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For your piece of mind
2022 Q1 10-Q:
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Operating expenses cash-flow (millions USD)
Before I analyze this, let see the “pure” US operation. It has positive contribution margin, defined as U.S. gross profit less U.S. sales and marketing-related expenses.
2021
Product revenue, net: 580
Cost of goods sold: 121
Gross margin: 459
Sales and marketing*: 266
Profit from U.S. commercial activities: 193
2022 Q1
Product revenue, net: 95
Cost of goods sold: 22
Gross margin: 73
Sales and marketing*: 62
Profit from U.S. commercial activities: 11
* Note: inc. ex-US expenses also, since no breakdown available … Profit from U.S. commercial activities is higher
Operating expenses (FY / Rest of the year)
Selling expense
2020: 350
2021: 266
2022: 219 (as 4 x 62 Q1 – 30 reduction in annual marketing expenses) / 156
G&A
2020: 73
2021: 110
2022: 95 (Based on Q1) / 71
R&D
2020: 32
2021: 25
2022: 28 (Based on Q1 and 2020 seasonality) / 20
Total operating expenses
2020: 456
2021: 401
2022: 342 / 247
Cash (inc. inventory, ex. revenue & others)
As of March 31: 389
OPEX: -247
Inventory: -49
As of December 31: 93
Not too much … but is it without income:
As too many unknown I will take Q1 revenue as revenue during the remaining quarters: 282 … cash as of EOY: 375 … but it is still without additional element, as:
(i) China milestone: it is min 2 but could be 33 as: The amounts to be received upon achievement of the regulatory milestone events relate to the submission and approval for three indications, and range from $2.0 million to $15.0 million for a total of $33.0 million.
(ii) Upfront payment regarding: (i) Greece (ii) Australia and New Zealand (iii) any other deal
(iii) Change in working capital. (I do not make any calculation, because it is impossible but some data. The balance of changes in Accounts receivable, Accounts payable, accrued expenses and other current liabilities was:
2020: +77
2021: +42
2022 Q1: -16 (vs +10 in 2021 Q1)
(iv) Higher revenue than in Q1 (see below)
Revenue
The Q1 revenue was low due to several factor: (i) seasonality (ii) decreasing scripts (iii) higher chargebacks (iv) lower inventory level at wholesalers.
(i) Seasonality: tt is usual, out of control … the rest of the year will be better (as usual)
(ii) Decreasing scripts: it is coming from the 50-55% of the market (the non-exclusive part). It will be stabilized at one point (will not be 0) and the decrease will be less and less (i) lower basis (ii) lower decline
(iii) Higher chargebacks: it is not a bad thing necessarily … exclusivity (volume) could compensate it.
Note: I do not know (could not find any exact information, could not calculate from available data*) when the higher chargebacks were applied first (in Q1 or in 2021) but the agreements about it was in place by EOY21 for 40%.
* I will try my best but as a clue (?):
a.) sold / dispensed script and Net Revenue was higher by 12%, 2% and 9%, the “Rebates Chargebacks and Discounts” was higher by 17% in Q2 21 vs Q1 21.
b.) sold / dispensed scripts and Net Revenue was lower by 3%, 1% and 8%, the “Rebates Chargebacks and Discounts” was slightly higher (+2%) than in Q3 21 vs Q2 21
(iv) Lower inventory level at wholesalers: it is “ATL”, at the lower end of the industry range (days of sales on hand). I assume it will be higher during the rest of the year (especially in Q4 ahead of price increase).
All together: the positive effect of seasonality will – at least – offset the decreasing script and higher inventory level at wholesalers will deliver higher revenue during the rest of the year (+60-100 ?). Please note: chargeback effect was not included because it is a totally unknown element.
Based on these, I will not be surprised if the rest of the year will be cash-flow positive.
Best,
G
Side note: Meanwhile I expect that Q2 will be significantly better than Q1 “unfortunately” Q2 2021 was extremely good. All of the quarters were 141-144 in 2021 (Net Revenue) but Q2 was 153 … more likely the 21 vs 22 comparison will be awful.
