Q3 2016 Earnings Call Transcript

Published: 4 Nov 2016

[Operator:]

Greetings, and welcome to the Amarin Corporation Third Quarter 2016 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. I would now like to turn the conference over to your host, Gene Mack, Executive Director of Investor Relations for Amarin. Thank you. You may begin.

[Gene Mack:]

Welcome, and thank you for joining us today for Amarin's third quarter 2016 results conference call. 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, perceivable product and licensing revenues, the impact our recent product line extension, cost and other commercial metrics, gross margin, expenditures and the adequacy of our financial resources, our current expectations regarding pending or ongoing litigation; regulatory reviews and government agency decisions, our current expectations regarding our cardiovascular outcome study, such as the timing of interim looks, study completion, regulatory review and likelihood of success, our plans and preparation for expanded promotion of Vascepa, our plans to protect the exclusivity and commercial potential of Vascepa, our goals regarding the timing and scope of international expansion and other business development opportunities, 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 3, 2016. 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 other 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 the quarter ended September 30, 2016. These documents have been 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 sub category of Events and Presentation, 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'll now turn the call over to John Thero, President and Chief Executive Officer of Amarin.

[John Thero:]

Thank you for joining us today and good morning. In our prepared remarks, we will comment on the Amarin’s recent commercial, operational and financial performance, and then take questions from analysts and investors. The dedication and focused execution of our team during Q3, again resulted in a greater than 50% in normalized prescriptions compared to the corresponding quarter of the prior year. Our product revenues from Vascepa were $32.4 million and $90.6 million for the three and nine months ended September 30, 2016, representing increases of 52% and 66% respectively over the corresponding periods of 2015. We are confident that Vascepa revenue growth will continue. As previously guided, we expect our full year 2016 net product revenues to be between $112 million and $125 million. We now believe that our results to the full year will be in the upper half of that range. In Q3, prescription growth of 54% and 56% over the same quarter of last year as reported by Symphony Health Solutions and IMS respectively are slightly stronger than our reported revenue growth. This is due primarily to ordinary course changes in inventory levels at wholesalers. You may recall that in our Q2 results, we quantify the incremental impact of wholesaler inventory levels as increasing reported Q2 revenues by approximately $2.9 million to $3.2 million. In Q3, the reverse happened, and our reported revenues were impacted by an estimated $0.5 million to $800,000 decline in wholesaler inventory from the start of the quarter calculated on a day of sales on hand basis. We anticipate that this quarter-to-quarter variability between the timing of wholesaler purchases and prescriptions will continue. Net product pricing in Q3 2016 was little changed from Q2 of 2016 and slightly higher than Q3 of last year. New prescription growth continues to outpace overall prescription growth. This is a positive leading indicator for future growth. Amarin's market share continues to increase with considerable opportunities for further growth. Our share of the nonstatin lipid modifying market while growing is only approximately 4%. Our share of the omega-3 prescription market is also growing and is currently slightly above 20%. Moreover, greater than 90% of patients with risk factors for vascular disease, who might benefit from lipid modifying therapy beyond statins received no additional prescription lipid modification therapy. While many physicians are proactive in prescribing lipid modifying therapy to their patients, even these physicians cite the need for outcomes trial data while other physicians are less active in their prescribing habits due to the absence of proven outcome study results. While we are confident that we can continue to grow Vascepa prescriptions based upon our current promotional programs and enhancements to such programs, the large medical need and opportunity presented by the REDUCE-IT cardiovascular outcome study has never been clearer. We commenced the REDUCE-IT study approximately five years ago. Enrollment in this important study is complete at 8,175 patients, all of whom have been randomized on a one-to-one basis to Vascepa plus statin therapy or placebo plus statin therapy. Thus, far over 23,000 patients' years of study have been accumulated in REDUCE-IT. We are now approximately a year away from the onset of the target 1612 cumulative primary cardiovascular event in the study which is the target for study completion. We are increasingly preparing the company for expanded promotion of Vascepa, based upon our anticipated success in the study. Such preparations include planning for sales force expansion, exploring potential advertising and public relation opportunities and increasing inventory levels. While some of these activities, such as beginning to increase supply purchases will add some cost over the coming quarters, including