In the ordinary course of business, we are from
time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements and other matters. Item 3. Legal Proceedings of our Annual Report on Form 10-K
for the fiscal year ended December 31, 2015 includes a discussion of our current legal proceedings. There have been no material changes to those disclosures as of the date of this filing other than as set forth below.
On May 7, 2015, we and a group of independent physicians filed a lawsuit in federal court to permit us to promote truthful and
non-misleading information, including, but not limited to, the ANCHOR trial clinical data, with healthcare professionals in the United States about certain uses of Vascepa not included within approved FDA labeling of Vascepa and thus not permitted
under the FDAs interpretation of applicable law. The lawsuit, captioned
Amarin Pharma, Inc., et al. v. Food & Drug Administration, et al.
(1:15-cv-03588-PAE), was filed in the United States District Court for the Southern
District of New York and sought a judicial declaration based on several legal theories. On August 7, 2015, the court granted our request for preliminary relief in this litigation through a declaratory judgment that confirmed that we may engage
in truthful and non-misleading speech promoting the off-label use of Vascepa, i.e., to treat patients with persistently high triglycerides, and such speech may not form the basis of a misbranding action under the Federal Food and Drug Cosmetic Act.
On March 8, 2016, the parties obtained court approval of negotiated settlement terms that resolved the causes of action raised in the litigation. Under the settlement, the FDA and the U.S. government agreed to be bound by the courts
conclusions from the August 7, 2015 declaration that we may engage in truthful and non-misleading speech promoting the off-label use of Vascepa and that certain statements and disclosures that we proposed to make to healthcare professionals
were truthful and non-misleading as of such date.
On April 26, 2016, the U.S. District Court for the District of New Jersey granted
our motion to dismiss the putative consolidated class action lawsuit captioned
In re Amarin Corporation plc, Securities Litigation,
No. 3:13-cv-06663 (D.N.J. Nov. 1, 2013). The class action was dismissed without prejudice with
leave for plaintiffs to file an amended complaint. The lawsuit sought unspecified monetary damages and attorneys fees and costs alleging that we and certain of our current and former officers and directors made misstatements and omissions
regarding the FDAs willingness to approve Vascepas ANCHOR indication and related contributing factors and the potential relevance of data from the ongoing REDUCE-IT trial to that potential approval. This is the second motion to dismiss
granted in favor of Amarin and related defendants in this litigation. The first motion to dismiss in this litigation was granted in June 2015 in response to the original complaint and related amendment. Should plaintiffs file another amended
complaint or appeal, we plan a vigorous defense. We have insurance coverage that is anticipated to cover any significant loss exposure that may arise from this action.
This Quarterly Report on Form 10-Q contains forward-looking
information based on our current expectations. Because our actual results may differ materially from any forward-looking statements that we make or that are made on our behalf, this section includes a discussion of important factors that could
affect our actual future results, including, but not limited to, our ability to successfully commercialize Vascepa, our capital resources, the progress and timing of our clinical programs, the safety and efficacy of our product candidates, risks
associated with regulatory filings, the potential clinical benefits and market potential of our product candidates, commercial market estimates, future development efforts, patent protection, effects of healthcare reform, reliance on third parties,
and other risks set forth below.
Those risk factors below denoted with a * are newly added or have been materially updated from our
Annual Report on 10-K filed with the SEC on February 25, 2016.
Risks Related to the Commercialization and Development of Vascepa
We are substantially dependent upon sales of Vascepa in the United States.
As a result of our reliance on a single product, Vascepa
®
(icosapent ethyl) capsules,
and our primary focus on the U.S. market in the near-term, much of our near-term results and value as a company depends on our ability to execute our commercial strategy for Vascepa in the United States. If commercialization efforts for Vascepa are
not successful, our business will be materially and adversely affected.
Even if we are able to develop Vascepa outside the United States
or develop additional products from our research and development efforts, the development time cycle for products typically takes several years. This restricts our ability to respond to adverse business conditions for Vascepa. If we are not
successful with development, or if there is not adequate demand for Vascepa or the market for such product develops less rapidly than we anticipate, we may not have the ability to effectively shift our resources to the development of alternative
products or do so in a timely manner without suffering material adverse effects on our business. As a result, the lack of alternative markets and products we develop could constrain our ability to generate revenues and achieve profitability.
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The uncertain effect of Vascepa on its ultimate targeted clinical benefit makes it more
difficult to achieve a level of market acceptance by physicians, patients, healthcare payors and others in the medical community necessary for commercial success.
In January 2013, we launched Vascepa based on FDA approval of our MARINE indication, for use as an adjunct to diet to reduce triglyceride
levels in adult patients with severe (TG
³
500 mg/dL) hypertriglyceridemia. Approximately 4.0 million people in the United States have severely high triglyceride levels (TG
>
500 mg/dL),
commonly known as very high triglyceride levels. Guidelines for the management of very high triglyceride levels suggest that reducing triglyceride levels is the primary goal in patients to reduce the risk of acute pancreatitis. A secondary goal for
this patient population is to reduce cardiovascular risk. The effect of Vascepa on cardiovascular mortality and morbidity, or the risk for pancreatitis, in patients with hypertriglyceridemia has not been determined and our FDA-approved labeling and
promotional efforts state these facts.
In August 2015, based on a federal court order, we also began marketing Vascepa in the United
States to healthcare professionals for the treatment of patients with high (TG
³
200 mg/dL and <500 mg/dL) triglyceride levels who are also on statin therapy for elevated low-density lipoprotein
cholesterol, or LDL-C, levels, based on results from the ANCHOR study of Vascepa. It is estimated that approximately 40 million adults in the United States have high triglyceride levels (TG
>
200 mg/dL), and many patients with high
triglycerides also have other lipid level abnormalities such as high cholesterol and are on statin therapy. FDA did not approve Vascepa for use in this population due to the uncertain effect of pharmaceutically induced triglyceride reduction in this
patient population on cardiovascular risk reduction, the ultimate targeted clinical benefit. Our promotional efforts disclose this fact and what we view as truthful and non-misleading information on the current state of research on both triglyceride
reduction and the active pharmaceutical ingredient in Vascepa, EPA, as each relate to the potential of Vascepa to reduce cardiovascular risk.
The uncertainties around the ultimate clinical benefit of Vascepa make it more difficult for Vascepa to gain market acceptance by physicians,
patients, healthcare payors and others in the medical community. If Vascepa does not achieve an adequate level of acceptance, we may not generate product revenues sufficient to become profitable. The degree of market acceptance of Vascepa for the
MARINE indication and in ANCHOR patients and any future approved indications will depend on a number of factors, including:
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the perceived efficacy, safety and potential advantages of Vascepa, as compared to alternative treatments;
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our ability to offer Vascepa for sale at competitive prices;
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convenience and ease of administration compared to alternative treatments;
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the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
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the scope, effectiveness and strength of product education, marketing and distribution support, including our sales and marketing team;
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publicity concerning Vascepa or competing products;
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our ability to continually promote Vascepa in the United States outside of FDA-approved labeling and the related perception thereof;
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sufficient third-party coverage or reimbursement for on-label use, and for permitted off-label use, the third-party coverage or reimbursement for which was not addressed in the scope of the August 2015 court
declaration; and
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the actual efficacy of the product and the prevalence and severity of any side effects, including any limitations or warnings contained in Vascepas approved labeling.
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Our current and planned commercialization efforts may not be successful in increasing sales of Vascepa.
In January 2013, we began selling and marketing Vascepa in the United States through our own, newly established sales and marketing teams and
through a newly established third-party commercial distribution infrastructure. We hired key personnel in these areas over the last several years and hired and trained a professional sales force in early January 2013. In October 2013, following an
FDA advisory committee recommendation against approval for the ANCHOR indication, we implemented a plan to reduce our workforce and our team of sales professionals in half.
In May 2014 we began co-promoting Vascepa in the United States with Kowa Pharmaceuticals America, Inc. under a co-promotion agreement we
entered into in March 2014. Under the agreement, approximately 250 Kowa Pharmaceuticals America, Inc. sales representatives devote a substantial portion of their time to promoting Vascepa with Amarins approximately 130 sales representatives
based on a plan designed to increase both the number of sales targets reached and the frequency of sales calls on existing sales targets. However, the commercialization of pharmaceutical products is a complex undertaking for a company to manage, and
we have very limited experience as a company operating in this area and co-promoting a pharmaceutical product with a partner.
49
We are also expanding our commercialization activities to markets outside of the United States
through partnering arrangements. On February 26, 2015, we entered into a Development, Commercialization and Supply Agreement (the DCS Agreement) with Eddingpharm (Asia) Macao Commercial Offshore Limited (Eddingpharm)
related to the development and commercialization of Vascepa in Mainland China, Hong Kong, Macau and Taiwan, or the China Territory. Under the DCS Agreement, Eddingpharm will be solely responsible for development and commercialization activities in
the China Territory and associated expenses. Additionally, Eddingpharm may be required to conduct clinical trials in the China Territory to secure regulatory approval. Significant commercialization of Vascepa in the China Territory is several years
away. If Eddingpharm is not able to effectively develop and commercialize Vascepa in the China Territory, we may not be able to generate revenue from the DCS Agreement resulting from the sale of Vascepa in the China Territory.
We have limited experience working with ex-U.S. partners such as Eddingpharm to develop and market our products in foreign countries. In order
for Eddingpharm, or us, to market and sell Vascepa in any country outside of the United States for any indication, it will be necessary to obtain regulatory approval from the appropriate regulatory authorities. The requirements and timing for
regulatory approval, which may include conducting clinical trials, vary widely from country to country and may in some cases be different than or more rigorous than requirements in the United States. Any failure by us or Eddingpharm to obtain
approval for Vascepa in any countries outside of the United States in a timely manner may limit the commercial success of Vascepa and our ability to grow our revenues.
Factors related to building and managing a sales and marketing organization that can inhibit our efforts to successfully commercialize Vascepa
include:
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our inability to attract and retain adequate numbers of effective sales and marketing personnel;
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our inability to adequately train our sales and marketing personnel, in particular as it relates to various healthcare regulatory requirements applicable to the marketing and sale of pharmaceutical products and the
court declaration that we believe enables us to expand marketing efforts for Vascepa, and our inability to adequately monitor compliance with these requirements;
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the inability of our new sales personnel, working for us as a new market entrant, to obtain access to or persuade adequate numbers of physicians to prescribe Vascepa;
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the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines;
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an inability by us or our partners to obtain regulatory and marketing approval or establish marketing channels in foreign jurisdictions; and
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unforeseen costs and expenses associated with operating a new independent sales and marketing organization.
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If we are not successful in our efforts to market and sell Vascepa, our anticipated revenues will be materially and negatively affected, and
we may not obtain profitability, may need to cut back on research and development activities or need to raise additional funding that could result in substantial dilution.
*We expect final positive results from the REDUCE-IT outcomes study will be required for FDA-approved label expansion for Vascepa.
Since January 2013 we have marketed Vascepa for use in the FDA-approved MARINE indication in the United States.
In April 2015, we received a CRL from the FDA on our Supplemental New Drug Application (sNDA) that sought approval for the use of
Vascepa in patients with high triglyceride levels (TG
³
200 mg/dL and <500 mg/dL) who are also on statin therapy, which we refer to as the ANCHOR indication. In regulatory dialogue, the FDA acknowledged
that the results of the ANCHOR trial as we presented them to FDA were valid and truthful in that, for example, Vascepa reduced triglyceride levels compared to placebo in patients treated in the ANCHOR study. The clinical rationale for reducing serum
triglycerides with Vascepa and modifying other lipid/lipoprotein parameters shown in ANCHOR among statin-treated patients with triglycerides 200-499 mg/dL is to reduce cardiovascular risk. In not approving our ANCHOR sNDA, the FDA concluded that,
for regulatory approval purposes, there are insufficient data at this time to support a drug-induced change in serum triglycerides as a surrogate for reducing cardiovascular risk in the ANCHOR population. The FDA did not determine that the
drug-induced effects of Vascepa, which go beyond triglyceride-lowering, would not actually reduce cardiovascular risk in this population.
In August 2015, based on a federal court order, we began marketing Vascepa in the United States to healthcare professionals for the treatment
of patients in the ANCHOR population through use of a set of qualified statements that reflect the state of research related to this use. In March 2016, we settled the litigation related to this court order under terms by which the FDA and the U.S.
government agreed to be bound by the conclusions from the federal court order that we may engage in truthful and non-misleading speech promoting the off-label use of Vascepa and that certain statements and disclosures that we proposed to make to
healthcare
50
professionals were truthful and non-misleading. An FDA-approved indication for this patient population has not been granted. Our ability to reach full potential in the commercialization of
Vascepa in the United States is dependent upon marketing claims associated with Vascepa that are granted with the approval of an indication statement by the FDA.
Based on our communications with the FDA, we expect that final positive results from the REDUCE-IT outcomes study will be required for FDA
approval of a new indication or other label expansion for Vascepa. Any delay in obtaining, or an inability to obtain, further expansion of our marketing approval rights with an FDA approval could prevent us from growing revenue at greater than our
current pace and could therefore have a material adverse effect on our operations and financial condition, including our ability to reach profitability. Even if we obtain additional regulatory approvals for Vascepa, the timing or scope of any
approvals may prohibit or reduce our ability to commercialize the product successfully. For example, if the approval process for any expanded indication takes too long, we may miss market opportunities and give other companies the ability to develop
competing products or establish market dominance. If the FDA does not approve any expanded indication at all, it could have a material impact on our future results of operations and financial condition. Additionally, the terms of any approvals
beyond the approval received from the FDA in July 2012 for the MARINE indication may prove to not have the scope or breadth needed for us to successfully commercialize Vascepa or become profitable.
*Our off-label promotion of Vascepa could subject us to additional regulatory scrutiny and present unforeseen risks.
The Federal Food, Drug, and Cosmetic Act, or FDCA, has been interpreted by the FDA to make it illegal for pharmaceutical companies to promote
their products for uses that have not been approved by the FDA. Companies that market drugs for so called off-label uses or indications have been subject to related costly litigation, criminal penalties and civil liability under the False Claims
Act.
