[Elisabeth Schwartz:]

Thank you all for joining us today. Please be aware that 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 and wholesaler inventories, Vascepa product and licensing revenues, costs 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 likelihood of success, our plans and preparation for extended promotion of Vascepa and related market positioning and potential, our plans to purchase additional supply of Vascepa, our goals regarding the timing and scope of international expansion and our current expectations regarding the effects of our co-promotion agreement on our business. These statements are based on information available to us today, February 27, 2018. 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 other material agreements that we may enter, 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 Annual Report on Form 10-K for the year ended December 31, 2017. These documents had been filed with the SEC and are available through the Investor Relations section of our website at 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, amarincorp.com, in the Investor Relations section under the sub-category Events and Presentations, summarize some of key updates discussed on today's call. Finally, an archive of this call will be posted on the Amarin website, again, 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, everyone. Thank you for joining us today. Amarin's record 2017 revenues we reported today are at the upper end of the guidance that we last provided and above the revenue level we guided to during 2017. Moreover, we are nearing completion of our potentially landmark cardiovascular outcome trial, REDUCE-IT. We are working hard towards having results to report from this important trial by the end of Q3 2018. And we are preparing for significant commercial expansion after REDUCE-IT results, based upon our anticipation that the REDUCE-IT results will be positive. Mike Kalb will talk further about Amarin 2017 results. I will mention a few highlights. In 2017, we achieved record total revenue of $181.1 million, including $179.8 million in net product revenue from the U.S. sales of Vascepa. This $50.9 million increase in net product revenue over 2016 was supported by corresponding record levels of Vascepa prescriptions. We also improved cash flow such that excluding our disproportionately large commitment to R&D spending, which included over $40 million in REDUCE-IT related payments. And excluding finance related proceeds and payments such as interest and royalties we were cash flow positive in 2017. We provided support for 25 scientific publications. We added HLS Therapeutics as a commercial partner for Canada. Supported our partner for Vascepa in the Middle East, Biologix, and submitting applications seeking Vascepa approval in multiple countries, and supported commencement of a clinical trial for Vascepa in China via partner Eddingpharm. And we are now within 7 months from reporting REDUCE-IT results, having guided for results before the end of Q3. Rather than my focusing on 2017, I will talk to you about our priorities for 2018, the opportunities we are working to address and while we are confident that 2018 will be our best year yet. Our strategic priorities remain foundational. They are grow product revenues, advance REDUCE-IT's completion and be prepared to promptly leverage successful results of the study and operate cost effectively and opportunistically. Overlaying this strategy, our tactics for executing are becoming increasingly advanced. Commercially in 2018, before REDUCE-IT results, we intend to build on the messaging and execution that contributed to our growth in 2017. This includes increasing education of healthcare professionals regarding the positive Phase 3 efficacy and safety results for Vascepa, differentiating these results from earlier generation therapies, leveraging broad payer reimbursement for Vascepa and prioritizing our focus on physicians who have demonstrated through their practice that they are caring for high cardiovascular risk patients and are proactive in pursuing potential preventative solutions beyond the important basics of diet, exercise and therapy to lower bad cholesterol. Our revenue growth has been generated by our highly trained and passionate Amarin sales team, which while relatively small is highly effective, augmented by the contribution of our co-promotion partner. These sales efforts should continue to support Vascepa growth. However, we recognize that most physicians, pharmacists and patients remain unfamiliar with Vascepa as our current promotional efforts have been kept narrow and focused due to economic constraints including the prioritization of our resources to completion of the REDUCE-IT study. As our Chief Medical Officer and our Chief Scientific Officer will discuss later in this call, we believe that the results of the REDUCE-IT study will be positive. Key opinion leaders