a few million dollars of anticipated added spending in Q4, the larger cost of hiring, expanded sales force or broadly advertising Vascepa will primarily wait after the results of their REDUCE-IT study are available and public. Prior to target completion of the REDUCE-IT study, there will be an interim efficacy and safety analysis, and review by the independent data monitoring committee or DMC at approximately 80% of the target aggregate number of primary cardiovascular events in the study. We anticipate that this analysis will occur in the third quarter of 2017. This will be the second of two, pre-specified interim efficacy reviews. As intended have been over a dozen periodic safety reviews by the DMC. The first interim efficacy review was completed on schedule and without any surprises. In September, we announced that the DMC concluded the first interim efficacy analysis, together within an interim safety analysis of REDUCE-IT. Such analysis were based upon the occurrence of approximately 60% of the targeted primary events. As expected, based upon these analysis, the DMC recommended that the trial continue as planned without modification. While this was the expected result for the 60% interim look, we view this result to be positive, both because it was executed as intended and without surprise, giving us further confidence in the study, design and execution and because approximately 60% of the primary cardiovascular events data is now locked down, which should help mitigate the risk of delay in finalizing the data at the end of the study. Based upon historical event rates, Amarin anticipates that the onset of approximately 80% of the primary cardiovascular events in the study will occur in the first half 2017, with a second free specified interim efficacy and safety analysis by DMC expected in the third quarter of 2017. As is typical of interim analysis, the statistical threshold for defining over whelming efficacy on the primary end point that would call for stopping this study early in connection with the such an analysis is considerably higher than the threshold for defining statistical significance after the expected completion of the study. Accordingly, Amarin continues to expect that the 80% interim analysis will result in a recommendation by the DMC to continue to reduce its study as planned to completion of 100% of the 1612 planned primary cardiovascular events. While REDUCE-IT continue to proceed as planned, we are often asked to interpret DMC's decision to continue the trial without modification. We want to remind our audience that Amarin remains blinded to results of this ongoing study, including to any and all efficacy data and interim key values achieved. Our interpretation is that we have robust study design and that the results of the interim look was expected for the study. REDUCE-IT is the first blinded multinational study of any drug therapy in treating patients who despite statin therapy have above normal triglyceride levels and other risk factors for cardiovascular disease. Continuing the study beyond 60% provides added power towards achieving a robust study result. In Q3, in addition to achieving continued increases in Vascepa revenues, combined with continued advancement of our REDUCE-IT cardiovascular outcome study, we also solidified our financial condition. We did this by continuing to control our spending, resulting in net cash used in operations in Q3 excluding REDUCE-IT costs, interest and royalties of approximately $2.7 million. The company remains on track to be cash flow positive on this basis in 2017. In Q3, we also completed an equity financing, resulting net proceeds of $64.6 million and eliminated $150 million in faced [ph] amount of debt by triggering a pre-defined exchange of the debt for equity. The primary purpose of the equity financing was to give Amarin the resources to fund REDUCE-IT to completion. The debt exchange, in addition to removing a substantial debt obligation, removes annual interest payments of over $5 million on the debt. We appreciate the support of our investors and we work diligently to use our cash resources productively and efficiently. Recently, after Q3 we introduced a smaller half gram capsule size for Vascepa as an alternative for a subset of patients who prefer a smaller capsule. While our market research suggest that the majority of patients taking Vascepa will continue to prescribed the one gram sized Vascepa capital, we are pleased to introduce the first and only half gram prescription omega-3 available. As previously discussed, because Vascepa addresses a chronic patient, uptake tends to occur over a more prolonged period of time than for therapy addressing acute conditions. Therefore we are not modifying our revenue guidance based on this product line extension. We are confident that the smaller capsule will be preferred by some patients and our sales force is clearly pleased to have this further differentiation to present to healthcare professionals. However it's too early to quantify the extent to which this increase will affect our overall revenues. Finally, we are pleased that managed care coverage for Vascepa, which has been good in 2016 is positioned to be even better for 2017. Most of our managed care contracts are in place for 2017, and while such contracting is fluid overall, we are positioned to have more lives covered in 2017 with the vast majority such coverage providing patients with unrestricted coverage. I would now like to turn the call over to Michael Kalb, our Chief Financial Officer for further review of our financial results. Mike?

