Amarin Corp Plc (AMRN)

[HDGabor]

Some thoughts … put a few things in perspective.

Net Revenue [NR] (per 120 capsules (NRpC]; $)

The NR is 133*; meanwhile the WAC is 304. The difference (171), based on 10-Qs and 10-Ks is
- Trade Allowances: 17% / 29
- Rebates, Chargebacks and Discounts [RCD]: 74% / 127
- Product Returns: “0” % / “0”
- Other Incentives: 5 % / 15
(* based on ICER report … however the actual NR, based on 10-Qs is a little bit lower, app. 125).
The NR could be increased by the reduction of the RCD … and more likely, it will be the case. John Thero (Q2 CC):

We have had some net price erosion in recent years, based upon how our net price went flat. We've taken some price increases and sort of put when -- it's sort of all gone back to the payers or that channel. We're opening that with these results and with the sort of the analysis being done, that this drug is cost-effective. That we haven't made money yet on this product. Our gross margins are in the 70s. We're hoping that this would give us some defense to avoid that creep in rebates that we don't think should be necessary going forward, at least to the extent that we've seen in the past.

NR & Gross Margin [GM] (yearly; $) … with and without generic “competition / treat”
Please note: it is not a NR and GM projection, it is about with and without generic “competition / treat”

If all statin users (annualized, 20M, US only) will be on Vascepa [V]
- the NR is 32 bn and the GM is 25 bn (77%) with the current NRpC
- the NR is 47 bn and the GM is 40 bn (85%) if the RCD will be decreased by 50% (=NRpC increased by 48%)
If the generics could enter (e.g. in 2029 / 2030), Amarin has to compete with them … the GM% should be decreased. If we assume that 20% GM is low enough to avoid generic competition the NR will be 9 bn and the GM will be 1.8 bn (20%). (… with 10% GM the GM will be 0,8 bn …).

Please note: the GM is BEFORE any cost other than COGS

Valuation of the Co. (= valuation of V)

(i) the company is in the development phase
(ii) V (economic) lifecycle isn’t endless, if it has to compete with generic it does not have too much value
Due to these a potential buyer:
- won’t make an offer as actual pps + x% premium ("premium" will be calculated AFTER the offer)
- won’t make an offer as X times NR or GM or EBITDA or anything
- won’t make a valuation based on Amarin (current) number / structure
- will consider the next (max) 10 years (till 2029 / 2030) only
- will make an own projection for NR, GM and EBITDA, etc. … and will discount it (NPV; risk due to assumptions)

Amarin vs BP

NR: both version could deliver the “same” revenue … but more likely BPs think that they could generate more. (RoW: BP could make more due to existing operation and “GIA”, meanwhile Amarin will receive a double digit royalty, max: 25-30%)

COGS: the same

Cost: BP will have less cost due to
(i) a lot of cost will be an incremental only
(ii) lot / some expenditure won’t be necessary since “functions / elements” exist already
(iii) the have a bigger volume … could get a bigger discount

All together: BP could generate higher bottom line over the years

GIA vs BO

GIA: additional indication (if any) could be monetized … but has a risk(s)
BO: eliminate all future risks

I am not for GIA or for BO, however I think Amarin will receive an offer - which will be recommended by the BoD - and a deal will be done.

RELAX … less than 62 days till the opening bell on November 15.

Best,
G