AMARIN CORP PLC\UK - Quarter Report: 2021 March (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2021

OR

For the transition period from                      to                     

Commission File No. 000-21392

Amarin Corporation plc

(Exact Name of Registrant as Specified in its Charter)

Registrant’s telephone number, including area code: +353 (0) 1 6699 020

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒

394,771,523 common shares were outstanding as of April 23, 2021, including 394,574,581 shares held as American Depositary Shares (ADSs), each representing one Ordinary Share, 50 pence par value per share and 196,942 Ordinary Shares.

INDEX TO FORM 10-Q

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PART I

AMARIN CORPORATION PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share amounts)

See notes to condensed consolidated financial statements.

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AMARIN CORPORATION PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

See notes to condensed consolidated financial statements.

4

AMARIN CORPORATION PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited, in thousands, except share amounts)

See notes to condensed consolidated financial statements.

5

AMARIN CORPORATION PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

See notes to condensed consolidated financial statements.

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AMARIN CORPORATION PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For purposes of this Quarterly Report on Form 10-Q, ordinary shares may also be referred to as “common shares” or “common stock.”

Nature of Business

Amarin Corporation plc, or Amarin, or the Company, is a pharmaceutical company focused on the commercialization and development of therapeutics to improve cardiovascular health and reduce cardiovascular risk.

The Company’s lead product, VASCEPA^® (icosapent ethyl), was first approved by the United States Food and Drug Administration, or U.S. FDA, in July 2012 for use as an adjunct to diet to reduce triglyceride, or TG, levels in adult patients with severe (>500 mg/dL) hypertriglyceridemia. In January 2013, the Company launched 1-gram size VASCEPA in the United States, or U.S., and in October 2016, introduced a smaller 0.5-gram capsule size. On December 13, 2019, the U.S. FDA approved an indication and label expansion for VASCEPA based on the results of the Company’s long-term cardiovascular outcomes trial, REDUCE-IT^®, or Reduction of Cardiovascular Events with EPA – Intervention Trial. VASCEPA is approved by the U.S. FDA as an adjunct to maximally tolerated statin therapy for reducing persistent cardiovascular risk in select high risk patients. VASCEPA is also available for sale by prescription only in Canada, Lebanon and the United Arab Emirates through collaborations and is also in development in other jurisdictions.  

On March 30, 2020, the United States District Court for the District of Nevada, or the Nevada Court, ruled in favor of two generics companies in Amarin’s patent litigation related to its abbreviated new drug applications, or ANDAs, that seek U.S. FDA approval for sale of generic versions of VASCEPA for the original indication of VASCEPA as an adjunct to diet to reduce TG levels in adult patients with severe (>500 mg/dL) hypertriglyceridemia. On May 22, 2020 and August 10, 2020, the two generics companies, Hikma Pharmaceutical USA Inc., or Hikma, and Dr. Reddy’s Laboratories, Inc., or Dr. Reddy’s, respectively, received U.S. FDA approval to market its generic versions of VASCEPA. On September 3, 2020, the U.S. Court of Appeals for the Federal Circuit, or the Federal Circuit, upheld the March ruling by the Nevada Court in favor of the two generics companies. On October 2, 2020, the Company filed a combined petition for panel rehearing or rehearing en banc. On November 4, 2020, the Company’s rehearing and en banc petitions were denied. On February 11, 2021, Amarin filed a petition for a writ of certiorari with the United States Supreme Court to ask the Court to hear the Company’s appeal in this litigation, which is pending.

In August 2020, the Company announced plans to launch icosapent ethyl under the brand name VAZKEPA, hereinafter along with the U.S. brand name VASCEPA, collectively referred to as VASCEPA, in major markets in Europe through the Company’s new European sales and marketing teams. On January 29, 2021, the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, adopted a positive opinion, recommending that a marketing authorization be granted to icosapent ethyl in the European Union, or EU, for the reduction of risk of cardiovascular events in patients at high cardiovascular risk. On March 26, 2021, the European Commission, or EC, approved the marketing authorization application for VAZKEPA in the EU to reduce the risk of cardiovascular events in high-risk, statin-treated adult patients who have elevated triglycerides (>150 mg/dL) and either established cardiovascular disease or diabetes and at least one additional cardiovascular risk event. On April 22, 2021, the Company announced that the Medicines and Healthcare Products Regulatory Agency, or MHRA, approved VAZKEPA in England, Scotland and Wales to reduce cardiovascular risk through MHRA’s new ‘reliance’ route following the end of the BREXIT transition period.

In November 2020, the Company announced topline results from the Phase 3 clinical trial of VASCEPA conducted by the Company’s partner in China. On February 9, 2021, the Company announced that regulatory review processes for approval of VASCEPA in Mainland China and Hong Kong have commenced. The Chinese National Medical Products Administration, or NMPA, has accepted for review the new drug application for VASCEPA based on the results from the Phase 3 clinical trial and the results from the Company’s prior studies of VASCEPA. The Hong Kong Department of Health is evaluating VASCEPA based on current approvals in the United States and Canada.

The Company currently has strategic collaborations to develop and commercialize VASCEPA in select territories outside the United States. Amarin is responsible for supplying VASCEPA to all markets in which the product is sold, including in Canada, Lebanon and the United Arab Emirates where the drug is promoted and sold via collaboration with third-party companies that compensate Amarin for such supply. Amarin is not responsible for providing any generic company with drug product. The Company operates in one business segment.

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Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States and pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC. Certain information in the footnote disclosures of the financial statements has been condensed or omitted where it substantially duplicates information provided in the Company’s latest audited consolidated financial statements, in accordance with the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes included in its Annual Report on Form 10-K for the fiscal year ended, or the Form 10-K, filed with the SEC. The balance sheet amounts in this report were derived from the Company’s audited consolidated financial statements included in the Form 10-K.

The condensed consolidated financial statements reflect all adjustments of a normal and recurring nature that, in the opinion of management, are necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods indicated. The preparation of the Company’s condensed consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles, or GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results for any future period. Certain numbers presented throughout this document may not add precisely to the totals provided due to rounding. Absolute and percentage changes are calculated using the underlying amounts in thousands. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying condensed consolidated financial statements of the Company and subsidiaries have been prepared on a basis which assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business, as well as the current global pandemic, COVID-19.

At March 31, 2021, the Company had Total assets of $990.3 million, of which $538.7 million consisted of cash and liquid short-term and long-term investments. More specifically, the Company had Current assets of $930.5 million, including Cash and cash equivalents of $291.0 million, Short-term investments of $223.7 million, Accounts receivable, net, of $151.3 million and Inventory of $230.9 million. In addition, as of March 31, 2021, the Company had Long-term investments of $24.0 million. As of March 31, 2021, the Company had no debt outstanding. 

     Revenue Recognition

In accordance with Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, or Topic 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For a complete discussion of accounting for net product revenue and licensing revenue, see Note 8—Revenue Recognition.

Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash, deposits with banks and short-term highly liquid money market instruments with remaining maturities at the date of purchase of 90 days or less. Restricted cash represents cash and cash equivalents pledged to guarantee repayment of certain expenses which may be incurred for business travel under corporate credit cards held by employees.

Accounts Receivable, net

Accounts receivable, net, comprised of trade receivables, are generally due within 30 days and are stated at amounts due from customers. The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of any recoveries. The allowance is based primarily on assessment of specific identifiable customer accounts considered at

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risk or uncollectible, as well as an analysis of current receivables aging and expected future write-offs. The expense associated with the allowance for doubtful accounts is recognized as Selling, general, and administrative expense. The Company has not historically experienced any significant credit losses. All customer accounts are actively managed and no losses in excess of amounts reserved are currently expected; however, the Company is monitoring the potential negative impact of COVID-19 on the Company’s customers’ ability to meet their financial obligations.

The following table summarizes the impact of accounts receivable reserves on the gross trade accounts receivable balances as of March 31, 2021 and December 31, 2020:

Inventory

The Company states inventories at the lower of cost or net realizable value. Cost is determined based on actual cost using the average cost method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. An allowance is established when management determines that certain inventories may not be saleable. If inventory cost exceeds expected net realizable value due to obsolescence, damage or quantities in excess of expected demand, changes in price levels or other causes, the Company will reduce the carrying value of such inventory to net realizable value and recognize the difference as a component of cost of goods sold in the period in which it occurs. The Company capitalizes inventory purchases of saleable product from approved suppliers while inventory purchases from suppliers prior to regulatory approval are included as a component of research and development expense. The Company expenses inventory identified for use as marketing samples when they are packaged. The average cost reflects the actual purchase price of VASCEPA active pharmaceutical ingredient, or API.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts and tax bases of assets and liabilities and operating loss carryforwards and other tax attributes using enacted rates expected to be in effect when those differences reverse. Valuation allowances are provided against deferred tax assets that are not more likely than not to be realized. Deferred tax assets and liabilities are classified as non-current in the condensed consolidated balance sheet.

The Company provides reserves for potential payments of tax to various tax authorities and does not recognize tax benefits related to uncertain tax positions and other issues. Tax benefits for uncertain tax positions are based on a determination of whether a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized, assuming that the matter in question will be decided based on its technical merits. The Company’s policy is to record interest and penalties in the provision for income taxes, as applicable.

The Company regularly assesses its ability to realize deferred tax assets. Changes in historical earnings performance, future earnings projections, and changes in tax laws, among other factors, may cause the Company to adjust its valuation allowance on deferred tax assets, which would impact the Company’s income tax expense in the period in which it is determined that these factors have changed.

Excess tax benefits and deficiencies that arise upon vesting or exercise of share-based payments are recognized as an income tax benefit and expense, respectively, in the condensed consolidated statement of operations. Excess income tax benefits are classified as cash flows from operating activities and cash paid to taxing authorities arising from the withholding of shares from employees are classified as cash flows from financing activities.

The Company’s and its subsidiaries’ income tax returns are periodically examined by various tax authorities, including the Internal Revenue Service, or IRS, and states. The Company is currently under audit by the IRS for the Company’s 2018 U.S. income tax return and by the New Jersey Department of Treasury for the years 2012 to 2015. Although the outcome of tax audits is always uncertain and could result in significant cash tax payments, the Company does not believe the outcome of these audits will have a material adverse effect on its consolidated financial position or results of operations.

Loss per Share

Basic net loss per share is determined by dividing net loss by the weighted average shares of common stock outstanding during the period. Diluted net loss per share is determined by dividing net loss by diluted weighted average shares outstanding. Diluted weighted

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average shares reflects the dilutive effect, if any, of potentially dilutive common shares, such as common stock options calculated using the treasury stock method and preferred stock and convertible notes using the “if-converted” method. In periods with reported net operating losses, all common stock options and preferred stock outstanding are deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal.

The Company’s preferred stock, of which none is outstanding as of March 31, 2021 and December 31, 2020, was entitled to receive dividends on an as-if-converted basis in the same form as dividends actually paid on common shares. Accordingly, the preferred stock was considered a participating security and the Company was required to apply the two-class method to consider the impact of the preferred stock on the calculation of basic and diluted earnings per share. The Company is in a net loss position for the periods presented and is therefore not required to present the two-class method, however, in the event the Company was historically in a net income position, the two-class method was applied by allocating all earnings during the period to common shares and preferred stock based on their contractual entitlements assuming all earnings were distributed.

The calculation of net loss and the number of shares used to compute basic and diluted net loss per share for the three months ended March 31, 2021 and 2020 are as follows:

For the three months ended March 31, 2021 and 2020, the following potentially dilutive securities were not included in the computation of net loss per share because the effect would be anti-dilutive:

Stock options are anti-dilutive during periods of net earnings when the exercise price of the stock options exceeds the market price of the underlying shares on the last day of the reporting period. Restricted stock and restricted stock units are anti-dilutive during periods of net earnings when underlying performance-based vesting requirements were not achieved as of the last day of the reporting period.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents, short-term and long-term investments, and accounts receivable. The Company maintains substantially all of its cash and cash equivalents and short-term and long-term investments, in financial institutions believed to be of high-credit quality.

A significant portion of the Company’s sales are to wholesalers in the pharmaceutical industry. The Company monitors the creditworthiness of customers to whom it grants credit terms and has not experienced any credit losses. The Company does not require collateral or any other security to support credit sales. Three customers individually accounted for 10% or more of the Company’s gross product sales, Customers A, B, and C accounted for 27%, 35%, and 31%, respectively, of gross product sales for the three months ended March 31, 2021, and represented 35%, 36%, and 24%, respectively, of the gross accounts receivable balance as of March 31, 2021. Customers A, B, and C accounted for 24%, 35%, and 32%, respectively, of gross product sales for the three months ended March 31, 2020 and represented 32%, 27%, and 30%, respectively, of the gross accounts receivable balance as of March 31, 2020. The Company has not experienced any significant write-offs of its accounts receivable. All customer accounts are actively managed and no losses in excess of amounts reserved are currently expected; however, the Company is monitoring the potential negative impact of COVID-19 on the Company’s customers’ ability to meet their financial obligations.

Concentration of Suppliers

The Company has contractual freedom to source the API for VASCEPA and to procure other services supporting its supply chain and has entered into supply agreements with multiple suppliers. The Company’s supply of product for commercial sale and clinical trials is dependent upon relationships with third-party manufacturers and suppliers.

The Company cannot provide assurance that its efforts to procure uninterrupted supply of VASCEPA to meet market demand will continue to be successful or that it will be able to renew current supply agreements on favorable terms or at all. Significant alteration to or disruption or termination of the Company’s current supply chain, including as a result of COVID-19, or the Company’s failure to

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enter into new and similar agreements in a timely fashion, if needed, could have a material adverse effect on its business, condition (financial and other), prospects or results of operations.

The Company currently has manufacturing agreements with multiple independent U.S. FDA-approved API manufacturers and several independent U.S. FDA-approved API encapsulators and packagers for VASCEPA manufacturing. Each of these companies has qualified and validated its manufacturing processes and is capable of manufacturing VASCEPA. There can be no guarantee that these or other suppliers with which the Company may contract in the future to manufacture VASCEPA or VASCEPA API will remain qualified to do so to its specifications or that these and any future suppliers will have the manufacturing capacity to meet potential global demand for VASCEPA.

