Michael Yee
Thank you. Well, good afternoon, everyone, and thank you for joining us at another great session here at the 2022 Jefferies In-Person Healthcare Conference. It's great to see everybody. We have Amarin with us here on the fireside panel, and I'd love to introduce Karim Mikhail, President and CEO. Thank you for being here with us. I would love for you to maybe just start off with sort of a high level perspective about 2022. I know you reported earnings or some challenges with that, but you guys are obviously executing in Europe as well. [Indiscernible] maybe just make a couple of comments about what you're focused for 2022?
Karim Mikhail
Sure. Happy to be here. And again, you know, the true growth and, you know, value creation for Amarin is really going to come from European growth, European launches, and international expansion. So, everything we do on quarterly, weekly, monthly basis is to make sure that we get ourselves positioned for success for these launches in Europe and big part of that was really depending on the U.S. market and U.S. market performance to ensure that we can internally fund the investments that we need for that European launch.
So, 2021 we've had one and two generics, and by the beginning of 2022 we've seen significant shift in market dynamics in the U.S. with the third of genetic entrant, which has impacted our first quarter revenue. This was – some of it was anticipated. I think the volume impact that we've seen in the first quarter not unusual, but what we've seen in terms of channel disruption, what we've seen in terms of price erosion was higher than was anticipated.
That's why we reevaluated our plans and we announced two days ago an important restructure to make sure that we are very focused on cash conservation and making sure that we are continuing to be well-positioned for financing our investments and launches in Europe successfully.
Michael Yee
So, we going into that a little bit, that announcement was made obviously very recently. What was the announcement? What are the changes? What spurred the changes? Why all of a sudden, the middle of, you know, end of May, you know, beginning of June, what now?
Karim Mikhail
Sure. So, first of all, this was a true reevaluation of where we stand in terms of our cost. structure. When we did the first reduction of outfield force in the U.S. in October. We already highlighted that this was a first step and if there is a change or a shift in market dynamics that we will act again if need be. So, we did that today because we have had at least the third genetic from February until today.
We see a number of variables and how things are shifting in terms of competition within the generic space, competition within the exclusive versus non-exclusive segments where the price levels are, and that's why we wanted not to wait for Q2, Q3, Q4, but to act ahead of time to conserve the contribution margin that's delivered by the U.S. market.
Michael Yee
I mean, that's a great point. So, on one hand, you said there was an earlier cost structure adjustment late last year that you would be cognizant and watch things. And so therefore, you made another adjustment and just to be clear, I believe it's a $100 million annualized savings that will start to go into a factual 100 million annualized and that was as the market evolves. So, was there something other than a generic that launched in February that changes the pricing changing, actually I think it is possible, but is that actually a signal that the U.S. is starting to pick-up the pace the wrong way? Because I look at the [scripts] [ph] are basically slowing. I mean, I don't see any big changes. [Is that going] [ph] to happen?
Karim Mikhail
Yeah. Look, if you look at our erosion overtime whether we have one, two, or three generics, you cannot really tell how many number – what is the number of generics? We've been on steady erosion ever since. However, that just shows volume. It doesn't show the evolution of the price. I think the biggest impact that the third entrant created was an impact mostly on price, not just on volume, right?
It's making the space more competitive price wise, and for us, we set a level upon which we believe it's where we need to compete and where we're not going to go beyond because this is also not a product where you would want to just compete in price. And that's especially at the time when you're negotiating prices in Europe, right.
Michael Yee
That's a good point. So, to close out on that, on your Q1 earnings call, was the price of that generic already known? Have you commented on that or that you continue to see evolving price [indiscernible] after going June, so investors should be aware of that, that you're seeing it go the wrong way, and that's why we're kicking the strict action?
Karim Mikhail
No, we've seen, you know, the initial steps of price competition, especially between generics. I'm sure you've seen that there was a big shift between the three players where one displaced almost two-thirds of the volume of the other. This is just the perspective of us and how we did. There was a huge shift in volumes between the generics and that was driven by price and that's driving more price competition in the space.
Michael Yee
So that was the third [indiscernible]?
Karim Mikhail
Yes, exactly.
Michael Yee
Okay. Alright. So, then to close out on U.S., what have you guided to or what are you telling investors to expect then for Q2, Q3, Q4?
Karim Mikhail
Look, we expected continues intense, you know, generic competition. You know, this is going – the second quarter is going to be the first full quarter of the second for the third generic coming into the market. So definitely, we don't anticipate that the competition is going to get less, right?
So, it is intense, and as I said, that's why we took action to basically preserve cash, manage our contribution margin. We did communicate before that we've had positive contribution margin from the U.S. and the actions we took 48 hours ago, two days ago, have as an objective to sustain as much as possible of the significant positive contribution margin from the U.S. business.
