Summary
•Amarin expects its year-end cash balance to be approximately $120 million.
•This represents cash outflows of $71.5 million during 2014, better than its target of $80 million.
•Amarin has done an excellent job conserving cash, and better than I anticipated. However, the ability to again use working capital changes for cash flow will be limited in 2015.
•Focus will be on sales growth. NRx growth of 70 per week would likely achieve $100+ million 2015 revenue and a year-end cash balance of $55 million to $60 million.
•If Vascepa is at around 5,700 to 5,800 NRx by the end of March, it will be on that trajectory.
Amarin (NASDAQ:AMRN) announced that it expects cash and cash equivalents to be approximately $120 million at the end of 2014. Amarin's cash outflows during 2014 would therefore be $71.5 million, better than its target of $80 million. Amarin has done an excellent job of conserving cash to date, although the ability to use working capital changes as a source of cash flow will be much more limited in 2015.
Amarin's cash outflow during Q4 2014 was $15.4 million. I expect Q4 2014 revenue to come in at $15.9 million, which would translate into approximately $10 million in gross margin. Cash expenditures include $1.4 million for the BioPharma repayment. If cash SG&A and R&D expenditures equal $30 million, then approximately we'd expect a cash outflow of $21.4 million without working capital changes or other inflows. A significant proportion of the $6 million difference between this number and actual cash outflow is likely due to lower inventory levels. As I mentioned before, inventory levels could likely be reduced by up to $7 million from Q3 2014 levels. If Amarin did reduce inventory levels by $6 million in Q4 2014, the decrease in inventory would have contributed $15 million to cash flow during 2014. With inventory near industry standard levels now, inventory decreases will not significantly contribute to cash flow in 2015.
This means that Amarin must focus on growing sales to reduce its cash burn during 2015. My previous expectation was $102 million in revenue during 2015, which would translate into approximately $60 million to $65 million in cash outflow during the year. This would result in Amarin ending up with around $55 million to $60 million in cash and cash equivalents at the end of 2015, and likely on track to end 2016 with $25 million to $30 million in cash and cash equivalents. To get to $102 million in revenue during 2015 would require Vascepa NRx growth of approximately 70 per week. If Vascepa is on track for that type of growth, it should be doing approximately 5,700 to 5,800 NRx by the end of March 2015.