In May 2015, we and a group of independent physicians filed a lawsuit against the FDA seeking a federal court declaration that would
permit us and our agents to promote to healthcare professionals the use of Vascepa in patients with mixed dyslipidemia and promote on the potential of Vascepa to reduce the risk of cardiovascular disease so long as the promotion is truthful and
non-misleading. This use of Vascepa at issue reflects recognized medical practice but was not approved by the FDA and is thus not covered by current FDA-approved labeling for the drug. Promotion of a so-called off-label use is considered by the FDA
to be illegal under the FDCA. The lawsuit, captioned
Amarin Pharma, Inc., et al. v. Food & Drug Administration, et al.
, S.D.N.Y. (1:15-cv-03588-PAE), was filed in the United States District Court for the Southern District of New
York. In the lawsuit, we contended principally that FDA regulations limiting off-label promotion of truthful and non-misleading information are unconstitutional under the freedom of speech clause of the First Amendment as applied in the case of our
proposed promotion of Vascepa. The physicians in the suit regularly treat patients at risk of cardiovascular disease and, as the complaint contended, have First Amendment rights to receive truthful and non-misleading information from Amarin. The
suit was based on the principle that better informed physicians make better treatment decisions for their patients. The FDA opposed this lawsuit but did not dispute the veracity of the subject ANCHOR clinical trial data, the safety data from which
is already in FDA-approved labeling of Vascepa, or the peer-reviewed research related to Vascepa and the potential for cardiovascular risk reduction.
In connection with this litigation, the FDA sent a detailed letter to us on June 5, 2015 that confirmed the validity of the ANCHOR trial
results. The letter also sought to clarify how, in the FDAs view, applicable law and FDA policies apply to the communications proposed in Amarins complaint. FDA stated in this letter that it did not have concerns with much of the
information Amarin proposed to communicate and provided Amarin with guidance on the FDAs view of lawful, but limited paths for the dissemination and communication to healthcare professionals of the effects of Vascepa demonstrated in the ANCHOR
clinical trial and use of peer-reviewed scientific publications in the context of appropriate disclaimers.
In August 2015, we were
granted preliminary relief in the form of a declaratory judgment in this lawsuit through the courts declaratory judgment that confirmed we may engage in truthful and non-misleading speech promoting the off-label use of Vascepa to healthcare
professionals, i.e., to treat patients with persistently high triglycerides, and that such speech may not form the basis of a misbranding action under the Federal Food and Drug Cosmetic Act. In August 2015, we began to promote Vascepa to healthcare
professionals as permitted by this court declaration. The FDA did not appeal the courts ruling. In March 2016, we settled this litigation under terms by which the FDA and the U.S. government agreed to be bound by the conclusions from the
federal court order that we may engage in truthful and non-misleading speech promoting the off-label use of Vascepa and that certain statements and disclosures that we proposed to make to healthcare professionals were truthful and non-misleading.
While we believe we are now permitted under applicable law to more broadly promote Vascepa, the FDA-approved labeling for Vascepa did not
change as a result of this litigation and settlement, and neither government nor other third-party coverage or reimbursement to pay for the off-label use of Vascepa promoted under the court declaration was required. Based on our communications with
the FDA, we expect that final positive results from the REDUCE-IT outcomes study will be required for label expansion for Vascepa.
51
Even though we have the benefit of a final settlement in this litigation, our promotion is still
subject to a high, perhaps abnormally high, degree of scrutiny to ensure that our promotion remains within the scope covered by the settlement. For example, under the settlement, we remain responsible for ensuring our speech is truthful and
non-misleading. Federal and state governments may also seek to find other means to prevent our promotion of unapproved truthful and non-misleading information about Vascepa. If our operations are found to be in violation of any law or governmental
regulation through existing or new interpretations, we may be subject to prolonged litigation, penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations, any of which could adversely
affect our ability to operate our business and our results of operations.
*We may not be able to compete effectively against our
competitors pharmaceutical products.
The biotechnology and pharmaceutical industries are highly competitive. There are many
pharmaceutical companies, biotechnology companies, public and private universities and research organizations actively engaged in the research and development of products that may be similar to our products. It is probable that the number of
companies seeking to develop products and therapies similar to our products will increase. Many of these and other existing or potential competitors have substantially greater financial, technical and human resources than we do and may be better
equipped to develop, manufacture and market products. These companies may develop and introduce products and processes competitive with or superior to ours. In addition, other technologies or products may be developed that have an entirely different
approach or means of accomplishing the intended purposes of our products, which might render our technology and products noncompetitive or obsolete.
Our competitors both in the United States and Europe include large, well-established pharmaceutical companies, specialty pharmaceutical sales
and marketing companies, and specialized cardiovascular treatment companies. GlaxoSmithKline plc, which currently sells Lovaza
®
, a prescription-only omega-3 fatty acid indicated for patients
with severe hypertriglyceridemia was approved by FDA in 2004 and has been on the market in the United States since 2005. As described below, multiple generic versions of Lovaza are now available in the United States. Other large companies with
competitive products include AbbVie, Inc., which currently sells Tricor
®
and Trilipix
®
for the treatment of severe hypertriglyceridemia
and Niaspan
®
, which is primarily used to raise HDL-C, but is also used to lower triglycerides. Generic versions of Tricor, Trilipix, and Niaspan are also now available in the United States. In
addition, in May 2014, Epanova
®
(omega-3-carboxylic acids) capsules, a free fatty acid form of omega-3 (comprised of 55% EPA and 20% DHA), was approved by the FDA for patients with severe
hypertriglyceridemia. Epanova was developed by Omthera Pharmaceuticals, Inc., and is now owned by AstraZeneca Pharmaceuticals LP (AstraZeneca). Also, in April 2014, Omtryg, another omega-3-acid fatty acid composition developed by Trygg Pharma AS,
received FDA approval for severe hypertriglyceridemia. Neither Epanova nor Omtryg have been commercially launched, but could launch at any time. Each of these competitors, other than potentially Trygg, has greater resources than we do, including
financial, product development, marketing, personnel and other resources.
Currently, five manufacturers have launched generic versions of
Lovaza. In April 2014, Teva Pharmaceuticals USA Inc., or Teva, launched a generic version of Lovaza after winning its patent litigation against Pronova BioPharma Norge AS, now owned by BASF, which owns such patents rights. In June 2014 and September
2014, Par Pharmaceutical Inc., or Par, and Apotex Inc., or Apotex, respectively, received FDA approval of their respective versions of generic Lovaza. In March 2011, Pronova/BASF entered into an agreement with Apotex to settle its patent litigation
in the United States related to Lovaza. Pursuant to the terms of the settlement agreement, Apotex launched a generic version of Lovaza in January 2015. Prasco Labs launched a generic version of Lovaza in March 2015 and Amneal Pharmaceuticals
launched its version in January 2016.
In addition, we are aware of other pharmaceutical companies that are developing products that, if
approved and marketed, would compete with Vascepa. We understand that Acasti Pharma, or Acasti, a subsidiary of Neptune Technologies & Bioresources Inc., announced in December 2015 that it intends to pursue a regulatory pathway under
section 505(b)(2) of the FDCA for its omega-3 prescription drug candidate, CaPre
®
, derived from krill oil for the treatment of hypertriglyceridemia. Acasti plans to begin a pivotal
bioavailability bridging study between CaPre and an omega-3 prescription drug to establish a scientific bridge between the two and determine the feasibility of a 505(b)(2) regulatory pathway. Acasti intends to follow this with a Phase 3 clinical
program to assess the safety and efficacy of CaPre in patients with very high (
³
500 mg/dL) triglycerides. We believe Catabasis Pharmaceuticals, or Catabasis, and Sancilio & Company, or Sancilio,
are also developing potential treatments for hypertriglyceridemia based on omega-3 fatty acids. To our knowledge, Catabasis initiated a Phase 2 clinical trial in October 2015 to evaluate the safety and efficacy of its product in combination with
atorvastatin in patients with hypercholesterolemia, and Sancilio also is pursuing a regulatory pathway under section 505(b)(2) of the FDCA for its product and submitted an IND in July 2015. Sancilio completed two pivotal pharmacokinetic studies, and
we expect the company to initiate a pivotal clinical endpoint study as the next step in development. In addition, we are aware that Matinas BioPharma, Inc. is developing an omega-3-based therapeutic for the treatment of severe hypertriglyceridemia
and mixed dyslipidemia. Matinas BioPharma, Inc. has filed an Investigational New Drug Application with the FDA to conduct a human study in the treatment of severe hypertriglyceridemia. Akcea Therapeutics/Ionis Pharmaceuticals (formerly Isis
Pharmaceuticals) announced favorable Phase 2 results of volanesorsen (formerly ISIS-APOCIII
Rx
), a drug candidate administered through weekly subcutaneous injections, in patients with high
triglycerides and type 2 diabetes and in patients with moderate to severe high triglycerides. Finally, Madrigal Pharmaceuticals has completed Phase 1 clinical testing of MGL-3196 for the treatment of high triglycerides and various lipid parameters
in patients.
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The regulatory exclusivity status of Vascepa remains uncertain creating uncertainty around
to what degree we will continue to enjoy the benefits we have to date in the absence of a definitive five-year regulatory exclusivity determination for Vascepa.
The timelines and conditions under the abbreviated new drug application, or ANDA process that permit the start of patent litigation and allow
the FDA to approve generic versions of brand name drugs like Vascepa differ based on whether a drug receives three-year, or five-year, new chemical entity (NCE) marketing exclusivity. The FDA typically makes a determination on marketing exclusivity
in connection with an NDA approval of a drug for a new indication. We applied to the FDA for five-year, NCE marketing exclusivity for Vascepa in connection with the NDA for our MARINE indication, which NDA was approved by the FDA on July 26,
2012. On February 21, 2014, in connection with the July 26, 2012 approval of the MARINE indication, the FDA denied a grant of NCE marketing exclusivity to Vascepa and granted three-year marketing exclusivity. Under applicable regulations,
such three-year exclusivity would have extended through July 25, 2015 and would have been supplemented by a 30-month stay triggered by patent litigation that would have extended into September 2016, unless such patent litigation was resolved
against us sooner.
NCE marketing exclusivity, not granted to Vascepa at this time, precludes approval during the five-year exclusivity
period of certain 505(b)(2) applications and ANDAs submitted by another company for another version of the drug. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. In
this case, the pioneer drug company may be afforded the benefit of a 30-month stay against the launch of such a competitive product that would extend from the end of the five-year exclusivity period, and may also be afforded other extensions under
applicable regulations, including a six-month pediatric exclusivity extension or a judicial extension if applicable requirements are met. Another drug sponsor could also gain a form of marketing exclusivity under the provisions of the FDCA, as
amended by the Hatch-Waxman Amendments, if such company can, under certain circumstances, complete a human clinical trial process and obtain regulatory approval of its product.
The three-year period of exclusivity granted to Vascepa under the Hatch-Waxman Amendments is for a drug product that contains an active moiety
that has been previously approved, such as when the application contains reports of new clinical investigations (other than bioavailability studies) conducted by the sponsor that were essential to approval of the application. Accordingly, we expect
to receive three-year exclusivity in connection with any future regulatory approvals of Vascepa, such as an approval sought based on positive REDUCE-IT outcomes study results.
Such three-year exclusivity protection precludes the FDA from approving a marketing application for an ANDA, a product candidate that the FDA
views as having the same conditions of approval as Vascepa (for example, the same indication and/or other conditions of use), or a 505(b)(2) NDA submitted to the FDA with Vascepa as the reference product, for a period of three years from the date of
FDA approval. The FDA may accept and commence review of such applications during the three-year exclusivity period. Such three-year exclusivity grant does not prevent a company from challenging the validity of patents at any time, subject to any
prior four-year period pending from a grant of five-year exclusivity. This three-year form of exclusivity may also not prevent the FDA from approving an NDA that relies only on its own data to support the change or innovation.
As noted above, the FDA typically makes a determination on marketing exclusivity in connection with an approval of an application for a new
indication of a drug. We applied to the FDA for five-year, NCE marketing exclusivity for Vascepa in connection with the NDA for our MARINE indication, which NDA was approved by the FDA on July 26, 2012 as the first FDA approval of Vascepa. On
February 21, 2014, in connection with the July 26, 2012 approval of the MARINE indication, the FDA denied a grant of NCE marketing exclusivity to Vascepa and granted three-year marketing exclusivity.
On February 27, 2014, we sued the FDA in the U.S. District Court for the District of Columbia to challenge the agencys denial of
five-year NCE exclusivity for Vascepa, based on our reading of the relevant statute, our view of FDAs inconsistency with its past actions in this area and the retroactive effect of what we believe is a new policy at FDA as it relates to our
situation.
On May 28, 2015, the Court granted our motion for summary judgment. This lawsuit sought an order requiring FDA to
recognize five-year, NCE marketing exclusivity for Vascepa. The decision vacated the FDAs denial of our claim for such exclusivity and remanded to the FDA for proceedings consistent with the decision. FDA did not appeal the Courts
decision prior to the July 28, 2015 deadline for appeal. A new exclusivity determination by FDA has not been made.
On July 22,
2015, Watson Laboratories Inc., the purported first Vascepa ANDA filer, sought to intervene and appeal the Courts decision. We and FDA opposed this intervention effort. The applicable courts denied Watson the relief sought and appeal periods
have expired.
A new exclusivity determination by FDA has been pending since the May 28, 2015 District of Columbia court order
setting aside FDAs denial of NCE exclusivity for Vascepa. We believe Vascepa is entitled to NCE exclusivity, but cannot predict the outcome of FDAs determination. It is possible that FDAs determination would be challenged by
interested parties.
Recent regulatory determinations and court decisions have provided us with certain benefits of five-year regulatory
exclusivity in the United States, such as delayed generic-related patent litigation and cessation of ANDA review at FDA. However, the uncertain status of our regulatory exclusivity at the FDA has, and is expected to continue to have, a negative
impact on our company as we have
53
not been able to obtain certainty on an exclusivity grant and thereby certainty around the benefits associated with a definitive five-year exclusivity status. Additional delays at FDA in making
an exclusivity decision, a denial of NCE exclusivity for Vascepa, additional associated litigation and uncertainty surrounding our regulatory exclusivity status generally could continue to have a negative effect on our company.
FDA marketing exclusivity is separate from, and in addition to, patent protection, trade secrets and manufacturing barriers to entry which
also help protect Vascepa against generic competition.
Generic company competitors are expected to again seek approval of generic
versions of Vascepa.