Michael Yee
Okay. I need to do some math on that, but it was – U.S. was positive, profit contribution.
Karim Mikhail
Exactly.
Michael Yee
The fact that you have got a 100 million annualized is a reflection of still trying to make sure that it's profitable. Just wanted to do some math on that, but one should expect a full large impact for Q2 after seeing Q1. So, Q2 will be done again, obviously.
Karim Mikhail
Potentially.
Michael Yee
Let's shift gears. I think most people know that there's challenges in the U.S. Based on our model, the $100 million annualized cost savings actually reflects, according to our model we’re actually somewhat in the [low consensus] [ph], a net profit that is actually flat to breakeven, but one in which you're not burning a lot of cash. Do you think that that is an accurate reflection and talk about how Europe needs to pick up?
Karim Mikhail
Sure. So first of all, the 100 million that we are talking about is net of additional investments in Europe. So, while we're doing this exercise of sitting in the U.S. we're taking into account that we will need additional investments in Europe. So, we're not sort of saying, oh, this a 100 million of savings in the U.S., but actually we're going to probably spend more than that in Europe and the net is nothing. This is actually net of additional European investments that we are making.
So that's just on that part. Going back to cash burn, there are specific events that can impact multiple quarters, but our key priority is cash conservation at this point in time. So, we are doing everything possible in terms of cash burn to ensure that we either hold completely some of the elements that deal with that or to lay them or sequence them, including by the way re-evaluating our European investments and the sequence of our European investments.
So, we have already said that we are very thoughtful in how we sequence investments in Europe based on pricing reimbursement. We said that we’re not going to higher significant headcount unless we are very close to pricing reimbursement. We want to reaffirm that we are going to be even more disciplined with that, but we do expect, as we disclosed before, a number of positive pricing reimbursement decisions this year, right.
Michael Yee
So, going to that bit. So, obviously, in Germany, you're launching, it's underway, there's, as we all know, [indiscernible] price there, ultimately, you're still negotiating. Have you announced prices in other countries? Can you talk about where you feel price will come out in some of these countries this year? And what is the expectation of price relative to, you know, [obviously] [ph] originally U.S. pricing, but, you know, what is the expectation for European pricing?
Karim Mikhail
So, we already have one first European country in the Nordics. So, Sweden has already approved a reimbursed price at the level of EUR160 monthly, so $180. So, this is, you know, in-line with what we communicated before to be at the same level or higher than U.S. net price.
Michael Yee
EUR180 per month?
Karim Mikhail
Per month. EUR160, a $180.
Michael Yee
It's almost one to one, you know that's okay. But yeah – okay, so [US$200 times 12, 2,400] [ph]. Okay.
Karim Mikhail
Exactly. And again, this is the first country that has pricing and reimbursement. If you look at the average reimbursed cardiometabolic price for patient, for products, for such huge patient population, so products that are not for the hundreds of thousands of eligible patients in the millions of patients. You usually are in the range of between EUR2, maybe EUR3 a day net, while what we are getting here with Sweden is somewhere in the EUR5 plus. So, we're very satisfied, confident with that level of price, because we've had a very important value-based strategy to basically say, we're not pricing it based on a profit you want to make, we are pricing it based on the value we bring to you, the Swedish government. And we're doing the same with the UK. We're doing the same with other markets.
And the next key milestones is hopefully other markets, basically approving that type of price. We have advanced significantly in the UK negotiation. The UK is the most sophisticated complex health, you know, assessment technology body in Europe. And we have had three rounds of negotiation and we expect an opinion imminently. So, this is going to be over the next few weeks. That's really the time frame. And that's going to be an important catalyst if, obviously, the UK comes back and says, I am willing to reimburse. I am willing to reimburse in that patient population, which is so far, is really our established CVD patient population, which is a very significant population at a price that is not too far at least that's what we are targeting, not too far from what the Swedish price is. So, that's what…
Michael Yee
That would be about positive announcement. Okay. You feel good about the negotiations through rounds. Obviously, from a practicality standpoint, can't be a huge difference from the good, healthy, Swedish price, and that will be announced. And you would press release that or if you could…?
Karim Mikhail
Yeah. Usually, companies would always press release a nice assessment. And usually, there is a confirmation of that final opinion. Six-weeks later, usually company also press release that.
Michael Yee
But, yeah, we wouldn't put [indiscernible] pricing. You would agree that you came to an reimbursement agreement, that's the press release.
Karim Mikhail
Yes.
Michael Yee
An analyst would come up with their own views about [what that is] [ph]?
Karim Mikhail
Exactly.
Michael Yee
Okay. Okay. But I heard when you said about being reasonable and some parity on price [indiscernible]. Okay. And what about other countries?