are increasingly referencing the upcoming results of the REDUCE-IT study as a key scientific milestone for 2018. However, recognition of the importance of REDUCE-IT and Vascepa remain relatively constrained to key opinion leaders, a limited number of clinical study sites and others familiar with the study itself. Commencing in Q2 2018, we will be taking broader actions to increase Vascepa awareness. In particular, we aim to begin a pilot multimedia awareness initiative including the first television commercial for Vascepa, which will be seen nationally. We have three primary objectives for this awareness initiative. First, to make more people aware of Vascepa beyond the limited universe currently addressed by our sales force participating in the REDUCE-IT study and experts in the lipid field. We believe that greater awareness of Vascepa will help the REDUCE-IT results to be more rapidly understood and appreciated. Second, we want to find out, which forms of media and what messages are most effective, albeit limited to our current indication for Vascepa. We want to do this in advance of potentially expanded promotion after REDUCE-IT results. Third, we want the program to be cost effective. We recognize that such promotion can be expensive and then there can be a delay in the impact of such an awareness initiative. Moreover, we recognize that the impact can be diminished if consumers start asking physicians about a drug and the physicians are not yet well informed about the drug. We intend to proceed in a measured fashion and ensure that we are meeting our goals and objectives. While we also intend to spend enough to realize detectable changes in Vascepa awareness levels from such limited promotion. We anticipate spending $15 million to $20 million on this pilot initiative to increase Vascepa awareness. While, this level of spending is a fraction of the amounts spent by many companies for product promotion, spending $15 million to $20 million is a large sum of money for us. It's because of this high cost that we have not initiated such a promotional program in the past. We are planning for success, assuming REDUCE-IT is successful, we believe that this pilot awareness initiative will be highly instructive and guiding us to effective broader promotion in the future. Note that people often need to see advertisements multiple times before the message and product names are highly memorable. For patients with asymptomatic conditions such as high triglycerides we don't expect patients to immediately rush to their physicians to inquire about Vascepa. However, we are hopeful that by creating brand recognition, with emphasis on Vascepa's demonstrated efficacy and safety in Phase 3 study, combined with Vascepa's affordability that patients increasingly over time will consult with their healthcare professionals about Vascepa, if they have very high triglycerides. We hope that such consultation with their physicians will increase after they potentially hear REDUCE-IT results. In parallel with building with Vascepa awareness, we also implement to increase our inventory levels of Vascepa. This increase in inventory is intended to help us prepare for a broad range of potential product demand scenarios after REDUCE-IT success. Our research suggests assuming REDUCE-IT study success, the growth in demand for Vascepa will be most increased by levels of product promotion and by degree to which Vascepa is demonstrated to lower major adverse cardiovascular events such as heart attacks and death. Because Vascepa is already on the market with broad managed care coverage, in five years of favorable commercial experience, we could see demand to accelerate more quickly than experienced for newly launched products. Prior to REDUCE-IT results, we aim to spend approximately $10 million or more on building inventory levels than we would otherwise spend if we were just building inventory to correspond with our anticipated growth. We are also working with our suppliers to increase their capacity and throughput. Since the REDUCE-IT studies began in 2011, I've explained to you why I believe the REDUCE-IT study will succeed. I've also pointed out that the important population being addressed in REDUCE-IT has not been studied by earlier generation therapies for a variety of reasons, including the products which was commonly used beyond statin therapy to lower triglyceride levels often increased bad cholesterol, have challenging side effects or difficult to tolerate. For those of you who were relatively new to following Amarin, I've asked Dr. Craig Granowitz, our Chief Medical Officer, to describe the medical need for the REDUCE-IT study and the opportunity it presents for patients, society and Amarin if it is successful. And I've asked Dr. Steve Ketchum, our Chief Scientific Officer to describe the timing of the REDUCE-IT study and some of the reasons why we believe that the study will be successful. Craig?