The Food Drug and Cosmetic Act, or FDCA, as amended by the Drug Price Competition and Patent Term
Restoration Act of 1984, as amended, or the Hatch-Waxman Amendments, permit the FDA to approve ANDAs for generic versions of brand name drugs like Vascepa. We refer to the process of generic drug applications as the ANDA process. The
ANDA process permits competitor companies to obtain marketing approval for a drug product with the same active ingredient, dosage form, strength, route of administration, and labeling as the approved brand name drug, but without having to conduct
and submit clinical studies to establish the safety and efficacy of the proposed generic product. In place of such clinical studies, an ANDA applicant needs to submit data demonstrating that its product is bioequivalent to the brand name product,
usually based on pharmacokinetic studies.
The Hatch-Waxman Amendments require an applicant for a drug product that relies, in whole or in
part, on the FDAs prior approval of Vascepa, to notify us of its application, a paragraph IV notice, if the applicant is seeking to market its product prior to the expiration of the patents that claim Vascepa. A bona fide paragraph IV notice
may not be given under the Hatch-Waxman Amendments until after the generic company receives from the FDA an acknowledgement letter stating that its ANDA is sufficiently complete to permit a substantive review.
The paragraph IV notice is required to contain a detailed factual and legal statement explaining the basis for the applicants opinion
that the proposed product does not infringe our patents, that our patents are invalid, or both. After receipt of a valid notice, we would have the option of bringing a patent infringement suit in federal district court against any generic company
seeking approval for its product within 45 days from the date of receipt of each notice. If such a suit is commenced within this 45 day period, we will be entitled to receive a 30 month stay on FDAs ability to give final approval to any of the
proposed products that reference Vascepa that begins on the date we receive the paragraph IV notice. The stay may be shortened or lengthened if either party fails to cooperate in the litigation and it may be terminated if the court decides the case
in less than 30 months. If the litigation is resolved in favor of the applicant before the expiration of the 30 month period, the stay will be immediately lifted and the FDAs review of the application may be completed. Such litigation is often
time-consuming and costly, and may result in generic competition if such patents are not upheld or if the generic competitor is found not to infringe such patents.
In the first half of 2014, we received six paragraph IV notices notifying us of accepted ANDAs to Vascepa under the Hatch-Waxman Amendments.
These ANDAs were submitted and accepted by FDA under the regulatory scheme adopted under the Hatch-Waxman Amendments based on the FDAs determination that we were entitled to three, and not five-year exclusivity. As a result from the first half
of 2014 until June 2015, we were engaged in costly litigation with the ANDA applicants to protect our patent rights.
Based on the
May 28, 2015, District of Columbia court order granting our motion for summary judgment in the NCE litigation, on June 26, 2015, the parties to the related Vascepa patent litigation that followed acceptance by FDA of ANDAs to Vascepa based
on a three-year regulatory exclusivity determination, agreed to a full stay of proceeding in that patent litigation.
Following the
May 28, 2015 District of Columbia court order setting aside FDAs denial of NCE exclusivity for Vascepa, FDA notified the ANDA filers that FDA had changed the status of their ANDAs to submitted, but no longer accepted, and notified ANDA
filers that FDA had ceased review of the pending ANDAs. In rescinding acceptance of the ANDAs, the statutory basis for the patent litigation (accepted ANDAs) no longer existed. Thus, on July 24, 2015, we moved to dismiss the pending patent
infringement lawsuits against each of the Vascepa ANDA applicants in the U.S. District Court for the District of New Jersey.
On
January 22, 2016, the U.S. District Court for the District of New Jersey granted Amarins motion to dismiss all patent infringement litigation related to the 2014 acceptance by the FDA of ANDAs to Vascepa. With this dismissal, there is no
pending patent litigation related to Vascepa. An appeal of the courts dismissal was filed by one ANDA filer in this case and we intend to continue to litigate vigorously in support of the courts dismissal. We cannot predict the outcome
of this litigation. A new exclusivity determination by FDA has been pending since the May 28, 2015 District of Columbia court order setting aside FDAs denial of NCE exclusivity for Vascepa. We believe Vascepa is entitled to NCE
exclusivity, but cannot predict the outcome of FDAs determination. We also cannot predict the outcome of this ANDA litigation. The legal process can also be costly and time-consuming.
We plan to defend the exclusivity of Vascepa through patent litigation after notification that FDA has accepted an ANDA application related to
Vascepa. Assuming an NCE exclusivity determination from the FDA or no exclusivity determination, we expect notification of new ANDA submissions no sooner than in late July 2016, after the expiration of four years from the 2012 approval of Vascepa.
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If an ANDA filer is ultimately successful in patent litigation against us, it meets the
requirements for a generic version of Vascepa to the satisfaction of the FDA under its ANDA (after any applicable regulatory exclusivity period and the litigation-related 30-month stay period expires), and is able to supply the product in
significant commercial quantities, the generic company could introduce a generic version of Vascepa. Such a market entry would likely limit our U.S. sales, which would have an adverse impact on our business and results of operations. In addition,
even if a competitors effort to introduce a generic product is ultimately unsuccessful, the perception that such development is in progress and/or news related to such progress could materially affect the perceived value of our company and our
stock price.
Vascepa is a prescription-only omega-3 fatty acid product. Omega-3 fatty acids are also marketed by other companies as
non-prescription dietary supplements. As a result, Vascepa is subject to non-prescription competition and consumer substitution.
Our only current product, Vascepa, is a prescription-only omega-3 fatty acid. Mixtures of omega-3 fatty acids are naturally occurring
substances contained in various foods, including fatty fish. Omega-3 fatty acids are also marketed by others as non-prescription dietary supplements. We cannot be sure physicians will view the pharmaceutical grade purity and tested safety of Vascepa
as having a superior therapeutic profile to naturally occurring omega-3 fatty acids and dietary supplements. In addition, the FDA has not enforced what we view as illegal drug claims made by certain supplement manufacturers to the extent we believe
appropriate under applicable law and regulations, for example, claims that such supplements reduce triglyceride levels. Also, for more than a decade now, the FDA has expressly permitted dietary supplement manufacturers that sell supplements
containing the omega-3 fatty acids EPA and/or DHA to make the following qualified health claim directly to consumers: Supportive but not conclusive research shows that consumption of EPA and DHA omega-3 fatty acids may reduce the risk of coronary
heart disease. As a result of our First Amendment litigation and settlement, we may now make this claim to healthcare professionals subject to certain qualifications. These factors enable dietary supplements to effectively compete with Vascepa. In
addition, to the extent the net price of Vascepa after insurance and offered discounts is significantly higher than the prices of commercially available omega-3 fatty acids marketed by other companies as dietary supplements (through that lack of
coverage by insurers or otherwise), physicians and pharmacists may recommend these commercial alternatives instead of writing or filling prescriptions for Vascepa or patients may elect on their own to take commercially available omega-3 fatty acids.
Either of these outcomes may adversely impact our results of operations by limiting how we price our product and limiting the revenue we receive from the sale of Vascepa due to reduced market acceptance.
We may not be successful in our Vascepa co-promotion effort with Kowa Pharmaceuticals America, Inc.
In March 2014, we entered into a co-promotion agreement with Kowa Pharmaceuticals America, Inc. to co-promote Vascepa in the United States
under which approximately 250 Kowa Pharmaceuticals America, Inc. sales representatives devote a substantial portion of their time to promoting Vascepa with Amarins approximately 130 sales representatives. Co-promotion under the agreement
commenced in May 2014 based on a plan designed to substantially increase both the number of sales targets reached and the frequency of sales calls on existing sales targets. While our agreement provides for minimum performance criteria, we have
little control over Kowa Pharmaceuticals America, Inc., and it may fail to devote the necessary resources and attention to promote Vascepa effectively. If that were to occur, depending on Vascepa revenues, we may have to curtail the continued
development of Vascepa for approval for additional indications or increase our planned expenditures and undertake additional development or commercialization activities at our own expense. Or, we may seek to terminate the agreement and search for
another commercialization partner. If we elect to increase our expenditures to fund development or commercialization activities on our own, depending on Vascepas revenues, we may need to obtain additional capital, which may not be available to
us on acceptable terms, or at all, or which may not be possible due to our other financing arrangements. If we do not generate sufficient funds from the sale of Vascepa or, to the extent needed to supplement funds generated from product revenue,
cannot raise sufficient funds, we may not be able to devote resources sufficient to market and sell Vascepa on our own in a manner required to realize the full market potential of Vascepa.
The commercial value to us of current and sought marketing rights may be smaller than we anticipate.
There can be no assurance as to the adequacy for commercial success of the scope and breadth of the marketing rights we currently have or, if
approved, an indication based on a successful outcome of the REDUCE-IT study. Even if we obtain marketing approval for additional indications, the FDA may impose restrictions on the products conditions for use, distribution or marketing and in
some cases may impose ongoing requirements for post-market surveillance, post-approval studies or clinical trials. Also, the number of actual patients with conditions within the scope of our marketing efforts may be smaller than we anticipate. If
any such marketing right or approved indication is narrower than we anticipate, the market potential for our product would suffer.
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Our special protocol assessment, or SPA, agreement for ANCHOR was rescinded and our SPA
agreement for REDUCE-IT is not a guarantee of FDA approval of Vascepa for the proposed REDUCE-IT indication.
A SPA is an
evaluation by the FDA of a protocol with the goal of reaching an agreement that the Phase 3 trial protocol design, clinical endpoints, and statistical analyses are acceptable to support regulatory approval of the drug product candidate with respect
to effectiveness for the indication studied. The ANCHOR trial was, and the REDUCE-IT trial is, being conducted under an SPA agreement with the FDA. In each case, the FDA agreed that, based on the information we submitted to the agency, the design
and planned analysis of the trial is adequate to support use of the conducted study as the primary basis for approval with respect to effectiveness. A SPA agreement is generally binding upon the FDA except in limited circumstances, such as if the
FDA identifies a substantial scientific issue essential to determining safety or efficacy after the study begins, or if the study sponsor fails to follow the protocol that was agreed upon with the FDA.
In October 2013, the FDA notified us that it rescinded the ANCHOR study SPA agreement because the FDA determined that a substantial scientific
issue essential to determining the effectiveness of Vascepa in the studied population was identified after testing began. In April 2015, we received a CRL from the FDA stating that the FDA determined not to approve label expansion reflecting the
ANCHOR clinical trial efficacy data at this time.
Thus, even though we have received regulatory approval of Vascepa for the MARINE
indication under an SPA agreement, our ANCHOR SPA agreement was rescinded and there is no assurance that the FDA will not rescind our REDUCE-IT SPA agreement. The inability to obtain marketing approval in the ANCHOR or REDUCE-IT indications has and
would prevent us from growing revenue more significantly, and it has had, and could continue to have, a material adverse effect on our operations and financial condition, including our ability to reach profitability.
The commercial value to us of sales of Vascepa under the DCS Agreement with Eddingpharm may be smaller than we anticipate.
There can be no assurance as to the adequacy for commercial success under the DCS Agreement with Eddingpharm. Even if we and Eddingpharm
obtain marketing approval in countries within the China Territory, applicable regulatory agencies may impose restrictions on the products conditions for use, distribution or marketing and in some cases may impose ongoing requirements for
post-market surveillance, post-approval studies or clinical trials. Also, with regard to any indications for which we may gain approval in these countries, the number of actual patients with the condition included in such approved indication may be
smaller than we anticipate. If any such approved indication is narrower than we anticipate, the market potential in these countries for our product would suffer.
Our products and marketing efforts are subject to extensive post-approval government regulation.
Once a product candidate receives FDA marketing approval, numerous post-approval requirements apply. Among other things, the holder of an
approved NDA is subject to periodic and other monitoring and reporting obligations enforced by the FDA and other regulatory bodies, including obligations to monitor and report adverse events and instances of the failure of a product to meet the
specifications in the approved application. Application holders must also submit advertising and other promotional material to regulatory authorities and report on ongoing clinical trials.
With respect to sales and marketing activities including direct-to-healthcare provider and direct-to-consumer advertising and promotional
activities involving the internet, advertising and promotional materials must comply with FDA rules in addition to other applicable federal and local laws in the United States and in other countries. The result of our First Amendment litigation and
settlement may cause the government to scrutinize our promotional efforts or otherwise monitor our business more closely. Industry-sponsored scientific and educational activities also must comply with FDA and other requirements. In the United
States, the distribution of product samples to physicians must comply with the requirements of the U.S. Prescription Drug Marketing Act. Manufacturing facilities remain subject to FDA inspection and must continue to adhere to the FDAs
pharmaceutical current good manufacturing practice requirements, or cGMPs. Application holders must obtain FDA approval for product and manufacturing changes, depending on the nature of the change. We also are subject to the new federal transparency
requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, which require manufacturers of certain drugs, devices, biologics, and medical supplies to report to the Centers for
Medicare & Medicaid Services, or CMS, information related to payments and other transfers of value to physicians and teaching hospitals and physician ownership and investment interests. We may also be subject, directly or indirectly through
our customers and partners, to various fraud and abuse laws, including, without limitation, the U.S. Anti-Kickback Statute, U.S. False Claims Act, and similar state laws, which impact, among other things, our proposed sales, marketing, and
scientific/educational grant programs. If we participate in the U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs, or other government drug programs, we will be subject to complex laws and
regulations regarding reporting and payment obligations. We must also comply with requirements to collect and report adverse events and product complaints associated with our products. For example, in September 2014, we participated in a routine
inspection from the FDA in which the FDA made observations on perceived deficiencies related to our processes for collection and processing of adverse events. We have responded to FDA with respect to these observations and
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continue to work with FDA to show that we have improved related systems and, given we received communication from the FDA that it considers this matter to be closed, we believe that we have
demonstrated to FDA that we have adequately responded to these observations. Our activities are also potentially subject to U.S. federal and state consumer protection and unfair competition laws. Similar requirements exist in many of these areas in
other countries.
Depending on the circumstances, failure to meet these post-approval requirements can result in criminal prosecution,
fines or other penalties, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, or refusal to allow us to enter into supply contracts, including government
contracts. We may also be held responsible for the non-compliance of our partners, such as Kowa Pharmaceuticals America, Inc. In addition, even if we comply with FDA and other requirements, new information regarding the safety or effectiveness of a
product could lead the FDA to modify or withdraw a product approval. Adverse regulatory action, whether pre- or post-approval, can potentially lead to product liability claims and increase our product liability exposure. We must also compete against
other products in qualifying for coverage and reimbursement under applicable third-party payment and insurance programs. In addition, all of the above factors may also apply to any regulatory approval for Vascepa obtained within the China Territory
under the DCS agreement with Eddingpharm. Given our inexperience with marketing and commercializing products in the China Territory, we will need to rely on Eddingpharm to assist us in dealing with any such issues.