Karim Mikhail
Yeah. So, you know, there are countries where the process is pretty public, so you can really follow it up. UK is the example. You can actually go and read all the scripts of every meeting with all the discussions, you know, I have done. An analyst [Multiple Speakers] So, but, you know, other countries that make their reports public is France, for example, so we currently have a positive reimbursement opinion that is public, so you can actually read that.
We also have a beginning of a price negotiation in France, having said that, negotiations in France are usually very tough and will take longer time. They usually like to wait less because they have the largest patient population in most European countries, but we're making very good advances in Italy. We're making very good advances in Spain. We're also making good advances in other Nordics countries and in the Netherlands.
So, you know, we have 10 dossiers submitted, so you have ongoing negotiations in most of these countries. And in our next earnings call, we're going to also disclose the additional countries that we are submitting in Western Europe. So we said that there is a wave two and the wave two is being submitted.
Michael Yee
So, you're making progress across Europe. You believe that the price that have already come out from one region and then soon perhaps the UK that that's all going along the right trajectory. So, price is looking good. Volume is also the other side of the equation, and people believe that in a improving COVID situation, that that will be better, but European launches take time, adoption takes time. I don't have a strong view about how the Europeans will adopt versus U.S., U.S. having a pretty strong [option] [ph] with [indiscernible] patent situation. And so, what are the expectations? Do you feel that that would be a better launch, but on the other side, people do not have the trade experience before such a brand new drug? I don't know if there's views about how people view, obviously, appear to be molecule. So, how do you – what is your expectation?
Karim Mikhail
Well, there are multiple variables. Yes. In the U.S., you had almost five years of premarketing, or four years of pre-marketing where 100 to 400 people were visiting physicians talking about triglyceride lowering and potentially cardiovascular risk reduction. So that impacts a launch uptick. I don't think it impacts peak per se. It impacts the uptick. So, in Europe, we don't have that luxury of – we're actually very, very measured of how much pre-marketing we do, not to burn cash too early without clarity on pricing and reimbursement.
Having said that, in European countries, just having a positive pricing reimbursement is a very significant step to establish your value for a physician, right. Because they not only understand that you went through the EMEA approval, but you actually went through, take the example of the UK. You actually went through a very complex machine, right or nice assessing every statement you made, every claim you made.
So that gives you a bit of a, you know, [indiscernible] validation going into the market. But you still have to go through the awareness, adoption, trial usage. [Indiscernible] switch takes a bit of time, and products differ. You've seen a product like CRESTOR took a lot of time to pick up, but ended up still with a very significant deal. Some have a faster penetration, but the good thing about most cardiometabolic products in Europe is that you can see that year-after-year there is significant growth that keeps coming back.
Could be slow at the beginning, could be faster at the beginning, but you rarely see a product that actually stops growing in the cardiometabolic space in Europe just because the eligible patient populations are huge.
Michael Yee
How – so talking about prices continue to dig into volumes, so how is the perception, and, again, the planned adoption of a unique fish oil product perceived there versus say the U.S. where, again, it had already been on the market for a long period of time? Greater education, greater awareness, I might even do some surveys, greater utilization of the generic fish oils, etcetera, versus U.S., I actually don't know that, but is there anything on the margin that you like? And then are there any challenges there?
Karim Mikhail
So, the most significant effort we're doing in Europe today is medical education, through our medical affairs team, right. We have a very, you know, robust team. All our medical directors on in the markets are mostly cardiologists, bringing in expertise and the product is not positioned as the [fish oil] [ph] is actually positioned as icosapent ethyl, which is a very unique entity that's, you know, the status that we have by the EMEA, which basically says, we’re different from anything else.
As a reminder, EMEA did withdraw all cardiovascular claims for all Omega-3 mixtures in Europe. So, we are coming in where there was a bit of clean up from a regulatory perspective done before us because nobody had evidence. Having said that…
Michael Yee
Let me be clear. I mean, they pulled all other Omega-3 mixtures to the [EMEA] [ph], but proved yours, they pulled all cardiovascular claims?
Karim Mikhail
They are all on the country, on the market, but they cannot make cardiovascular claims because they never demonstrated.
Michael Yee
[Indiscernible]. Okay. And so then they improved yours. And then you're actually getting reimbursement for these, which again goes through the validation that the regulatory bodies agree.
Karim Mikhail
Exactly.
Michael Yee
And pay for that news.
Karim Mikhail
Now, let's not also forget that this is a completely new paradigm. This product is coming after 30 years of LDL reduction and many of us on the team, we're involved with the LDL paradigm, you know, I personally launched both statins, ezetimibe and other products in that space. So, it definitely takes time to make that shift. However, as a reminder, both European Society of Cardiology and EAS, European Atherosclerosis Society, both had [the skipper] [ph] on the guideline before we got regulatory approval.
So, from a top scientific leadership endorsement in Europe is, definitely needs support. What we need to do is, take the time to work with this scientific leadership to cascade this education to top scientific leadership country by country, and that's work that we started to do even prior to...