[Craig Granowitz:]

Thank you, John. In the United States alone there is more than one death every 38 seconds from cardiovascular disease, a total of nearly 800,000 deaths per year. These numbers are on the rise. Also on the rise is the tremendous cost of treating cardiovascular disease, often while conducting a long clinical study, the patient population being studied becomes less relevant as treatment patterns change and new therapies come on to the market. In the case of REDUCE-IT, the population has actually increased since the study was initiated and the population continues to expand due to multiple factors including increased prevalence of obesity and diabetes. The American Heart Association estimates that the cost of care in the United States alone for cardiovascular disease will exceed $1 trillion a year within two decades. Heart attacks, stroke and other interventional procedures for cardiovascular disease are expensive. This is a healthcare crisis. Cardiovascular disease is the most expensive disease area and the number one cause of death in the United States. It is current responsible for more deaths in the United States than all cancers combined. This crisis affects families, friends and neighbors, and it's not an easy crisis to solve. Since 1987, statin therapy has been successfully advanced to lower bad cholesterol and lowers cardiovascular risk. Over the years, statin therapy has become more potent and other alternatives have been introduced to further lower bad cholesterol. We have learned that lower is better regarding bad cholesterol. However, even with well-controlled bad cholesterol tens of millions of patients remain at high risk for cardiovascular disease. Following the success and improving cardiovascular health via lowering bad cholesterol, focus shifted to raising good cholesterol. Unfortunately, after extensive study raising good cholesterol alone has not shown to have an added clinical benefit. Remaining targets for potentially lowering cardiovascular risk beyond diet, exercise and therapy to lower bad cholesterol potentially include therapy to lower triglycerides or other atherogenic biomarkers and therapy to lower inflammation and other factors associated with arthrosclerosis. I was quite impressed to learn two years ago when I joined Amarin from Merck about the extensive scientific research that Amarin has pioneered in these areas. Hopefully, via the REDUCE-IT study, we will later this year learn that Vascepa can help lower the cardiovascular risk for the potentially tens of millions of patients, who with elevated triglycerides remain at high cardiovascular risk despite well-controlled bad cholesterol. The population being studied in REDUCE-IT with well-controlled bad cholesterol, but other CV risk factors and without potential benefits of Vascepa was assumed in the design of the study to incur major adverse cardiovascular events at a rate approximately 5% per year. At the American Heart Association's Annual Scientific Sessions this past November, data were presented from two major managed care providers over a recent five-year period. These analyses demonstrated the following. The rate of major adverse cardiovascular events in the elevated TG statin-treated patient population being evaluated in REUCE-IT was comparable to the projected event rate for such patients in the actual study. And that these patients compared with statin-treated patients without elevated triglyceride levels had considerably higher rates of major adverse cardiovascular events. For example, the rates of myocardial infarction were more than 30% higher with a cost of care approximately 15% higher. This is clearly a patient population which needs help. These are the types of patients being studied in REDUCE-IT. In the REDUCE-IT study, patients with well-controlled bad cholesterol and one or more risk factors for heart disease, including mean and median triglyceride levels above 200 milligrams per deciliter for patients screened, qualified and randomized into the study. Our aim is to demonstrate that Vascepa can lower the rate of major adverse cardiovascular events, abbreviated as MACE in these patients. We are pleased that Vascepa is as we like to say a pragmatic therapy designed for use in potentially tens of millions of patients. Vascepa is affordably priced, well tolerated, orally administrated and has placebo like safety profile. Assuming that REDUCE-IT is successful, Vascepa could one day be used in appropriate patients in conjunction with statin therapy and could potentially benefit tens of millions of patients to help prevent the pain and loss, not to mention the high cost associated with cardiovascular disease. Such preventative care could be a huge benefit to patients, their families, caregivers, society at large, and of course, Amarin. I very much look forward to learning the results of the REDUCE-IT study. I now turn it over to Steve to discuss our path to such results. Steve?