The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. If we or
Kowa Pharmaceuticals America, Inc. are found to have improperly promoted uses of Vascepa, we may become subject to significant fines and other liability. The government may seek to find means to prevent our promotion of truthful and non-misleading
information beyond our current court ruling.
The FDA and other regulatory agencies strictly regulate the promotional claims that
may be made about prescription products. In particular, in general, the U.S. governments position has been that a product may not be promoted for uses that are not approved by the FDA as reflected in the products approved labeling. Even
though we received FDA marketing approval for Vascepa for the MARINE indication and we believe our First Amendment court ruling and litigation settlement affords us a degree of protection for other promotional efforts, physicians may still prescribe
Vascepa to their patients for use in the treatment of conditions that are not included as part of the indication statement in our FDA-approved Vascepa label or our settlement. If we are found to have promoted Vascepa outside the terms of the court
ruling or in violation of what federal or state government may determine to be acceptable, we may become subject to significant government fines and other related liability, such as under the False Claims Act or other theories of liability.
Government may also seek to hold us responsible for the non-compliance of our co-promotion partner, Kowa Pharmaceuticals America, Inc., or our ex-U.S. commercialization partner, Eddingpharm. For example, the Federal government has levied large civil
and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which
specified promotional conduct is changed or curtailed.
In addition, incentives exist under applicable laws that encourage competitors,
employees and physicians to report violations of rules governing promotional activities for pharmaceutical products. These incentives could lead to so-called whistleblower lawsuits as part of which such persons seek to collect a portion of moneys
allegedly overbilled to government agencies due to, for example, promotion of pharmaceutical products beyond labeled claims. These incentives could also lead to suits that we have mischaracterized a competitors product in the marketplace and
may, as a result, be sued for alleged damages to our competitors. Such lawsuits, whether with or without merit, are typically time-consuming and costly to defend. Such suits may also result in related shareholder lawsuits, which are also costly to
defend.
Even though we have the benefit of a preliminary ruling and may be ultimately successful with a final settlement or final ruling
in our current litigation related to promotion beyond FDA-approved labeling, our promotion would still be subject to a high, perhaps abnormally high, degree of scrutiny to ensure that our promotion remains within the permitted scope. Likewise,
federal or state government may seek to find other means to prevent our promotion of truthful and non-misleading information.
The
REDUCE-IT cardiovascular outcomes trial may fail to show that Vascepa can reduce major cardiovascular events in an at-risk patient population on statin therapy, and the long-term clinical results of Vascepa may not be consistent with the clinical
results we observed in our Phase 3 clinical trial, in which case our sales of Vascepa may then suffer.
In accordance with the SPA
agreements for our MARINE and ANCHOR trials, efficacy was evaluated in these trials compared to placebo at twelve weeks. No placebo-controlled studies have been conducted regarding the long-term effect of Vascepa on lipids, and no outcomes study has
been conducted evaluating Vascepa. The REDUCE-IT study, which commenced in 2011 and reached its approximately 8,000 patient enrollment target in March 2016, is designed to evaluate the efficacy of Vascepa in reducing major cardiovascular events in
an at-risk patient population on statin therapy.
Outcomes studies of certain other lipid-modifying therapies have failed to achieve the
endpoints of such studies, even though they reduced triglyceride levels and showed other favorable effects on parameters relevant to cardiovascular health in studied patients.
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For example, in 2010, the results of the ACCORD-Lipid trial were published. This trial studied the effect of adding fenofibrate onto open-label simvastatin therapy on cardiovascular outcomes. The
addition of fenofibrate did not show any treatment benefit on cardiovascular outcomes over simvastatin monotherapy in this study. In 2011, the results of the AIM-HIGH trial were published. This trial studied the effect of adding a second
lipid-altering agent, extended-release niacin, to simvastatin therapy on cardiovascular outcomes in people at high risk for cardiovascular events. No significant incremental treatment benefit with extended-release niacin was observed. In addition,
in September 2012, researchers published in the
Journal of the American Medical Association,
or
JAMA,
the results of a retrospective meta-analysis of twenty previously conducted studies regarding the use of omega-3 supplements across
various patient populations. This meta-analysis suggested that the use of such supplements was not associated with a lower risk of all-cause death, cardiac death, sudden death, heart attack, or stroke. We believe the results of these studies may not
be directly applicable to the use of Vascepa over time. For instance, the outcomes studies for fenofibrates and niacin were conducted in patient populations in which the majority of patients studied had triglycerides below 200 mg/dL and fenofibrates
and niacin are believed to work differently than Vascepa in the body and do not have as favorable a side-effect profile, and nineteen of the twenty studies included in the
JAMA
meta-analysis involved the use of omega-3 supplements containing
a mixture of EPA and DHA, and most were evaluated at relatively lower doses. In addition, in May 2013,
The New England Journal of Medicine
published the results of an outcomes study of 1 gram per day of an omega-3 acid ethyl ester
composition. In that study, the composition failed to show a benefit in reducing the rate of death from cardiovascular causes or hospitalization for cardiovascular causes when administered to patients with cardiovascular risk factors under different
study conditions than in the REDUCE-IT study. Vascepa is comprised of highly-pure ethyl-EPA, and has been approved by the FDA for use in adult patients with severe hypertriglyceridemia at a dose of 4 grams per day and is being studied in REDUCE-IT
at 4 grams per day.
The only other outcomes study involving the use of a highly-pure formulation of ethyl-EPA, called the Japan
EPA Lipid Intervention Study (JELIS), suggested that use of a highly-pure formulation of ethyl-EPA in Japan, when used in conjunction with statins, reduced cardiovascular events by 19% compared to the use of statins alone. However, there are several
limitations to the JELIS study. First, the patient population was exclusively Japanese, the majority of the participants were women, and at baseline patients had a much higher LDL, limiting its generalizability to the intended target population.
Also, a low dose of statins was used. It is unknown whether the positive treatment effects would have persisted if these patients had been optimally treated with statins using contemporary LDL targets in the United States. In addition, JELIS was an
open-label trial, which could influence patient and physician behavior and reporting of symptoms, decisions regarding hospitalization, and referral of events for adjudication. This may be particularly relevant since hospitalization for unstable
angina was a primary contributor of the overall positive result, and is considered a softer endpoint than fatal cardiovascular events.
Further, FDA determined that JELIS results could not be used as support for or against the use of triglyceride levels as a surrogate for
cardiovascular risk reduction. Patients treated with EPA and statin in JELIS achieved triglyceride levels that were only 5% lower, on average, than those achieved among patients treated with statin alone; however, the reduction in cardiovascular
risk in the primary endpoint analysis was 19%. Likewise, within the primary and secondary prevention sub-analyses, triglyceride levels were lowered only 5% on average in the EPA plus statin group compared with the statin alone group; however, the
relative risk reduction was 53% in the primary prevention population with elevated triglyceride (
>
150 mg/dL) and low HDL-C (
<
40 mg/dL) levels and 23% in the secondary prevention population with established coronary artery
disease. These large differences in magnitude between triglyceride reduction and risk reduction in JELIS suggest that the effects of EPA on triglyceride levels alone may not be responsible for, or predict, the observed differences in cardiovascular
events between treatment groups in JELIS. JELIS was not designed to evaluate primary and secondary prevention populations. It is possible that the putative cardioprotective effects of EPA observed in JELIS are due not to a single mode of action,
such as triglyceride lowering, but rather to multiple mechanisms working together, such as purported beneficial effects on multiple atherosclerosis processes, including endothelial function, oxidative stress, foam cell formation,
inflammation/cytokines, plaque formation/progression, platelet aggregation, thrombus formation, and plaque rupture. The REDUCE-IT study is needed to determine the clinical benefit, if any, of EPA therapy in statin-treated patients with elevated
triglyceride levels.
Although we believe the results of the
JAMA
meta-analysis and other studies are not directly applicable to
the potential long-term clinical experience with Vascepa, there can be no assurance that the endpoints of the REDUCE-IT cardiovascular outcomes study will be achieved or that the lipid-modifying effects of Vascepa in REDUCE-IT or any other study of
Vascepa will not be subject to variation beyond twelve weeks. If the REDUCE-IT trial fails to achieve its clinical endpoints or if the results of these long-term studies are not consistent with the 12-week clinical results, it could prevent us from
expanding the labeled approval of Vascepa or even call into question the currently understood efficacy and safety profile of Vascepa.
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*The prospective interim efficacy and safety analysis of the REDUCE-IT cardiovascular
outcomes trial may not be completed in the contemplated timeframe in 2016 and may not demonstrate to the independent committee monitoring the study a sufficient benefit risk result to warrant the independent committee recommending stopping the study
early for overwhelming efficacy. The independent monitoring committee may, at their discretion, also recommend that the study be stopped for safety or related concerns.
In accordance with the SPA agreement for our REDUCE-IT cardiovascular outcomes trial, an interim review of the efficacy and safety results of
the trial is scheduled to occur upon reaching approximately 60% of the target aggregate number of cardiovascular events. We currently expect this interim review by the studys independent data monitoring committee (DMC) to occur during 2016
based on our understanding of the current event rates in the study and expected future event rates. It may actually take longer than anticipated for the DMC assessment of data for the interim analysis.
Further, as is typical of interim analyses, the statistical threshold for defining overwhelming efficacy on the primary endpoint that would
call for stopping the study early in connection with such analysis is considerably higher than the threshold for defining statistical significance after the expected completion of the study in 2017. We do not expect the study to be stopped due to
overwhelming efficacy at this interim look. We have requested the DMC to not recommend stopping the study early based only upon achieving statistical significance for the primary endpoint, but to ensure that supportive trends of benefit are also
consistently observed in certain secondary endpoints and subpopulations before recommending that the study be stopped early for overwhelming efficacy. For example, even if the appropriate studied cardiovascular events in the trial occur at
sufficiently low rates in the active, Vascepa, group as compared to the placebo group such that the study would be a success at completion, the more rigorous statistical analysis applied by the DMC at the interim analysis may not warrant stoppage of
the study for overwhelming efficacy in connection with the interim analysis. The study may also be stopped pursuant to recommendation by the DMC at this interim analysis due to low likelihood of obtaining a favorable result at completion. Despite no
formal futility analysis or boundary being pre-specified in the protocol, it is within the purview of the DMC to weigh all available information and recommend study stoppage or continuation.
Moreover, it is the DMC that will make the formal recommendation as to whether to stop the study early or to continue as planned. Amarin is
blinded to the interim analysis results and is informed by the DMC of the recommendation to stop the study or to continue as planned. The DMC may consider factors outside the pre-specified statistical analysis plan when assessing whether to
recommend continuing the study as planned. For example, even if study results are sufficiently positive at the interim analysis to demonstrate overwhelming efficacy, the DMC at its discretion may recommend continuation of the study as planned with
the goal of arriving at more robust results at the planned study completion if it believes that waiting for more robust results outweighs the potential medical benefit of stopping and unblinding the study early.
The DMC has multiple times per year assessed safety data generated in the ongoing study and has thus far recommended to continue the study as
planned. Thus, multiple safety analyses to date have not warranted study stoppage. Nevertheless, the study may be stopped at any time based on recommendations of the DMC due to safety concerns identified by the DMC during its ongoing and regularly
scheduled safety data assessments.
We may not be successful in developing or marketing future products if we cannot meet the
extensive regulatory requirements of the FDA and other regulatory agencies for quality, safety and efficacy.
The success of our
research and development efforts is dependent in part upon our ability, and the ability of our partners or potential partners, to meet regulatory requirements in the jurisdictions where we or our partners or potential partners ultimately intend to
sell such products once approved. The development, manufacture and marketing of pharmaceutical products are subject to extensive regulation by governmental authorities in the United States, the China Territory under the DCS Agreement with
Eddingpharm, the European Union, Japan and elsewhere. In the United States, the FDA generally requires pre-clinical testing and clinical trials of each drug to establish its safety and efficacy and extensive pharmaceutical development to ensure its
quality before its introduction into the market. Regulatory authorities in other jurisdictions impose similar requirements. The process of obtaining regulatory approvals is lengthy and expensive and the issuance of such approvals is uncertain. The
commencement and rate of completion of clinical trials and the timing of obtaining marketing approval from regulatory authorities may be delayed by many factors, including:
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the lack of efficacy during clinical trials;
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the inability to manufacture sufficient quantities of qualified materials under cGMPs for use in clinical trials;
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slower than expected rates of patient recruitment;
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the inability to observe patients adequately after treatment;
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changes in regulatory requirements for clinical or preclinical studies;
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the emergence of unforeseen safety issues in clinical or preclinical studies;
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delay, suspension, or termination of a trial by the institutional review board responsible for overseeing the study at a particular study site;
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unanticipated changes to the requirements imposed by regulatory authorities on the extent, nature or timing of studies to be conducted on quality, safety and efficacy;
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government or regulatory delays or clinical holds requiring suspension or termination of a trial; and
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political instability affecting our clinical trial sites, such as the potential for political unrest affecting our REDUCE-IT clinical trial sites in the Ukraine and Russia.
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Even if we obtain positive results from early stage pre-clinical or clinical trials, we may not achieve the same success in future trials.
Clinical trials that we or potential partners conduct may not provide sufficient safety and efficacy data to obtain the requisite regulatory approvals for product candidates. The failure of clinical trials to demonstrate safety and efficacy for our
desired indications could harm the development of that product candidate as well as other product candidates, and our business and results of operations would suffer. For example, the efficacy results of our Vascepa Phase 3 clinical trials for the
treatment of Huntingtons disease were negative. As a result, we stopped development of that product candidate, revised our clinical strategy and shifted our focus to develop Vascepa for use in the treatment of cardiovascular disease.
Any approvals that are obtained may be limited in scope, may require additional post-approval studies or may require the addition of labeling
statements focusing on product safety that could affect the commercial potential for our product candidates. Any of these or similar circumstances could adversely affect our ability to earn revenues from the sale of such products. Even in
circumstances where products are approved by a regulatory body for sale, the regulatory or legal requirements may change over time, or new safety or efficacy information may be identified concerning a product, which may lead to the withdrawal of a
product from the market or similar use restrictions. The discovery of previously unknown problems with a product or in connection with the manufacturer of products may result in restrictions on that product or manufacturer, including withdrawal of
the product from the market, which would have a negative impact on our potential revenue stream.
