Amarin Corp Plc (AMRN)

[HDGabor]

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.