[Steven Ketchum:]

Good morning, everyone. Echoing comments in today's press release, I first want to express my appreciation for the patients in clinical sites involved in the REDUCE-IT cardiovascular outcome study, together with the tireless efforts of Amarin's employees, consultants and contract research staff involved in this potential landmark study. As you likely know, the first patients enrolled in the REDUCE-IT study were enrolled in late 2011, over 6 years ago. This 8,175 patient outcome study is evaluating whether treatment with Vascepa reduces cardiovascular events in patients, who despite stabilized statin therapy have elevated triglyceride levels and other risk factors for cardiovascular disease. If the REDUCE-IT results were successful as Craig described, this positions Vascepa to be able to potentially help tens of millions of at-risk patients. The medical community wants outcomes data. Most patients at high cardiovascular risk are not treated for risks beyond high bad cholesterol and diabetes. Our commercial team is looking forward to moving from the promotion of Vascepa based on biomarker data, which is our current emphasis, to promotion based on demonstration that Vascepa use lowers the incidence of major adverse cardiovascular events. Fortunately, we will have REDUCE-IT result soon. We are approaching the estimated onset of the targeted 1,612 patients with primary Major Adverse Cardiovascular Events or MACE in the study. As a reminder, we don't need exactly 1,612 patients to experience primary MACE in the REDUCE-IT study. Rather, the statistical powering of the study at 90% power to detect a 15% relative risk reduction, was calculated at the start of the study, based on 1,612 patients experiencing a primary MACE. The statistical power of the REDUCE-IT study will be relatively little impacted if at the end of the study we have slightly fewer or slightly greater than 1,612 patients with primary MACE. In fact, given the timing for identifying, documenting and adjudicating events, combined with the timing for completing patient final site visits, it would be a surprise if we ended up with precisely 1,612 patients with primary MACE in the study. At this point, the timing of study completion is covered not by the accumulation of MACE, but by operational challenges consistent with the wrap up of any major outcome study. The clinical sites in the REDUCE-IT study are actively scheduling the remaining living patients in this study for their final site visits. We, together with our contract research organization are working to train the clinical sites to ensure that the clinical sites collect the needed data at these final patient visits, and get the data promptly and accurately recorded in the database. This is not a small undertaking, as this study is being conducted at approximately 450 clinical sites across 11 countries. Final patient site visits include blood work and comprehensive review of each patient's health status. Clinical sites are motivated to complete final patient visits during the months of March and April. Once each patient completes his or her final visit, they will no longer be active in the study and they will discontinue use of their Vascepa or placebo study drug. MACE experienced after that patient's final visit will no longer count towards the primary data being accumulated in the study. In parallel, patients who have not yet completed their final visits will remain active in the study. If an active patient experiences a MACE, then the event will ultimately upon formal adjudication be included in the accumulated total of MACE for the study. We are working with an experienced Contract Research Organization or CRO and we are working with experienced and thoughtful clinical sites. Extensive effort is being made to complete the final patient visits as soon as possible. This is sometimes complicated by the severe health condition of patients or by patients who move their residence. It is these types of challenges that we are reviewing with clinical sites in advance of the first patients being scheduled for their final site visits on March 1. After the patient's final site visits, data from those visits is added to the study's database. We have accumulated over 33,000 patient years of study during the term of the REDUCE-IT study. Once the data from the final site visits are added, data cross-checks will be fine-tuned to identify missing data or data which may have been improperly inputted. Unfortunately, we won't be able to adequately quantify the scope of data which needs to be cleaned until this final patient visit data is added. It is the required time to follow up on and clean this data, which could become the greatest variable with respect to the database becoming locked. Until the database is locked, Amarin will remain blinded to the clinical trial data. Based upon the experience of our CRO and review of the wrap-up phase of other large outcome studies, we believe that we will have top-line results from the REDUCE-IT study to report before the end of Q3 of this year. After reporting top-line results, our aim will be to have a presentation of the data around a major medical congress ideally in Q4 of this year with corresponding publication of the results. Clearly, this is an exciting time regarding the REDUCE-IT study. Clearly, it is also a very busy time with much work to be done to help ensure that the results of this study are as robust as possible. I am often asked why I believe that the REDUCE-IT study will be successful. While I can cite extensive data from epidemiological, clinical and genetic studies which support the basis for my confidence in positive study results, it is the totality of this data and the consistency of this data, which gives me the most confidence. In the Investor Relations section of Amarin's website at www.amarincorp.com, we reference numerous scientific publications. Some of these publications pertain to the correlation between elevated triglyceride levels and CV risk. Some of these publications pertain to the correlation between other atherogenic biomarkers and CV risk. And some pertain to the effects of the active ingredient in Vascepa on endothelial cell function, inflation, coronary plaque formation and other processes associated with arthrosclerosis. It is the aggregate of this data, which gives me the most confidence. As a point of distinction, the REDUCE-IT study is designed to evaluate the effect of Vascepa on lowering the incidence of MACE. This was noted in the design paper for the REDUCE-IT as authored by Dr. Deepak Bhatt, the principal investigator for this study. A copy of which is also on our website. This study is not designed to evaluate how much of this potential lowering of MACE is derived from lowering of triglyceride levels versus improving atherosclerotic process versus any of the other potential health benefits delivered by Vascepa. It is the totality of these potential benefits which matters most and which is being evaluated in REDUCE-IT. Key elements of the design of the REDUCE-IT study are that, we are studying a patient population which is at high risk for cardiovascular events. We are using a unique drug in Vascepa, which for example doesn't result in increased bad cholesterol. We are using a high daily dose of Vascepa in order to have significant effect on lipid, lipoprotein and other biomarkers associated with cardiovascular health and Vascepa has a safety and tolerability profile which supports its prolonged daily use at 4 grams per day. These factors differentiate REDUCE-IT from all prior studies. The unique efficacy and safety profile of Vascepa differentiates it from all other therapies. Other parties have researched or are researching whether Omega-3 fatty acids help reduce the incidence of cardiovascular events, but most of the study is being performed or using 1 gram a day of a mixed EPA DHA product. We applaud the attention these parties are giving to this important area. We believe that 4 grams a day of a pure EPA will net more positive benefits than lower doses of mixed Omega-3 products and will do so without raising bad cholesterol. I am very proud to be working on such an important potential game-changing study and I look forward to reporting the REDUCE-IT results to you later this year. Let me now turn the call over to Mike Kalb, our Chief Financial Officer for further comment. Mike?

[Michael Kalb:]