Fair Value of Financial Instruments

The Company provides disclosure of financial assets and financial liabilities that are carried at fair value based on the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements may be classified based on the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities using the following three levels:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3—Unobservable inputs that reflect the Company’s estimates of the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

The following tables present information about the estimated fair value of the Company’s assets and liabilities as of March 31, 2021 and December 31, 2020 and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

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The carrying amount of the Company’s cash and cash equivalents approximates fair value because of their short-term nature. The cash and cash equivalents consist of cash, deposits with banks and short-term highly liquid money market instruments with remaining maturities at the date of the purchase of 90 days or less.

The Company’s held-to-maturity investments are stated at amortized cost, which approximates fair value. The Company does not intend to sell these investment securities and the contractual maturities are not greater than 24 months. Those with maturities greater than 90 days and less than twelve months are included in short-term investments on its condensed consolidated balance sheet. Those with remaining maturities in excess of twelve months are included in long-term investments on its condensed consolidated balance sheet.

Unrealized gains or losses on held-to-maturity securities are not recognized until maturity, except other-than-temporary unrealized losses which are recognized in earnings in the period incurred. The Company evaluates securities with unrealized losses to determine whether such losses are other than temporary. The unrealized gain or loss for the three months ended March 31, 2021 and 2020 was a gain of $0.2 million and a loss of $0.7 million, respectively. Interest on investments is reported in interest income.

Segment and Geographical Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources to an individual segment and in assessing performance of the segment. The Company currently operates in one business segment, which is the development and commercialization of VASCEPA. A single management team that reports to the Company’s chief decision-maker, who is the Chief Executive Officer, comprehensively manages the business. Accordingly, the Company does not have separately reportable segments.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, and are early adopted by the Company or adopted as of the specified effective date.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, the recognition of deferred tax liabilities for outside basis differences, among other simplifications. The Company adopted this standard effective January 1, 2021, which did not have an impact on the Company’s condensed consolidated financial statements.

The Company believes that the impact of other recently issued but not yet adopted accounting pronouncements will not have a material impact on the Company’s condensed consolidated financial position, results of operations, and cash flows, or do not apply to the Company’s operations.

Intangible asset consists of milestone payments to the former shareholders of Laxdale related to the 2004 acquisition of the rights to VASCEPA, which is the result of VASCEPA receiving marketing approval in the U.S. for the first indication in 2012, the expanded label in 2019 and marketing approval in Europe in 2021. Upon approval of the marketing authorization application for VAZKEPA in March 2021, a milestone for £7.5 million was achieved, which resulted in the Intangible asset increasing by $12.0 million. Refer to Note 5 – Commitments and Contingencies for further details. In accordance with ASC 350, the Company evaluates the remaining useful lives of the intangible asset at each reporting period to determine if any events or circumstances warrant a revision to the remaining period of amortization. As of March 31, 2021, the Company determined the useful life of the intangible asset, which had a remaining useful life of 9.3 years, has been extended to 10.0 years due to the approval of VAZKEPA in Europe and the related period of market protection. The carrying value as of March 31, 2021 and December 31, 2020 is as follows:

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The Company capitalizes its purchases of saleable inventory of VASCEPA from suppliers that have been qualified by the U.S. FDA. Inventories as of March 31, 2021 and December 31, 2020 consist of the following:

(5)Commitments and Contingencies

Litigation

The active pharmaceutical ingredient in VASCEPA is difficult and time consuming to manufacture, often requires considerable advanced planning and long-term financial commitment to ensure sufficient capacity is available when needed. The Company has invested over a decade to develop with individual members of its third-party, active pharmaceutical ingredient supply chain the technical knowhow, manufacturing processes and related regulatory approvals that have helped enable the Company’s suppliers to supply the Company’s need for clinical and commercial supply globally. Based on statements made by generic competitors, Hikma and Dr. Reddy’s, the active pharmaceutical ingredient of VASCEPA needed to manufacture their generic versions of VASCEPA is in short supply to them. The Company believes this may be due to their lack of adequate planning, investment, knowhow and expertise regarding this fragile active ingredient.

As has been a practice in the generic pharmaceutical industry, on April 27, 2021, Dr. Reddy’s filed a complaint against the Company in the United States District Court District of New Jersey (case no. 2:21-cv-10309) alleging various antitrust violations stemming from alleged anticompetitive practices related to the supply of active pharmaceutical ingredient of VASCEPA. Damages sought include recovery for alleged economic harm to Dr. Reddy’s, payors and consumers, treble damages and other costs and fees. Injunctive relief against the alleged violative activities is also being sought by Dr. Reddy’s. Amarin believes it has valid defenses and will vigorously defend against the claims. Amarin has also received a civil investigative demand from the U.S. Federal Trade Commission and a subpoena from the New York Attorney General with respect to information on the same topic. The Company believes such contact from the governments may have been prompted by a generic competitor. Amarin is cooperating with the government agencies. Such litigation and investigations can be lengthy, costly and could materially affect and disrupt the Company’s business. The Company cannot predict when these matters will be resolved, their outcome or their potential impact on the Company’s business. If a government determines that Amarin has violated antitrust law, the Company could be subject to significant civil fines and penalties.

On February 22, 2019, a purported investor in the Company’s publicly traded securities filed a putative class action lawsuit against Amarin Corporation plc, the chief executive officer and chief scientific officer in the U.S. District Court for the District of New Jersey, Debendra Sharma v. Amarin Corporation plc, John F. Thero and Steven Ketchum, No. 2:19-cv-06601 (D.N.J. Feb. 22, 2019). On March 12, 2019, another purported investor filed a substantially similar lawsuit captioned Richard Borghesi v. Amarin Corporation plc, John F. Thero and Steven Ketchum, No. 3:19-cv-08423 (D.N.J. March 12, 2019). On May 14, 2019 the court consolidated the cases under the caption In re Amarin Corporation PLC Securities Litigation, No. 3:19-cv-06601 and appointed two other purported shareholders, Dan Kotecki and the Gaetano Cecchini Living Trust, as Co-Lead Plaintiffs. Co-Lead Plaintiffs filed a consolidated amended complaint, or Amended Complaint, on July 22, 2019 that added as defendants the Company’s current chief medical officer and the Company’s former chief executive officer, who is a current director. The Amended Complaint alleged that from September 24, 2018 to November 9, 2018 the Company misled investors by releasing topline results for the REDUCE-IT study without disclosing data on biomarker increases in the placebo group as compared with baseline measurement. The Amended Complaint alleged that these data suggest that the mineral oil placebo used in the REDUCE-IT study may have interfered with statin absorption in the placebo group, which they alleged may have increased adverse outcomes in the placebo group. The Amended Complaint further alleged that these purported misrepresentations and omissions inflated the share price. Based on these allegations, the suit asserted claims under the Securities Exchange Act of 1934 and sought unspecified monetary damages and attorneys’ fees and costs.

On March 29, 2021, the court granted the Company’s motion to dismiss this litigation for failure to state a valid claim. The litigation was dismissed without prejudice, giving the plaintiffs the right to file an amended complaint. We intend to vigorously defend against any future complaint in this matter.

In September and October 2016, the Company received paragraph IV certification notices from four companies contending to varying degrees that certain of its patents are invalid, unenforceable and/or will not be infringed by the manufacture, use, sale or offer for sale

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of a generic form of VASCEPA as described in those companies’ ANDAs. The Company filed patent infringement lawsuits against three of these four ANDA applicants. In October 2016, Amarin filed a lawsuit against Roxane Laboratories, Inc. and related parties (collectively, “Roxane”) in the Nevada Court. The case against Roxane was captioned Amarin Pharma, Inc. et al. v. Roxane Laboratories, Inc. et al., Civ. A. No. 2:16-cv-02525 (D. Nev.). According to a stipulation filed with the Nevada Court, in December 2016, Roxane transferred its ANDA to West-Ward Pharmaceuticals International Limited, which then designated West-Ward Pharmaceuticals Corp. (or together with West-Ward Pharmaceuticals International Limited, West-Ward) as its agent for U.S. FDA communications. In view of the ANDA transfer, in February 2017, West-Ward replaced Roxane and related parties as Defendants in the above-referenced case. The case against West-Ward was then captioned Amarin Pharma, Inc. et al. v. West-Ward Pharmaceuticals Corp. et al., Civ. A. No. 2:16-cv-02525 (D. Nev.). In November 2016, the Company filed a lawsuit against Dr. Reddy’s Laboratories, Inc. and Dr. Reddy’s Laboratories, Ltd. (collectively, “DRL”) in the U.S. District Court for the District of Nevada. The case against DRL is captioned Amarin Pharma, Inc. et al. v. Dr. Reddy’s Laboratories, Inc. et al., Civ. A. No. 2:16-cv-02562 (D. Nev.). In November 2016, the Company filed a lawsuit against Teva Pharmaceuticals USA, Inc. and Teva Pharmaceuticals Industries Limited (collectively, “Teva”) in the Nevada Court. The case against Teva was captioned Amarin Pharma, Inc. et al. v. Teva Pharmaceuticals USA, Inc. et al., Civ. A. No. 2:16-cv-02658. In all three lawsuits, the Company sought, among other remedies, an order enjoining each defendant from marketing generic versions of VASCEPA before the last to expire of the asserted patents in 2030.

The fourth ANDA applicant referenced above is Apotex Inc., or Apotex, which sent the Company a paragraph IV certification notice in September 2016. The notice reflected that Apotex made a paragraph IV notice as to some, but not all, of the patents listed in the Orange Book for VASCEPA.

In October 2016, the Company introduced to the market a 0.5-gram dose strength of VASCEPA. In August 2017, as anticipated, the Company received a paragraph IV certification notice from Teva contending that certain of its patents are invalid, unenforceable and/or will not be infringed by the manufacture, use, sale or offer for sale of a generic form of the 0.5-gram dose strength of VASCEPA, as described in the Teva ANDA. This Teva ANDA was filed as an amendment to the 1-gram Teva ANDA and is related to patents already at issue in the 1-gram VASCEPA patent litigation. This certification followed the related listing in the Orange Book of patents associated with the 0.5-gram product in June 2017. This June 2017 listing was within the five-year, post NDA-approval period during which the Hatch-Waxman Amendments require a paragraph IV certification of patent invalidity or non-infringement under the Hatch-Waxman, five-year, NCE regulatory scheme. Accordingly, in October 2017, the Company filed a patent infringement lawsuit against Teva in the U.S. District Court for the District of Nevada. The case was captioned Amarin Pharma, Inc. et al. v. Teva Pharmaceuticals USA, Inc. et al., Civ. A. No. 2:17-cv-2641 (D. Nev.). In this lawsuit, the Company sought, among other remedies, an order enjoining Teva from marketing generic versions of the 0.5-gram dose strength of VASCEPA before the last to expire of the asserted patents in 2030.

On May 24, 2018, the Company entered into a settlement agreement with Teva that resolved its ANDA patent litigation as it relates to Teva’s as amended ANDA for both the 1-gram and 0.5-gram dose strengths of VASCEPA. As part of the settlement agreement, Teva may, subject to procurement of product supply, sell a generic version of VASCEPA in the United States now that the U.S. Federal Circuit Court of Appeals issued its mandate following our Nevada Court trial appeal lost at the level. The settlement agreement with Teva also substantially resolved litigation with Teva that could have ensued related to the December 2019 cardiovascular risk reduction indication of VASCEPA based on the REDUCE-IT study.

In July 2018, as anticipated, the Company received a paragraph IV certification notice from DRL contending that certain of its patents are invalid, unenforceable and/or will not be infringed by the manufacture, use, sale or offer for sale of a generic form of the 0.5-gram dose strength of VASCEPA, as described in the DRL ANDA. This DRL ANDA was filed as an amendment to the 1-gram DRL ANDA and is related to patents already at issue in the 1-gram VASCEPA patent litigation. This certification followed the related listing in the Orange Book of patents associated with the 0.5-gram product in June 2017. This June 2017 listing was within the five-year, post NDA-approval period during which the Hatch-Waxman Amendments require a paragraph IV certification of patent invalidity or non-infringement lawsuit against DRL in the U.S. District Court for the District of Nevada. The case is captioned Amarin Pharma, Inc. et al. v. Dr. Reddy’s Laboratories, Inc. et al., Civ. A. No. 2:18-cv-01596 (D. Nev.). In this lawsuit, the Company sought, among other remedies, an order enjoining DRL from marketing generic versions of the 0.5-gram dose strength of VASCEPA before the last to expire of the asserted patents in 2030. In light of the overlap between the cases, DRL and the Company have stipulated that the final judgment on the merits of the parties’ contentions in the consolidated 1-gram action shall also be binding in the 0.5-gram case.

The trial for the ANDA patent litigation against defendants DRL and Hikma, and certain of their respective affiliates, or the Defendants, took place in the Nevada Court (case no.: 2:16-cv-02525-MMD-NJK (consolidated with 2:16-cv=02562=MMD-NJK). Following conclusion of the trial in late January 2020, the Nevada Court, on March 30, 2020, decided in favor of the Defendants, ruling that the relevant patents are invalid due to obviousness. Amarin appealed this decision to the Federal Circuit (case no.: 20-1723).

In June 2020, the Company entered into a settlement agreement with Apotex that resolved patent litigation that was expected to result from the ANDA filed by Apotex with the U.S. FDA, which ANDA was amended in May 2020, seeking approval of a generic form of VASCEPA capsules based on the MARINE study. As part of the settlement agreement, Apotex may, subject to U.S. FDA approval of

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its ANDA and procurement of product supply, sell a generic version of VASCEPA with MARINE indication labeling in the United States now that the U.S. Federal Circuit Court of Appeals issued its mandate following our Nevada Court trial appeal loss at the level (the same such date provided for under the 2018 settlement agreement with Teva). The settlement agreement with Apotex also substantially resolved litigation with Apotex that could have ensued related to the December 2019 cardiovascular risk reduction indication of VASCEPA based on the REDUCE-IT study. Apotex may amend its label under our settlement agreement to include the REDUCE-IT indication after expiration of the associated Hatch-Waxman Act regulatory exclusivity expires in December 2022.