Inventory (possible) effect on cash-flow (millions USD)
Purchase obligation / commitment has two parts:
a.) Certain of the agreements with the suppliers include minimum purchase obligations. These purchases are generally made on the basis of rolling 12-month forecasts which in part are binding on Amarin and the balance of which are subject to adjustment by Amarin subject to certain limitations.
b.) Certain of the agreements also include contractual minimum purchase commitments regardless of the rolling 12-month forecasts.
Inventory cash-flow equal with (-) COGS (+/-) change of inventory. Amarin had the following
Period: COGS / Inventory* / Change in inventory = Cash-flow / Commitment at the end of the period** / Change in commitment.
* They have a “new” inventory category since end of 2021 (long-term inventory: when consumption of the inventory is expected normal operating cycle) but as I do not know the duration of the normal operating cycle I did not separate it in this analysis … just as a note below.)
** Pursuant to the supply agreements, there is a total of approximately $ X million that is potentially payable over the term of such agreements based on minimum purchase obligations.
2020: 131* / 189* / 112** = 244* / 326* / +134**
2021 Q1: 28 / 231 / 42 = 70 / 213 / -113
2021 Q2: 32 / 272 / 42 = 74 / 213 / 0
2021 Q3: 30 / 309 / 37 = 67 / 213 / 0
2021 Q4: 31 / 356 / 47 = 77 / 196 / -17
2021: 121* / 356* / 167** = 288* / 196* / -130**
2022 Q1: 22 / 409 / 53 = 75 / 49 / -147
* Sum of the year or at the end of the year
** vs. previous year end
So what could be changed?
First of all: it was an awful “goods” / inventory management e.g. (i) they spent more in 2021 than in 2020 (ii) commitment was not changed during Q2 & Q3 2021 …
The good things (looks like as … based on these data): they are managing the inventory since August 1 (?), 2021 … since Q4 2021 (i) separating the short-term and long-term inventory (ii) reducing obligation / commitment.
The commitment is ATL (49) as of March 31, 2021 and I assume that it is “100”% the contractual minimum purchase commitments (regardless of the rolling 12-month forecasts) or contains minimal rolling 12-month forecasts.
I will use the following assumptions:
(i) the 49 commitment is due till the end of 2022 (I think it is conservative)
(ii) they will not purchase anything top of the commitment (Maybe it is a bold assumption … but it is a prudent one).
What it means?
API purchase was -75 (75% of total net CF) in Q1. This and the 49 commitment means -124 spending on API in 2022 (vs 244 and 288 in 2020 and 2021 respectively).
- They had 389 cash as of March 31, 2022.
- The non-API related net cash-flow was -24 in Q1 2022
- Assuming – but it is not the case – revenue and other cost / cash-flow will be flat (“same” as in Q1) they will have 317 cash as of December 31, 2022.
Note:
(i) I would like to analyze the API / inventory only (independently from other elements).
(ii) I did not analyzed the long-term inventory separately – two data available only – but it will be “interesting” to check the level of it (EOY2021: 121; EOQ12022: 141). As the short term level is 268 I expect an increase in the upcoming quarters – meanwhile the short-term decreasing – but a decrease after a certain quarters.
Best,
G
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a.) The WAC is increasing but the (average) net price decreasing (mainly due to higher chargeback*)
b.) Dispensed scripts was higher than the sold. Part of the dispensed was sold in 2021.
e.g. (numbers are for example only it is not an exact calculation)
2021
dispensed: 1.000.000 (to patients)
sold: 1.100.000 (to wholesalers)
WAC: 320
Chargeback (to payors): 50%
Discount (to wholesalers): 5%
Gross Revenue: 320.0M (1.100k x 320)
Discount: 17.6M (1.100k x 320 x 5%)
Chargeback: 160.0M (1.000k x 320 x 50%)
Net (reported) Revenue: 174.4 M
2022
dispensed: 1.000.000 (to patients)
sold: 900.000 (to wholesalers)
WAC: 330
Chargeback (to payors): 60% (of WAC)
Discount (to wholesalers): 5%
Gross Revenue: 297.0M (900k x 330)
Discount: 14.9M (900k x 330 x 5%)
Chargeback: 198.0M (1.000k x 330 x 60%)
Net (reported) Revenue: 84.2 M
Best,
G
* I am not sure but … furthermore chargeback calculated based on dispensed (in Q1) scripts, meanwhile net revenue (“sold” scripts) was booked in 2021 by a higher net price.