[Michael Kalb:]

Thanks John. As Gene mentioned at the start of the call, both our most recent 10-Q 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 will cover in this morning’s call. Overall the third quarter was another strong quarter for the Company and both our quarterly and year-to-date results underscore the substantial growth that the Company has experienced since last year. During the third quarter, Amarin’s net product revenue increased to $32.4 million, a 52% improvement over the $21.3 million reported for the third quarter of 2015. This brings net product revenue for the first nine months of the year to $90.6 million compared to $54.6 million for the first nine months of 2015, an increase of 66%. The core driver of our year-over-year increases in net product revenue was continued growth in new and recurrent Vascepa prescriptions. As John mentioned, total normalized Vascepa prescriptions in Q3 increased at a higher percentage rate than our reported product revenues compared to the corresponding quarter in 2015, due to variability in the level of inventories of our product held by wholesalers, which declined an estimated $0.5 million to $800,000 from the start of the quarter. During the second quarter of this year, we saw a decrease in wholesaler inventory levels compared to first quarter. In the third quarter, this trend was reversed and wholesaler inventory levels decreased. As mentioned by days sales on hand. For the nine-month period ended September 30, 2016, we estimate that the net impact on product revenue of the overall increase in wholesaler inventory during that same period was approximately $900,000 to $1.2 million. As you can appreciate, our and other manufactures product revenues tends to fluctuate as wholesalers evaluate their own overall product mix and related inventory levels, which may not always directly reflect the prevailing script growth trends of specific products such as Vascepa. In addition to product revenue, you will note we recognized licensing revenue of $300,000 in the three months ended September 30, 2016 and $800,000 for the nine months ended September 30, 2016, related to agreements for the commercialization of Vascepa outside the United States. Most of this licensing revenue came from amortization of the initial $15 million we received upon entering into our agreement with Eddingpharm for China. Also included is the amortization of deferred revenue related to our agreement with the distributor for Vascepa in the Middle East and North Africa. Gross margins improved 74% during the third quarter and 73% overall for 2016 to date. This compares favorably to the 65% and 64% gross margins for the comparable periods in 2015. This improvement continues to be driven primarily by lower active pharmaceutical ingredient cost. Selling, general and administrative or SG&A expenses in the nine months ended September 30, 2016 and 2015 were $80.1 million and $77.5 million respectively. The increase in SG&A expenses primarily reflects an increase in co-promotion fees payable to Kowa. Research and development expenses in the nine months ended September 30, 2016 and 2015 were $39.8 million and $37.7 million respectively. This increase in expenses was primarily driven by quarterly variability and cost related to the REDUCE-IT study. Under GAAP, Amarin reported a net loss applicable to common shareholders of $15.8 million in the third quarter of 2016, or basic and diluted loss per share of $0.08. This net loss included $3.4 million in non-cash stock based compensation expense and a $3.6 million non-cash gain on the change in fair value of derivatives. Amarin reported a net loss applicable to common shareholders of $32.3 million in the third quarter of 2016, or basic and diluted loss per share of $0.18, which included $3.9 million in non-cash share based compensation expense, a $200,000 non-cash loss on the change in fair value of derivatives and a $1.6 million charge for a non-cash deemed dividend for accounting proposes. Under GAAP, Amarin reported a net loss applicable to common shareholders of $58.9 million in the nine months ended September 30, 2016 or basic and diluted loss per share of $0.31. This net loss included $10.4 million in non-cash stock based compensation expense and an $8.2 million non-cash gain on the change in the fair value of derivatives. For the nine months ended September 30, 2015, Amarin reported a net loss applicable to common shareholders of $127.2 million or basic and diluted loss per share of $0.71. This net loss included $10.2 million in non-cash stock based compensation expense, $400,000 million non-cash loss on the change in the fair value of derivatives and $33.9 million in charges for non-cash deemed dividends for accounting purposes. Excluding non-cash gains or losses for stock based compensation, change in fair value of derivatives and the non-cash deemed dividend, non-GAAP adjusted net loss was $16.0 million for the third quarter of 2016, or non-GAAP adjusted basic and diluted loss per share of $0.08 compared to non-GAAP adjusted net loss of $26.5 million for the third quarter of 2015 or non-GAAP adjusted basic and diluted loss per share of $0.14. Excluding non-cash gains or losses for stock based compensation, warrant compensation, change in fair value of derivatives and the non-cash deemed dividends, non-GAAP adjusted net loss was $56.7 million for the nine months ended September 30, 2016 or non-GAAP adjusted basic and diluted loss per share of $0.29, compared to non-GAAP adjusted net loss of $82.8 million for the nine months ended September 30, 2015, or non-GAAP adjusted basic and diluted loss per share of $0.46. Amarin reported cash and cash equivalents of $117.6 million as of September 30, 2016. The cash balance includes $64.6 million in net proceeds from an equity financing completed in August. During the quarter ended September 30, 2016, net cash used in operating activities, including REDUCE-IT costs was $18.7 million, or as John mentioned approximately $2.7 million excluding REDUCE-IT costs, interest and royalties. We referenced net cash flow without cost of REDUCE-IT interest and royalties, nor does it substitute for managing our overall cash flow, but rather is the measure of the progress of our commercial business, which is tracking to be cash flow positive in 2017. As of September 30, 2016, the Company had $17.5 million in net accounts receivable and $19.8 million in inventory. As of September 30, 2016, Amarin had approximately 269.2 million American depository shares for ABS's [ph], and ordinary shares outstanding, 32.8 million common share equivalents of Series A convertible preferred shares outstanding, and approximately $21.2 million equivalent shares underlying stock options at a weighted average exercise price of $3.36, as well as 10.3 million equivalent shares underlying restricted or deferred stock units. I will now turn the call back over to John for closing remarks. John?