On September 3, 2020, the U.S. Court of Appeal for the Federal Circuit upheld the March 2020 trial ruling by the Nevada Court in favor of Hikma and DRL. On October 2, 2020, the Company filed a combined petition for panel rehearing or rehearing en banc (case no.: 20-1723-1901), which was denied. On February 11, 2021, the Company filed a petition for a writ of certiorari with the United States Supreme Court to ask the Supreme Court to hear the appeal in this litigation (case no.: 20-1119). That petition is pending.

In November 2020, the Company filed a new patent infringement lawsuit against Hikma in the United States District Court in Delaware. The complaint alleges that Hikma has induced the infringement of VASCEPA-related cardiovascular risk reduction U.S. Patent Nos. 9,700,537 (Composition for preventing the occurrence of cardiovascular event in multiple risk patient), 8,642,077 (Stable pharmaceutical composition and methods of using same), and 10,568,861 (Methods of reducing the risk of a cardiovascular event in a subject at risk for cardiovascular disease) by making, selling, offering to sell and importing generic icosapent ethyl capsules in or into the United States. The Company is seeking remedies including a permanent injunction against Hikma’s unlawful inducement of infringing uses of its generic product to reduce cardiovascular risk and monetary damages in an amount sufficient to compensate the Company for such infringement.

In January 2021, the Company expanded the scope of the VASCEPA CV risk reduction patent infringement lawsuit against Hikma to include a health care insurance provider in the United States, Health Net, LLC. Through insurance coverage and economic incentives the Company alleges that Health Net, LLC has actively induced pharmacies to dispense, and patients to use, Hikma generic icosapent ethyl capsules in infringement of the related patents. In the complaint, the Company is seeking remedies including a permanent injunction against the unlawful inducement by Hikma and Health Net, LLC of infringing uses of the Hikma generic product, i.e., uses to reduce cardiovascular risk as detailed in the patents, and monetary damages in an amount sufficient to compensate the Company for such infringement. The Company is considering its legal options against parties similarly situated to Health Net, LLC and Hikma and acting in concert with either by making or selling any drug product or component thereof covered by the subject patents, or inducing others to do the same.

The Company intends to vigorously enforce its intellectual property rights relating to VASCEPA, but cannot predict the outcome of these lawsuits or any subsequently filed lawsuits.

In addition to the above, in the ordinary course of business, the Company is from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements and other matters.

Milestone and Supply Purchase Obligations

The Company entered into long-term supply agreements with multiple U.S. FDA-approved API suppliers and encapsulators. Certain supply agreements require annual minimum volume commitments by the Company and certain volume shortfalls may require payments for such shortfalls.

These agreements include requirements for the suppliers to meet certain product specifications and qualify their materials and facilities with applicable regulatory authorities including the U.S. FDA. The Company has incurred certain costs associated with the qualification of product produced by these suppliers.

Pursuant to the supply agreements, there is a total of approximately $213.0 million that is potentially payable over the term of such agreements based on minimum purchase obligations. The Company continues to meet its contractual purchase obligations.

On March 26, 2021, the EC approved the marketing authorization application for VAZKEPA. Under the 2004 share repurchase agreement with Laxdale, upon receipt of marketing approval in Europe for the first indication for VASCEPA (or first indication of any product containing intellectual property acquired from Laxdale in 2004), the Company must make an aggregate stock or cash payment to the former shareholders of Laxdale (at the sole option of each of the sellers) of £7.5 million. The Company recorded a liability of $12.0 million in Accrued expenses and other current liabilities on the condensed consolidated balance sheet as of March 31, 2021.

Also under the Laxdale agreement, upon receipt of a marketing approval in Europe for a further indication of VASCEPA (or further indication of any other product acquired from Laxdale in 2004), the Company must make an aggregate stock or cash payment (at the sole option of each of the sellers) of £5 million (approximately $6.9 million as of March 31, 2021) for the potential market approval.

The Company has no provision for any of these obligations, except as noted above, since the amounts are either not paid or payable as of March 31, 2021.

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Marketing Obligations

As of March 31, 2021, the Company had certain marketing commitments, consisting of communication costs related to the direct-to-consumer activities, totaling approximately $14.2 million.

Preferred Stock

In March 2015, the Company entered into subscription agreements with both existing and new investors, or the Purchasers, for the private placement of a total of 391,017,970 restricted American Depositary Shares, or ADSs, each representing one share of Amarin’s Series A Convertible Preference Shares, par value £0.05 per share, in the capital of the Company, or Series A Preference Shares. For each restricted ADS, the Purchasers paid a negotiated price of $0.15 (equating to $1.50 on an as-if-converted-to-ordinary-shares basis), resulting in gross proceeds to the Company of approximately $58.6 million before deducting estimated offering expenses of approximately $0.7 million. At the request of the holders and provided certain conditions were met, each ten Series A Preference Shares were able to be consolidated and redesignated as one ordinary share, par value £0.50 per share, in the capital of the Company, each ordinary share to be represented by ADSs. During the years ended December 31, 2020, 2018, and 2015, the Company issued 28,931,746, 3,886,718, and 6,283,333 ADSs, respectively, upon consolidation and redesignation of Series A Preference Shares at the request of the holders, such that no Series A Preference Shares remained outstanding as of March 31, 2021 and December 31, 2020. Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for a more complete background.

Common Stock

There was no common stock activity during the three months ended March 31, 2021 and 2020 except as described in Incentive Equity Awards below.

Incentive Equity Awards

As of March 31, 2021, there were an aggregate of 19,371,777 stock options and 10,251,564 restricted stock units, or RSUs, outstanding, representing approximately 5% and 2%, respectively, of outstanding shares on a fully diluted basis.

During the three months ended March 31, 2021 and 2020, the Company issued 783,320 and 412,465 common shares, respectively, as a result of the exercise of stock options, resulting in gross and net proceeds of $2.1 million during the three months ended March 31, 2021 and $1.3 million during the three months ended March 31, 2020. During the three months ended March 31, 2021 and 2020, the Company issued 940,977 and 1,109,600 common shares, respectively, related to the vesting of RSUs, of which 365,463 and 406,042 shares, respectively, were retained as treasury shares as settlement of employee tax obligations. During the three months ended March 31, 2021 and 2020, in connection with the achievement of certain regulatory and sales performance conditions associated with the REDUCE-IT clinical trial and subsequent revenue growth, the Company issued 1,506,428 and 841,848 common shares, respectively, upon vesting of performance-based RSUs granted in 2017 and 2018, of which 638,502 and 353,790 shares, respectively, were retained as treasury shares as settlement of employee tax obligations. These performance-based RSUs will continue to vest ratably monthly through August 2021.

On January 4, 2021, the Company granted a total of 3,265,700 RSUs and 3,100,200 stock options to employees under the Amarin Corporation plc 2020 Stock Incentive Plan, or the 2020 Plan. The RSUs vest annually over a three-year period and the stock options vest quarterly over a four-year period with a one-year cliff vesting. Also on January 4, 2021, the Company granted a total of 1,345,800 RSUs to certain employees under the 2020 Plan that vest upon the achievement of specified operational performance conditions.

On March 2, 2020 and February 3, 2020, the Company granted a total of 821,950 RSUs and 1,875,000 stock options, respectively, to employees under the Amarin Corporation plc 2011 Stock Incentive Plan, or the 2011 Plan. The RSUs vest annually over a three-year period and the stock options vest quarterly over a four-year period. Also on February 3, 2020, the Company granted a total of 1,253,400 RSUs to employees under the 2011 Plan that vest upon the achievement of specified sales performance conditions.

On March 31, 2014, the Company entered into a Co-Promotion Agreement, or the Agreement, with Kowa Pharmaceuticals America, Inc. related to the commercialization of VASCEPA capsules in the United States. The Company and Kowa Pharmaceuticals America, Inc. intentionally designed the Agreement to naturally end as of December 31, 2018 and mutually agreed not to renew the Agreement.

During 2018, which was the last year of the co-promotion of VASCEPA by Kowa Pharmaceuticals America, Inc., the Company incurred expense for co-promotion tail payments which are calculated as a percentage of the 2018 co-promotion fee, which was eighteen and a half percent (18.5%) of VASCEPA gross margin in 2018. The accrued tail payments are paid over three years with

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declining amounts each year. Kowa Pharmaceuticals America, Inc. was eligible to receive $17.8 million in co-promotion tail payments, the present value of which $16.6 million, was fully accrued as of December 31, 2018.

As of March 31, 2021, a net payable to Kowa Pharmaceuticals America, Inc. of $2.5 million was classified as current on the condensed consolidated balance sheet, representing the remaining accrued co-promotion tail payments. As of December 31, 2020, a net payable to Kowa Pharmaceuticals America, Inc. of $3.8 million, of which $3.2 million was classified as current on the condensed consolidated balance sheet, represents the remaining accrued co-promotion tail payments.

(8)Revenue Recognition

The Company sells VASCEPA principally to a limited number of major wholesalers, as well as selected regional wholesalers and specialty pharmacy providers in the United States, or collectively, its distributors or its customers, that in turn resell VASCEPA to retail pharmacies for subsequent resale to patients and healthcare providers. Patients are required to have a prescription in order to purchase VASCEPA. In addition to distribution agreements with distributors, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of the Company’s product.

Revenues from product sales are recognized when the distributor obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the distributor. Payments from distributors are generally received 30-60 days from the date of sale. The Company evaluates the creditworthiness of each of its distributors to determine whether revenues can be recognized upon delivery, subject to satisfaction of the other requirements, or whether recognition is required to be delayed until receipt of payment. The Company calculates gross product revenues generally based on the wholesale acquisition cost that the Company charges its distributors for VASCEPA.

Reserves for Variable Consideration

Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from (a) trade allowances, such as invoice discounts for prompt pay and distributor fees, (b) estimated government and private payor rebates and chargebacks and discounts, such as Medicaid reimbursements, (c) reserves for expected product returns and (d) estimated costs of incentives that are offered within contracts between the Company and its distributors, health care providers, payors and other indirect customers relating to the Company’s sales of its product. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the distributor) or as a current liability (if the amount is payable to a party other than a distributor). Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company adjusts these estimates, which would affect net product revenue and earnings in the period such variances become known.

Trade Allowances: The Company generally provides invoice discounts on VASCEPA sales to its distributors for prompt payment and fees for distribution services, such as fees for certain data that distributors provide to the Company. The payment terms for sales to distributors generally include a 2% discount for prompt payment while the fees for distribution services are based on contractual rates agreed with the respective distributors. Based on historical data, the Company expects its distributors to earn these discounts and fees, and deducts the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized.

Rebates, Chargebacks and Discounts: The Company contracts with Medicaid, Medicare, other government agencies and various private organizations, or collectively, Third-party Payors, so that VASCEPA will be eligible for purchase by, or partial or full reimbursement from, such Third-party Payors. The Company estimates the rebates, chargebacks and discounts it will provide to Third-party Payors and deducts these estimated amounts from its gross product revenues at the time the revenues are recognized. The Company estimates these reserves based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability, which is included in Accrued expenses and other current liabilities on the condensed consolidated balance sheets. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program. The Company estimates the rebates, chargebacks and discounts that it will provide to Third-party Payors based upon (i) the Company’s contracts with these Third-party Payors, (ii) the government-mandated discounts applicable to government-funded programs, (iii) information obtained from the Company’s distributors and (iv) information obtained from other third parties

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regarding the payor mix for VASCEPA. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period.

Product Returns: The Company’s distributors have the right to return unopened unprescribed VASCEPA during the 18-month period beginning six months prior to the labeled expiration date and ending twelve months after the labeled expiration date. The expiration date for VASCEPA 1-gram and 0.5-gram size capsules is currently four years and three years, respectively, after being converted into capsule form, which is the last step in the manufacturing process for VASCEPA and generally occurs within a few months before VASCEPA is delivered to distributors. The Company estimates future product returns on sales of VASCEPA based on: (i) data provided to the Company by its distributors (including weekly reporting of distributors’ sales and inventory held by distributors that provided the Company with visibility into the distribution channel in order to determine what quantities were sold to retail pharmacies and other providers), (ii) information provided to the Company from retail pharmacies, (iii) data provided to the Company by a third-party data provider which collects and publishes prescription data, and other third parties, (iv) historical industry information regarding return rates for similar pharmaceutical products, (v) the estimated remaining shelf life of VASCEPA previously shipped and currently being shipped to distributors and (vi) contractual agreements intended to limit the amount of inventory maintained by the Company’s distributors. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in Accrued expenses and other current liabilities on the condensed consolidated balance sheets.

Other Incentives: Other incentives that the Company offers to indirect customers include co-pay mitigation rebates provided by the Company to commercially insured patients who have coverage for VASCEPA and who reside in states that permit co-pay mitigation programs. The Company’s co-pay mitigation program is intended to reduce each participating patient’s portion of the financial responsibility for VASCEPA’s purchase price to a specified dollar amount. Based upon the terms of the program and information regarding programs provided for similar specialty pharmaceutical products, the Company estimates the average co-pay mitigation amounts and the percentage of patients that it expects to participate in the program in order to establish its accruals for co-pay mitigation rebates. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in Accrued expenses and other current liabilities on the condensed consolidated balance sheets. The Company adjusts its accruals for co-pay mitigation rebates based on actual redemption activity and estimates regarding the portion of issued co-pay mitigation rebates that it estimates will be redeemed. 

The following tables summarize activity in each of the net product revenue allowance and reserve categories described above for the three months ended March 31, 2021 and 2020:

Such net product revenue allowances and reserves are included within Accrued expenses and other current liabilities within the condensed consolidated balance sheets, with the exception of trade allowances and chargebacks, which are included within Accounts receivable, net as discussed below.

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Licensing Revenue

The Company enters into licensing agreements which are within the scope of Topic 606, under which it licenses certain rights to VASCEPA for uses that are currently commercialized and under development by the Company. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; payments for manufacturing supply services the Company provides through its contract manufacturers; and royalties on net sales of licensed products. Each of these payments results in licensing revenues.

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. 

In determining performance obligations, management evaluates whether the license is distinct from the other performance obligations with the collaborative partner based on the consideration of the relevant facts and circumstances for each arrangement. Factors considered in the determination include the stage of development of the license delivered, research and development capabilities of the partner and the ability of partners to develop and commercialize VASCEPA independent of the Company.