Legislative or regulatory reform
of the healthcare system in the United States and foreign jurisdictions may affect our ability to profitably sell Vascepa.
Our
ability to commercialize our future products successfully, alone or with collaborators, will depend in part on the extent to which coverage and reimbursement for the products will be available from government and health administration authorities,
private health insurers and other third-party payors. The continuing efforts of the U.S. and foreign governments, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce healthcare costs may
adversely affect our ability to set prices for our products which we believe are fair, and our ability to generate revenues and achieve and maintain profitability.
Specifically, in both the United States and some foreign jurisdictions, there have been a number of legislative and regulatory proposals to
change the healthcare system in ways that could affect our ability to sell our products profitably. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the
PPACA, enacted in March 2010, substantially changes the way healthcare is financed by both governmental and private insurers. Among other cost-containment measures, PPACA establishes:
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An annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents;
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A new Medicare Part D coverage gap discount program, in which pharmaceutical manufacturers who wish to have their drugs covered under Part D must offer discounts to eligible beneficiaries during their coverage gap
period; and
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A new formula that increases the rebates a manufacturer must pay under the Medicaid Drug Rebate Program.
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We expect further federal and state proposals and healthcare reforms to continue to be proposed by legislators, which could limit the prices
that can be charged for the products we develop and may limit our commercial opportunity.
The continuing efforts of government and other
third-party payors to further contain or reduce the costs of healthcare through various means may limit our commercial opportunity. It will be time consuming and expensive for us to go through the process of seeking coverage and reimbursement from
Medicare and private payors. Our products may not be considered cost effective, and government and third-party private health insurance coverage and reimbursement may not be available to patients for any of our future products or sufficient to allow
us to sell our products on a competitive and profitable basis. Our results of operations could be adversely affected by PPACA and by other healthcare reforms that may be enacted or adopted in the future. In addition, increasing emphasis on managed
care in the United States will continue to put pressure on the pricing of pharmaceutical products. Cost control initiatives could decrease the price that we or any potential collaborators could receive for any of our future products and could
adversely affect our profitability.
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In some foreign countries, including major markets in the European Union and Japan, the pricing
of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take 6 to 12 months or longer after the receipt of regulatory marketing approval for a product. To obtain
reimbursement or pricing approval in some countries, we may be required to conduct a pharmacoeconomic study that compares the cost-effectiveness of Vascepa to other available therapies. Such pharmacoeconomic studies can be costly and the results
uncertain. Our business could be harmed if reimbursement of our products is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels.
As we evolve from a company primarily involved in research and development to a company also focused on establishing an infrastructure
for commercializing Vascepa, we may encounter difficulties in managing our growth and expanding our operations successfully.
We
hired and trained a professional sales force of approximately 275 sales representatives and commenced our commercial launch of Vascepa in the MARINE indication in the United States in early January 2013. The process of establishing a commercial
infrastructure is difficult, expensive and time-consuming. Our October 2013 worldwide reduction in force, which included the termination of approximately 50% of the then-staffed sales force, has made this process more difficult. As our operations
expand with the anticipated growth of our produce sales, we expect that we will need to manage additional relationships with various collaborative partners, suppliers and other third parties. Future growth will impose significant added
responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees. Our future financial performance and our ability to commercialize Vascepa and to compete effectively will depend, in
part, on our ability to manage our future growth effectively. To that end, we must be able to manage our development efforts effectively, and hire, train, integrate and retain additional management, administrative and sales and marketing personnel.
We may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our company.
Risks
Related to our Reliance on Third Parties
Our supply of product for commercial supply and clinical trials is dependent upon
relationships with third-party manufacturers and key suppliers.
We have no in-house manufacturing capacity and rely on contract
manufacturers for our clinical and commercial product supply. We cannot assure you that we will successfully manufacture any product we may develop, either independently or under manufacturing arrangements, if any, with our third-party
manufacturers. Moreover, if any manufacturer should cease doing business with us or experience delays, shortages of supply or excessive demands on their capacity, we may not be able to obtain adequate quantities of product in a timely manner, or at
all.
Any manufacturing problem, natural disaster affecting manufacturing facilities, or the loss of a contract manufacturer could be
disruptive to our operations and result in lost sales. Additionally, we will be reliant on third parties to supply the raw materials needed to manufacture Vascepa. Any reliance on suppliers may involve several risks, including a potential inability
to obtain critical materials and reduced control over production costs, delivery schedules, reliability and quality. Any unanticipated disruption to future contract manufacture caused by problems at suppliers could delay shipment of products,
increase our cost of goods sold and result in lost sales. If our suppliers were unable to supply us with adequate volumes of active pharmaceutical ingredient (drug substance) or encapsulated bulk product (drug product), it would have a material
adverse effect on our ability to continue to commercialize Vascepa.
We initially purchased all of our supply of the bulk compound
(ethyl-EPA), which constitutes the only active pharmaceutical ingredient, or API, of Vascepa, from a single supplier, Nisshin Pharma, Inc., or Nisshin, located in Japan. Nisshin was approved by the FDA as a Vascepa API supplier as part of our FDA
marketing approval for the MARINE indication in July 2012. In April 2013, we announced the approval by the FDA of Chemport, Inc. and BASF (formerly Equateq Limited) as additional Vascepa API suppliers. We terminated our agreement with BASF due to
its inability to meet the agreement requirements, may enter into a new development and supply agreement with BASF, and may purchase API from BASF. In 2014, we obtained sNDA approval of a fourth supplier of API, which includes the manufacturing
facility of Finorga SAS (Novasep). We currently purchase and use commercial supply from Novasep, Chemport, and Nisshin. Each of the API manufacturers obtains supply of the key raw material to manufacture API from other third-party sources of supply.
While we have contractual freedom to source the API for Vascepa and have entered into supply agreements with multiple suppliers who also
rely on other third-party suppliers of the key raw material to manufacture the API for Vascepa, Novasep, Nisshin and Chemport currently supply all of our API for Vascepa. Our strategy in adding API suppliers beyond Nisshin has been to expand
manufacturing capacity and to partially mitigate the risk of reliance on any single supplier.
Expanding manufacturing capacity and
qualifying such capacity is difficult and subject to numerous regulations and other operational challenges. The resources of our suppliers vary and are limited; costs associated with projected expansion and qualification can be significant. For
example, Chemport, which was approved as one of our API suppliers in April 2013, is a privately-held company and their commitment to Vascepa supply has required them to seek additional resources. There can be no assurance that the expansion plans of
any of our suppliers will be successful. Our aggregate capacity to produce API is dependent upon the
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qualification of our API suppliers. Each of our API suppliers has outlined plans for potential further capacity expansion. If no additional API supplier is approved by the FDA, our API supply
will be limited to the API we purchase from previously approved suppliers. If our third-party manufacturing capacity is not expanded and compliant with applicable regulatory requirements, we may not be able to supply sufficient quantities of Vascepa
to meet anticipated demand. We cannot assure you that we can contract with any future manufacturer on acceptable terms or that any such alternative supplier will not require capital investment from us in order for them to meet our requirements.
Alternatively, our purchase of supply may exceed actual demand for Vascepa.
We currently have encapsulation agreements with three
commercial API encapsulators for the encapsulation of Vascepa: Patheon, Inc. (formerly Banner Pharmacaps), Catalent Pharma Solutions, and Capsugel Plöermel SAS. These companies have qualified their manufacturing processes and are capable of
manufacturing Vascepa. There can be no guarantee that additional other suppliers with which we have contracted to encapsulate API will be qualified to manufacture the product to our specifications or that these and any future suppliers will have the
manufacturing capacity to meeting anticipated demand for Vascepa. We cannot assure you that we can contract with any future manufacturer on acceptable terms or that any such alternative supplier will not require capital investment from us in order
for them to meet our requirements.
We may not be able to maintain our exclusivity with our certain third-party Vascepa suppliers if
we do not meet minimum purchase obligations due to lower than anticipated sales of Vascepa.
Certain of our agreements with our
suppliers include minimum purchase obligations and limited exclusivity provisions based on such minimum purchase obligations. If we do not meet the respective minimum purchase obligations in our supply agreements, our suppliers, in certain cases,
will be free to sell the active pharmaceutical ingredient of Vascepa to potential competitors. Similarly if we terminate certain of our supply agreements, such suppliers may be free to sell the active pharmaceutical ingredient of Vascepa to
potential competitors of Vascepa. While we anticipate that intellectual property barriers and FDA regulatory exclusivity will be the primary means to protect the commercial potential of Vascepa, the availability of Vascepa active pharmaceutical
ingredient from our suppliers to our potential competitors would make our competitors entry into the market easier and more attractive.
We have limited experience with the commercial sale of Vascepa, and such inexperience may cause us to purchase too much or not enough
supply to satisfy actual demand, which could have a material adverse effect on our financial results and financial condition.
Certain of our agreements with our suppliers include minimum purchase obligations and limited exclusivity provisions. These purchases are
generally made on the basis of rolling twelve-month forecasts which in part are binding on us and the balance of which are subject to adjustment by us subject to certain limitations. Certain of our agreements also include contractual minimum
purchase commitments regardless of the rolling twelve-month forecasts. We have limited experience with the commercial sale of Vascepa, and as such expectations regarding expected demand may be wrong. We may not purchase sufficient quantities of
Vascepa to meet actual demand or our purchase of supply may exceed actual demand. In either case, such event could have a material adverse effect on our financial results and financial condition.
The manufacture and packaging of pharmaceutical products such as Vascepa are subject to FDA requirements and those of similar foreign
regulatory bodies. If we or our third-party manufacturers fail to satisfy these requirements, our product development and commercialization efforts may be materially harmed.
The manufacture and packaging of pharmaceutical products, such as Vascepa, are regulated by the FDA and similar foreign regulatory bodies and
must be conducted in accordance with the FDAs pharmaceutical current good manufacturing practices, or cGMPs, and comparable requirements of foreign regulatory bodies. There are a limited number of manufacturers that operate under these cGMPs
regulations who are both capable of manufacturing Vascepa and willing to do so. Failure by us or our third-party manufacturers to comply with applicable regulations, requirements, or guidelines could result in sanctions being imposed on us,
including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our products, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product, operating restrictions
and criminal prosecutions, any of which could significantly and adversely affect our business. For example, Nisshin may expand its capacity to supply API to us by further expanding their current facility. If we are not able to manufacture Vascepa to
required specifications through our current and potential API suppliers, we may be delayed in successfully supplying the product to meet anticipated demand and our anticipated future revenues and financial results may be materially adversely
affected.
Changes in the manufacturing process or procedure, including a change in the location where the product is manufactured or a
change of a third-party manufacturer, may require prior FDA review and approval of the manufacturing process and procedures in accordance with the FDAs cGMPs. Any new facility may be subject to a pre-approval inspection by the FDA and would
again require us to demonstrate product comparability to the FDA. There are comparable foreign requirements. This review may be costly and time consuming and could delay or prevent the launch of a product.
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Furthermore, the FDA and foreign regulatory agencies require that we be able to consistently
produce the API and the finished product in commercial quantities and of specified quality on a repeated basis, including proven product stability, and document our ability to do so. This requirement is referred to as process validation. This
includes stability testing, measurement of impurities and testing of other product specifications by validated test methods. If the FDA does not consider the result of the process validation or required testing to be satisfactory, the commercial
supply of Vascepa may be delayed, or we may not be able to supply sufficient quantities of Vascepa to meet anticipated demand.
The FDA
and similar foreign regulatory bodies may also implement new standards, or change their interpretation and enforcement of existing standards and requirements, for manufacture, packaging or testing of products at any time. If we are unable to comply,
we may be subject to regulatory, civil actions or penalties which could significantly and adversely affect our business.
We rely on
third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet established deadlines for the completion of such clinical trials.
Our reliance on third parties for clinical development activities reduces our control over these activities. However, if we sponsor clinical
trials, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trials. Moreover, the FDA requires us to comply with standards, commonly referred to as
good clinical practices, for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are
protected. Our reliance on third parties does not relieve us of these responsibilities and requirements. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties
do not successfully carry out their contractual duties or meet expected deadlines, we may be delayed in obtaining regulatory approvals for our product candidates and may be delayed in our efforts to successfully commercialize our product candidates
for targeted diseases.
We are dependent upon our collaboration with Eddingpharm to commercialize Vascepa in certain regions outside
of the United States, and if Eddingpharm fails to successfully fulfill its obligations, or is ineffective in its commercialization of Vascepa in the China Territory, or if our collaboration is terminated, our plans to commercialize Vascepa outside
of the United States may be adversely affected.
In February 2015, we entered into the DCS Agreement with Eddingpharm, under which
we granted exclusive rights to Eddingpharm to develop and commercialize Vascepa in the China Territory. We are dependent on Eddingpharm for certain regulatory filings outside of the United States with respect to Vascepa, which may require conducting
clinical trials in the China Territory to secure regulatory approval, as well as the commercialization of Vascepa outside of the United States. If Eddingpharm fails to perform its obligations under the DCS Agreement or is ineffective in its
commercialization of Vascepa in the China Territory or if we fail to effectively manage our relationship with Eddingpharm, our ability to and the extent to which we commercialize and obtain certain regulatory approvals of Vascepa outside of the
United States would be significantly harmed.
In addition, Eddingpharm has the right to terminate the agreement under certain conditions.
If Eddingpharm terminates the DCS Agreement, we would be required to either enter into alternative arrangements with third parties to commercialize Vascepa in the China Territory, which we may be unable to do, or to increase our internal
infrastructure, both of which would likely result in significant additional expense and delay or termination of our Vascepa clinical development programs outside of the United States.
Risks Related to our Intellectual Property
We are dependent on patents, proprietary rights and confidentiality to protect the commercial potential of Vascepa.
Our success depends in part on our ability to obtain and maintain intellectual property protection for our drug candidates, technology and
know-how, and to operate without infringing the proprietary rights of others. Our ability to successfully implement our business plan and to protect our products with our intellectual property will depend in large part on our ability to:
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obtain, defend and maintain patent protection and market exclusivity for our current and future products;
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preserve any trade secrets relating to our current and future products;
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acquire patented or patentable products and technologies; and
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operate without infringing the proprietary rights of third parties.