[John Thero:]

Thank you, Mike. Looking ahead, there will be an oral presentation at the American Heart Association Annual Scientific Sessions later this month on the results of the anchor study in women. Also in Q4, Amarin will be presenting at or attending meetings at the Jefferies Global Healthcare Conference in London and at the Piper Jaffray and Citi Bank Investor Conference's, both of which are in New York City. A hallmark of our progress has been our focus and execution. Our primary goals remain growing revenues from Vascepa and successfully executing on the REDUCE-IT study, while operating cost effectively and opportunistically. This is exciting time in Amarin. We are pleased that Vascepa is currently being used to help over 100,000 patients, of which I am one, and motivated that the onset of the target 1,612 primary cardiovascular event in REDUCE-IT is now only about a year away. We look forward to providing you with continued updates on our progress. With that we conclude our prepared comments, and will like to open the line to some questions. Operator?

[Operator:]

Thank you. At this time, we will be conducting question-and-answer session. [Operator Instructions] Our first question comes from the line of Hugo Ong with Jefferies. Please proceed with your question.

[Hugo Ong:]

Just a couple of questions on the half of gram Vascepa pill. When you say a subset of patients who prefer the smaller pill, about how big of a percentage would you say that subset is?

[John Thero:]

So we have some markets out here and we have some anecdotal data. It's not a huge percent. I think in terms of trying to quantify it, it's somewhere between 1 in 20 and 1 in 30 patients have expressed challenges with swallowing the one gram capsule. That doesn’t mean that with the availability of something that's smaller, that a higher percentage might not decide it's preferable to them. But in terms of a sort of attempt at quantification, it's somewhere in that range.