Steve, thank you. As mentioned at the start of this call, both our 2017 annual report on Form 10-K and today's press release can be found on our website. They contain discussion of our fourth quarter and full year financial results, including some detail, which go beyond the highlights I will cover in this morning's call. All four quarters of 2017 resulted in strong growth over the corresponding quarters of the prior year. While John mentioned full year net product revenue in 2017 increasing to $179.8 million, I want to add that our fourth quarter 2017 net product revenue will also set a record quarterly high for us by increasing to $53.5 million. Our 2017 net product revenue growth reflects increased Vascepa prescriptions volumes, particularly from the physicians called upon by our sales team. Net pricing in 2017 was relatively flat and the impact of shifts in wholesaler inventory levels was not significant with wholesalers ending 2017 with Vascepa inventory levels that were consistent with industry norms. With respect to revenue guidance for 2018, we continue to believe that the measurement of Vascepa growth compared to corresponding periods of the prior year. It's a better measure of our progress than evaluating consecutive quarter growth. We emphasize the value of comparisons year-over-year quarters, because in the United States we continue to experience and anticipate seasonal effects such as typical slower prescription levels in Q1 of each year as patients are slow to fill prescriptions when they encounter large annual deductible amounts under their medical insurance plans. Guidance for 2018 is further complicated by our inability to accurately predict to relative risk reduction demonstrated by Vascepa and the REDUCE-IT trial or the precise timing of the results of the REDUCE-IT trial. Accordingly, our guidance for 2018 is based on our current promotion of Vascepa. On that basis, we anticipate net product revenue in 2018 to increase to approximately $230 million, an increase of approximately $50 million over 2017. We anticipate this growth to be fueled by continued increase prescription growth for Vascepa with net product pricing continuing to vary slightly from quarter-to-quarter, but generally remaining flat. We will revisit this revenue guidance after the results of the REDUCE-IT study are known. Gross margin from net product revenue improved to 75% in both Q4 and for the full-year ended December 31, 2017. While we may see some slight improvements in gross margin in 2018, for the most part we anticipate our gross margin from net product revenue to remain little changed until sales volumes get much higher. At which point gross margins could approach 80% but are most likely remain in the 70s. Selling, general and administrative or SG&A expenses for Q4 2017 were $35.6 million, an increase of $4.4 million over Q4 2016. SG&A expenses for full-year 2017 were $134.5 million, an increase of $23.3 million of 2016. These expense levels will include $3 million and $11.8 million of non-cash compensation expenses in Q4 2017 and for the full-year 2017 respectively. Excluding these non-cash costs, SG&A expenses increased $4.2 million and $22.7 million in Q4 2017 and for the full-year 2017 compared to the corresponding periods of 2016. These increases were due primarily to increased promotional activities, including commercial spend to prepare for anticipated expansion following successful REDUCE-IT results, and increased legal costs. For 2018, we increased our sales force from approximately 135 sales reps, which we had in place for most of 2017 to approximately 150 sales reps. After REDUCE-IT results, assuming study success, we planned promptly move to increase the size of Amarin sales team to 400 to 500 sales reps. We anticipate that will require approximately 90 days to hire, train and deploy these added sales reps, such that their impact on 2018 prescription levels is likely to be limited. Our co-promotion partner, Kowa, the schedule for continue working with us to support Vascepa prescription growth throughout 2018. This agreement with Kowa was intentionally schedule to expire at the end of 2018 to provide us with flexibility and determining how best to promote Vascepa after REDUCE-IT results. In accordance with the terms of our agreement with Kowa, we pay them a co-promotion fee, which is calculated as a percentage of gross margin. This fee rate increases slightly in 2018 with the cost recorded as part of SG&A expense, but is likely to be increased more by the impact of increasing Vascepa revenue levels. In addition, as incentive for Kowa to continue to actively promote Vascepa throughout term of the agreement. We owe Kowa a tell-fee [ph], which is calculated of the total co-promotion fee amount earned by Kowa in 2018. This tell-fee, the aggregate of which is less than the full fees Kowa bored in 2018 will be paid in installments over 2019, 2020 and 2021, but include as part of the SG&A expenses in 2018. In addition, our SG&A expenses in 2018 are likely to increase as a result of the pilot Vascepa awareness initiative that John described earlier, at a cost of approximately $15 million to $20 million. Overall, our SG&A costs to remain subject to quarterly variability. Research and development or R&D expenses for Q4 2017 were $11.9 million, an increase of $1.8 million over Q4 2016. R&D expenses for full-year 2017 were $47.2 million, and $2.8 million decline compared to 2016. These R&D costs include $1.5 million and $2.1 million of non-cash compensation expenses and Q4 2017 and for the full-year 2017 respectively. Excluding these non-cash costs, R&D expenses increased $1.8 million in Q4 2017 and decreased $2.7 million for the full-year 2017 compared to the corresponding periods of 2016. Most of these R&D expenses pertain to the REDUCE-IT study with variability of spending levels based on timing of REDUCE-IT related activities. In 2018, we anticipate R&D expenses to continue to be variable and generally between $10 million and $15 million per quarter. This level of spending is likely to continue until the study is completed and published. Realized savings after patients in the study complete their final study visits are anticipated to be offset by costs of preparing for publication the results, and other activities intended to support robust reporting and presentation of results from the first ever study of the large at risk patient population being evaluated in REDUCE-IT. As previously guided, Amarin incurred a provision for income taxes in 2017 of $13 million, the majority of which was non-cash. As of December 31, 2017, Amarin reported cash and cash equivalents of approximately $73.6 million. This balance was augmented by approximately $65 million in net proceeds from an equity financing transaction completed in February 2018. Amarin believes that these resources will be sufficient to fund our projected operations through results of the REDUCE-IT study, which we anticipate will be available before the end of the third quarter 2018 and assuming the positive results of the REDUCE-IT study throughout subsequent public presentation of such results at a medical congress as anticipated before the end of 2018. The extent to which, if any, additional capital may be needed to expand promotion of Vascepa following REDUCE-IT results cannot currently be determined. In some respects, the more favorable the results are from REDUCE-IT, the greater the amount that the company may determine it is best to spend on product promotion. During the period of 2018 that is prior to REDUCE-IT results, the company expects to be net cash flow positive, excluding interest, royalties and payments for REDUCE-IT R&D and other costs incurred mostly medical affairs and supply-related expenditures in preparation for positive REDUCE-IT results. However, these results will continue to vary from quarter to quarter, including, as seen in prior years, the impact of certain annual payments in Q1, which will likely result in Q1 2018 net cash outflows exceeding those in Q4 2017. As of December 31, 2017, the company also had $45.3 million in net accounts receivable, $57.8 million in gross accounts receivable before allowances and reserves and $30.3 million in inventory. I'll now turn the call back over to John for closing remarks. John?