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Amarin has prosecuted,
and is currently prosecuting, multiple patent applications to protect the intellectual property developed during the Vascepa cardiovascular program. As of the date of this report, we had 47 patent applications in the United States that have
been either issued or allowed and more than 30 additional patent applications are pending in the United States. Such 47 allowed and issued applications include the following:
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2 issued U.S. patents directed to a pharmaceutical composition of Vascepa in a capsule that have terms that expire in 2020 and 2030, respectively,
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1 issued U.S. patent covering a composition containing highly pure EPA that expires in 2021,
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36 U.S. patents covering the use of Vascepa in either the MARINE or anticipated ANCHOR indication that have terms that expire in 2030,
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3 additional patents related to the use of a pharmaceutical composition comprised of free fatty acids to treat the ANCHOR patient population with a term that expires in 2030,
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2 additional patents related to the use of a pharmaceutical composition comprised of free fatty acids to treat the MARINE patient population with a term that expires in 2030,
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1 additional patent related to a pharmaceutical composition comprised of free fatty acids and uses thereof to treat both the MARINE and ANCHOR patient populations with a term that expires in 2030,
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1 additional patent related to a formulation of EPA/DHA and uses thereof with a term that expires in 2030, and
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1 additional patent related to the use of Vascepa to treat obesity with a term that expires in 2030.
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A Notice of Allowance is issued after the USPTO makes a determination that a patent can be granted from an application. A Notice of Allowance
does not afford patent protection until the underlying patent is issued by the USPTO. No assurance can be given that applications with issued notices of allowance will be issued as patents or that any of our pending patent applications will issue as
patents. No assurance can be given that, if and when issued, our patents will prevent competitors from competing with Vascepa. For example, we may choose to not assert all issued patents in patent litigation and patents or claims within patents may
be determined to be invalid.
We are also pursuing patent applications related to Vascepa in multiple jurisdictions outside the United
States. We may be dependent in some cases upon third-party licensors to pursue filing, prosecution and maintenance of patent rights or applications owned or controlled by those parties. It is possible that third parties will obtain patents or other
proprietary rights that might be necessary or useful to us. In cases where third parties are first to invent a particular product or technology, or first to file after various provisions of the America Invents Act of 2011 went into effect on
March 16, 2013, it is possible that those parties will obtain patents that will be sufficiently broad so as to prevent us from utilizing such technology or commercializing our current and future products.
Although we intend to make reasonable efforts to protect our current and future intellectual property rights and to ensure that any
proprietary technology we acquire or develop does not infringe the rights of other parties, we may not be able to ascertain the existence of all potentially conflicting claims. Therefore, there is a risk that third parties may make claims of
infringement against our current or future products or technologies. In addition, third parties may be able to obtain patents that prevent the sale of our current or future products or require us to obtain a license and pay significant fees or
royalties in order to continue selling such products.
We may in the future discover the existence of products that infringe patents that
we own or that have been licensed to us. If we were to initiate legal proceedings against a third party to stop such an infringement, such proceedings could be costly and time consuming, regardless of the outcome. No assurances can be given that we
would prevail, and it is possible that, during such a proceeding, our patent rights could be held to be invalid, unenforceable or both. Although we intend to protect our trade secrets and proprietary know-how through confidentiality agreements with
our manufacturers, employees and consultants, we may not be able to prevent parties subject to such confidentiality agreements from breaching these agreements or third parties from independently developing or learning of our trade secrets.
We anticipate that competitors may from time to time oppose our efforts to obtain patent protection for new technologies or to submit patented
technologies for regulatory approvals. Competitors may seek to oppose our patent applications to delay the approval process or to challenge our granted patents, for example, by requesting a reexamination of our patent at the USPTO, or by filing an
opposition in a foreign patent office, even if the opposition or challenge has little or no merit. Such proceedings are generally highly technical, expensive, and time consuming, and there can be no assurance that such a challenge would not result
in the narrowing or complete revocation of any patent of ours that was so challenged.
Our issued patents may not prevent
competitors from competing with Vascepa, even if we seek to enforce our patent rights.
We plan to vigorously defend our rights
under issued patents. For example, in March 2014, we filed a patent infringement suit against Omthera Pharmaceuticals, Inc., and its parent company, AstraZeneca Pharmaceuticals LP. The suit sought injunctive relief and monetary damages for
infringement of Amarins U.S. Patent No. 8,663,662. The complaint alleged infringement of the patent arising from the expected launch of Epanova, a product that is expected to compete with Vascepa in the United States. The patent covers
methods of lowering triglycerides by administering a pharmaceutical composition that includes amounts of EPA as free acid, and no more than about 30% DHA. In November 2014, based on a representation from AstraZeneca Pharmaceuticals LP that the
commercial launch of Epanova was not imminent, the court dismissed our complaint, without prejudice (i.e., preserving our ability to later re-file the suit). The court required the defendant to notify us before any product launch. We intend to
pursue this litigation vigorously and aggressively protect its intellectual property rights. However, patent litigation is a time-consuming and costly process. There can be no assurance that we will be successful in enforcing this patent or that it
will not be successfully challenged and invalidated. Even if we are successful in enforcing this patent, the process could take years to reach conclusion.
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Other drug companies may challenge the validity, enforceability, or both of our patents and seek
to design its products around our issued patent claims and gain marketing approval for generic versions of Vascepa or branded competitive products based on new clinical studies. The pharmaceutical industry is highly competitive and many of our
competitors have greater experience and resources than we have. Any such competition could undermine sales, marketing and collaboration efforts for Vascepa, and thus reduce, perhaps materially, the revenue potential for Vascepa.
Even if we are successful in enforcing our issued patents, we may incur substantial costs and divert managements time and attention in
pursuing these proceedings, which could have a material adverse effect on us. Patent litigation is costly and time consuming, and we may not have sufficient resources to bring these actions to a successful conclusion.
There can be no assurance that any of our pending patent applications relating to Vascepa or its use will issue as patents.
We have filed and are prosecuting numerous families of patent applications in the United States and internationally with claims designed to
protect the proprietary position of Vascepa. For certain of these patent families, we have filed multiple patent applications. Collectively the patent applications include numerous independent claims and dependent claims. Several of our patent
applications contain claims that are based upon what we believe are unexpected and favorable findings from the MARINE and ANCHOR trials. If granted, many of the resulting granted patents would expire in 2030 or beyond. However, no assurance can be
given that any of our pending patent applications will be granted or, if they grant, that they will prevent competitors from competing with Vascepa.
Securing patent protection for a product is a complex process involving many legal and factual questions. The patent applications we have
filed in the United States and internationally are at varying stages of examination, the timing of which is outside our control. The process to getting a patent granted can be lengthy and claims initially submitted are often modified in order to
satisfy the requirements of the patent office. This process includes written and public communication with the patent office. The process can also include direct discussions with the patent examiner. There can be no assurance that the patent office
will accept our arguments with respect to any patent application or with respect to any claim therein. The timing of the patent review process is independent of and has no effect on the timing of the FDAs review of our NDA or sNDA submissions.
We cannot predict the timing or results of any patent application. In addition, we may elect to submit, or the patent office may require, additional evidence to support certain of the claims we are pursuing. Furthermore, third parties may attempt to
submit publications for consideration by the patent office during examination of our patent applications. Providing such additional evidence and publications could prolong the patent offices review of our applications and result in us
incurring additional costs. We cannot be certain what commercial value any granted patent in our patent estate will provide to us.
Despite the use of confidentiality agreements and/or proprietary rights agreements, which themselves may be of limited effectiveness, it
may be difficult for us to protect our trade secrets.
In addition to our patent portfolio and strategy, we will also rely upon
trade secrets and know-how to help protect our competitive position. We rely on trade secrets to protect technology in cases when we believe patent protection is not appropriate or obtainable. However, trade secrets are difficult to protect. While
we require certain of our academic collaborators, contractors and consultants to enter into confidentiality agreements, we may not be able to adequately protect our trade secrets or other proprietary information.
Risks Related to our Business
If
the estimates we make, or the assumptions on which we rely, in preparing our projected guidance prove inaccurate, our actual results may vary from those reflected in our projections and accruals.
In January 2016, we issued financial and business guidance, including preliminary (unaudited) 2015 revenue and year-end cash results as well
as expected fiscal year 2016 total net revenue, which is based on estimates and the judgment of management. Because of the inherent nature of estimates, there could be significant differences between our estimates and the actual amount of product
demand. If, for any reason, we are unable to realize our projected 2016 revenue, we may not realize our publicly announced financial guidance. If we fail to realize or if we change or update any element of our publicly disclosed financial guidance
or other expectations about our business, our stock price could decline in value.
We and certain of our current and former
executive officers were named as defendants in a class action lawsuit that could result in substantial costs and divert managements attention.
The market price of our American Depositary Shares, or ADSs, declined significantly after the October 2013 decision by the FDA Advisory
Committee to recommend against approval of Vascepa in the ANCHOR indication. We and certain of our current and former executive officers and directors were named as defendants in a class action lawsuit that generally alleged that we and certain of
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our current and former officers and directors violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and/or
misleading statements or material omissions concerning the ANCHOR sNDA and related FDA regulatory approval process in an effort to lead investors to believe that Vascepa would receive approval from the FDA in the ANCHOR indication. The complaints
sought unspecified damages, interest, attorneys fees, and other costs.
We engaged in a vigorous defense of this lawsuit. On
June 29, 2015, the court granted our first motion to dismiss the class action litigation without prejudice. The court held that the plaintiffs failed to state a claim upon which relief could be granted and plaintiffs were given 30 days to
refile an amended complaint.
On July 29, 2015, the plaintiffs filed an amended complaint and we again moved to dismiss. On
April 26, 2016, the court granted a second motion to dismiss, again without prejudice, with leave for plaintiffs to file an amended complaint.
Should plaintiffs file another amended complaint or appeal, we plan a vigorous defense. We are unable to predict the ultimate outcome of this
matter at this time. While we expect insurance to cover any financial exposure from this litigation, the conclusion of this matter in a manner adverse to us could have a material adverse effect on our financial condition and business. For example,
we could incur substantial costs not covered by our directors and officers liability insurance, suffer a significant adverse impact on our reputation and divert managements attention and resources from other priorities, including
the execution of business plans and strategies that are important to our ability to grow our business, any of which could have a material adverse effect on our business. In addition, any of these matters could require payments that are not covered
by, or exceed the limits of, our available directors and officers liability insurance, which could have a material adverse effect on our operating results or financial condition.
Potential technological changes in our field of business create considerable uncertainty.
We are engaged in the biopharmaceutical field, which is characterized by extensive research efforts and rapid technological progress. New
developments in research are expected to continue at a rapid pace in both industry and academia. We cannot assure you that research and discoveries by others will not render some or all of our programs or product candidates uncompetitive or
obsolete. Our business strategy is based in part upon new and unproven technologies to the development of therapeutics to improve cardiovascular health. We cannot assure you that unforeseen problems will not develop with these technologies or
applications or that any commercially feasible products will ultimately be developed by us.
We are subject to potential product
liability.
Following the commercial launch of Vascepa, we will be subject to the potential risk of product liability claims
relating to the manufacturing and marketing of Vascepa. Any person who is injured as a result of using Vascepa may have a product liability claim against us without having to prove that we were at fault.
In addition, we could be subject to product liability claims by persons who took part in clinical trials involving our current or former
development stage products. A successful claim brought against us could have a material adverse effect on our business. We cannot guarantee that a product liability claim will not be asserted against us in the future.
We may become subject to liability in connection with the wind-down of our EN101 program.
In 2007, we purchased Ester Neurosciences Limited, an Israeli pharmaceutical company, and its lead product candidate, EN101, an AChE-R mRNA
inhibitor for the treatment of myasthenia gravis, or MG, a debilitating neuromuscular disease. In connection with the acquisition, we assumed a license to certain intellectual property assets related to EN101 from the Yissum Research Development
Company of The Hebrew University of Jerusalem. In keeping with our 2009 decision to re-focus our efforts on developing improved treatments for cardiovascular disease and cease development of all product candidates outside of our cardiovascular
disease focus, we amended the terms of our acquisition agreement with the original shareholders of Ester.
Following our decision to cease
development of EN101, Yissum terminated its license agreement with us. In June 2011, Yissum announced that it had entered into a license agreement with BiolineRX Ltd for the development of EN101 in a different indication, inflammatory bowel disease.
In 2011 and early 2012, but not after, we received several communications on behalf of the former shareholders of Ester asserting that we
are in breach of our agreement with them as it relates to alleged rights to share in the value of EN101 due to the fact that Yissum terminated its license. We do not believe the circumstances presented constitute a breach of the agreement. If the
dispute arises again, we plan to defend our position vigorously, but there can be no assurance as to the outcome of this dispute.
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A change in our tax residence could have a negative effect on our future profitability.
Under current UK legislation, a company incorporated in England and Wales, or which is centrally managed and controlled in the
UK, is regarded as resident in the UK for taxation purposes. Under current Irish legislation, a company is regarded as resident for tax purposes in Ireland if it is centrally managed and controlled in Ireland, or, in certain circumstances, if it is
incorporated in Ireland. Where a company is treated as tax resident under the domestic laws of both the UK and Ireland then the provisions of article 4(3) of the Double Tax Convention between the UK and Ireland provides that such enterprise shall be
treated as resident only in the jurisdiction in which its place of effective management is situated. We have sought to conduct our affairs in such a way so as to be resident only in Ireland for tax purposes by virtue of having our place of effective
management situated in Ireland. Trading income of an Irish company is generally taxable at the Irish corporation tax rate of 12.5%. Non-trading income of an Irish company (e.g., interest income, rental income or other passive income) is taxable at a
rate of 25%.
However, we cannot assure you that we are or will continue to be resident only in Ireland for tax purposes. It is possible
that in the future, whether as a result of a change in law or the practice of any relevant tax authority or as a result of any change in the conduct of our affairs, we could become, or be regarded as having become resident in a jurisdiction other
than Ireland. Should we cease to be an Irish tax resident, we may be subject to a charge to Irish capital gains tax on our assets. Similarly, if the tax residency of any of our subsidiaries were to change from their current jurisdiction for any of
the reasons listed above, we may be subject to a charge to local capital gains tax charge on the assets.
The loss of key personnel
could have an adverse effect on our business.