Licenses of intellectual property: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments: At the inception of each arrangement that includes development, regulatory and commercial milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the respective milestone as well as the level of effort and investment required. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development, regulatory and commercial milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect licensing revenues and earnings in the period of adjustment.

The Company receives payments from its customers based on billing schedules established in each contract. Up-front payments and fees are recorded as deferred revenue upon receipt or when due, and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

In-licenses

Mochida Pharmaceutical Co., Ltd.

In June 2018, the Company entered into a collaboration with Mochida related to the development and commercialization of drug products and indications based on the active pharmaceutical ingredient in VASCEPA, the omega-3 acid, EPA, or eicosapentaenoic acid. Among other terms in the agreement, the Company obtained an exclusive license to certain Mochida intellectual property to advance the Company’s interests in the United States and certain other territories and the parties will collaborate to research and develop new products and indications based on EPA for the Company’s commercialization in the United States and certain other territories. The potential new product and indication opportunities contemplated under this agreement are currently in early stages of development.

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Upon closing of the collaboration agreement, the Company made a non-refundable, non-creditable upfront payment of approximately $2.7 million. In addition, the agreement provides for the Company to pay milestone payments upon the achievement of certain product development milestones and royalties on net sales of future products arising from the collaboration, if any.

In January 2021, the Company exercised certain rights under the agreement, resulting in a payment of $1.0 million to Mochida, which was recorded as Research and development expense in the condensed consolidated statement of operations. In January 2020 and December 2020, the Company exercised certain rights under the agreement, resulting in payments of $1.0 million, respectively, to Mochida, which were recorded as Research and development expense in the condensed consolidated statement of operations.

Out-licenses

Eddingpharm (Asia) Macao Commercial Offshore Limited

In February 2015, the Company entered into a Development, Commercialization and Supply Agreement, or the DCS Agreement, with Eddingpharm (Asia) Macao Commercial Offshore Limited, or Edding, related to the development and commercialization of VASCEPA in Mainland China, Hong Kong, Macau and Taiwan, or the China Territory. Under the terms of the DCS Agreement, the Company granted to Edding an exclusive (including as to the Company) license with right to sublicense to develop and commercialize VASCEPA in the China Territory for uses that are currently commercialized and under development by the Company based on the Company’s MARINE, ANCHOR and REDUCE-IT clinical trials of VASCEPA.

Under the DCS Agreement, Edding is solely responsible for development and commercialization activities in the China Territory and associated expenses. The Company provides development assistance and is responsible for supplying finished and later bulk drug product at defined prices under negotiated terms. The Company retains all VASCEPA manufacturing rights. Edding agreed to certain restrictions regarding the commercialization of competitive products globally and the Company agreed to certain restrictions regarding the commercialization of competitive products in the China Territory.

The Company and Edding agreed to form a joint development committee to oversee regulatory and development activities for VASCEPA in the China Territory in accordance with a negotiated development plan and to form a separate joint commercialization committee one year prior to expected approval in the China Territory to oversee VASCEPA planning and pre-launch commercialization activities in the China Territory. Development costs are paid by Edding to the extent such costs are incurred in connection with the negotiated development plan or otherwise incurred by Edding. Edding is responsible for preparing and filing regulatory applications in all countries of the China Territory at Edding’s cost with the Company’s assistance. The DCS Agreement also contains customary provisions regarding indemnification, supply, record keeping, audit rights, reporting obligations, and representations and warranties that are customary for an arrangement of this type.

The term of the DCS Agreement expires, on a product-by-product basis, upon the later of (i) the date on which such product is no longer covered by a valid claim under a licensed patent in the China Territory, or (ii) the twelfth (12th) anniversary of the first commercial sale of such product in Mainland China. The DCS Agreement may be terminated by either party in the event of a bankruptcy of the other party and for material breach, subject to customary cure periods. In addition, at any time following the third anniversary of the first commercial sale of a product in Mainland China, Edding has the right to terminate the DCS Agreement for convenience with twelve months’ prior notice. Neither party may assign or transfer the DCS Agreement without the prior consent of the other party, provided that the Company may assign the DCS Agreement in the event of a change of control transaction.

Upon closing of the DCS Agreement, the Company received a non-refundable $15.0 million up-front payment. In March 2016, Edding submitted its clinical trial application, or CTA, with respect to the MARINE indication for VASCEPA to the Chinese regulatory authority. Following the CTA submission, the Company received a non-refundable $1.0 million milestone payment. In March 2017, the CTA was approved by the Chinese regulatory authority, and, in December 2017, Edding commenced a pivotal clinical trial aimed to support the regulatory approval of the first indication of VASCEPA in a patient population with severe hypertriglyceridemia in Mainland China. In November 2020, the Company announced statistically significant topline results from the Phase 3 clinical trial of VASCEPA conducted by Edding, which is being used to seek regulatory approval in Mainland China.

In addition to the non-refundable, up-front and regulatory milestone payments described above, the Company is entitled to receive certain regulatory and sales-based milestone payments of up to an additional $153.0 million as well as tiered double-digit percentage royalties on net sales of VASCEPA in the China Territory escalating to the high teens. The regulatory milestone events relate to the submission and approval of certain applications to the applicable regulatory authority, such as a clinical trial application, clinical trial exemption, or import drug license application. The amounts to be received upon achievement of the regulatory milestone events relate to the submission and approval for three indications, and range from $2.0 million to $15.0 million for a total of $33.0 million. The sales-based milestone events occur when annual aggregate net sales of VASCEPA in the territory equals or exceeds certain specified thresholds, and range from $5.0 million to $50.0 million for a total of $120.0 million. Each such milestone payment shall be payable only once regardless of how many times the sales milestone event is achieved. Each such milestone payment is non-refundable and non-creditable against any other milestone payments.

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The Company assessed this arrangement in accordance with Topic 606 and concluded that the contract counterparty, Edding, is a customer. The Company identified the following performance obligations at the inception of the DCS Agreement: (1) the exclusive license to develop and commercialize VASCEPA in the China Territory for uses that are currently commercialized and under development by the Company, (2) the obligation to participate in various steering committees, and (3) ongoing development and regulatory assistance. Based on the analysis performed, the Company concluded that the identified performance obligations are not distinct and therefore a combined performance obligation.

The transaction price includes the $15.0 million up-front consideration received and the $1.0 million milestone payment received related to the successful submission of the CTA for the MARINE indication. None of the other clinical or regulatory milestones have been included in the transaction price, as all milestone amounts are fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the licensee’s efforts. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur and therefore have also been excluded from the transaction price. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.  

During the three months ended March 31, 2021 and 2020, the Company recognized $0.3 million and $0.6 million, respectively, as licensing revenue related to the up-front and milestone payments received in connection with the Edding agreement. From contract inception through March 31, 2021 and December 31, 2020, the Company recognized $6.4 million and $6.1 million, respectively, as licensing revenue under the DCS Agreement concurrent with the input measure of support hours provided by Amarin to Edding in achieving the combined development and regulatory performance obligation, which in the Company’s judgment is the best measure of progress towards satisfying this performance obligation. The remaining transaction price of $10.5 million and $10.8 million is recorded in deferred revenue as of March 31, 2021 and December 31, 2020, respectively, on the condensed consolidated balance sheets and will be recognized as revenue over the remaining period of 13 years. 

Biologix FZCo

In March 2016, the Company entered into an agreement with Biologix FZCo, or Biologix, a company incorporated under the laws of the United Arab Emirates, to register and commercialize VASCEPA in several Middle Eastern and North African countries. Under the terms of the distribution agreement, the Company granted to Biologix a non-exclusive license to use its trademarks in connection with the importation, distribution, promotion, marketing and sale of VASCEPA in the Middle East and North Africa territory. Upon closing of the agreement, the Company received a non-refundable up-front payment, which will be recognized as revenue over 10 years commencing upon first marketing approval of VASCEPA in the territory. The Company is entitled to receive all payments based on total product sales and pays Biologix a service fee in exchange for its services, whereby the service fee represents a percentage of gross selling price which is subject to a minimum floor price.

The Company received approval of VASCEPA as a prescription medication for use in Lebanon in March 2018, in United Arab Emirates in July 2018, in Qatar in January 2020 and in Bahrain in December 2020 as an adjunct to diet to reduce triglyceride levels in adult patients with severe hypertriglyceridemia. VASCEPA was launched in Lebanon in June 2018 and in United Arab Emirates in February 2019.

The Company recognized net product revenue of approximately $0.5 million and nil as of March 31, 2021 and 2020, respectively, related to sales to Biologix.

HLS Therapeutics, Inc.

In September 2017, the Company entered into an agreement with HLS Therapeutics Inc., or HLS, a company incorporated under the laws of Canada, to register, commercialize and distribute VASCEPA in Canada. Under the agreement, HLS will be responsible for regulatory and commercialization activities and associated costs. The Company is responsible for providing assistance towards local filings, supplying finished product under negotiated supply terms, maintaining intellectual property, and continuing the development and funding of REDUCE-IT related activities.

Upon closing of the agreement, the Company received one-half of a non-refundable $5.0 million up-front payment, and received the remaining half on the six-month anniversary of the closing. Following achievement of the REDUCE-IT trial primary endpoint, which was announced in September 2018, the Company received a non-refundable $2.5 million milestone payment. Following approval from Health Canada in December 2019, the Company received a non-refundable milestone payment of $2.5 million in February 2020. In addition, in January 2020 HLS obtained regulatory exclusivity from the Office of Patented Medicines and Liaison, or OPML, as a result the Company received a non-refundable $3.8 million milestone payment. In addition to the non-refundable, up-front and regulatory milestone payments just described, the Company is entitled to receive certain sales-based milestone payments of up to an additional $50.0 million, as well as tiered double-digit royalties on net sales of VASCEPA in Canada.

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The Company assessed this arrangement in accordance with Topic 606 and concluded that the contract counterparty, HLS, is a customer. The Company identified the following performance obligations at the inception of the contract: (1) license to HLS to develop, register, and commercialize VASCEPA in Canada, (2) support general development and regulatory activities, and (3) participate in various steering committees. Based on the analysis performed, the Company concluded that the identified performance obligations in the agreement are not distinct and therefore a combined performance obligation.

The transaction price includes the $5.0 million up-front consideration, the $2.5 million milestone related to the achievement of the REDUCE-IT trial primary endpoint, the $2.5 million milestone related to obtaining approval from Health Canada and $3.8 million milestone related to obtaining regulatory exclusivity from the OPML. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur and therefore have also been excluded from the transaction price. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

During the three months ended March 31, 2021 and 2020, the Company recognized $0.3 million and $2.2 million, respectively, as licensing revenue related to up-front and milestone payments received in connection with the HLS agreement. From the contract’s inception through March 31, 2021 and December 31, 2020, the Company has recognized $6.9 million and $6.6 million, respectively, as licensing revenue is recognized under the agreement concurrent with the input measure of support hours provided by Amarin to HLS in achieving this performance obligation, which in the Company’s judgment is the best measure of progress towards satisfying the combined development and regulatory performance obligation. The remaining transaction price of $6.8 million and $7.1 million is recorded in deferred revenue as of March 31, 2021 and December 31, 2020, respectively, on the condensed consolidated balance sheets and will be recognized as revenue over the remaining period of 9 years.

The Company recognized net product revenue of nil and $6.7 million as of March 31, 2021 and 2020, respectively, related to HLS.

The following table presents changes in the balances of the Company’s contract assets and liabilities during the three months ended March 31, 2021:

During the three months ended March 31, 2021, the Company recognized the following revenues as a result of changes in the contract asset and contract liability balances in the respective periods:

The Company leases office space under operating leases. The lease liability is initially measured at the present value of the lease payments to be made over the lease term. Lease payments are comprised of the fixed and variable payments to be made by the Company to the lessor during the lease term minus any incentives or rebates or abatements receivable by the Company from the lessor or the owner. Payments for non-lease components do not form part of lease payments. The lease term includes renewal options only if these options are specified in the lease agreement and if failure to exercise the renewal option imposes a significant economic penalty for the Company. As there are no significant economic penalties, renewal cannot be reasonably assured and the lease terms for the office space do not include any renewal options. The Company has not entered into any leases with related parties. The Company accounts for short-term leases (i.e., lease term of 12 months or less) by making the short-term lease policy election and will not apply the recognition and measurement requirements of ASC 842.

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The Company has determined that the rate implicit in the lease is not determinable and the Company does not have borrowings with similar terms and collateral. Therefore, the Company considered a variety of factors, including the Company’s credit rating, observable debt yields from comparable companies with a similar credit profile and the volatility in the debt market for securities with similar terms, in determining that 11.5% was reasonable to use as the incremental borrowing rate for purposes of the calculation of lease liabilities and a change of 1% would not result in a material change to the Company’s condensed consolidated financial statements.  

On February 5, 2019, the Company entered into a lease agreement for new office space in Bridgewater, New Jersey, or the Lease. The Lease commenced on August 15, 2019, or the Commencement Date, for an 11-year period, with two five-year renewal options. Subject to the terms of the Lease, Amarin will have a one-time option to terminate the agreement effective on the first day of the ninety-seventh month after the Commencement Date upon advance written notice and a termination payment specified in the Lease. Under the Lease, the Company pays monthly rent of approximately $0.1 million for the first year following the Commencement Date, and such rent will increase by a nominal percentage every year following the first anniversary of the Commencement Date. In addition, Amarin receives certain abatements subject to the limitations in the Lease. The operating lease liability is $10.6 million and $10.6 million and the operating lease right-of-use asset is $8.0 million and $8.1 million, as of March 31, 2021 and December 31, 2020, respectively. The lease expense for the three months ended March 31, 2021 and 2020 is approximately $0.4 million and $0.4 million, respectively.

The table below depicts a maturity analysis of the Company’s undiscounted payments for its operating lease liabilities and their reconciliation with the carrying amount of lease liability presented in the statement of financial position as of March 31, 2021:

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This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements reflect our plans, estimates and beliefs. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Because of these risks and uncertainties, the forward-looking events and circumstances discussed in this report may not transpire. We discuss many of these risks in Part I, Item 1A under the heading “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and below under Part II, Item IA, “Risk Factors”.

Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this document. You should read this document with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we do not undertake any obligation to publicly update or revise any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.

Overview

This Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, should be read in conjunction with the Part I, Item 1, Business and Part II, Item 7, MD&A included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for additional information on our business.