[John Thero:]

Thank you, Mike. I want to take this opportunity to thank our shareholders for your support and our employees for their great contributions. We have a considerable amount of work to do before and after the REDUCE-IT read out and I know the team is up to the challenge. Overall, 2017 was a terrific year. We have every expectation that 2018 will be an even better year. We look forward to updating you along the way. With that, we conclude our prepared comments and would like to open the line to some questions. Operator?

[Operator:]

Thank you, sir. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question today comes from Louise Chen of Cantor Fitzgerald. Please go ahead.

[Jennifer Kim:]

Hi, this is Jennifer Kim on for Louise. Thanks for taking my question. I have a few here. My first one is what ranges do you have in mind for the 2018 revenue forecast in the different possible REDUCE-IT scenarios, so if it hits the primary endpoint, if it doesn't hit but it hits some secondary endpoints or if it doesn't hit any secondary endpoints? And then second, how quickly can you ramp up after REDUCE-IT results and how fast do you think uptake can be? Thanks.

[John Thero:]

Jennifer, good morning. John. Thanks for the questions. With regard to the first question, we're preparing for success and this maybe gets a little bit into your third question, it's what does can success constitute, because assume when we hit the primary end point with just little significance, do we hit that with 15% relative risk reduction as the trial is designed around? Do we hit it with a lower number, which given the [power in those] [ph] study, which is possible or do we hit it with a higher number which is - will have - equally possible. This is the first study ever in this population. I think there is considerable data suggesting support for a 15% relative risk reduction. Could argue there is considerable support greater than the 15% relative risk reduction. But we really don't know, because this is the first study ever of any therapy in the combination. We're very pleased that the unique profile of Vascepa positions us for success here. The rate at which we think that our revenues will grow will be heavily impacted by that relative risk reduction level. It will also be heavily impacted by our level of promotion. And our level of promotion will be different if we have a 25% relative risk reduction versus a 15% relative risk reduction versus, say, a 10% relative risk reduction. We think we grow substantially under all of those scenarios, but trying to predict the magnitude of it without knowing the details of the results within, that's - I think the top-line results really are what's key. But looking at some of the underlying results, how do we deal within the diabetic subgroups and some of the other subgroups could have importance. So we at this point in time are not giving quantified guidance on what those scenarios might be. In terms of scenarios, where for some unexpected reason, we don't hit the primary endpoint. Again, that's not where we think we'll end up. We'll have to see what those results look like before we can provide assessment for scenarios that we're not expecting. There are backups as we have described in this study. It's not all, but it's not all-or-nothing kind of results given the broad multiple - tens of millions of patients with elevated triglycerides and the difference in the medical conditions of these patients. But our focus really is to hit the primary endpoint and that is where we are concentrated. In terms of speed of ramp-up, our aim is to get the results out as quickly as possible. When we have the data we don't intend to sit on it for long. We tend to get it out to the public quickly. And then we intend to move very quickly to the presentation of those results at a medical congress and publication of those results in parallel. All that hopefully will be happening before the end of this year. Once we have results, assuming they are positive, we will move relatively quickly towards expanding our sales team. And we think it takes about 90 days to hire sales reps, train sales reps and deploy sales reps. We will have based upon the pilot promotional campaign that we're going to be launching here in the second quarter, we will have some better feedback on the effectiveness of advertising and from that we will be able to better fine-tune, to the degree to which we will be increasing our promotional spend through television and other media based upon those pilot results. Those types of spend, which would be initially off of our current label, because until you expand the label, you're not changing the label that's referenced in those kinds of promotions. Those kinds of promotions can be accelerated very quickly. But we want to see the results of the - of our pilot program. That's one of the key reasons for doing the pilot program. We'll see those results before we decide the magnitude to which we wish to increase that promotion. But that can be done pretty quickly in terms of the increase itself. I hope those comments are helpful. And you can appreciate why we're not quantifying guidance on a range of scenarios that are difficult to predict.