US
No actual breakdown is available, but based on available information the US looks like something like this (in 2021, ‘000 USD):
Product revenue, net: 580,320
Cost of goods sold: 121.327
Gross margin: 458.993
Sales and marketing: 258.993
Profit from U.S. commercial activities: 200.000
Inventory (‘000 USD unless stated otherwise):
a.) Certain of the agreements with the suppliers include minimum purchase obligations. These purchases are generally made on the basis of rolling 12-month forecasts which in part are binding on Amarin and the balance of which are subject to adjustment by Amarin subject to certain limitations. Certain of the agreements also include contractual minimum purchase commitments regardless of the rolling 12-month forecasts.
b.) They “introduced” a “new” category in the Balance Sheet by Dec 31, 2021, classify inventory as long-term inventory when consumption of the inventory is expected beyond normal operating cycle..
c.) They spent 288,393 and 75.179 in 2021 and 2022 Q1 respectively. (Please note: Q1 spending was 75% of the net outflow.)
What we could expect in the upcoming quarters?
a.) Commitment: It was 196,100 by Dec 31, 2021 and 49,300 by March 31, 2020 … a 146,800 decrease as result of (i) Q1 spending of 75.179 (ii - more likely) the revised rolling 12-month forecasts (iii - maybe, but not likely) termination of a supply agreement.
I assume that (i) the 49,300 is the contractual minimum purchase commitments regardless of the rolling 12-month forecasts (ii) rolling 12-month forecast is 0 (iii) rolling 12-month forecast equally distributed across quarters (12.325 / Q).
b.) We do not know the duration of the “normal operating cycle” (12 month or 24 months or X months) so the level of the long-term inventory reflects their expectation compared to their previous expectation (not vs. actual trends / data).
c.) I expect 12.325 / Q spending for “goods” during the rest of 2022 (112,154 inc. Q1 vs 288,393 in 2021).
Cash(-flow) [rest of the year, MUSD unless stated otherwise]
They had 389 (consisting of cash and cash equivalents, liquid short-term and long-term investments) as of March 31, 2022.
Based on Q1, available info, etc. my assumption that the operational outflow will be 340 as:
- SG&: 270
- R&D: 30
- “Goods”: 40 (if my assumption is correct and they will not buy top of the minimum commitment *)
Inflow (net revenue) is depending on several factors so I am not making a prediction but a scenario:
A.) 2019 Revenue with 2022 chargebacks: 192. Cash as of Dec 31, 2022: 241
B.) “Flat” revenue: 282. Cash as of Dec 31, 2022: 331
C.) 2021 Revenue less by 20% and with 2022 chargebacks: 332. Cash as of Dec 31, 2022: 381
Best,
G
* the current economic condition supports my assumption since shipping cost are 5-10x higher than 1-2 years ago. It is absolutely realistic and prudent to use the – high level – inventory insteady of higher (new) COGS
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Currently no, but on my watchlist and I follow "closely".
Best,
G
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FYI:
Scripts (based on Symphony Health data) = dispensed to patients
vs
Revenue = sold to wholesalers (WSs - usually - increace inventory level in Q4 ahead of price increase)
Best,
G
current share price
I am in ...
Best,
G
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Pls remove sticky #336820. (No content behind it.)
TIA,
G
Amarin Pharma, Inc. v. Hikma Pharmaceuticals USA Inc., 1:20-cv-1630-RGA-JLH
Doc 47 & 47-1
47: "Cover letter"; 4 pages
47-1: [PROPOSED] SCHEDULING ORDER; 18 pages
Khm ..
BS ... Majority ("all") are below $5.00* ... Most of them @$1.50 (Series A Preferred @$0.15 with 10:1 conversation ratio) ... open market purchase was not significant ((IIRC: less than 1M)
* significantly below but I am not 100% sure about the Notes conversation ($2.68?) ratio so I stay on a "safe side".
Amarin Pharma Inc. et al v. West-Ward Pharmaceuticals Corp et al (2:16-cv-02525-MMD-NJK)