We are a pharmaceutical company focused on the commercialization and development of therapeutics to improve cardiovascular, or CV, health and reduce CV risk. Our lead product, VASCEPA^® (icosapent ethyl) was first approved by the United States Food and Drug Administration, or U.S. FDA, for use as an adjunct to diet to reduce triglyceride, or TG, levels in adult patients with severe (≥500 mg/dL) hypertriglyceridemia. We launched VASCEPA in the United States, or U.S., in January 2013. On December 13, 2019 the U.S. FDA approved an indication and label expansion for VASCEPA based on the landmark results of our cardiovascular outcomes trial of VASCEPA, REDUCE-IT^®, or Reduction of Cardiovascular Events with EPA – Intervention Trial. VASCEPA is the first and only drug approved by the U.S. FDA as an adjunct to maximally tolerated statin therapy for reducing persistent cardiovascular risk in select high risk-patients.

In August 2020, we announced our plans to launch icosapent ethyl under the brand name VAZKEPA, hereinafter along with the U.S. brand name VASCEPA, collectively referred to as VASCEPA, in major markets in Europe through our own new European sales and marketing teams. On January 28, 2021, the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, adopted a positive opinion, recommending that a marketing authorization be granted to our drug, icosapent ethyl, in the European Union, or EU, for the reduction of risk of cardiovascular events in patients with high cardiovascular risk. On March 26, 2021, the European Commission, or EC, granted approval of the marketing authorization application in the EU for VAZKEPA to reduce the risk of cardiovascular disease or diabetes and at least one additional cardiovascular risk factor. VAZKEPA is the first and only EC approved therapy to reduce cardiovascular risk in high-risk statin-treated patient. The EC approval provides ten years of market protection in the EU, and we have been issued a patent that expires in 2033 with additional pending applications that could extend exclusivity into 2039. On April 22, 2021, we announced that we received marketing authorization from the Medicines and Healthcare Products Regulatory Agency, or MHRA, for VAZKEPA in England, Wales and Scotland to reduce cardiovascular risk through MHRA’s new ‘reliance’ route following the end of the BREXIT transition period.

In Europe, launch of VAZKEPA in individual countries is gated by timing of achieving product reimbursement on a country-by-country basis as is typical for new drugs. In seeking market access, we expect to file dossiers in ten European countries in the coming months, including the largest countries in Europe. Similar to our approach in launching VASCEPA in the United States, in Europe we have been building a core team of experienced professionals and a highly capable sales team, who are involved with pre-launch planning and other commercial preparation activities and plan to leverage third-party relationships for various support activities. We also have commenced training sales representatives to advance pre-launch disease and brand awareness initiatives in preparation for the planned commercial launch of VAZKEPA in Germany before the end of Q3 2021. We expect to have approximately 150 sales representatives deployed for pre-launch product and disease state awareness programs by mid-Q2 2021 and approximately 300 professionals by the end of 2021.

In November 2020, we announced statistically significant topline results from the Phase 3 clinical trial of VASCEPA conducted by our partner in China. On February 9, 2021, we announced that our partner in China commenced the regulatory review processes in Mainland China and Hong Kong. The Chinese National Medical Products Administration, or NMPA, has accepted for review the new drug application for VASCEPA based on the results from the Phase 3 clinical trial and the results from our prior studies of VASCEPA. We expect to receive a decision from the NMPA in Mainland China near the end of 2021. The Hong Kong Department of

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Health is evaluating VASCEPA based initially on current approvals in the United States and Canada with subsequent notification of the EC approval. The review process in Hong Kong is expected to conclude near the end of 2021.

In addition to the U.S., VASCEPA is currently available by prescription in Canada, Lebanon and the United Arab Emirates. In Canada, VASCEPA has the benefit of eight years of data protection afforded through Health Canada (until the end of 2027), in addition to separate patent protection with expiration dates that could extend into 2039. In China and the Middle East, we are pursuing such regulatory approvals and subsequent commercialization of VASCEPA with commercial partners.

Based on REDUCE-IT results, to-date 15 clinical treatment guidelines or position statements from medical societies have been updated recommending the use of icosapent ethyl in at-risk patients. Based on our analysis of branded cardiovascular drugs in the United States which have positive cardiovascular outcomes studies, we believe the wholesale acquisition cost of VASCEPA is the lowest. In addition, while none of these other cardiovascular drugs compete directly with VASCEPA and no head-to-head studies have been done between VASCEPA and these other drugs and the length and construct of the respective outcomes studies of these drugs vary, analysis of published clinical results from the cardiovascular outcomes studies of these drugs indicates that the number needed to treat, or NNT, for VASCEPA is as low or lower than for these other branded cardiovascular drugs. NNT is a measure of how many patients need to be treated before one patient benefits from the therapy. For VASCEPA, in this analysis, the NNT was based on the 25% relative risk reduction demonstrated for the primary endpoint of the study, the NNT for which is 21, as opposed to one fewer MACE on average per six patients treated over the five-year study period based on total events. The original pricing for VASCEPA in the United States was established prior to results of the REDUCE-IT cardiovascular outcomes study during a timeframe when VASCEPA was only approved for the original indication as an adjunct to diet to reduce TG levels in adult patients with severe (TG ≥500 mg/dL) hypertriglyceridemia. We believe that this relatively low price for VASCEPA in the United States, together with the demonstrated efficacy and safety of VASCEPA, will help lead to many at-risk patients being treated by VASCEPA.

On March 30, 2020, the United States District Court for the District of Nevada, or the Nevada Court, ruled in favor of two generic companies in our patent litigation related to their abbreviated new drug applications, or ANDAs, that sought U.S. FDA approval for sale of generic versions of VASCEPA. On May 22, 2020 and August 10, 2020, the two generic companies, Hikma Pharmaceutical USA Inc., or Hikma, and Dr. Reddy’s Laboratories, Inc., or Dr. Reddy’s, received U.S. FDA approval to market its generic versions of VASCEPA for the original indication of VASCEPA as an adjunct to diet to reduce TG levels in adult patients with severe (≥500 mg/dL) hypertriglyceridemia. On September 3, 2020, the U.S. Court of Appeals for the Federal Circuit upheld the March ruling by the Nevada Court in favor of the two generic companies. On October 2, 2020, we filed a combined petition for panel rehearing or rehearing en banc. On November 4, 2020, our rehearing and en banc petitions were denied. On February 11, 2021, we filed a petition for a writ of certiorari with the United States Supreme Court to ask the Court to hear our appeal in this litigation, which is pending. We intend to vigorously pursue this matter, but we cannot predict the outcome.

In November 2020, Hikma launched their generic version of VASCEPA on a limited scale. On November 30, 2020 we filed a patent infringement lawsuit against Hikma for making, selling, offering to sell and importing generic icosapent ethyl capsules in and into the United States in a manner that we allege has induced the infringement of patents covering the use of VASCEPA to reduce specified cardiovascular risk. The earlier ANDA litigation did not pertain to our patents covering cardiovascular risk reduction. On January 25, 2021 we expanded the scope of the patent infringement lawsuit to include a health care insurance provider, Health Net, LLC.

Although, to date, no generics other than Hikma have been launched, in addition to ANDAs approved for Hikma and Dr. Reddy’s, on September 11, 2020, Teva Pharmaceuticals USA, Inc’s., or Teva’s, ANDA was approved by the U.S. FDA. Apotex, Inc., or Apotex, has applied for ANDA approval and such application, based on public records, has not yet been approved.

We intend to vigorously pursue these ongoing litigation matters, but cannot predict the outcomes or the impact on our business. Geographies outside the United States in which VASCEPA is sold and under regulatory review are not subject to this U.S. patent litigation and judgment. No similar litigation involving potential generic version of VASCEPA is pending outside the United States.

We are responsible for supplying VASCEPA to all markets in which the branded product is sold, including Canada, Lebanon and the United Arab Emirates where the drug is promoted and sold via collaborations with third-party companies that compensate us for such supply. Subject to commercial launch in Europe and approval in China, we will be responsible for supplying products to those markets as well. We are not responsible for providing any generic company with drug product.

Commercialization

We commenced the commercial launch of VASCEPA in the United States in January 2013 based on the original indication for VASCEPA. In October 2016, in addition to the original 1-gram capsule size for VASCEPA, we introduced a smaller 0.5-gram capsule size. The U.S. FDA-approved dosing for VASCEPA continues to be 4 grams per day, and as expected, the majority of new and existing patients taking VASCEPA continue to be prescribed the 1-gram size VASCEPA capsule. VASCEPA is sold principally to a limited number of major wholesalers, as well as selected regional wholesalers and specialty pharmacy providers, or collectively, our

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distributors or our customers, that in turn resell VASCEPA to retail pharmacies for subsequent resale to patients and healthcare providers.

As a result of the COVID-19 pandemic and the related social distancing, in March 2020, we suspended face-to-face interactions between our sales representatives and healthcare professionals. We resumed on a limited basis field-based, face-to-face interactions with healthcare providers beginning in June 2020. During the late part of the summer of 2020, substantially all of our field force personnel were able to resume some level of face-to-face customer interactions in a manner consistent with guidelines from local, state and government health officials in the United States. In the fourth quarter of 2020 and continuing into the first quarter of 2021, the impact of COVID-19 worsened in much of the United States, with some physicians again limiting access to face-to-face interactions with our field force personnel. Accordingly, in the United States, we have intentionally slowed the hiring of replacements for certain of our open positions which resulted from ordinary turnover. When we witness our sales representatives increasingly able to resume direct interactions with healthcare professionals, it is our intention to fill a significant number of these positions, provided such replacements are then appropriate to meet our business needs, which we continually evaluate.

Based on monthly compilations of data provided by a third party, Symphony Health, the estimated number of normalized total VASCEPA prescriptions for the three months ended March 31, 2021 and 2020 was approximately 1,064,000 and 1,061,000, respectively. According to data from another third party, IQVIA, the estimated number of normalized total VASCEPA prescriptions for the three months ended March 31, 2021 and 2020 was approximately 989,000 and 955,000, respectively. Normalized total prescriptions represent the estimated total number of VASCEPA prescriptions dispensed to patients, calculated on a normalized basis (i.e., one month’s supply, or total capsules dispensed multiplied by the number of grams per capsule divided by 120 grams). Inventory levels at wholesalers tend to fluctuate based on seasonal factors, prescription trends and other factors. Such third-party sources also report that the number of patients visiting physicians remains well below pre-pandemic levels, with such reported decline being particularly pronounced in some areas of the country where there is greater awareness of VASCEPA, such as southern California. In addition, these sources report lower levels of patient visits during the three months ended March 31, 2021 in Texas and other parts of the United States which experienced severe weather and power outages.

Companies such as Symphony Health and IQVIA collect and report estimates of weekly, monthly, quarterly and annual prescription information. There is a limited amount of information available to such companies to determine the actual number of total prescriptions for prescription products like VASCEPA during such periods. Each vendor’s estimates utilize a proprietary projection methodology and are based on a combination of data received from pharmacies and other distributors, and historical data when actual data is unavailable. Their calculations of changes in prescription levels between periods can be significantly affected by lags in data reporting from various sources or by changes in pharmacies and other distributors providing data. Such methods can from time to time result in significant inaccuracies in information when ultimately compared with actual results. These inaccuracies have historically been most prevalent and pronounced during periods of time of inflections upward or downward in rates of use. Further, data for a single and limited period may not be representative of a trend or otherwise predictive of future results. Data reported by Symphony Health and IQVIA is rarely identical. As such, the resulting conclusions from such sources should be viewed with caution. We are not responsible for the accuracy of these companies’ information and we do not receive prescription data directly from retail pharmacies.

We recognize revenue from product sales when the distributor obtains control of our product, which occurs at a point in time, typically upon delivery to the distributor. Timing of shipments to wholesalers, as used for revenue recognition purposes, and timing of prescriptions as estimated by these third parties may differ from period to period. Although we believe these data are prepared on a period-to-period basis in a manner that is generally consistent and that such results can be generally indicative of current prescription trends, these data are based on estimates and should not be relied upon as definitive. While we expect to be able to grow VASCEPA revenues over time, no guidance should be inferred from the operating metrics described above. We also anticipate that such sales growth will be inconsistent from period to period. We believe that investors should view the above-referenced operating metrics with caution, as data for this limited period may not be representative of a trend consistent with the results presented or otherwise predictive of future results. Seasonal fluctuations in pharmaceutical sales, for example, may affect future prescription trends of VASCEPA, as could changes in prescriber sentiment, quarterly changes in distributor purchases, and other factors. We believe investors should consider our results over several quarters, or longer, before making an assessment about potential future performance. In Europe, privacy laws and other factors impact the availability of data to inform European commercial operations at an individual physician level. Generally, less data is available and at reduced frequencies as compared to the United States.

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We began 2020 by taking steps to further expand promotion of VASCEPA in the United States, including direct to consumer advertising, based on the new indication and label expansion of VASCEPA. Our field sales efforts are further complemented by investments in digital and non-personal channels as well as peer-to-peer (e.g., promotional medical education programs and product theaters) initiatives to further increase VASCEPA brand awareness and clarify VASCEPA’s unique clinical profile. In January 2020, we launched an educational campaign, True To Your Heart, to help people learn more about cardiovascular disease and how to better protect against persistent cardiovascular risk. In the United States, in July 2020 we launched our first television-based promotion of VASCEPA emphasizing that it is the first and only U.S. FDA approved drug for its indication. As the impact of COVID-19 on much of the United States worsened in the fourth quarter of 2020, we suspended television-based promotion of VASCEPA as we determined that the cost was not sufficiently justified in light of the COVID-19 pandemic’s impact on patient visits to doctors. We resumed on a very limited basis, direct-to-consumer campaign in January 2021, including television-based promotion, digital and social media promotion to continue to grow consumer awareness of VASCEPA. As we witnessed the effect of COVID-19 persisting, we elected to keep the level of such promotion limited. We anticipate that at-risk patients will increasingly resume visiting their doctors for non-urgent medical care after they are vaccinated for COVID-19, however, we cannot accurately predict when this resumption in visits to doctors will occur. The timing is likely to vary by geography. As COVID-19 protocols ease and ordinary course activities resume, we will seek to adjust our promotional initiatives accordingly, including pursuing increased face-to-face interactions with healthcare professionals and expanding various forms of direct-to-consumer promotion.