[Jennifer Kim:]

No, definitely. Thank you.

[Operator:]

Our next question comes from Joel Beatty of Citi. Please go ahead.

[Joel Beatty:]

Hi, good morning and congratulations on the revenue growth. The first question is with regards to the marketing program. If we do see the results are successful, do you anticipate that marketing messages could incorporate those results right away and physicians could prescribe it in the REDUCE-IT population right away? Or should we expect it to take some time to wait for, say, a label change or prepare guidelines to change before the revenue could ramp up with regards to the REDUCE-IT results?

[John Thero:]

Joel, good morning. Thanks for the question. So as part of the communication of the results, I mean, if they're as robust as we anticipate, we think that regardless of what are field reports are saying that, amongst key opinion leaders and physicians and hopefully the general public, this is a huge advance in preventative care for patients at risk for cardiovascular event. So we hope that that news will spread independent to what we're doing. We'll certainly through public relations efforts, try to make sure that people aren't paying attention - pay attention. As part of our current promotion of Vascepa, there are certain required disclosures that we have about conducting a cardiovascular outcome study. By the nature of those disclosures to the extent that an outcome study has been conducted, we will have to be doing some updating of our messaging. The specifics of how we will update our messaging are still to be worked out. Certainly, those updates would include caveats that results haven't yet been reviewed by the FDA. But as part of our current messaging there is a statement that it hasn't been studied, and we said it has been studied. We will have to be a sort of de facto providing some update. Again, the degree to which required an update depends upon the results and we'll have to see those results before we can make that final determination as to the extent to which we provide those updates. And do we do that right way, do we wait until after it's published in the fourth quarter, do we wait until it's after sNDA is submitted, we'll have to - got to see. Certainly, after the label is expanded there would be broad expansion. And during the process of seeking label expansion, we will be interacting with societies that provide guidelines to ensure that they are aware of these results. Many of the scientific members involved with setting guidelines in some of those societies, are certainly intimate with what we're doing in the REDUCE-IT study and very interested in the results of the REDUCE-IT study. So that the pace at which they will move will have to be seen as well. But we will be interacting early and often with those groups.

[Joel Beatty:]

Okay. Thanks for that perspective and then one follow-up question. It is a - typically, we see a little bit of a decrease early in the year for Vascepa sales. And I think you mentioned that a little bit in your prepared remarks. But could you talk about the dynamics, that you even seeing they go into that, and if it's comparable to what you've seen in previous years and what you might expect for the rebound to look like? Thanks.

[Craig Granowitz:]

Sure. So historically, and this is part - as you referenced, Joel, this is part of our guidance. Historically, we have seen seasonal differences in our - our trends in our product. In particular, in Q1, we found the results to be relatively soft. We reported on months that it'd be - looked at trends particularly soften sort of the January, February timeframe. As it relates to really beginning of the year, insurance for patients, the patients that are on Vascepa tend to be very sick patients. They are not just patients treated with Vascepa. They're often patients who are hypertensive, they may be diabetic, they've got elevated cholesterol, and many of them had previous cardiovascular events. There are a lot of different therapies and if they have - it seems increasingly popular under insurance plans beginning of the year deductibles of $1,000, $2,000, $3,000. And they go into fill their five or six prescriptions. What they may be used to be coming back with this five or six prescriptions each filled for $10 to $15 each. And all of a sudden they're coming back for the bill for $1,000 or more. They end up picking and choosing, what prescriptions they bill at that point in time. And something like a pain medication they're going to fill, something for asymptomatic conditions, if they are financially limited they may choose not to fill. So Vascepa and this is true for many drugs, particularly those for asymptomatic conditions doesn't mean the drugs are important, just that patients have to make consumer choices on where they're spending their money. They tend to not fill those prescriptions. We've seen this ever year for Vascepa, and then we see rebounds in scripts in March and particularly in Q2. So our guidance that we have provided for this year suggests that in fact we will have record revenues which in the first quarter will be a lower. We've talked about revenues in the first quarter probably somewhere between the $45 million to $48 million range. And then rebounding to $55 million or more in the second quarter, and we've urged people as they're thinking about modeling our revenues, that they think of it in a year-over-year basis as opposed to a consecutive quarter basis, from an investor perspective that we provided that guidance. Sometimes people want to pass. They're a bit surprised for Q1 is lower than - why exist on a consecutive basis when on a year-over-year basis it's still very strong and it rebounds in Q2, and people who had been disappointed in Q1 are roaring back into it and things is great. So I think we've seen those trends in the past. Q1 is not done, so I'm not providing - I'm not giving any specific sort of week to week guidance here on scripts in Q1 of this year. But that is the path off that we have seen in the past and it is something that we have guided to here for 2018. So thanks for the question.