We are highly dependent upon the efforts of our senior management. The loss of the
services of one or more members of senior management could have a material adverse effect on us. As a small company with a streamlined management structure, the departure of any key person could have a significant impact and would be potentially
disruptive to our business until such time as a suitable replacement is hired. Furthermore, because of the specialized nature of our business, as our business plan progresses we will be highly dependent upon our ability to attract and retain
qualified scientific, technical and key management personnel. As we evolve from a development stage company to a commercial stage company we may experience turnover among members of our senior management team. We may have difficulty identifying and
integrating new executives to replace any such losses. There is intense competition for qualified personnel in the areas of our activities. In this environment, we may not be able to attract and retain the personnel necessary for the development of
our business, particularly if we do not achieve profitability. The failure to recruit key scientific, technical and management personnel would be detrimental to our ability to implement our business plan.
We could be adversely affected by our exposure to customer concentration risk.
A significant portion of our sales are to wholesalers in the pharmaceutical industry. Our top three customers accounted for 95% and 94% of
gross product sales for the three months ended March 31, 2016 and 2015, respectively, and represented 95% and 94% of the gross accounts receivable balance as of March 31, 2016 and 2015, respectively. There can be no guarantee that we will
be able to sustain our accounts receivable or gross sales levels from our key customers. If, for any reason, we were to lose, or experience a decrease in the amount of business with our largest customers, whether directly or through our distributor
relationships, our financial condition and results of operations could be negatively affected.
Risks Related to our Financial Position and Capital
Requirements
*
We have a history of operating losses and anticipate that we will incur continued losses for an
indefinite period of time.
We have not yet reached profitability. For the fiscal years ended December 31, 2015, 2014, and
2013, we reported losses of approximately $149.1 million, $56.4 million, and $166.2 million, respectively, and we had an accumulated deficit as of December 31, 2015 of $1.1 billion. For the three months ended March 31, 2016 and 2015, we
reported losses of approximately $29.8 million and $32.0 million, respectively and we had an accumulated deficit as of March 31, 2016 of $1.1 billion. Substantially all of our operating losses resulted from costs incurred in connection with our
research and development programs, from general and administrative costs associated with our operations, costs related to the commercialization of Vascepa, and from non-cash losses on changes in the fair value of warrant derivative liabilities.
Additionally, as a result of our significant expenses relating to research and development and to commercialization, we expect to continue to incur significant operating losses for an indefinite period. Because of the numerous risks and
uncertainties associated with developing and commercializing pharmaceutical products, we are unable to predict the magnitude of these future losses. Our historic losses, combined with expected future losses, have had and will continue to have an
adverse effect on our cash resources, shareholders deficit and working capital.
Although we began generating revenue from
Vascepa in January 2013, we may never be profitable.
Our ability to become profitable depends upon our ability to generate
revenue. In January 2013, we began to generate revenue from the marketing of Vascepa for use in the MARINE indication, but we may not be able to generate sufficient revenue to attain profitability. Our ability to generate profits on sales of Vascepa
is subject to the market acceptance and commercial success of Vascepa and our ability to manufacture commercial quantities of Vascepa through third parties at acceptable cost levels, and may also depend upon our ability to enter into one or more
strategic collaborations to effectively market and sell Vascepa.
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Even though Vascepa has been approved by the FDA for marketing in the United States in the MARINE
indication, it may not gain market acceptance or achieve commercial success and it may never be approved for the ANCHOR indication or any other indication. In addition, we anticipate continuing to incur significant costs associated with
commercializing Vascepa. We may not achieve profitability soon after generating product sales, if ever. If we are unable to generate sufficient product revenues, we will not become profitable and may be unable to continue operations without
continued funding.
Our historical financial results do not form an accurate basis for assessing our current business.
As a consequence of the many years developing Vascepa for commercialization and the commercial launch of Vascepa in 2013 in the United States,
our historical financial results do not form an accurate basis upon which investors should base their assessment of our business and prospects. In addition, we expect that our costs will increase substantially as we continue to commercialize Vascepa
in the MARINE indication and with ANCHOR data and seek to obtain additional regulatory approval of Vascepa from continuation of the REDUCE-IT cardiovascular outcomes study. Accordingly, our historical financial results reflect a substantially
different business from that currently being conducted and from that expected in the future. In addition, we have a limited history of obtaining regulatory approval for, and no demonstrated ability to successfully commercialize, a product candidate.
Consequently, any predictions about our future performance may not be as accurate as they could be if we had a history of successfully developing and commercializing pharmaceutical products.
Our operating results are unpredictable and may fluctuate. If our operating results are below the expectations of securities analysts or
investors, the trading price of our stock could decline.
Our operating results are difficult to predict and will likely fluctuate
from quarter to quarter and year to year, and Vascepa prescription figures will likely fluctuate from month to month. Vascepa sales are difficult to predict from period to period and as a result, you should not rely on Vascepa sales results in any
period as being indicative of future performance, and sales of Vascepa may be below the expectation of securities analysts or investors in the future. We believe that our quarterly and annual results of operations may be affected by a variety of
factors, including:
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the level of demand for Vascepa;
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the extent to which coverage and reimbursement for Vascepa is available from government and health administration authorities, private health insurers, managed care programs and other third-party payers;
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the timing, cost and level of investment in our sales and marketing efforts to support Vascepa sales and the resulting effectiveness of those efforts with our new co-promotion partner, Kowa Pharmaceuticals America,
Inc.;
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the timing and ability of Eddingpharm to development and commercialize Vascepa in the China Territory, including obtaining necessary regulatory approvals and establishing marketing channels;
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additional developments regarding our intellectual property portfolio and regulatory exclusivity protections, if any;
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the results of the REDUCE-IT study or post-approval studies for Vascepa;
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outcomes of litigation and other legal proceedings, including our pending FDA determination on regulatory exclusivity, shareholder litigation, regulatory matters and tax matters; and
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our regulatory dialogue on the REDUCE-IT study.
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We may require
substantial additional resources to fund our operations. If we cannot find additional capital resources, we will have difficulty in operating as a going concern and growing our business.
We currently operate with limited resources. We believe that our cash and cash equivalents balance of $81.4 million as of March 31, 2016
will be sufficient to fund our projected operations for at least the next twelve months. Depending on the level of cash generated from operations, additional capital may be required to sustain operations.
In order to fully realize the market potential of Vascepa, we may need to enter into a new strategic collaboration or raise additional
capital. We may also need additional capital to fully complete our REDUCE-IT cardiovascular outcomes trial.
Our future capital
requirements will depend on many factors, including:
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revenue generated from the commercial sale of Vascepa;
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the costs associated with commercializing Vascepa in the United States and for additional indications in the United States and in jurisdictions in which we receive regulatory approval, if any, including the cost of
sales and marketing capabilities with our new co-promotion partner, Kowa Pharmaceuticals America, Inc., and the cost and timing of securing commercial supply of Vascepa and the timing of entering into any new strategic collaboration with others
relating to the commercialization of Vascepa, if at all, and the terms of any such collaboration;
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the continued cost associated with our REDUCE-IT cardiovascular outcomes study;
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continued costs associated with litigation and other legal proceedings;
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the time and costs involved in obtaining additional regulatory approvals for Vascepa;
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the extent to which we continue to develop internally, acquire or in-license new products, technologies or businesses; and
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the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
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If we require additional funds and adequate funds are not available to us in amounts or on terms acceptable to us or on a timely basis, or at
all, our commercialization efforts for Vascepa may suffer materially, and we may need to delay the advancement of the REDUCE-IT cardiovascular outcomes trial.
Continued negative economic conditions would likely have a negative effect on our ability to obtain financing on acceptable terms.
While we may seek additional funding through public or private financings, we may not be able to obtain financing on acceptable
terms, or at all. There can be no assurance that we will be able to access equity or credit markets in order to finance our current operations or expand development programs for Vascepa, or that there will not be a further deterioration in financial
markets and confidence in economies. We may also have to scale back or further restructure our operations. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our research or
development programs or our commercialization strategies.
Raising additional capital may cause dilution to our existing
shareholders, restrict our operations or require us to relinquish rights.
To the extent we are permitted under our Purchase and
Sale Agreement with BioPharma Secured Debt Fund II Holdings Cayman LP, or BioPharma, we may seek additional capital through a combination of private and public equity offerings, debt financings and collaboration, strategic and licensing
arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your
rights as a shareholder.
In January 2012, we issued $150 million in aggregate principal amount of 3.5% exchangeable senior notes due
2032, or the 2012 Notes, $16.2 million of which was subsequently repaid. In May 2014, we entered into separate, privately negotiated exchange agreements with certain holders of the 2012 Notes pursuant to which Corsicanto exchanged $118.7 million in
aggregate principal amount of the existing 2012 Notes for $118.7 million in aggregate principal amount of new 3.5% May 2014 Exchangeable Senior Notes due 2032, or the 2014 Notes. In the event of physical settlement, the remaining 2012 Notes and
2014 Notes would be exchangeable into a total of 1,714,270 ADSs and 45,666,925 ADSs, respectively.
In November 2015, we issued $31.3
million in aggregate principal amount of 3.5% exchangeable senior notes due 2032, or the 2015 Notes. In the event of physical settlement, the 2015 Notes would be exchangeable into a total of 12,025,385 ADSs.
Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such
as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our
technologies, Vascepa or product candidates beyond the rights we have already relinquished, or grant licenses on terms that are not favorable to us.
Potential business combinations or other strategic transactions may disrupt our business or divert managements attention.
On a regular basis, we explore potential business combination transactions, including an acquisition of us by a third party,
exclusive licenses of Vascepa or other strategic transactions or collaborations with third parties. For example, in March 2014, we entered into a co-promotion agreement with Kowa Pharmaceuticals America, Inc. related to the commercialization of
Vascepa in the United States. The consummation and performance of any such future transactions or collaborations will involve risks, such as:
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diversion of managerial resources from day-to-day operations;
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exposure to litigation from the counterparties to any such transaction, other third parties or our shareholders;
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misjudgment with respect to the value;
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higher than expected transaction costs; or
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an inability to successfully consummate any such transaction or collaboration.
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As a result of these risks, we may not be able to achieve the expected benefits of any such
transaction or collaboration or deliver the value thereof to our shareholders. If we are unsuccessful in consummating any such transaction or collaboration, we may be required to reevaluate our business only after we have incurred substantial
expenses and devoted significant management time and resources.
Risks Related to Ownership of our ADSs and Common Shares
The price of our ADSs and common shares may be volatile.
The stock market has from time to time experienced significant price and volume fluctuations that may be unrelated to the operating
performance of particular companies. In addition, the market prices of the securities of many pharmaceutical and medical technology companies have been especially volatile in the past, and this trend is expected to continue in the future.
As of May 1, 2016 we had 185,124,341 common shares outstanding including 183,096,686 shares held as ADSs and 2,027,655 held as common
shares (which are not held in the form of ADSs). There is a risk that there may not be sufficient liquidity in the market to accommodate significant increases in selling activity or the sale of a large block of our securities. Our ADSs have
historically had limited trading volume, which may also result in volatility. If any of our large investors, such as the participants in our March 2015 private placement, seek to sell substantial amounts of our ADSs, particularly if these sales are
in a rapid or disorderly manner, or other investors perceive that these sales could occur, the market price of our ADSs could decrease significantly.
The market price of our ADSs and common shares may also be affected by factors such as:
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developments or disputes concerning ongoing patent prosecution efforts and any future patent or proprietary rights;
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litigation and regulatory developments in the United States affecting our Vascepa promotional rights, and regulatory developments in the European Union or other countries;
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actual or potential medical results relating to our products or our competitors products;
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interim failures or setbacks in product development;
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innovation by us or our competitors;
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currency exchange rate fluctuations; and
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period-to-period variations in our results of operations.
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The number of our ordinary
shares, or ADSs representing such ordinary shares, outstanding may increase substantially as a result of our March 2015 private placement and the later consolidation and redesignation of the Series A Preference Shares represented by Preference ADSs
issued thereunder, and some of the investors may then beneficially own significant blocks of our ordinary shares; the ordinary shares and Series A Preference Shares resulting from the private placement will be generally available for resale in the
public market upon registration under the Securities Act.
In March and July 2015, we completed a private placement of American
Depositary Shares in two tranches representing 352,150,790 and 38,867,180 Series A Preference Shares, respectively, each ten (10) of which may be consolidated and redesignated into one (1) ordinary share in our capital. During the three
months ended June 30, 2015, 62,833,330 preferred shares were converted, resulting in the issuance of 6,283,333 ordinary shares. The consolidation and redesignation of the Series A Preference Shares currently outstanding would result in an
additional 32,818,464 ordinary shares outstanding, resulting in substantial dilution to shareholders who held our ordinary shares or ADSs representing such ordinary shares prior to the private placement. Although the Series A Preference Shares do
not have voting rights, in general, upon consolidation and redesignation into ordinary shares some of the investors in the private placement could then have significant influence over the outcome of any shareholder vote, including the election of
directors and the approval of mergers or other business combination transactions.
Pursuant to the securities subscription agreements that
we entered into with the investors in the private placement, we agreed to file with the SEC a registration statement to register the resale of the Series A Preference Shares represented by American Depositary Shares issued in the private placement
and the ordinary shares issuable upon the consolidation and consolidation and redesignation of such Series A Preference Shares. Upon such registration and subsequent consolidation and redesignation, these securities will become generally available
for immediate resale in the public market. The market price of our ordinary shares could fall as a result of an increase in the number of shares available for sale in the public market.
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Failure to comply with our obligations under the March 2015 securities subscription
agreements could result in our becoming liable for damages to certain investors under these agreements, including specified liquidated damages, which could be material in amount.
Under the terms of the March 2015 securities subscription agreements, we are subject to various obligations, failure to comply with which
could result in our becoming liable to certain investors under these agreement for damages, which could be material in amount.
For
example, under each of these agreements we have agreed to file and maintain the effectiveness of certain resale registration statements for ADSs representing the ordinary shares underlying the Series A Preference shares we issued and sold under
these agreements. Specifically, we have agreed to pay liquidated damages to the investors in the respective private placements if (a) the applicable resale registration statements we are required to file are not declared effective within 120
days after the closing of the applicable private placement, or (b) after effectiveness and subject to certain specified exceptions, we suspend the use of the applicable registration statement or the registration statement ceases to remain
continuously effective as to all the securities for which it is required to be effective. We refer to each of these events as a registration default. Subject to the specified exceptions, for each 30-day period or portion thereof during which a
registration default remains uncured, we are obligated to pay liquidated damages to each investor in cash in an amount equal to 1% of the aggregate subscription price paid by each such investor in the private placement, up to a maximum of 8% of such
aggregate subscription price. These amounts could be material, and any liquidated damages we are required to pay could have a material adverse effect on our financial condition.