Similar to our approach in launching VASCEPA in the United States, in Europe we intend to build a core team of experienced professionals and a highly capable sales team involved with pre-launch planning and other commercial preparation activities and plan to leverage third-party relationships for various support activities. In Europe, patients at high risk for cardiovascular disease tend, in comparison to the United States, to be treated more often by specialists, such as cardiologists rather than by physicians who are general practitioners. This greater concentration of at-risk patients being treated by specialists in Europe should allow for more efficient promotion in Europe than in the United States. We have been active in preparing for reimbursement negotiations which we will commence on a country-by-country basis in Europe, now that VAZKEPA received marketing authorization on March 26, 2021. In most European countries, securing product reimbursement is a requisite to launching. In all countries securing adequate reimbursement is a requisite for commercial success of any therapeutic. The time required to secure reimbursement tends to vary from country to country and cannot be reliably predicted at this time. While we believe that we have strong arguments regarding the cost effectiveness of VAZKEPA, the success of such reimbursement negotiations could have a significant impact on our ability to realize the commercial opportunity of VAZKEPA in Europe.

We plan to assess other potential partnership opportunities for licensing VASCEPA to partners in other parts of the world. While we believe that there is medical need and opportunity for VASCEPA elsewhere in the world, our current priorities are the geographies described above.

Research and Development

The results of the REDUCE-IT STROKE subgroup analyses were presented at the International Stroke Conference 2021 from March 17 - 19, 2021. The REDUCE-IT STROKE analyses examined stroke rates across the enrolled patient population (n=8179). Enrolled patients were required to be treated with statins and other conventional therapies, and all patients had either established cardiovascular disease or diabetes and had other cardiovascular risk factors such as elevated triglyceride levels. Event rates for time to first fatal or nonfatal stroke were 2.4% for VASCEPA vs. 3.3% for placebo for a relative risk reduction of 28% (p=0.01). Ischemic stroke time to first event rates were 2.0% for VASCEPA vs. 3.0% for placebo for a RRR of 36% (p=0.002). Hemorrhagic stroke occurred at low rates with no significant difference for VASCEPA vs. placebo (0.3% vs 0.2%; p=0.55).

Based on our current understanding of the biological effects of a COVID-19 infection, including that patients at high risk of cardiovascular disease are at higher risk of mortality and severe effects from a COVID-19 infection, and based on data related to the mechanism of action and effects of VASCEPA in lowering cardiovascular risk in certain high-risk patients, we believe that VASCEPA could play a beneficial clinical role in helping patients infected by the virus. We are currently supporting investigator initiated studies by providing study drug product and limited financial support to investigators in multiple pilot studies designed to better understand the potential of VASCEPA and its potentially beneficial role. On December 12, 2020, we announced at the National Lipid Association Scientific Sessions 2020 positive clinical results from the first study of VASCEPA in COVID-19 infected outpatients, CardioLink-9. If the results of the other pilot studies are positive, we will evaluate whether additional studies will be appropriate. The clinical effects of VASCEPA are multi-factorial. Multiple mechanisms of action associated with VASCEPA from clinical and mechanistic studies support the rationale to study its effects in patients with the COVID-19 infection. Additional postulated mechanisms that might play a role in the use of VASCEPA in the patients infected with COVID-19 include potential antiviral/antimicrobial effects, fibrosis and cardiac damage mitigation in animal models and anti-inflammatory effects (acute) in pulmonary/lung tissue.

Commercial and Clinical Supply

We manage the manufacturing and supply of VASCEPA internally and have done so since we began clinical development of VASCEPA prior to the drug’s marketing approval by U.S. FDA in 2012. We rely on contract manufacturers in each step of our

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commercial and clinical product supply chain. These steps include active pharmaceutical ingredient, or API, manufacturing, encapsulation of the API, product packaging and supply-related logistics. Our approach to product supply procurement is designed to mitigate risk of supply interruption and maintain an environment of cost competition through diversification of contract manufacturers at each stage of the supply chain and lack of reliance on any single supplier. We have multiple U.S. FDA-approved international API suppliers, encapsulators and packagers to support the VASCEPA commercial franchise. We also have multiple international API suppliers, encapsulators and packagers to support the commercialization of VASCEPA in geographies where the drug is approved outside the United States. Not all of our suppliers approved by the U.S. FDA are approved in every other geography. In Europe, while certain of our suppliers are approved, after the impact of COVID-19 subsides and more readily allows for regulatory inspections, we will seek to expand the number of our suppliers approved for use in further product sales in Europe. The amount of supply we seek to purchase in future periods will depend on the level of growth of VASCEPA revenues and minimum purchase commitments with certain suppliers. While our current supply chain is scalable, we continue efforts to expand, diversify and further enhance it.

Impact of COVID-19

As of March 31, 2021, approximately 16% of the U.S. population has been fully vaccinated and approximately 30% of the U.S. population has received at least one dose of a vaccine. Despite the growing vaccine rate  and growing number of those who are eligible to receive the vaccine, according to CDC data, as of March 31, 2021, new cases of COVID-19 have been and continue to increase in the U.S. and the pandemic’s impact on global populations and economies continues to remain. While we expect the number of new cases to decrease as more of the population is vaccinated, we continue to evaluate the pandemic’s effect on patients, distributors, customers and our employees, as well as on our operations and the operations of our business partners and communities. Given the uncertainties regarding the scope, duration and impact of COVID-19 on our sales, supply, research and development efforts and operations, and on the operations of our customers, suppliers, distributors, other partners and patients, the impact of COVID-19 could impact our current performance and continues to represent a risk to our future performance.

Our ability to directly promote VASCEPA to healthcare professionals has been limited due to appropriate social distancing practices associated with COVID-19 and by patients electing to forego visiting their doctors for non-urgent medical examinations and/or choosing to not get blood tests which the results of these tests provide useful information to the treatment of cardiovascular risk. These limitations have had a significant impact on slowing VASCEPA prescription and revenue growth. While COVID-19 continues to impact our promotion of VASCEPA, we have seen signs of improvement. As a result of the COVID-19 pandemic and the related social distancing, in March 2020, we suspended face-to-face interactions between our sales representatives and healthcare professionals. We resumed on a limited basis field-based, face-to-face interactions with healthcare providers beginning in June 2020. During the late part of the summer of 2020, substantially all of our field force personnel were able to resume face-to-face customer interactions, in a manner consistent with guidelines from local, state and government health officials in the United States. In the fourth quarter of 2020 and continuing into the first quarter of 2021, the impact of COVID-19 worsened in much of the United States with some physicians again limiting access to face-to-face interactions with our field force personnel. Such access remains variable and challenging due to COVID-19.

In the United States, in July 2020 we launched our first television-based promotion of VASCEPA emphasizing that it is the first and only U.S. FDA approved drug for the cardiovascular risk reduction indication. As the impact of COVID-19 on much of the United States worsened in the fourth quarter of 2020, we suspended television-based promotion of VASCEPA judging that the cost was not sufficiently justified. We resumed a limited direct-to-consumer campaign in January 2021, including television-based promotion, digital and social media promotion to continue to grow consumer awareness of VASCEPA. We anticipate that at-risk patients will increasingly resume visiting their doctors for non-urgent medical care after they are vaccinated for COVID-19. As more of the population is vaccinated, COVID-19 protocols ease and ordinary course activities resume, we will seek to adjust our promotional initiatives accordingly, including pursuing increased face-to-face interactions with health care professionals and expanding various forms of direct-to-consumer promotion.

Thus far, COVID-19 has not materially impacted our ability to secure and deliver supply of VASCEPA. And, thus far, COVID-19 is not known to have significantly impacted ongoing clinical trials of VASCEPA.

The ultimate impacts of COVID-19 on our business are unknown; however, we are actively monitoring the situation and may take precautionary and preemptive or reactive actions that we determine are in the best interests of our business. We cannot predict the effects that such actions may have on our business or on our financial results, in particular with respect to demand for or access to VASCEPA.

We believe that the overall morale of our employees is good despite the challenges associated with COVID-19. As a result of COVID-19 and its limitations on our promotion of VASCEPA in the United States, we have intentionally slowed the hiring of replacements for our open positions which resulted from ordinary turnover. When we witness our sales representatives increasingly able to resume direct interactions with healthcare professionals, it is our intention to fill a significant number of these positions, provided such replacements are then appropriate to meet our business needs, which we continually evaluate.

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Management Succession Plans

In April 2021, we announced that John Thero, President and Chief Executive Officer, will retire from his positions as President and Chief Executive Officer and member of the Board of Directors effective August 1, 2021 and will provide phased transitional and consulting services to us thereafter. The Board of Directors has appointed Karim Mikhail, currently our Senior Vice President, Commercial Head Europe, to succeed Mr. Thero as our next President and Chief Executive Officer, as well as, a member of the Board of Directors, effective August 1, 2021. In April 2021, we also announced that Joseph Kennedy will retire from his position as Executive Vice President, General Counsel. A search has commenced to hire a new General Counsel with Mr. Kennedy also intending to support this transition and to provide consulting support on certain legal matters.

Financial Operations Overview

Product revenue, net. All of our product revenue is derived from product sales of 1-gram and 0.5-gram size capsules of VASCEPA, net of allowances, discounts, incentives, rebates, chargebacks and returns. In the United States, we sell product to a limited number of major wholesalers, as well as selected regional wholesalers and specialty pharmacy providers, or collectively, our distributors or our customers, who resell the product to retail pharmacies for purposes of their reselling the product to fill patient prescriptions. Revenues from product sales are recognized when the Distributor obtains control of our product, which occurs at a point in time, typically upon delivery to the Distributor. Timing of shipments to wholesalers, as used for revenue recognition, and timing of prescriptions as estimated by third-party sources such as Symphony Health and IQVIA may differ from period to period. During the quarters ended March 31, 2021 and 2020, our Product revenue, net included adjustment for co-pay mitigation rebates provided by us to commercially insured patients. Such support is intended for offset for a portion of the out-of-pocket expense that patients are required to pay for VASCEPA based upon the benefit design of their prescription drug coverage. Our cost for these co-payment support payments in both of the quarters ended March 31, 2021 and 2020 was up to $150 per 30-day prescription filled and up to $450 90-day prescription filled.

Outside of the United States, currently all our product revenue is derived from the sales of VASCEPA to our commercial partners based on the net price for VASCEPA established in our contracts with such partners. These commercial partners then resell the product in their agreed commercial territory. Revenues from product sales to our international commercial partners are recognized when the commercial partners obtain control of our product, which occurs at a point in time, typically upon delivery to the commercial partner. The net price of VASCEPA sold by us to our customers where we directly sell VASCEPA is generally significantly higher than the net price of VASCEPA that we sell to commercial partners who then incur the cost of promoting and reselling the product in their territories. As a result, even when the net price of VASCEPA to patients is similar in various parts of the world, our gross margin on sales is higher where we sell VASCEPA directly. Currently the majority of our product revenue is derived from direct sales of VASCEPA in the United States.

Licensing and royalty revenue. Licensing and royalty revenue currently consists of revenue attributable to receipt of up-front, non-refundable payments, milestone payments and sales-based payments related to license and distribution agreements for VASCEPA outside the United States. We recognize revenue from licensing arrangements as we fulfill the performance obligations under each of the agreements.

Cost of goods sold. Cost of goods sold includes the cost of API for VASCEPA on which revenue was recognized during the period, as well as the associated costs for encapsulation, packaging, shipment, supply management, quality assurance, insurance, and other indirect manufacturing, logistics and product support costs. The cost of the API included in Cost of goods sold reflects the average cost method of inventory valuation and relief. This average cost reflects the actual purchase price of VASCEPA API. Our cost of goods sold is not materially impacted by whether we sell VASCEPA directly in a country or we sell VASCEPA to a commercial partner for resale in a country.

Selling, general and administrative expense. Selling, general and administrative expense consists primarily of salaries and other related costs, including stock-based compensation expense, for personnel in our sales, marketing, executive, business development, finance and information technology functions. Other costs primarily include facility costs and professional fees for accounting, consulting and legal services.

Research and development expense. Research and development expense consists primarily of fees paid to professional service providers in conjunction with independent monitoring of our clinical trials and acquiring and evaluating data in conjunction with our clinical trials, fees paid to independent researchers, costs of qualifying contract manufacturers, costs associated with supporting investigator initiated studies, services expenses incurred in developing and testing products and product candidates, salaries and related expenses for personnel, including stock-based compensation expense, costs of materials, depreciation, rent, utilities and other facilities costs. In addition, Research and development expenses include the cost to support current development efforts, costs of product supply received from suppliers when such receipt by us is prior to regulatory approval of the supplier, as well as license fees related to our strategic collaboration with Mochida. We expense research and development costs as incurred.

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Interest and other (expense) income, net. Interest expense consists of interest incurred under our December 2012 royalty-bearing instrument financing arrangement, which was calculated based on an estimated repayment schedule and was paid in full in 2020. Interest income consists of interest earned on our cash and cash equivalents, as well as our short-term and long-term investments. Other (expense) income, net, consists primarily of foreign exchange losses and gains.

Income tax (provision) benefit. Income tax (provision) benefit, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated future taxes to be paid. We are subject to income taxes in both the United States and foreign jurisdictions. In applying guidance prescribed under ASC 740 and based on present evidence and conclusions around the realizability of deferred tax assets, we determined that any tax benefit related to the pretax losses generated for the first quarters of 2021 and 2020 are not more likely than not to be realized. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was enacted in the United States. Among other provisions, the CARES Act allows businesses to carry back net operating losses arising in years 2018 to 2020 to the five prior tax years.

Critical Accounting Policies and Significant Judgments and Estimates

Our discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements and notes, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience and on various market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Estimates are assessed each period and updated to reflect current information. A summary of our critical accounting policies, significant judgments and estimates is presented in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020. There were no material changes to our critical accounting policies, significant judgments and estimates during the three months ended March 31, 2021.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 2—Significant Accounting Policies in the accompanying Notes to Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information.

Effects of Inflation

We believe the impact of inflation on operations has been minimal during the past three years.  