[Joel Beatty:]

Okay. Thank you.

[Operator:]

Our next question is from Matthew Andrews of Jefferies. Please go ahead.

[Roger Song:]

Thank you for taking the question. This is Roger Song for Matt. So congratulations on the record revenue year. So we have two questions, the first one I leave it to the REDUCE-IT. So I know as Steve provided a pretty detailed plan for the analysis after the final revisits from the study. So can you just give us some more color about the timeline regarding each step after the final visit from the study?

[Craig Granowitz:]

Roger, good morning. Obviously, REDUCE-IT is a big area of focus. I'm sitting here next to Steve Ketchum, and he's just coming from Investigator Meetings with clinical sites that are very enthused to see with the results of the study are. But also clinical sites that recognized that there is a lot of work to be done here with bringing all the remaining living patients back in. A challenge, and this is not unique to this study, a challenge for any study, where you've got many patients at many clinical sites just to get all that data. And you were talking about over 33,000 patient years of study. That's a lot of data to be collected. We intentionally did some interim reviews to try to get data rolled up early. But when you get to the end of the study, you're still pooling in those final reports on patients. And those final reports including blood work, et cetera, it is very important data. And it is data that - and until you have it all into the database, you're not exactly sure what you're missing. I mean, we have lots of different reports and analysis that tries to identify pieces that are missing and give us sort of early reads on what you're chasing. But until the data is starting to roll up, you don't know if you got it all or whether there is inconsistencies that need to be cleaned, and with clean meeting - followed up to confirm that they were accurate, whether to see some of the data that are missing. So we're providing a lot of time to ourselves and through our very experienced CRO and providing instructions to the clinical sites on how to do this. But a key variable or the key variable relative to the time between our having patients start to coming for the final visits is getting all the patients in. It means all the patients, are there stragglers, trying to find, make sure we get them in, and then getting all the data together until you, and again, till you have the data rolled up we don't know exactly what you are missing. And then chase those missing pieces, get that cleaned and get that locked and until it's locked and Amarin doesn't see the data. So we are - we believe based upon the experience of other studies and based upon the guidance of our CRO, from their work in large multi-year, multi-national studies. But the timeframe that we've outlined is ample for getting this done. But there is a lot of work to be done and until the database is rolled up we can't assess whether that's amount of data that needs to be chased is small or large, but that's the key piece. In parallel, there is final adjudication of patients' events to be done, but the real time - dating timeline here is getting the patients in, getting the data in. Getting the data rolled up and cleaning it, find the holes, filling the holes and getting it a locked.

[Roger Song:]

Sure. That's very helpful. So my second question is, historically you have taken about annual price increase approximately 6%. So if reduces positive how much larger kind of price increase? If any, do you believe you can take without push back from payers?

[Craig Granowitz:]

So the payer question actually is a good one in the context of - we've seen other drugs that there haven't been major - hasn't been really a major advance in cardiovascular preventative care since statin therapy. But there have been advances such as PCSK9s, for example. And we think that lowers better on the LDL side. But we've also seen that from multiple studies of LDL cholesterol lowering that you can get it really lowering and still have significant residual risk, which is while we're doing we're trying to do. But unlike, say, PCSK9 that introduced to the market, A, with a high price and, B, without managed care coverage, when we have our results I think we are going to benefit from the fact that we've already have brought managed care coverage. We believe first and foremost that our opportunity is a volume opportunity. There are tens of millions of patients who potentially could be addressed by Vascepa if we're successful. And our - we're now trying to replace statin therapies for we think that statin therapies, Lipitor grew to, what, $15 billion, $16 billion, because, A, it worked and, B, it was affordable. And our pricing today is not too dissimilar to where branded statins were, or it's slightly below that. You're right; we have taken annual price increases. Those price increases have generally then given back through rebates and wholesaler fee, such that our net pricing has been generally flat now for the last couple of years. Our growth has been volume driven. And we believe that our growth after a REDUCE-IT success will be volume driven. Will we look at price? Sure, we'll look at price. But this is really a volume story. And I think as we sort of thought of it as a volume story. And at this point in time without having seen the results, our plan is for this to continue to be a volume story and to the extent we do anything on price, we'll evaluate at the time. But that's not going to be the primary driver of our growth.

[Roger Song:]

Got it, very helpful. Thanks you. That's it.

[John Thero:]

Thanks, Roger.

[Operator:]

There are no additional questions at this time. I'd like to turn the call back over to John Thero for closing remarks.

[John Thero:]

Folks, thanks again. Less than 7 months to REDUCE-IT results. People here are working very hard towards that. In parallel, we believe that we're going to continue to grow our commercial business. Exciting times here. We appreciate your interest and support. And we look forward to providing you updates as we move forward. Have a great day.

[Operator:]

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