[Hugo Ong:]

Okay, got it. Just how has the long-term compliance of the one gram Vascepa pill been? And does your market research on the half a gram pill suggest you could have improved compliance?

[John Thero:]

Yes, so if we look at compliance, I'll look at in two ways. One is sort of average daily dose, and two is how long the patients say on the drug. Both are pretty good and when I define pretty good, I'm comparing it to other therapies, particularly other therapies for chronic use for asymptomatic indication, including statin therapy. So our typical prescription for Vascepa would be four brands per day. On average patients for taking about 3.5 grams. We are aware that some physicians do prescribe on occasion less than the 4 grams, and we're aware that some patients may forget pills from time to time. But 3.5 is pretty good for a daily average take. We think the data strongly suggest that taking the full 4 grams and getting the EPA levels and plasma up to levels that we saw in the JELIS study make a lot of sense, but nonetheless I think that that will make sense. 3.5 average is pretty good. In terms of patients standing on the drug, on average it's about six months, which is right in line with what we have seen for Laveza. It's also right in line, which was surprising to me a few years ago when I saw this, but since we're repeating, right in line with what you see in average for statin therapy, and there's a variety of reasons for that. And often we do see patients who have rolled off eventually come back on to the therapy. But I think both of those figures answer your question. And I hope they do anyway.

[Hugo Ong:]

Okay. No it's very helpful. And maybe could you comment on any progress with your collaboration with Eddingpharm with respect to the opportunity in China?

[John Thero:]

So in China the -- sorry just reflecting. I think I said close to six. It's probably closer to five relative to the average number of months on drug. For compliance again that's [indiscernible].

[Hugo Ong:]

Okay sure, okay.

[John Thero:]

Yes, so in China Eddingpharm with our support has completed all the filings needed to make request of China FDA as defined in the regulatory path going forward. We and they are anxious to get response from China FDA. One of the reasons we went with Eddingpharm was their record and experience relative to working products through the regulatory approval process in China. That being said, it's still maybe a bit of time before we hear back from China FDA. There are backlogs at China FDA which have been publicized that they're trying to shorten but nonetheless those backlogs exist. Once we do hear back from China FDA, it's anticipated that we'll have to fund it by Eddingpharm, conduct some study in China, probably study somewhat analogous to what we did with the MARINE and ANCHOR studies here in the U.S. which as a reminder, were studies that from start to finish were about a year in duration. We don’t have those answers yet from China FDA. When we do have greater clarity there, we'll let folks know. That being said, all the information is in and we're -- we think China FDA has what they need to get back. it's just a matter of waiting.

[Hugo Ong:]

Okay great and just one last question, on your gross margins, I believe you mentioned, it was about 74% and is mid-70s still and appropriate expectation going forward or do you believe there is potential for more improvement?

[John Thero:]

So we’re proud of improvement in gross margin that we’ve seen over the past year. As you remember, it was -- since we started not too long ago, it was in the low 60’s and then mid-60’s, and now we're into the 70s. That improvement has predominantly occurred as a result of your lowering of cost of API and manufacturing overall, through encapsulation and packing. And that's something that we’re continuing to push. We’ve also have modest net price increases. We remind you that this is a business that we are trying to drive based on volume much more than based upon prices, where see the opportunity. The manufacturing cost in this space are such that, we don’t ever anticipate margins getting into the 90s. We do think that as our volume grows and as our multiple suppliers continue to compete with each other and gain greater efficiencies, that we could see some greater increase in margins, our for revenues working towards get to -- into billions range, that could creep into the 80s but I think sort of modeling it in the 70s makes sense. You may see a little of that inching up here but, as we continue to focus on ensuring that we produce a very high quality product, margins somewhere in the 70s in about the range that we're currently at for the near term is probably the right way to look at it.

[Operator:]

Thank you. Our next question comes from the line of Joel Beatty with Citi. Please proceed with your question.

[Joel Beatty:]

Regarding the REDUCE-IT trail and the interim analysis, I know you've guided in the past towards, the most likely outcome be in the trail going through the final analysis. However could you compare the likelihood of the trail stopping early for efficacy in second the interim analysis compared to the first one during the quarter?

[John Thero:]

Joe good morning thanks for the question. I’m here with Steven Ketchum who is overseeing that program and I'll let Steve jump in on that one.

[Steven Ketchum:]

So as you know just as our preparations for the 60% interim, our preparations for the 80% will be triggered by the anticipated onset of approximately 80% of the events, which we expect to happen in the first half of 2017, with the second interim analysis performed by the independent DMC in or around the third quarter of 2017. And similar to the prior interim analysis, there is an over whelming efficacy boundary it’s been pre-defined within the protocol and the accompanying statistical analysis plan that are agreed with FDA according to our special protocol assessment agreement, and that boundary, though it is lower than the boundary at the 60% interim analysis, is still a very high threshold relative to the boundary defined at the final analysis. And it’s also important, as we've previously communicated that we don’t just robustness on the primary endpoint, but that we see robustness and consistency and across a range of other endpoints and in sub groups, because we do want these results both in the efficacy and safety basis to be unequivocal to provide the strongest foundation from which they seek expanded labeling for Vascepa. So that's what guides our expectation that the DMC will recommend that we continue as planned.

[Michael Kalb:]

John just to add to that and emphasize, our guidance is we expect the trial and we go to completion. There has been heightened focus Joel, as you probably have seen on the triglycerides, sort of non-LDL lipids being sort of the next frontier in managing cardiovascular risk. There has been no study of any therapy done on a perspective randomized global basis and the population we're studying in REDUCE-IT. We think we have a very well designed study. It's been conducted in a time frame that's consistent with our expectations. We want to get this result right. We want to make sure that as the first study in this space the result is definitive and robust. So while there is provision at the 80% to look for stopping for overwhelming efficacy, we wouldn’t want to have it stop and then have people question what might have happened had we seen the resulting the 20% of the events. So obviously if it's unethical to continue at that point time in time, we feel that the study should stop but I just remind folks that this in in fact the fourth, that are fifth or sixth LDL study and this is the first in the space and it's a huge patient population and we want to make sure that we have a robust result and we're very pleased having with the five years and so studies have been started and long on that since the studies than designed and we disclose to the end. We don’t want to short cut it.

[John Thero:]

And the other benefit John of the interim analysis is of course it's a forcing function. It forces us to clean the data and get the data locked down. So having -- those activities are obviously key. We're doing other things so that we can compress the time frame to the final reporting and ultimate publication of the study results.

[John Boris:]

Okay, good. And one other question. Earlier in the call you mentioned your plans for increased supply purchases of Vascepa ahead of the REDUCE-IT results. Could you give a sense of the overall quantity you plan on purchasing before the results?

[John Thero:]

So one of the nice things about our product and the encapsulation of our product, it was mentioned quality earlier, is that we've got a very long shelf life for the API and as well as for the API encapsulated. So not to sound contradictory, with the with the last comments it's making about the trial likely to be running to conclusion. But there are some purchases that we were envisioning making from suppliers potentially in the second half of next year that we are moving forward a bit. The net of that non-cash is essentially net zero versus what we were previously planning but our -- given lead times and given possibilities for more rapid growth, our view is we should be bringing that -- some of that supply, some of that supply in earlier. In Q4 effect on cash is probably $3 million to $4 million on the supply side for doing that. We are still working on finalizing our plans for 2017. We will upgrade our guidance on that as we get into the new year. But this is largely sliding forward of activities, or purchases that were planned for later.

[Operator:]

Thank you. [Operator Instruction] Our next question comes from the line of Chiara Russo with Cantor Fitzgerald. Please proceed with your question. I am sorry, our next question comes from the line of John Boris with SunTrust Robinson Humphrey. Please proceed with your question.

[John Boris:]

First one for Steve. I think that you guys had considered publishing a trial design paper on REDUCE-IT. Any update on the status of when we might see that, and any additional publications that we might see on the product? Second question, just has to do with the cycling of the JELIS study. I think KOA [ph] started to promote that in around the February timeframe. Usually it takes a good five, six months to see any benefit from that. Can you maybe give some additional commentary around the penetration, not only within cardiologists but also within primary care? Third question, just has to do with formularies John. You commented that 17 formulary coverage would be better with a higher percent on Tier 2. Can you put some quantification around that? Thanks.

[Steven Ketchum:]

Yes John, to address the first question about the design paper for the REDUCE-IT study, so we continue to work. Dr. Craig Granowitz and I working very closely with our steering committee for REDUCE-IT. And now that we have somewhat recently -- re-agreed our special protocol assessment with the FDA which included an amendment to add 30 or more -- total now of 30 or more secondary and tertiary end points, we are working towards the goal. We don’t have a specific timeline to communicate at this point in time. But we have all the elements now agreed with FDA that would enable us to progress that publication in a timely manner. And as the other part of your question is, that’s part of an overall publication plan where we would have certain obviously aspects in the design paper, and then we're also mapping out the stream of publications and their various focal point and emphasis after that primary publication, which our goal would be to have a main stage late breaking Congress presentation in combination with the primary results publication, as many folks target in this situation.

[John Thero:]

And regarding sort of the marketing of the product, you were asking about, the promotion of the JELIS information in particular. For our salesforce, year-to-date as a reminder, we target just around 20,000 physicians with our specialty size, the sales force more representatives. Year-to-date in term of presenting of the JELIS data to our targets, just over about 40% of them have had three or more calls with that data, just over -- under 30% somewhere. 20% or so have had five or more calls with that data. KOA [ph] takes the approach of many more physician targets with lower frequency, and they got trained on the JELIS data after our sales reps did, and have spent some of this year or predominantly for talking about some of the anchorage data or otherwise just generally introducing Vascepa the physicians not familiar with the product. I don’t have quantification front of me relative to what [indiscernible] John in terms of number so calls but, I would overall continue to characterize it as being that we’re still in the relatively early stages of the introducing these broader, clinical results of both ANCHOR and JELIS to potential user of Vascepa. We’re pleased that the number of new positions prescribing Vascepa continues to increase. We’re also pleased that the physicians that we call on most frequently continue to increase their prescriptions and we see considerable room or opportunity of continued expansion of prescriptions across the board, new physicians as well our currently active targets. Formulary coverage in 2016 has been good. I think one of the challenges with respect to formulary coverage remains convincing physicians who are not familiar with the therapy, that the coverage is as good as it is. There is preconceived notions amongst physicians that particularly in a market where generic drug exists, so geez, the generic must be easier to access. The approval rate for -- at managed care in 2016 for our drug, versus generic, Laveza is neck in neck. So that’s one of our challenges, is to -- the data supports us by making sure that physicians respect and understand that. We are at a stage of coverage now that is in a range of what branded Laveza was before going generic. So when we talk about expanded coverage for 2017, mention that really in two regards. One because there's been a lot of publicity of late, of companies, particularly specialty drugs getting pushed back, narrowed in terms of their coverage. We’re not seeing that. We’re continuing to expand. But there is not a lot of expansion remaining. We’re adding some coverage for 2017 in accounts that were that had never covered Laveza, which we're very pleased with. I think the fact that it's not going backwards is an important point relative to others. The fact that it's expanding will be incrementally better, but it's not an overwhelming increase. So there's not room given over 140 million lives in tier two unrestricted to have overwhelming increases, but we continue to look for increases on the margin and particularly some of the four in a year [ph] accounts that can cast a shadow or cause headaches for the staff and physicians. It's nice to be chipping away at some of those. Operator, I don’t know if there's other calls in the queue. I know that a number of folks here before this call expressed that they needed to run on to other calls. So maybe we have for one more question.

[Operator:]

Yes. So our next question comes from the line of Chiara Russo with Cantor Fitzgerald. Please proceed with your question.

[Chiara Russo:]

Just some sort of quick hits. Can you just remind us if there is a futility analysis along with the safety analysis on these interim looks?

[John Thero:]

There is not futility analysis, no.

[Chiara Russo:]

And then secondly, within the KOL [ph] that you kind of speak, to what sort of is considered the clinically meaningful relative risk that you are looking at? I know that you are 90% powered for the 15%. Where do you think is sort of the lowest bracket for physicians saying hey this is going to be something that we're going to take your attention too?

[John Thero:]

Now when the improvement results came out, we had an opportunity to revisit that, because we had done variety of research early on, and we're hearing geez, anything in double digits would be terrific. We're aiming for higher but anything in double digits would be terrific. Then we saw the improved results came out around seven and that subsequently it sort of got understood and maybe really it wasn’t a true seven, But at seven there was some enthusiasm and we started hearing from docs yes, particularly given the safety profile that Vascepa has and the price point, you can do that, high single digits might be terrific and you will get use at that level. We're aiming higher than that. The trial is designed around detecting 15% relatively risk -- relative risk reduction. There is data out there suggesting that our results could be higher than that. But in terms of the feedback, adding double digit's, potentially high single digits could be clinically meaningful, particularly given the safety and tolerability and cost profile of Vascepa.

[Chiara Russo:]

And sort of last question here. There seems to be some changes going on within the market. Obviously Pfizer recently stopped their PCSK9 trial, and sort of the lack of impact with increased good cholesterol sort of staring to make the rounds, do you think these sorts of help your potential market opportunity if REDUCE-IT reads out positive as you guys could be in alternate therapy?

[John Thero:]

It's an interesting point. There was a conference recently in your city Boston where Peter [indiscernible] was talking about sort of next frontier in cardiovascular medicine being triglyceride management, essentially focusing on other lipids. We have never been a therapy that's LDL related. So we don’t consider ourselves to be in competition with PCSK9s. They are very high priced therapies. We know managed care has pushed back on those considerably, but that residual risk that hasn’t been addressed by LDL reduction. Those PCSK9s are really trying to get to those patients where, for whatever reason LDL couldn’t be controlled. But even where there is LDL control there is still very high -- even the best of the trials have suggested that there still 60% plus residual risk. And that’s the piece that we're trying to address. Statins are terrific. I think PCSK9s are terrific as well for the appropriate patients. But heart disease remains the number one cause of death. It's very expensive, lots of strokes, lots of heart attacks. So I think the decline in what's happening there just leaves more attention for voice more and I think the community is waking up to the fact that the direction that we're heading in makes sense. Dr. Craig Granowitz, who runs Medical Affairs for us and hopefully I think incorrect. Craig, is there anything you wanted to add to that?

[Craig Granowitz:]

Thank you John for the chance to comment, and Chiara, thank you for your question. It's a very important one. I think the latest data that's coming out has really put significant questions around HDL. As John said, LDL is being managed, but beyond LDL there is still significant risk. I think the field for many years was focused on HDL as the solution and as the answer. I think all of the data that’s come out, whether it's genetic, epidemiologic, and now clinical shows that HDL is not associated either with high risk or elevating HDL has any impact on cardiovascular outcomes. I think on the base of those data as John mentioned, people like Peter Libby [ph], other long time leaders in the field, many of whom were strong HDL advocates have come back and really now focused on high triglyceride base line as a very adverse marker. And that’s why REDUCE-IT is such a landmark study, because it is the first study that would be completed, an outcome study that is focused on the high TG, well-controlled LDL patient. And for that it's particularly important, and I think the field is now coming back to realize that as HDL falls by the wayside.

[Chiara Russo:]

Interesting. All right, great, thank you guys so much for talking the questions.

[John Thero:]

Thanks everybody for joining us here today. I appreciate the questions and the interest and we look forward to continuing to update you on our progress. Have a great day.