In addition, under the securities subscription agreement dated as of March 5, 2015, we are required to offer to certain investors party
to that agreement an opportunity to participate in future equity and debt financings we may conduct from time to time, and to not publicly disclose the identity of the investors party to that agreement, subject to certain exceptions for disclosures
required in securities filings and under applicable law. If we fail to comply with these obligations we could become liable to these investors for damages, including specified liquidated damages. For example, following certain public statements made
by us on a quarterly conference call concerning the 2015 private placement, we agreed to specified liquidated damages in the event we are found to have violated the confidentiality provisions of the subscription agreement in the future.
A share price of less than $1.00 may impact our NASDAQ listing.
If our closing bid price is less than $1.00 for 30 consecutive trading days, we would receive a NASDAQ staff deficiency letter indicating that
we are not in compliance with the minimum bid price requirement for continued listing. Such a letter would trigger an automatic 180 calendar day period within which the company could regain compliance. Compliance is regained at any time during this
period if the Amarin closing bid price is $1.00 per share or more for a minimum of 10 consecutive trading days. If we do not regain compliance during this period, our ADSs could be delisted from The NASDAQ Global Market, transferred to a listing on
The NASDAQ Capital Market, or delisted from the NASDAQ markets altogether. The failure to maintain our listing on The NASDAQ Global Market could harm the liquidity of our ADSs and could have an adverse effect on the market price of our ADSs.
Actual or potential sales of our common shares by our employees, including members of our senior management team, pursuant to
pre-arranged stock trading plans could cause our stock price to fall or prevent it from increasing for numerous reasons, and actual or potential sales by such persons could be viewed negatively by other investors.
In accordance with the guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934 and our policies regarding stock
transactions, a number of our directors and employees, including members of our senior management team, have adopted and may continue to adopt pre-arranged stock trading plans to sell a portion of our common stock. Generally, sales under such plans
by members of our senior management team and directors require public filings. Actual or potential sales of our ADSs by such persons could cause the price of our ADSs to fall or prevent it from increasing for numerous reasons. For example, a
substantial amount of our ADSs becoming available (or being perceived to become available) for sale in the public market could cause the market price of our ADSs to fall or prevent it from increasing. Also, actual or potential sales by such persons
could be viewed negatively by other investors.
We may be a passive foreign investment company, or PFIC, which would result in
adverse U.S. federal tax consequences to U.S. investors.
Amarin Corporation plc and certain of our subsidiaries may be classified
as passive foreign investment companies, or PFICs, for U.S. federal income tax purposes. The tests for determining PFIC status for a taxable year depend upon the relative values of certain categories of assets and the relative amounts of
certain kinds of income. The application of these factors depends upon our financial results, which are beyond our ability to predict or control, and which may be subject to legal and factual uncertainties.
We believe it is prudent to assume that we were classified as a PFIC in 2012. We do not believe that we were classified as a PFIC in 2013,
2014 or 2015. Our status as a PFIC is subject to change in 2016 and future years.
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If we are a PFIC, U.S. holders of notes, ordinary shares or ADSs would be subject to adverse U.S.
federal income tax consequences, such as ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S. federal
income tax laws and regulations. Whether or not U.S. holders of our ADSs make a timely QEF election or mark-to-market election may affect the U.S. federal income tax consequences to U.S. holders with respect to the
acquisition, ownership and disposition of Amarin ADSs and any distributions such U.S. Holders may receive. A QEF election and other elections that may mitigate the effect of our being classified as a PFIC are unavailable with respect to the notes.
Investors should consult their own tax advisors regarding all aspects of the application of the PFIC rules to the notes, ordinary shares and ADSs.
Failure to meet our obligations under our Purchase and Sale Agreement with BioPharma could adversely affect our financial results and
liquidity.
Pursuant to our December 2012 Purchase and Sale Agreement with BioPharma, we are obligated to make payments to
BioPharma based on the amount of our net product sales of Vascepa and any future products based on ethyl-EPA, or covered products, subject to certain quarterly caps.
Pursuant to this agreement, we may not, among other things: (i) incur indebtedness greater than a specified amount, which we refer to as
the Indebtedness Covenant; (ii) pay a dividend or other cash distribution, unless we have cash and cash equivalents in excess of a specified amount after such payment; (iii) amend or restate our memorandum and articles of association
unless such amendments or restatements do not affect BioPharmas interests under the transaction; (iv) encumber any of the collateral securing our performance under the agreement; and (v) abandon certain patent rights, in each case
without the consent of BioPharma.
Upon a transaction resulting in a change of control of Amarin, as defined in the agreement, BioPharma
will be automatically entitled to receive any amounts not previously paid, up to our maximum repayment obligation. As defined in the agreement, change of control includes, among other things, (i) a greater than 50 percent change in
the ownership of Amarin, (ii) a sale or disposition of any collateral securing our debt with BioPharma and (iii), unless BioPharma has been paid a certain amount under the indebtedness, certain licensings of Vascepa to a third party for sale in
the United States. The acceleration of the payment obligation in the event of a change of control transaction may make us less attractive to potential acquirers, and the payment of such funds out of our available cash or acquisition proceeds would
reduce acquisition proceeds for our shareholders.
To secure our obligations under the agreement, we granted BioPharma a security interest
in our rights in patents, trademarks, trade names, domain names, copyrights, know-how and regulatory approvals related to the covered products, all books and records relating to the foregoing and all proceeds of the foregoing, which we refer to as
the collateral. If we (i) fail to deliver a payment when due and do not remedy that failure within specific notice period, (ii) fail to maintain a first-priority perfected security interest in the collateral in the United States and do not
remedy that failure after receiving notice of such failure or (iii) become subject to an event of bankruptcy, then BioPharma may attempt to collect the maximum amount payable by us under this agreement (after deducting any payments we have
already made).
There can be no assurance that we will not breach the covenants or other terms of, or that an event of default will not
occur under, this agreement and, if a breach or event of default occurs, there can be no assurance that we will be able to cure the breach within the time permitted. Any failure to pay our obligations when due, any breach or default of our covenants
or other obligations, or any other event that causes an acceleration of payment at a time when we do not have sufficient resources to meet these obligations, could have a material adverse effect on our business, results of operations, financial
condition and future viability.
Our existing indebtedness could adversely affect our financial condition.
Our existing indebtedness consists of $165.1 million in aggregate principal amount of 3.5% exchangeable senior notes due 2032, $15.1 million
of which relates to the January 2012 notes with provisions for the notes to be put to us on or after January 19, 2017 and $118.7 million of May 2014 notes and $31.3 million of November 2015 notes, both with provisions for the notes to be
redeemed by us on or after January 19, 2018 or put to us by the holders on or after January 19, 2019.
Our indebtedness and the
related annual debt service requirements may adversely impact our business, operations and financial condition in the future. For example, they could:
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increase our vulnerability to general adverse economic and industry conditions;
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limit our ability to raise additional funds by borrowing or engaging in equity sales in order to fund future working capital, capital expenditures, research and development and other general corporate requirements;
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require us to dedicate a substantial portion of our cash to service payments on our debt; or
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limit our flexibility to react to changes in our business and the industry in which we operate or to pursue certain strategic opportunities that may present themselves.
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The accounting for convertible debt securities that may be settled in cash, such as our
notes, could have a material effect on our reported financial results.
Under the FASB Accounting Standards Codification, or ASC,
we are required to separately account for the liability and equity components of the convertible debt instruments (such as the notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuers
economic interest cost. The effect of ASC on the accounting for our outstanding convertible notes may be that the equity component is required to be included in the additional paid-in capital section of stockholders equity on our consolidated
balance sheets and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the notes. As a result, we are required to record non-cash interest expense as a result of the
amortization of the discounted carrying value of the notes to their face amount over the term of the notes. We may be required to report higher interest expense in our financial results because ASC may require interest to include both the current
periods amortization of the debt discount and the instruments coupon interest, which could adversely affect our reported or future financial results and the trading price of our ADSs.
Servicing our debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to provide the funds
sufficient to pay our substantial debt.
Our ability to make scheduled payments of the principal, to pay interest on or to refinance our
indebtedness, including the notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future
sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity
capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in
these activities on desirable terms, which could result in a default on our debt obligations, including the notes, and have a material adverse effect on the trading price of our ADSs.
We may be able to incur substantial additional debt in the future, subject to the restrictions contained in our future debt instruments, if
any, which would intensify the risks discussed above.
The conditional exchange feature of the notes, if triggered, may adversely
affect our financial condition and operating results.
In the event the conditional exchange feature of the notes is triggered,
holders of notes will be entitled to exchange the notes at any time during specified periods at their option. If one or more holders elect to exchange their notes, unless we elect to satisfy its exchange obligation by delivering solely the ADSs
(other than cash in lieu of any fractional ADS), we would be required to settle a portion or all of its exchange obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to
exchange their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net
working capital.
The change in control repurchase feature of the notes may delay or prevent an otherwise beneficial takeover
attempt of us.
The indenture governing the notes will require us to repurchase the notes for cash upon the occurrence of a change
in control of Amarin and, in certain circumstances, to increase the exchange rate for a holder that exchanges its notes in connection with a make-whole fundamental change. A takeover of us may trigger the requirement that we purchase the notes
and/or increase the exchange rate, which could make it more costly for a potential acquirer to engage in a combinatory transaction with us. Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be
beneficial to investors.
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We do not intend to pay cash dividends on the ordinary shares in the foreseeable future.
We have never paid dividends on ordinary shares and do not anticipate paying any cash dividends on the ordinary shares in the
foreseeable future. Under English law, any payment of dividends would be subject to relevant legislation and our Articles of Association, which requires that all dividends must be approved by our Board of Directors and, in some cases, our
shareholders, and may only be paid from our distributable profits available for the purpose, determined on an unconsolidated basis.
The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation.
We are incorporated under English law. The rights of holders of ordinary shares and, therefore, certain of the rights of holders of ADSs, are
governed by English law, including the provisions of the Companies Act 2006, and by our Articles of Association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations. The principal differences include
the following:
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Under English law and our Articles of Association, each shareholder present at a meeting has only one vote unless demand is made for a vote on a poll, in which case each holder gets one vote per share owned. Under U.S.
law, each shareholder typically is entitled to one vote per share at all meetings.
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Under English law, it is only on a poll that the number of shares determines the number of votes a holder may cast. You should be aware, however, that the voting rights of ADSs are also governed by the provisions of a
deposit agreement with our depositary bank.
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Under English law, subject to certain exceptions and disapplications, each shareholder generally has preemptive rights to subscribe on a proportionate basis to any issuance of ordinary shares or rights to subscribe for,
or to convert securities into, ordinary shares for cash. Under U.S. law, shareholders generally do not have preemptive rights unless specifically granted in the certificate of incorporation or otherwise.
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Under English law and our Articles of Association, certain matters require the approval of 75% of the shareholders who vote (in person or by proxy) on the relevant resolution (or on a poll shareholders representing 75%
of the ordinary shares voting (in person or by proxy)), including amendments to the Articles of Association. This may make it more difficult for us to complete corporate transactions deemed advisable by our board of directors. Under U.S. law,
generally only majority shareholder approval is required to amend the certificate of incorporation or to approve other significant transactions.
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In the United Kingdom, takeovers may be structured as takeover offers or as schemes of arrangement. Under English law, a bidder seeking to acquire us by means of a takeover offer would need to make an offer for all of
our outstanding ordinary shares/ADSs. If acceptances are not received for 90% or more of the ordinary shares/ADSs under the offer, under English law, the bidder cannot complete a squeeze out to obtain 100% control of us. Accordingly,
acceptances of 90% of our outstanding ordinary shares/ADSs will likely be a condition in any takeover offer to acquire us, not 50% as is more common in tender offers for corporations organized under Delaware law. By contrast, a scheme of
arrangement, the successful completion of which would result in a bidder obtaining 100% control of us, requires the approval of a majority of shareholders voting at the meeting and representing 75% of the ordinary shares voting for approval.
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Under English law and our Articles of Association, shareholders and other persons whom we know or have reasonable cause to believe are, or have been, interested in our shares may be required to disclose information
regarding their interests in our shares upon our request, and the failure to provide the required information could result in the loss or restriction of rights attaching to the shares, including prohibitions on certain transfers of the shares,
withholding of dividends and loss of voting rights. Comparable provisions generally do not exist under U.S. law.
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The quorum requirement for a shareholders meeting is a minimum of two shareholders entitled to vote at the meeting and present in person or by proxy or, in the case of a shareholder which is a corporation,
represented by a duly authorized officer. Under U.S. law, a majority of the shares eligible to vote must generally be present (in person or by proxy) at a shareholders meeting in order to constitute a quorum. The minimum number of shares
required for a quorum can be reduced pursuant to a provision in a companys certificate of incorporation or bylaws, but typically not below one-third of the shares entitled to vote at the meeting.
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U.S. shareholders may not be able to enforce civil liabilities against us.
We are incorporated under the laws of England and Wales, and our subsidiaries are incorporated in various jurisdictions, including foreign
jurisdictions. A number of the officers and directors of each of our subsidiaries are non-residents of the United States, and all or a substantial portion of the assets of such persons are located outside the United States. As a result, it may not
be possible for investors to affect service of process within the United States upon such persons or to enforce against them judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the
United States. We have been advised by our English solicitors that there is doubt as to the enforceability in England in original actions, or in actions for enforcement of judgments of U.S. courts, of civil liabilities to the extent predicated upon
the federal securities laws of the United States.
U.S. holders of the ADSs or ordinary shares may be subject to U.S. federal income
taxation at ordinary income tax rates on undistributed earnings and profits.
There is a risk that we will be classified as a
controlled foreign corporation, or CFC, for U.S. federal income tax purposes. If we are classified as a CFC, any ADS holder or shareholder that is a U.S. person that owns directly, indirectly or by attribution, 10% or more of the voting power of our
outstanding shares may be subject to U.S. income taxation at ordinary income tax rates on all or a portion of our undistributed earnings and profits attributable to subpart F income. Such 10% holder may also be taxable at ordinary income
tax rates on any gain realized on a sale of ordinary shares or ADS, to the extent of our current and accumulated earnings and profits attributable to such shares. The CFC rules are complex and U.S. holders of the ordinary shares or ADSs are urged to
consult their own tax advisors regarding the possible application of the CFC rules to them in their particular circumstances.