Last Updated on May 12, 2019 by Sultan Beardsley
Amarin PLC (AMRN) plans to announce its first quarter 2019 financial results and provide an operational update prior to opening of American markets on Wednesday May 1st at 7:30 ET. I am eagerly awaiting this update to see the progress management has made both on the regulatory and commercial front. This report has the opportunity to be a catalyst that could either go positively or negatively.
Amarin is a commercial stage biotechnology company whose lead asset is a differentiated fish oil derivative icosapent ethyl marketed as the brand product Vascepa. Currently, Vascepa is approved and marketed for the treatment of high triglycerides. Late in the first quarter, Amarin filed an sNDA with the FDA based on the results of the REDUCE-IT trial which were reported in the second half of 2018. The expanded indication of Vascepa is expected to be for patients with elevated triglyceride levels (fasting triglyceride level of 135 to 499 mg per deciliter) despite the use of statins. The sNDA has been acknowledged by the FDA, however Amarin and investors are waiting to be informed if the FDA will accept and assign review of the sNDA either the standard 10 month review or a priority 6 month review. This typically happens 60 to 74 days after submission of the sNDA. Amarin retains the rights to Vascepa in Europe at present time.
As seen in Figure 1, the quarterly prescription numbers have consistently grow in each consecutive quarter, with the exception of a flat period from the 4th quarter of 2017 to the 1st quarter of 2018. The most rapid growth was from the 3rd quarter of 2018 to the 4th quarter of 2018, which corresponds with the quarter in which the REDUCE-IT results were released. Despite these consecutive quarterly growth, this has not always translated into consecutive quarterly growth in revenue. As seen in Figure 2, revenues show some patterns of seasonality, with the 1st quarter historically being the lowest quarter of the year. Most often 1st quarter revenue is less than the revenue for the preceding 4th quarter.
Revenue Estimates and Discussion
Despite this trend in seasonality, Amarin and the growth of Vascepa has not been like the traditional history. When looking at the Symphony retail prescriptions data, growth in non-normalized and normalized retail prescriptions was 14.6% and 14.5% for consecutive quarters respectively. When Vascepa is dispensed, it is done so as a 30 day supply, and is considered to be one prescription. Some pharmacies and insurances will allow patients to fill their medications as a 90 day supply, to decrease the number of trips the patient needs to make to the pharmacy. Non-normalized prescriptions means that if a patient fills a 90 day supply, this appears as just 1 prescription. While is you look at the normalized prescription data, a 90 day supply would appear as 3 prescriptions. In this case, both the non-normalized and normalized statistics showed almost identical growth metrics.
Using the Symphony data, Amarin received $183.76 per non-normalized prescription and $141.56 per normalized prescription in the fourth quarter of 2018. When comparing the normalized prescriptions, the cost per normalized prescription in the fourth quarter of 2018 was 4.25% higher than the cost per normalized prescription in the fourth quarter of 2017 ($141.56 vs $135.79). But how do these values compare to the cost per normalized prescription in the first quarter? In the first quarter of 2018, the cost per normalized prescription fell to just $111.08. This underscores the differences seen in seasonality throughout the year.
This will lead to a conundrum for investors going into this earnings report. Essentially, will need to determine if the rate of growth will be able to outpace the historical seasonality, and how a beat or miss could impact the stock price. An additional factor to consider is an increase in price for the new year. I estimate this to be in the range of the 4.5% that we saw last year to an upper end of 7%. As such, we can estimate a cost per normalized prescription to be roughly $116.08 to $118.86. This equates to a projected revenue of $72.4 million to $74.1 million for the first quarter using the reported normalized prescriptions from Symphony. This exceed the average revenue estimates of $67.3 million per Yahoo Finance (range $52.5 to 79.8 million). These estimates still fall below the revenue that Amarin earned in the fourth quarter of 2018, which was $77 million. I anticipate if revenue comes in below the $77 million seen in the fourth quarter, the stock price will stumble in absence of other developments.
As seen in Chart 1, Amarin’s stock price saw significant appreciation upon the results of the REDUCE-IT trial. Since a low in late 2019 when Amarin dipped to under $12, the stock prices has been on the upswing. There has also been a recent wedge formation since the beginning of March, which on Friday Amarin appeared to break above. At the close on Friday, Amarin was 16.6% below its recent highs. At the same time on Friday, the 6 day exponential moving average crossed over the 13 day exponential moving average. For additional commentary on this move, I recommend viewing the educational video recently posted by Kevin Douglass. These appear to be two bullish indicators, but I believe they will not be strong enough to trump any of fundamental developments that occur during Wednesday morning’s earnings report.
This earnings report for Amarin is likely to be a volatile one. Unless Amarin is able to break through the chains of its seasonality, I expect revenue to come in around $73 million. This will be above the estimates reported on Yahoo Finance, but may not be as convincing for the “street.” With two trading day until the earnings report, Amarin may see a run up into earnings given the current chart setup. In addition to revenue, I will be closely watching how Amarin is able to manage expenses, as well as managements discussion on the recent sNDA filing with the FDA. Any hints to priority versus standard review will likely weigh heavily on the perception of the earnings report.
For additional thoughts or questions, please feel free to comment below.
I/we long AMRN, but may buy/sell securities in the next 48 hours.