Results of Operations

Comparison of Three Months Ended March 31, 2021 and March 31, 2020

Total revenue, net. We recorded total revenue, net, of $142.2 million and $155.0 million during the three months ended March 31, 2021 and 2020, respectively, a decrease of $12.8 million, or 8%. Total revenue, net consists primarily of revenue from the sale of VASCEPA in the United States. In addition to the United States, VASCEPA is currently available by prescription in Canada, Lebanon and the United Arab Emirates through collaborations with third-party companies. As further discussed below, this decrease consists of a $6.2 million decrease from net product revenue from sales of VASCEPA outside of the United States, a $4.6 million decrease in U.S. net product revenue and a $2.0 million decrease in licensing and royalty revenue.

Product revenue, net. We recorded product revenue, net, of $141.4 million and $152.2 million during the three months ended March 31, 2021 and 2020, respectively, a decrease of $10.8 million, or 7%. This decrease was driven primarily by five factors, which are further described below: 1) effectively one fewer week of shipments in the first quarter of 2021 as compared to the first quarter of 2020; 2) COVID-19; 3) generic competition; 4) regional adverse weather conditions and 5) timing of international sales. In addition, compared with other quarters of the year, beginning of the year deductibles under patient insurance plans, which are not unique to VASCEPA, tends to cause some patients to not fill prescriptions particularly for asymptomatic medical conditions.

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In the fourth quarter of 2020, the impact of COVID-19 worsened in much of the United States, with some physicians who began to allow access to our field based personnel again limiting access to face-to-face interactions. For a U.S. FDA-approved drug like VASCEPA to be prescribed, historically physicians need to have met with their patients for an examination and have received blood test results prior to prescribing the drug to the patient. The first quarter of 2020 included two weeks of significant COVID-19 related impact, while the full three months of the first quarter of 2021 was impacted by COVID-19 and public reports from IQVIA showed patient visits on average during the three months ended March 31, 2021 were down to approximately 78% of the first quarter 2020 pre-COVID levels. We cannot predict the duration of this pandemic and we cannot quantify the impact of COVID-19 on our business beyond March 31, 2021.

We remain confident that the patient need for VASCEPA is high and that a significant portion of the slowing of VASCEPA growth is COVID-19 related. While we are optimistic that the worst of the COVID-19 impact is behind us regarding the levels of patients seeking ordinary course doctor visits and lab tests, we expect that COVID-19 will continue, at least in the near term, to impact the level of VASCEPA prescriptions and the degree and timing to which we can, if at all, reaccelerate VASCEPA growth, particularly if there are resurgences in the spread of the infection in various geographies and a reinforcement of social distancing and other protocols. In addition, as patients, pharmacies and payers adjust to the availability, pricing and label of generic competition variability is expected. As a result of the uncertainty of the extent of COVID-19, the impact of generic competition and challenges for most drugs seeking market access in Europe, a process we were only able to formally commence following product approval in March 2021, we are not providing quantified revenue guidance at this time. We will consider resuming revenue guidance when there is greater clarity on the impact of these issues.

Licensing and royalty revenue. Licensing and royalty revenue during the three months ended March 31, 2021 and 2020 was $0.8 million and $2.8 million, respectively, a decrease of $2.0 million, or 72%. Licensing and royalty revenue relates to the recognition of amounts received in connection with the following VASCEPA licensing agreements:

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The up-front and milestone payments are being recognized over the estimated period in which we are required to provide regulatory and development support pursuant to the agreements. The amount of licensing and royalty revenue is expected to vary from period to period based on timing of milestones achieved and changes in estimates of the timing and level of support required.

As part of our licensing agreements with certain territories outside of the United States, we are entitled to a percentage of revenue earned based on sales by our partners. The royalty payments are being recognized as earned based on revenue recognized by our current partners.

Cost of goods sold. Cost of goods sold during the three months ended March 31, 2021 and 2020 was $28.3 million and $34.8 million, respectively, a decrease of $6.5 million, or 19%. Cost of goods sold includes the cost of API for VASCEPA on which revenue was recognized during the period, as well as the associated costs for encapsulation, packaging, shipment, supply management, insurance and quality assurance. The cost of the API included in cost of goods sold reflects the average cost of API included in inventory. This average cost reflects the actual purchase price of VASCEPA API.

The API included in the calculation of the average cost of goods sold during the quarters ended March 31, 2021 and 2020 was sourced from multiple API suppliers. These suppliers compete with each other based on cost, consistent quality, capacity, timely delivery and other factors. In the future, we may see the average cost of supply change based on numerous potential factors including increased volume purchases, continued improvement in manufacturing efficiency, the mix of purchases made among suppliers, currency exchange rates and other factors. We currently anticipate API average cost in 2021 to be similar to or modestly lower than 2020. The average cost may be variable from period to period depending upon the timing and quantity of API purchased from each supplier.

Our overall gross margin on product sales for each of the three months ended March 31, 2021 and 2020 was 80% and 77%, respectively.

Selling, general and administrative expense. Selling, general and administrative expense for the three months ended March 31, 2021 and 2020 was $105.8 million and $133.9 million, respectively, a decrease of $28.1 million, or 21%. Selling, general and administrative expenses for the three months ended March 31, 2021 and 2020 are summarized in the table below:

We anticipate our selling, general and administrative expenses to increase throughout 2021 primarily due to the costs associated with preparing VAZKEPA for commercial launch in Europe and subject to market access, launching VAZKEPA in one or more

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countries in Europe during 2021. We plan to expand to approximately 300 professionals by the end of 2021. As we work to increase revenue from VASCEPA, we continuously evaluate all of our spending commitments and priorities and we plan to adjust our level of education and promotional activities based on various factors, including the impact of COVID-19 and generic competition.

Research and development expense. Research and development expense for the three months ended March 31, 2021 and 2020 was $9.4 million and $10.3 million, respectively, a decrease of $0.9 million, or 9%. Research and development expenses for the three months ended March 31, 2021 and 2020 are summarized in the table below:

We anticipate our research and development expenses to remain consistent in 2021 with the prior year. We continuously evaluate all of our spending commitments and priorities and we plan to adjust our level of research and development activities based on the impact of COVID-19 and generic competition.

  Interest income, net. Net interest income for the three months ended March 31, 2021 and 2020 was $0.5 million and $1.2 million, respectively, a decrease of $0.7 million, or 61%. Net interest income for the three months ended March 31, 2021 and 2020 is summarized in the table below:

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Other expense, net. Other expense, net, for the three months ended March 31, 2021 and 2020 was expense of $142 thousand and $91 thousand, respectively. Other expense, net, primarily consists of gains and losses on foreign exchange transactions. 

Income tax (provision) benefit. Income tax (provision) benefit for the three months ended March 31, 2021 and 2020 was a provision of $0.6 million and benefit of $2.4 million, respectively. The provision for the three months ended March 31, 2021 is the result of income generated by our U.S. operations for which tax expense has been recognized based on a full year estimated U.S. income tax liability. The income tax benefit recorded for the three months ended March 31, 2020 related to carrybacks of net operating losses as allowed under the CARES Act.

Liquidity and Capital Resources

Our aggregate sources of liquidity as of March 31, 2021 are in excess of $500.0 million, with no debt. Our aggregate sources of liquidity include cash and cash equivalents and restricted cash of $294.9 million, short-term investments of $223.7 million and long-term investments of $24.0 million. Our cash and cash equivalents primarily include checking accounts and money market funds with original maturities less than 90 days. Our short-term investments consist of held-to-maturity securities that will be due in one year or less. Our long-term investments consist of held-to-maturity securities that will be due in more than one year. We invest cash in excess of our immediate requirements, in accordance with our investment policy, which limits the amounts we may invest in any one type of investment and requires all investments held by us to maintain minimum ratings from Nationally Recognized Statistical Rating Organizations so as to primarily achieve our goals of liquidity and capital preservation.

Our cash flows from operating, investing and financing activities, as reflected in the consolidated statements of cash flows, are summarized in the following table:

Net cash used in operating activities during the three months ended March 31, 2021 as compared to the net cash provided by operating activities during the same period in 2020 is primarily as a result of an increase in inventory purchases during 2021 as well as costs associated with planning for commercial launch in Europe.

Net cash provided by investing activities during the three months ended March 31, 2021 is primarily due to the proceeds from the maturity of $127.9 million in investment-grade interest bearing instruments, with no purchases of additional securities as compared to the same period in 2020 where approximately $310.6 million investment-grade interest bearing instruments were purchased, partially offset by the proceeds from the maturity and sale of securities.

Net cash used in financing activities during the three months ended March 31, 2020 primarily reflects the payments made on our royalty-bearing instrument with CPPIB, with the final payment made in the fourth quarter of 2020. In December 2012, we entered into a financing agreement with BioPharma. Under this agreement, we granted to BioPharma a security interest in future receivables and all related rights to VASCEPA, in exchange for $100.0 million received at the closing of the agreement which occurred in December 2012. In December 2017, BioPharma assigned all rights under this agreement to CPPIB. In the fourth quarter of 2020, we have repaid the remaining amounts outstanding of the agreed upon $150.0 million.

As of March 31, 2021, we had net accounts receivable $151.3 million and inventory of $230.9 million. We have incurred annual operating losses since our inception and, as a result, we had an accumulated deficit of $1.4 billion as of March 31, 2021. We anticipate that quarterly net cash outflows in future periods will continue to be variable as a result of the timing of certain items, including our purchases of API, the impact from COVID-19 on our operations, the generic competition in the United States as a result of our ANDA litigation and commercialization of VAZKEPA in Europe. For Europe, we commenced pre-launch planning and other commercial preparation activities, with plans to expand to approximately 300 professionals by the end of 2021.

We believe that our cash and cash equivalents of $291.0 million as of March 31, 2021 together with our short-term investments of $223.7 million as of March 31, 2021, will be sufficient to fund our projected operations for at least twelve months and is adequate to achieve positive cash flow from VASCEPA based on our current plans. We have based this estimate on assumptions that may prove to be wrong, including as a result of the risks discussed under Part II, Item IA, “Risk Factors”, and we could use our capital resources sooner than we expect or fail to achieve positive cash flow.

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Contractual Obligations

Our contractual obligations consist mainly of payments related to purchase obligations with certain supply chain contracting parties and operating leases related to real estate used as office space. There have been no material changes during the three months ended March 31, 2021 to our contractual obligations as presented in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020.

We do not have any special purpose entities or other off-balance sheet arrangements.

There have been no material changes with respect to the information appearing in PART II, Item 7A “Quantitative and Qualitative Disclosures about Market Risk” of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2021.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended ,or the “Exchange Act, is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.

As of March 31, 2021, or the Evaluation Date, our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our Principal Executive Officer and Principal Financial Officer have concluded based upon the evaluation described above that, as of March 31, 2021 our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2021, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

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, 2020 includes a discussion of our current legal proceedings. Refer to Note 5 – Commitments and Contingencies in the accompanying Notes to the Condensed Consolidated Financial Statements in this Form 10-Q for further details on our legal proceedings during the three months ended March 31, 2021.

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 effects of tax reform, and other risks set forth below.

Except those denoted below with a “*”, these risk factors have not been materially updated from our Annual Report on 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021, or our Annual Report.

Summary Risk Factors

Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business. These risks include, but are not limited to, the following:

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The summary risk factors described above should be read together with the text of the full risk factors below and in the other information set forth in our Annual Report and this Quarterly Report on Form 10-Q, including our consolidated financial statements and the related notes, as well as in other documents that we file with the SEC. If any such risks and uncertainties actually occur, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition and results of operations.

Risks Related to the Commercialization and Development of VASCEPA

* We are substantially dependent upon VASCEPA, its commercialization in the United States and its development and commercialization in Europe and other major markets. In the United States, VASCEPA competes with a generic version of VASCEPA and we could experience increased generic competition in the near term. In Europe, VAZKEPA only recently received approval for sale by applicable regulatory authorities and must also obtain relevant pricing approvals.

The success of our company depends on our ability to successfully commercialize our only product, VASCEPA^® (icosapent ethyl) capsules, in major markets globally. Much of our near-term financial results and value as a company had depended and currently depend on our ability to execute our development and commercial strategy for VASCEPA in the United States. A generic version of VASCEPA launched in the United States in November 2020, and VASCEPA could face even more competition from generic companies in the United States in the near term in light of the patent litigation rulings against us in this territory. Sales of generic versions of VASCEPA could have a material and adverse impact on our revenues and results of operations in the United States.

We continue our development efforts to support regulatory approvals and launch of VASCEPA in major markets outside the United States, and in March 2021 we announced that the European Commission, or the EC, has approved the marketing authorization application for icosapent ethyl, under the brand name VAZKEPA, and hereafter along with VASCEPA, collectively referred to as VASCEPA, to reduce the risk of cardiovascular events in high-risk, statin-treated adult patients who have elevated triglycerides (≥150 mg/dL) and either established cardiovascular disease or diabetes and at least one additional cardiovascular risk factor. We must also obtain pricing approvals for VASCEPA in relevant jurisdictions in Europe, which process is complex and is conducted on a country-by-country basis.

Our expansion and development of VASCEPA outside the United States is generally not subject to the adverse patent ruling in the United States. Development outside the United States is primarily based on the second indication approval for VASCEPA in the United States, use of the drug in the reduction of cardiovascular risk in select high-risk patients, which we believe has significantly more value potential.

We have been developing VASCEPA on our own in Europe for the approved indication and are exploring possible strategic collaborations in smaller markets within Europe and in other major markets. We currently have multiple partners for the development and commercialization of VASCEPA in select geographies and intend to consider potential additional partners to commercialize VASCEPA in other parts of the world. For example, we have strategic collaborations for the development and commercialization of VASCEPA in Canada, the Middle East and Greater China. However, we cannot make any guarantees as to the success of these efforts,

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and if commercialization plans for VASCEPA do not meet expectations in major markets such as the United States and Europe, our business and prospects could be materially and adversely affected.

The development and commercial time cycle for VASCEPA or other products that we may develop from our research and development efforts could result in delays in our ability to achieve commercial success. For example, it took over a decade of preceding product development before we received marketing approval for VAZKEPA in March 2021 from the EC.

Likewise, if we seek to diversify our development programs or product offerings through licensing or acquisitions, such transactions are also time-consuming, may be dilutive to existing shareholdings, and can be disruptive to operations, and may not be available on favorable terms, or at all. These dynamics can restrict our ability to respond rapidly to adverse business conditions for VASCEPA. If development of, or demand for, VASCEPA does not meet expectations, 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.