Michael Yee
So, is VASCEPA listed in like the top tier rating for the treatment guidelines in Europe?
Karim Mikhail
Yes. So, the way European guidelines work is you work by level of evidence. So, if you have one study, it's not like two, it's not like three. So, obviously, we have one study, so we're rated accordingly, but based on that, we actually have the best position we could get with one cardiovascular outcome study.
Michael Yee
Okay. I mean, I had to pull it up, but like for high triglycerides, what does it say?
Karim Mikhail
Oh, well, it uses high triglyceride as a patient profile, but in reality, it is positioned as a cardiovascular risk agent. It is not just listed for triglyceride lowering.
Michael Yee
Okay. Alright. So, you're executing on the pricing negotiations that's proceeding well on volume, there's education and you're working through that and you feel like guidance, treatment guidelines and all these others and obviously in validation by reimbursement would support why uptick and volume should grow, but it takes time? Two questions, one is, people worry about the branded life period for in Europe, do you believe that it is a 10-year base case, because you were granted 10-year EMEA protection for a new chemical entity, molecular entity. That's very important. We saw that with [indiscernible]. So, is that your base case or are you telling people no, it’s going beyond 10-years because you have are cardiovascular patents? I don’t know if they are [a real issue] [ph]. So, we feel very confident it won’t be [10 years] [ph]?
Karim Mikhail
Look, we have cardiovascular patents that go beyond the [10.31] [ph], which are the 10 years, but we are currently just, you know, in Europe, data exclusivity is very, very strong, right, because it, you know, a patent you know, can be challenged. You can enter into different negotiations. So, regulatory exclusivity is the most critical one. We believe that with the fixed dose combination, we can get additional data exclusivity of at least one year. So, we know that the 2031 could be 2032 for sure with data exclusivity.
We have patents that go one or two years more than that, and we will do everything to extend the life cycle in Europe because if that product, you know, reaches its peak and we said it's going to be more than a billion dollar. One year is a billion, right? So…
Michael Yee
But 10 years is a base case. Data exclusivity protection in Europe is strong, because that’s like [Tecfidera] [ph] is still branded in Europe, and the U.S. has gone generic for Biogen. And we believe that cardiovascular patents for the [CVOT] [ph] have been filed or issued, and so we believe that even if someone were to come and try beyond the 10 years that they would be violating the cardiovascular [indiscernible] I'm trying to figure out, how long the cash flow is going for? [Technical Difficulty] So that leads us a minimum 10 years. So that leads us to some additional questions in the last two minutes, which was a, people believe you remain an important strategic, a wholly-owned European asset in U.S. that you're on a primary care setting. These takes huge expenses and infrastructure as you rightly know. So, why do you believe that there is a strategic optionality for your asset, do you believe it's in the right interest of shareholders to consider those types of things and simultaneously with that, obviously, it's out there that the number one [older in stock] [ph] is [indiscernible], they haven't said anything, but, you know, that that raises eyebrows for people about your ability and priority to maximize shareholder value beyond just [Technical Difficulty].
Karim Mikhail
Yeah. So look, this is what the job is about. The job is about, right, maximizing shareholder value. As we see it today, everything we're really focusing on is what will create shareholder value. For example, every price we get in Europe is what's going to create value. Right? And remember, we're not there yet. You know, we're still starting with the first country. Hopefully, a second big one will come soon. And that will move us a lot closer to creating that value.
Having said that, while we're working on all of this, we are very open and very engaged with all our Top 10, I would say, even 15, and some of them are in the room. So, you know, and all of them have been incredibly supportive, but also challenging to us, to, you know, the right way. And we have very stimulating, engaging discussion. and it's a dialogue on how to do better overtime for all shareholders.
There is no dogma about a certain position or a certain opinion. We were asked for example, why aren't you open? And I think you did ask the question before, Michael, about partnering or not. And today, our partner HLS in Canada has Pfizer, promoting for primary care. That just shows that we allowed it, if it makes sense, if you're going to get the right support. So, look, there is not, you know, an opinion or a view or a position that is out of the table. Everything is on the table.
If it's going to create better shareholder value, we're going to explore it. We're going to make sure to, you know, decide what is right at the end.
Michael Yee
Alright. So, look, you're continuing to remain open and engage with that wisely cut the operating expenses to reflect the U.S. situation shifting over to Europe to invest in that, but being really right minded about investing until you've got pricing and so you're being smart about that. And meanwhile, continue to have dialogue and open to anything that’s on [indiscernible].
Karim Mikhail
Yeah. Great.
Michael Yee
Good. Very good. Thank you very much for the time. Appreciate it. Looking forward to progress.
Karim Mikhail
Thank you.
Michael Yee
Thank you.