As a result of the decision in favor of the two generic drug companies in connection with our ANDA patent trial, which ruling was upheld on appeal by a Federal Circuit panel, a generic version of VASCEPA has launched in the United States, and we could face further generic competition in the near term and our revenues and results of operations could be materially and adversely affected.

We received paragraph IV certification notices from certain companies contending to varying degrees that certain of our patents are invalid, unenforceable and/or will not be infringed by the manufacture, use, sale or offer for sale of a generic form of VASCEPA as described in those companies’ ANDAs. Following receipt of the paragraph IV certifications, beginning in late 2017 we were involved in litigation against these companies, including Dr. Reddy’s Laboratories, Inc., or Dr. Reddy’s or DRL, and Hikma Pharmaceuticals USA Inc., or Hikma, (formerly known as West-Ward), and certain of their affiliates, or the Defendants, in the U.S. District Court for the District of Nevada, or the Nevada Court. In these lawsuits, we sought, among other remedies, an order enjoining each Defendant from marketing generic versions of VASCEPA before the last to expire of the asserted patents in 2030.  

On March 30, 2020, following conclusion of a trial in late January 2020, the Nevada Court issued its ruling in favor of the Defendants. On May 22, 2020 and August 10, 2020, Hikma and Dr. Reddy’s, respectively, received its U.S. FDA approval to market its generic versions of VASCEPA. On September 3, 2020, the U.S. Court of Appeals for the Federal Circuit, or the Federal Circuit, upheld the March ruling by the Nevada Court in favor of the two generic companies. On October 2, 2020, we filed a combined petition for panel rehearing or rehearing en banc. On November 4, 2020, our rehearing and en banc petitions were denied. The mandate of the court was issued on November 12, 2020. On February 11, 2021, we filed a petition for a writ of certiorari with the United States Supreme Court to ask the Court to hear our appeal in this litigation, which is pending.

In November 2020, Hikma launched its generic version of VASCEPA on a limited scale. On November 30, 2020, we filed a patent infringement lawsuit against Hikma affiliate for making, selling, offering to sell and importing generic icosapent ethyl capsules in and into the United States in a manner that we allege has induced the infringement of patents covering the use of VASCEPA to reduce specified cardiovascular risk. On January 25, 2021 we expanded the scope of this patent infringement lawsuit to include a health care insurance provider, Health Net, LLC.

Although, to date, no generics other than Hikma have been launched, in addition to ANDAs approved for Hikma and Dr. Reddy’s, on September 11, 2020, Teva Pharmaceuticals USA, Inc’s., or Teva’s, ANDA was approved by the U.S. Food and Drug Administration, or U.S. FDA. Apotex Inc., or Apotex, has applied for ANDA approval such application, based on public records, has not yet been approved. We intend to vigorously pursue these ongoing litigation matters, but cannot predict the outcomes or the impact on our business.

The court rulings detailed above could also permit each of Teva and Apotex to launch a generic version of VASCEPA under certain circumstances pursuant to a settlement agreement with us. For example, Teva and Apotex settlement agreements permit such companies to launch their generic version of VASCEPA under royalty-free license from us given that our petition for en banc Federal Circuit review was not granted, after issuance of the Federal Circuit mandate on November 12, 2020. While Teva received U.S. FDA approval of its ANDA, any launch by Apotex would be subject to U.S. FDA approval of the Apotex ANDA and each generic launch is subject to procurement of adequate supply.

Once a generic version of VASCEPA is available in the market, whether based on a generic product with a MARINE indication label or REDUCE-IT indication label it is typically used in many U.S. states to fill a prescription for any use of the drug, subject, in certain circumstances, to state reimbursement law, the potential for patent infringement under certain case law and subject to certain Teva and Apotex settlement agreement terms. We currently face generic competition from Hikma’s generic version of VASCEPA in the United States, and could face increased competition from additional generic entrants in the near term, which could have a material and adverse impact on our revenues and our results of operations. There can be no assurance that we will be successful in preventing

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use of generic versions of VASCEPA in indications for which they have not been approved by U.S. FDA, even if such use is determined to infringe certain of our patent claims.

Further, although we are pursuing available remedies, including a petition for a writ of certiorari to ask the United States Supreme Court to hear our appeal, we may not be successful in any such efforts, which will be costly and time-consuming to pursue. Such efforts will also require considerable attention of management and could, even if ultimately successful, negatively impact our results of operations.

Additionally, we believe that VASCEPA is difficult to manufacture and that building capacity to manufacture VASCEPA is time-consuming and expensive. These factors limit the amount of VASCEPA supply available to generic companies, as experienced by Hikma. We do not have direct visibility into the supply levels of any of the generic company and we rely on our own experience together with information from third parties, which information may not be reliable. The generic companies could potentially find or develop sources of qualified VASCEPA supply that are not known to us and that are more efficient or inexpensive than our sources. Furthermore, generic companies could potentially convince our suppliers to prioritize supply to the generic companies ahead of any applicable contractual commitments to supply us. While we anticipate that our suppliers will honor their commitments to us, if generic competitors are successful in gaining an advantage in the supply chain promotional and educational efforts, and potentially manufacture and supply, with respect to VASCEPA will suffer and consequentially VASCEPA prescriptions will likely decrease. In addition, we may need to litigate with such suppliers to protect our rights, which can be costly and distracting to management. Such circumstances could have a material and adverse impact on our revenues and results of operations directly in the United States and potentially outside of the United States as well if supply costs and availability are affected or promotion and education programs reduced.

Factors outside of our control make it more difficult for VASCEPA to achieve a level of market acceptance by physicians, patients, healthcare payors and others in the medical community necessary to meet expectations for commercial success.

In January 2013, we launched VASCEPA based on the U.S. FDA, approval of our MARINE indication, for use as an adjunct to diet to reduce triglyceride levels in adult patients with severe (TG ≥500 mg/dL) hypertriglyceridemia. Guidelines for the management of very high triglyceride levels suggest that the primary goal of reducing triglyceride levels in this patient population is reduction in the risk of acute pancreatitis. A secondary goal for this patient population is to reduce cardiovascular risk. The effect of VASCEPA on the risk for pancreatitis in patients with severe hypertriglyceridemia has not been determined and our U.S. FDA-approved labeling and promotional efforts state this fact.

In September 2018, we announced topline results from the REDUCE-IT^®, or Reduction of Cardiovascular Events with EPA—Intervention Trial cardiovascular outcomes study of VASCEPA. In November 2018, we announced the primary results of our REDUCE-IT cardiovascular outcomes study confirming 25% relative risk reduction for the topline primary endpoint result with multiple robust demonstrations of efficacy, including 20% reduction in cardiovascular death. REDUCE-IT was a multinational, prospective, randomized, double-blind, placebo-controlled study, enrollment for which started in November 2011. REDUCE-IT investigated the effects of VASCEPA on CV risk in statin-treated adults with well-controlled LDL-C 41-100 mg/dL (median baseline LDL-C: 75 mg/dL) and other CV risk factors, including persistent elevated TG 150-499 mg/dL (median baseline TG: 216 mg/dL). REDUCE-IT topline results showed the trial met its primary endpoint demonstrating an approximately 25% relative risk reduction, to a high degree of statistical significance (p<0.001), in MACE in the intent-to-treat patient population with use of VASCEPA 4 grams/day as compared to placebo. MACE events were defined as a composite of cardiovascular death, nonfatal myocardial infarction (MI), nonfatal stroke, coronary revascularization, or unstable angina requiring hospitalization. This result was supported by robust demonstrations of efficacy across multiple secondary endpoints. VASCEPA was well tolerated in REDUCE-IT with a safety profile generally consistent with clinical experience associated with omega-3 fatty acids and current U.S. FDA-approved labeling.

In December 2019, the U.S. FDA approved a new indication and label expansion for VASCEPA as an adjunct to statin therapy to reduce the risk of MACE events in adult patients with elevated TG levels (≥150 mg/dL) and established cardiovascular disease or diabetes mellitus and two or more additional risk factors for cardiovascular disease.

Despite U.S. FDA approval for this new indication and expanded label for VASCEPA, we may not meet expectations for market acceptance by physicians, patients, healthcare payors and others in the medical community for this new approved use, even if we are successful in our appeal effort. If VASCEPA does not achieve an adequate level of acceptance, we may not generate product revenues sufficient to become profitable on an ongoing basis. The degree of market acceptance of VASCEPA for its approved indications and uses or otherwise will depend on a number of factors, including:

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For example, two major factors that affect market use of prescription drugs are their perceived cost-effectiveness and the breadth of their use among different patient populations, both on label and off-label. In October 2019, the Institute for Clinical and Economic Review, or ICER, released its final evidence report regarding clinical effectiveness and economic impacts on VASCEPA. The conclusion from the report is that VASCEPA easily met even the most stringent “commonly cited thresholds for cost-effectiveness and therefore represent(s) a high long-term value for money,” based on the organization’s value assessment framework. As part of the public meeting held by ICER analyzing REDUCE-IT data, the ICER review committee discussed whether, based on REDUCE-IT, VASCEPA should be considered for use in patients as an add-on to statin therapy generally, and not just in patients with persistent elevated triglyceride levels after statin therapy, which ICER defined as triglyceride levels of at least 135 mg/dL. Use as an add-on to statin therapy generally represents a larger patient population than studied in REDUCE-IT and larger than covered by U.S. FDA-approved labeling. By contrast, U.S. FDA-approved labeling for VASCEPA reflects limitations such as use in patients with persistent elevated triglyceride levels defined as triglyceride levels of at least 150 mg/dL after statin therapy and specific criteria designed to ensure the patient populations approved for use had sufficiently high degrees of CV risk. While the clinical judgment of prescribing physicians is the most important factor that determines the breadth of a drug’s use in the United States and often results in prescriptions in patient populations that go beyond U.S. FDA labeling, U.S. FDA-approved labeling that is more closely tied to the patient population studied in a clinical trial could limit use generally and by making reimbursement more difficult.  

The scale and scope of the COVID-19 pandemic is uncertain and poses a significant threat to public health and infrastructure throughout the world, which could have a negative impact on our business.

The global spread of the coronavirus, the COVID-19, has created significant volatility, uncertainty and disruption in healthcare, social and economic infrastructures. The extent to which the coronavirus pandemic impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict or plan around, including:

To comply with travel restrictions, social distancing, quarantines and other containment measures implemented in various geographies, in March 2020, we suspended field based face-to-face interactions. We resumed on a limited basis field-based, face-to-face interactions with healthcare providers beginning in June 2020. During the late part of the summer of 2020, substantially all of our field force personnel had the ability to resume face-to-face customer interactions, in a manner consistent with state and local guidance. In the fourth quarter of 2020 and in early 2021, the impact of COVID-19 worsened in much of the United States, with some healthcare professionals again limiting access to face-to-face interactions. Additionally, the number of patient visits to doctors’ offices and patients undergoing blood testing remains down considerably from pre-COVID-19 levels. These circumstances vary geographically and vary over time, with continued risk of resurgences in COVID-19 cases, and reinstitution of protocols, in various geographies. We hope to be able to maintain our substantial resumption of our business efforts, however, given the dynamics related to COVID-19, there can be no assurance that this will be the case. While we have supplemented these face-to-face interactions with virtual outreach, these efforts may not be as impactful as traditional, in-person interactions. Specifically, access to healthcare professionals through the internet or other channels, may not be as productive as in-person interactions.

Although we have a geographically diversified supply chain for VASCEPA and believe we have sufficient inventory on hand at pharmacies throughout the United States and other markets where it is approved for sale, and at various stages of manufacturing with our suppliers, the global spread of the outbreak and containment measures has been unprecedented and could have a negative impact on the availability of VASCEPA at various points in our supply chain, including limiting the ability of new suppliers to be inspected, which would have a material and adverse effect on our business.

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The disruptions associated with the coronavirus pandemic could also delay the timing of a determination on our ability to seek legal remedies as travel, operational resources and personnel are disrupted, with respect to our efforts and capabilities, as well as those of our advisors and the courts. The disruptions associated with the coronavirus pandemic could delay the potential timing of subsequent steps for the launch of commercialization of VAZKEPA in Europe, including plans to hire additional employees in Europe. Additionally, COVID-19 could limit our ability to have access with healthcare professionals to help educate them regarding VAZKEPA so that they are more likely to prescribe it to their at-risk patients. And, similar to our experience in the United States, the effects of COVID-19 and social distancing considerations may reduce the frequency at which at-risk patients seek non-urgent preventative medical care.

As with any cardiovascular outcomes trial, over time further data assessment related to REDUCE-IT by international regulatory authorities or otherwise could yield additional useful information to inform greater understanding of study outcome. If the additional data or related interpretations do not meet expectations, the perception of REDUCE-IT results and VASCEPA revenue potential may suffer and our stock price may decline.

In December 2019, the U.S. FDA approved a new indication and label expansion for VASCEPA as an adjunct to statin therapy to reduce the risk of MACE events in adult patients with elevated TG levels (≥150 mg/dL) and established cardiovascular disease or diabetes mellitus and two or more additional risk factors for cardiovascular disease. Even though U.S. FDA has approved VASCEPA for this expanded label and new indication based on the REDUCE-IT results, additional data assessment by international regulatory authorities or otherwise could yield additional useful information to inform greater understanding of study outcome. Generally, trial data assessment sufficient to convey a complete picture of trial outcome can take years to complete and publish. When new data are assessed and released or presented it could exceed, match or may not meet investor expectations.

In addition, the same set of data can sometimes be interpreted to reach different conclusions. This was the case when Health Canada approved an indication based on REDUCE-IT data that was different in certain respects than that approved by U.S. FDA and by the EC in Europe. It is possible the scope of subsequent regulatory approvals, if any, could likewise differ based on the same data. Conflicting interpretations of data, or new data, could impact public and medical community perception of the totality of the efficacy and safety data from REDUCE-IT.

Regulatory authorities and medical guideline committees outside of the United States and the EU may consider the following additional factors, which could lead to evaluations of the totality of the efficacy and safety data from REDUCE-IT that differ from those of the U.S. FDA or the EC: