Amarin Corporation plc  (NASDAQ: AMRN) Q1 2020 Earnings Call Transcript

Amarin Corporation plc  (AMRN) Q1 2020 earnings call dated Apr. 30, 2020

Corporate Participants:

Elisabeth Schwartz — Senior Director of Investor Relations

John F. Thero — President, Chief Executive Officer & Director

Michael W. Kalb — Senior Vice President, Chief Financial Officer

Analysts:

Jessica Fye — JP Morgan — Analyst

Yasmeen Rahimi — ROTH Capital — Analyst

Ken Cacciatore — Cowen & Co. — Analyst

Louise Chen — Cantor Fitzgerald — Analyst

Michael Yee — Jefferies — Analyst

Presentation:

Operator

Welcome to Amarin Corporation’s Conference Call to discuss its Preliminary First Quarter Financial Results and Operational Updates. [Operator Instructions]

I would now like to turn the conference over to Elisabeth Schwartz, Senior Director of Investor Relations of Amarin.

Elisabeth Schwartz — Senior Director of Investor Relations

Please be aware that this conference call will contain forward-looking statements that are intended to be covered under the safe harbor provided by the Private Securities Litigation Reform Act. Examples of such statements include, but are not limited to, our current expectations regarding our commercial and financial performance, including levels of VASCEPA prescriptions, VASCEPA product and licensing revenues, costs and other commercial metrics and gross margin; our current plans and expectations regarding spending, including expenditures for the purchase of additional supply of VASCEPA; our current expectations regarding the adequacy of our financial resources; our current plans and expectations for product revenue growth and product promotion in light of COVID-19 and any potential for added cardiovascular risk attention to VASCEPA as a result of COVID-19; our current plans and expectations regarding appealing the District Court VASCEPA related patent litigation decision to the Federal Circuit and our current plans and expectations for a potential launch of generic versions of VASCEPA by generic companies and by ourselves, including expectations regarding ANDA approvals by the FDA; generic cost-effective supply availability; timing, potential levels of damages and ability to recover VASCEPA growth if the appeal succeeds; our current expectations for regulatory reviews outside the United States regarding VASCEPA approval and regulatory reviews inside the United States regarding consumer promotion and related timing thereof; our expectations regarding sales force productivity; our goals regarding the timing, scope and success of international expansion, including expectations regarding our ability to launch VASCEPA in Europe directly or through a potential partner and our expectations for clinical trial results in China; and our current plans for commercial expansion in the United States with and without entry of potential generic competition.

These statements are based on information available to us today, April 30, 2020. We may not actually achieve our goals, carry out our plans or intentions or meet the expectations disclosed in our forward-looking statements. Actual results or events could differ materially. So you should not place undue reliance on these statements. We assume no obligation to update these statements as circumstances change. Our forward-looking statements do not reflect the potential impact of significant transactions we may enter into such as mergers, acquisitions, dispositions, joint ventures or any material agreements that we may enter into, amend or terminate.

For additional information concerning the factors that could cause actual results to differ materially, please see the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2019 and the Form 10-Q filed for the quarter ended March 31, 2020. These documents have been filed with the SEC and are available through the Investor Relations section of our website at amarincorp.com.

We encourage everyone to read these documents. This call is intended for investors in Amarin and is not intended to promote the use of VASCEPA outside its approved indication. An archive of this call will be posted on the Amarin website, also in the Investor Relations section.

I will now turn the call over to John Thero, President and Chief Executive Officer at Amarin.

John F. Thero — President, Chief Executive Officer & Director

Hello, everyone, and thank you for joining us today.

During this call, we will cover the following: First, discuss our Q1 2020 results. Second, reemphasize and update important information from our investor call on April 13, with emphasis that our reasons for optimism have not changed. And third, respond to questions asked by investors and analysts.

Our Q1 2020 results were positive. Highlights of such results include: we commenced the launch of VASCEPA in the United States based upon the differentiated cardiovascular risk reduction indication approved by the FDA in late 2019. We supported the launch of VASCEPA for cardiovascular risk reduction in Canada via our commercial partner pursuant to VASCEPA’s approval by Health Canada in late 2019. We progressed regulatory review of VASCEPA in Europe that supports our anticipated pan-European recommendation for approval of VASCEPA by the European Medicines Agency near the end of this year.

We achieved record net total revenue and record net product revenue, increased gross margin from US sales of VASCEPA, reported positive net cash flow from operations, expanded our US sales force to 800 sales representatives plus their managers, improved managed care coverage for VASCEPA in the United States by convincing certain outlier insurance plans that had not previously covered VASCEPA provide preferred status coverage for VASCEPA, reported 18 scientific publications or presentations pertaining to VASCEPA and its unique active ingredient and demonstrated positive clinical effects and increase to 10 the number of medical societies which have updated their medical guidelines or issued statements supporting the use of VASCEPA for treating at-risk patients.

Along the way, an announcement was made that the STRENGTH trial, the clinical outcome study, which was studying a product to potentially compete with VASCEPA, was stopped early by its sponsor based upon the study data monitoring committee’s conclusion that there was a low likelihood of demonstrating a benefit to patients. It is our understanding that the sponsor is no longer pursuing that product candidate. This result further emphasizes the uniqueness of VASCEPA and reinforces that any new branded product that seeks to directly compete with VASCEPA will need to show outcome study results which are similar to VASCEPA because lipid biomarker changes alone cannot predict outcomes.

In a few minutes, Mike Kalb, Amarin’s Chief Financial Officer, will provide further comments regarding our Q1 results. Before going there, I will make some comments regarding our patent litigation and the appeal we initiated after the District Court decision. This litigation pertains to patents previously approved by the US Patent Office and relied upon by Amarin in our development of VASCEPA. The patent covers the unique effects of VASCEPA relevant to VASCEPA’s initial FDA approved indication for lowering very high triglyceride levels.

At the end of March 2020, the US District Court in Nevada declared as invalid the previously issued US patent on the grounds that they were obvious and therefore should not have been granted by the US Patent Office. If such a decision is allowed to stand, it undermines the protection of VASCEPA upon which Amarin in good faith relied throughout the development of VASCEPA.

We have filed our appeal to the Federal Circuit. We and our outside counsel believe that we have numerous strong arguments that will contribute to a substandard appeal. Amarin and the two defendants in the patent litigation have agreed to an expedited schedule. An expedited schedule is likely good for all involved given the high costs associated with patent litigation, the early status of VASCEPA’s launch in the United States and the risks to all involved if generic versions of VASCEPA are launched. Under the schedule, our initial appeal brief will be filed on May 12. As is conventional, we at Amarin will file our brief first. The defendants file their responsive brief on June 16, and we would file our reply brief on June 26.

Our proposed expedited schedule also asks the Federal Circuit to place this appeal on the next available argument calendar once briefing is complete. Given the Court typically hears cases the first week of the month, we believe the Federal Circuit likely will hold a hearing the first week of September or October 2020 and issue decision thereafter. We believe that this timing positions the three judge panel at the Federal Circuit to likely make its ruling on our appeal before the end of 2020 or in early 2021. Timing for a Court hearing and a decision are determined entirely by the Court. The substance of our appeal arguments and the defendants’ responses will be defined in the briefs filed with the Court. When filed with the Federal Circuit, they then become publicly available through PACER, the Internet based docket publications platform.

It would not be constructive for us at this time to comment on which legal arguments we intend to prioritize in our motions. As discussed on our April 13 conference call, the appeal process is not set up to completely reargue the case that was litigated in the District Court. Because of the importance of the appeal and because the Federal Circuit appeals are specialized, we have appointed a new lead counsel to augment our existing legal teams. His name is Jonathan Singer and he works for the well-regarded law firm of Fish & Richardson.

Mr. Singer has argued 15 patent litigation appeals in the Federal Circuit, including nine Hatch-Waxman cases like ours over the last nine years. In these Hatch-Waxman appeals, Mr. Singer’s record is seven wins and two losses for its clients, including a reversal of an obvious misjudgment in the re cyclobenzaprine, the seminal Federal Circuit case on consideration of the objective indicia of nonobviousness as well as multiple affirmations of nonobviousness. In addition to Mr. Singer, his legal group includes a specialized team of life science patent appellate lawyers, including several former clerks of sitting federal circuit justices. Mr. Singer is the head of his firm’s practice in this area, and his firm handles more IP appeals than any other firm. In 2019, his firm argued 28 Federal Circuit cases.

For reasons described on our April 13 call, it remains stunning that the invention of VASCEPA can now be viewed by anyone as obvious. It wasn’t obvious to our competitors or to others in the industry throughout our more than a decade of VASCEPA development and testing. I appreciate that the elegance of our solution may now in hindsight appear obvious. However, such is often the nature of innovation. Amarin is vigorously pursuing this appeal. We are doing so fully convinced that the invention of VASCEPA was not obvious. Aside from the legal merits of our appeal, the risk to society of this District Court decision includes compromised patient care and discouragement of innovation.

People are learning that the wholesale price of generic Lovaza when it was launched was nearly identical to the wholesale price of branded Lovaza and that the wholesale price of generic Lovaza many years later remains the same. All of these factors have caused an increasing number of people to question the wisdom of having a generic version of VASCEPA at this time. For years, VASCEPA’s net pricing has been viewed by managed care plans as being on parity to generic Lovaza. This has been a good deal for patients as VASCEPA is more difficult and expensive to manufacture than Lovaza and because Lovaza has repeatedly failed to demonstrate cardiovascular risk reduction in clinical studies. In my view, the most expensive product is one that doesn’t work.

The key points here are that generic products often are not priced significantly lower than branded product pricing, particularly when the underlying product is expensive to manufacture. And, VASCEPA is already affordably priced. Given that multiple pharmacoeconomic analyses have concluded that VASCEPA is cost effective, it can be readily argued that for society the negatives of a generic version of VASCEPA likely outweigh the positives. We are convinced that patient care will suffer if the launch of VASCEPA is interrupted by generic competition.

Remember that generic companies don’t provide market education. In the US today, healthcare professionals rely on product developers, the people who know the most about their products, under FDA supervision, to provide responsible product introduction and education. This is particularly important for a new class of products like VASCEPA into a market which has experienced little innovation beyond cholesterol management for many years.

The introduction of a generic version of VASCEPA at this early stage will lead to less medical education regarding VASCEPA likely resulting in less product usage and leave more patients at risk for heart attack, strokes or other cardiovascular events, including death. Remember that no other product has the proven cardiovascular risk reduction effects of VASCEPA. Moreover, if the District Court decision is not overturned on appeal, the undermining of VASCEPA’s patents on hindsight will discourage companies from taking the risks necessary to develop future innovative therapies to address unmet medical needs.

Development of new drugs is expensive and takes many years. Developers need to be able to rely on duly granted patent from the US Patent Office. A precedence of patents being reversed under circumstances like ours will deter developers from taking such risk for fear that they won’t have the opportunity to recover their costs or profit from their risk.

Based upon review of the FDA’s website, it does not appear that the FDA has yet approved any ANDA regarding VASCEPA. Until the FDA approves one or more of such applications, no generic version of VASCEPA can launch. If a generic version of VASCEPA is launched during the appeal process and Amarin wins the appeal, the generic company that launched will be at risk for paying for potentially large damages to Amarin. While it is possible that a generic company will get their generic version of VASCEPA FDA approved and take the risk of launching, often generic companies hold off on launching to see if they prevail upon appeal. Holding off both avoids the risk of damages and avoids incurring costs for creating manufacturing capacity at commercial scale and building up inventory levels.

VASCEPA is a unique product that is difficult to replicate for composition, quality and consistency, including stability over extended periods of time, and to do so cost effectively. The importance of producing VASCEPA to high standards consistent with Amarin’s product is supported by the failed clinical results of other products, including Epanova, the outcome study for which was stopped recently due to a reported low likelihood of demonstrating benefit. Lovaza, which failed to demonstrate benefit in multiple cardiovascular outcome studies, including the ASCEND and VITAL studies and dietary supplements, which in the statin era have consistently failed in clinical testing to demonstrate cardiovascular benefit.

Shifting the discussion to Europe. I was surprised after the April 13 conference call by the number of investors who thought that it would be a bad move for Amarin to elect use of a commercial partner for VASCEPA in Europe. Such investors expressed concern that partners won’t provide adequate value for a multibillion-dollar product like VASCEPA and that Amarin deserves to retain the upside potential from VASCEPA because Amarin has taken all of the development risk.

I reiterated to them and I reiterate now, Amarin has not yet decided on the best commercial payout for VASCEPA in Europe. We believe that there is a large market opportunity for VASCEPA in Europe. VASCEPA will likely be the first product recommended by the European Medicines Agency for the cardiovascular risk reduction indication being sought by Amarin and there is no near-term direct competition in sight. At the same time, we recognize that creating a new market for any product is not easy, even if that product is already endorsed by the leading medical societies as is VASCEPA. The leading medical societies to which I refer regarding Europe are the European Society of Cardiology and the European Atherosclerosis Society. Both of these esteemed medical societies have already included VASCEPA in their medical treatment guidelines.

As we attempted to communicate previously, Amarin is taking a parallel path of evaluating whether it is best for shareholder value to launch VASCEPA directly in whole or in part in Europe or best to contract with a partner for pan-European VASCEPA promotion and sales. While we continue to welcome shareholder input, we and our advisors intend to continue the dual evaluation of direct versus partnered commercialization of VASCEPA in Europe with a goal of finalizing a decision by Q3 2020.

As previously described, in conjunction with the timing of the Day 120 letter from the European Medicines Agency or EMA, the details of which added to our confidence that VASCEPA is on track to be recommended for approval in Europe by the EMA near the end of this year, we kicked off a review of potential partners for VASCEPA in Europe. It is too early to conclude whether the proposals from potential partners will exceed economically what we can potentially do directly with VASCEPA in Europe. For quite a while, we had been advancing plans for a potential direct launch of VASCEPA in this region. We don’t yet need to make a decision regarding the best path for commercialization of VASCEPA in Europe, and for now we intend to continue to advance these paths in parallel. Our aim is to maximize shareholder value from this large opportunity.

Our clinical and regulatory affairs groups continue to work through inquiries from the European Medicines Agency regarding our European marketing authorization application. While COVID-19 has had some impact on this review process, the overall timing impact does not appear to be significant. As was true for both the US FDA and Health Canada, questions from EMA are extensive. We are confident that we have good responses to such questions. We anticipate that VASCEPA will be recommended for approval by the EMA near the end of 2020. We anticipate that a positive recommendation for VASCEPA approval from the EMA will result in prompt approval thereafter by the European community. As part of this process, the EMA confirmed that if VASCEPA is approved, it will be eligible for 10 to 11 years of regulatory exclusivity in Europe. We believe patents for VASCEPA in Europe for cardiovascular risk reduction have the potential to extend VASCEPA’s exclusivity into 2033.

Turning the discussion to VASCEPA in China. Our partner there continues to report progress. They are nearing completion of their clinical trial of VASCEPA, the results of which are expected to be reported later this year. They intend to use these results, assuming that they are positive results, to pursue approval to market and sell VASCEPA in China. Assuming approval, VASCEPA would be the first-in-class product approved in China, raising the bar for potential future competitors.

Our partner in China has been advancing medical education to Chinese physicians in this area. Supporting their educational efforts have been various key opinion leaders from the United States, including doctors, Sergio Fazio, Deepak Bhatt and Michael Miller. We look forward to continued progression of VASCEPA in China.

In Canada, Amarin’s commercial partner began promotion of VASCEPA in mid-Q1 2020. We look forward to VASCEPA sales growth in Canada as our partner executes on its phased launch plan.

Mike Kalb has some further comments regarding our Q1 results. Let me now turn the discussion over to him. Mike?

Michael W. Kalb — Senior Vice President, Chief Financial Officer

Good morning.

Our net total revenue reached a record high of $155.0 million in Q1 2020 as compared to $73.3 million in Q1 2019, an increase of approximately 112%. Of our net total revenue, net product revenue for the three months ended March 31, 2020 and 2019 was approximately $152.2 million and $72.7 million respectively. This $79.5 million increase in net product revenue was driven primarily by increased volume of sales for VASCEPA in the United States.

As previously described, in accordance with US GAAP and the terms of our customer agreements, we recognize revenue upon our customers’ receipt of product that they ordered from us and we delivered to them. In most weeks, the largest orders from our wholesaler customers occur at the start of the week. The timing of the calendar in 2020 was such that with March 30 falling on a Monday and shipments from that Monday being received by customers on March 31, there was effectively an additional week of these beginning of the week shipments in Q1 2020 compared to Q1 2019. Conversely, there will be one fewer week of these beginning of the week shipments in Q2 2020. The additional week of these beginning of the week shipments in Q1 2020 added approximately $10.8 million in net product revenue, building on an already strong month of shipments to customers in March.

In addition to increased volume of VASCEPA sold in Q1 2020, US net product revenue was augmented by a modest increase in VASCEPA’s net selling price, reflecting multiple factors, including improved managed care coverage.

Our reported increase in net product revenue also included VASCEPA sales outside of the United States of approximately $6.7 million during Q1 2020 as compared to $300,000 in Q1 2019. These international sales were primarily to ensure adequate product supply for our commercial partners’ launch of VASCEPA in Canada. Revenue is recognized upon shipment by Amarin to that partner. Timing of their revenue recognition from their resale of VASCEPA is likely to differ from period to period. Until their launch is further along, we expect their purchase from us to be variable and for example not to include a repeat of launch quantity purchases in the near future. As John mentioned, they commenced their launch of VASCEPA in mid-Q1 2020.

Based on monthly compilations of US data provided by third parties, Symphony Health and IQVIA, the estimated number of normalized total VASCEPA prescriptions for the three months ended March 31, 2020 and 2019 increased 72% and 74% respectively. Normalized total prescriptions represent the estimated total number of VASCEPA prescriptions dispensed to patients calculated on a normalized basis, that is, one month’s supply or total capsules dispensed multiplied by the number of grams per capsule divided by 120 grams.

Inventory levels at wholesalers tends to fluctuate based on seasonal factors, prescription trends and other factors. However, such inventory levels remained within normal industry range. In Q1 2020, we saw prescription growth lag in January and February compared to trends in Q4 2019. We believe that such lag, similar to prior years, was due to high beginning of the year insurance deductibles as are increasingly prevalent in managed care coverage. Such deductibles are not product-specific but do, as previously reported, impact whether patients can afford to fill prescriptions for all drugs at the beginning of the year.

Historically, these high beginning of the year insurance deductibles have caused prescriptions of drugs for asymptomatic chronic conditions such as cardiovascular disease not being filled because patients can’t afford the uninsured cost of multiple drugs. Historically, late in Q1 or in Q2, patients begin to move beyond the beginning of the year insurance deductible and prescriptions of VASCEPA have grown.

Throughout March 2020, prescription levels and related shipments of product increased over levels experienced in the first two months of Q1 2020, likely reflecting that some patients had overcome their insurance deductibles and that healthcare professionals were writing more prescriptions for VASCEPA and urging their high-risk patients to fill their VASCEPA prescriptions.

Additionally, Amarin recognized licensing and royalty revenue of approximately $2.8 million and $500,000 for the first quarter of 2020 and 2019 respectively under agreements for the commercialization of VASCEPA outside the United States. Amarin’s overall gross margin on net product revenue was 77% and 76% for the three months ended March 31, 2020 and 2019 respectively. This increase in gross margin on product sales was driven by gross margin on US product sales of 80%, partially offset by the gross margin on product sales to our partners outside the US as per contractual arrangements. Net product revenue to our partners does not include licensing and royalty revenue. Despite improvements in our gross margin, VASCEPA continues to have a lower gross margin than many other drugs due to the high-quality standards and the difficulty of extracting and encapsulating EPA which is a sensitive product.

We had an increase in selling, general and administrative expenses primarily resulting from increased personnel costs related to the hiring and training of the additional 400 sales representatives in late 2019 and the first quarter of 2020. We also increased our promotional activities and direct to consumer promotion following the launch of VASCEPA in early 2020 for the new indication and expanded label approved by the FDA in late 2019. All of our newly hired sales professionals have completed training and are interacting with healthcare providers. As previously announced, we suspended face-to-face interactions in mid-March, and these interactions currently consisted other forms of interaction consistent with good social distancing practices amidst the COVID-19 pandemic.

Research and development expenses during the three months ended March 31, 2020 and 2019 were $10.3 million and $7.2 million respectively. The increase was primarily driven by costs beyond the conduct of the REDUCE-IT study to further analyze samples collected from REDUCE-IT patients as well as costs associated with the achievement of certain milestones under our strategic collaboration agreement with Mochida.

As of March 31, 2020, we reported aggregate cash and investments of $623.7 million, consisting of cash and cash equivalents of $329.0 million and liquid short-term investments and long-term investments of $213.2 million and $81.5 million respectively.

Net cash flow from operations was positive in Q1 2020 of approximately $4.1 million despite increases as expected in net accounts receivable, reflecting revenue growth and inventory in preparation for anticipated future growth. As of March 31, 2020, we reported $158.3 million in net accounts receivable, all of which were then current. This represents $189.6 million in gross accounts receivable before allowances and reserves and $92.1 million in inventory.

Based on our current plans and expectations, we believe that our current capital resources are sufficient to achieve sustained positive cash flows from VASCEPA, although results are anticipated to vary significantly on a quarterly basis, including some potential negative net cash flow periods as we work to launch VASCEPA based on its new cardiovascular risk reduction indication and adjust the impacts of COVID-19 and any potential launch of generic versions of VASCEPA in the United States.

Before I turn the discussion back to John, let me provide a bit more background color that may be useful to you. We kicked off the launch of VASCEPA for its new indication in mid-January 2020 following the training of our field teams. Our VASCEPA prescription growth in Q1 2020 came both from prior prescribers of VASCEPA and new prescribers of VASCEPA. As part of this growth, we witnessed prescription growth in areas of the country where until recently Amarin had little or no sales representation.

Last year, nearly all of the sales representatives we added at the start of the year were paying for themselves by Q3. That is a faster pace of contribution than seen for many therapies, and this reflects the high quality people we recruit and train as well as the unprecedented results of VASCEPA’s clinical trials. Early signs from this year suggest that our new hires were getting off to similar good starts. While COVID-19 may slow their contributions, we are convinced that the opportunity is large and that these new sales representatives will add value.

Managed care coverage improved at various managed care plans in Q1. In particular, it improved at Blue Cross Blue Shield plans in three states. Near the start of Q2, managed care coverage further improved with preferred coverage for VASCEPA adopted via Anthem for Blue Cross Blue Shield plans in 14 states, including California, as well as the insurance plans managed by CVS and certain other insurers.

Due to uncertainties associated with COVID-19 and to our patent litigation, we are not at this time prepared to provide new revenue guidance, having previously withdrawn our 2020 revenue guidance in our last call. [Indecipherable] prescription levels were growing rapidly in Q1 with the rate of growth preparing to accelerate going into March. In late March, after we suspended in-person sales calls due to COVID-19, we witnessed overall prescription levels remain much higher than prior year prescriptions as patients renewed their prescriptions.

However, as has been reported for many drug therapies, we witnessed a decline in the rate of new prescriptions. This dynamic of significantly higher overall prescriptions than a year ago but a downward slope in new prescriptions has continued in April. The decline in new prescriptions is not, in our view, a reflection of reduced need for VASCEPA but rather a reflection that patients are not going to their doctors for routine visits. Our sales and marketing teams are maintaining communications with many of VASCEPA prescribers, and we are utilizing new names of seeking to educate healthcare professionals who are less knowledgeable about VASCEPA.

In parallel, we are preparing plans to re-initiate direct sales outreach likely on a phased basis once we are able to do so. We believe that we were responsible and appropriate during March when we were one of the first companies to announce that we are suspending direct sales interaction with customers. We similarly intend to move thoughtfully and quickly to resume direct sales interactions when it is responsible to do so.

Historically, Q2 each year has been one of our strongest quarters in terms of consecutive quarter growth. While we cannot at this time accurately estimate Q2 net revenue, if such revenue in Q2 2020 were to be flat with Q1 2020, this would still represent an increase of 54% over the same quarter of 2019. Whether our net revenue results in Q2 2020 are higher, lower or the same as in Q1 2020 cannot be predicted at this time.

An IQVIA report dated April 17 regarding the impact of COVID-19 on patients’ visits to physicians showed that overall HCP and patient interactions were down 70% and that HCP office interactions for chronic asymptomatic conditions are down about 75%. These declines in healthcare provider interactions with patients are impacting the growth in prescription numbers of many drugs including VASCEPA. While we do not have visibility into patient visit levels at each doctor who prescribes VASCEPA, this data of reduced patient visits is consistent with what our sales representatives are hearing from many such doctors. The doctors are preparing to be potentially very busy when COVID-19 concerns are mitigated and patients can return to address other health-related matters.

As explained in today’s press release, COVID-19 presents unique challenges for the launch of VASCEPA, particularly in many areas of the United States where reports of COVID-19 infection are most pronounced, for example, metropolitan areas. These are areas which we were relying on for sales growth in 2020. Our direct sales team has been finding new ways to interact with healthcare professionals and we continue to receive positive feedback from physicians regarding VASCEPA. While this environment may slow VASCEPA’s sales growth, we anticipate that most patients who currently take VASCEPA will continue to fill their prescriptions.

With respect to spending, as John described on our April 13 Investor Call, we are prioritizing our spending to emphasize the following: winning the patent litigation appeal, near-term revenue growth in the United States and international expansion. We intend to continue to purchase VASCEPA’s supply at levels which are consistent with our earlier guidance in preparation for potentially accelerated international growth and the US market [Technical Issues] with or without generic competition. While we had intended to kick off a comprehensive patient and consumer education and promotion campaign in mid-2020, we now intend to defer most of the spending for that campaign. If we win our appeal on the patent litigation, we intend to launch this campaign at that time. We recently received feedback from OPDP, which is the group within the FDA which oversees drug product promotion. Based on this feedback, we are positioned such that we could have launched such a consumer in-patient focused campaign before the end of June. We do not think that such higher level of spending is justified at this time.

As mentioned on our April 13 conference call, we have been interacting with various physicians and institutions interested in whether VASCEPA can help with cardiovascular or other medical concerns of patients infected by COVID-19 or at high risk for COVID-19. At this time, such evaluation is at an early stage. When and if such opportunities expand, we will make further comment. Currently the bulk of our R&D spending is directed towards expanding international regulatory approvals of VASCEPA and publishing additional clinical results from REDUCE-IT.

We are fortunate to have a strong balance sheet. We will provide further updates to our priorities and guidance as we get greater clarity on the duration and impact of COVID-19 and the impact of potential generic competition and our decision regarding how to best commercialize VASCEPA in Europe. Until then, we are working to execute on the priorities I described while remaining ready to accelerate growth if we win on the patent litigation appeal.

In recent years, we have held our Annual General Meeting of Shareholders in May. In earlier years, we held it in July. This year, due to travel restrictions brought on by COVID-19, we are aiming to have our Annual General Meeting in July. The amendment we filed yesterday to our 2019 Annual Report on Form 10-K reflect this update of time. We will file our proxy statement for the shareholder meeting when we are closer to the likely date of the Annual General Meeting. This timing is not anticipated to have any impact on Amarin’s ongoing operations.

I will now turn the call back over to John for closing remarks. John?

John F. Thero — President, Chief Executive Officer & Director

Thanks, Mike.

I thank our investors for your continued support and I hope that everyone is staying safe and healthy during these unprecedented times.

With that, we conclude our prepared comments and we’d like to open the line to some questions. Operator?

Questions and Answers:

Operator

[Operator Instruction]. Our first question comes from the line of Jessica Fye with JP Morgan. Please proceed with your question.

Jessica Fye — JP Morgan — Analyst

Hey, guys. Good morning. Thanks for taking my questions. Two from me. First, is the Federal Circuit currently holding hearings in light of the COVID-19 pandemic? And if not, is there a reason to expect a backlog in cases to be heard when they resume? Basically asking, are those issues reflected in the estimates you provided for a hearing in the first week of September or October?

Second question, as you embark on the assessment of whether to strike a European partnership, is clarity on the US appeal relevant to that process or is it independent? I ask because it sounds like you intend to decide in the third quarter prior to an appellate decision and potentially even before you have a hearing. So can you just elaborate on how you view that decision as either linked or not linked to the US IP situation? Thank you.

John F. Thero — President, Chief Executive Officer & Director

Jess, good morning. Thanks for the questions. With regard to the Federal Circuit, it’s our understanding that they are proceeding and that they remain active and our estimates of timing are based upon our current expectations for the Court and involve inputs from our counsels who are active with the Federal Circuit on other matters. It’s always possible something to change due to COVID-19 but Federal Circuit seems to be making considerable progress on other matters, and we’re anticipating, given the importance of this matter and the timing of our motion that that will support the timing of a hearing in the first week of September or first week of October as previously described. Obviously, we do not control the Court’s schedule, but that’s our best estimate at this point in time.

With respect to the EU decision, our aim is to maximize shareholder value. There are lots of different considerations that go into how to maximize shareholder value. And some of those are, what do we think that we can do with this drug in Europe on our own; some of that is, what terms would be available to us via a partner. So that also reflects optionality both for additional products, global value, global flexibility. The anticipation that we have is that the EMA will recommend VASCEPA for approval in Europe near the end of this year and could be promptly approved by the European Community thereafter with a regulatory exclusivity period which suggests that we want to get off to a good start in Europe. But this is an important product, and we want to make sure that we are positioned to maximize that value for shareholders.

The US litigation doesn’t directly affect the approval in Europe, doesn’t directly affect the market opportunity in Europe, doesn’t affect reimbursement directly in Europe. But it does reflect that holistic view of corporate value and optionality and all of those considerations will be put forward. At this point in time, we’re continuing to develop relationships with key opinion leaders in Europe and appreciating the support there as evidenced by the two medical studies that have already included us and VASCEPA in their guidelines, but continuing to advance KOL support. We’re also doing some pharmacoeconomic analysis to support reimbursement in Europe. And all of those inputs will also factor into our decision-making. So, it is a holistic perspective. Hopefully those comments are helpful.

Jessica Fye — JP Morgan — Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from line of Yasmeen Rahimi with ROTH Capital Partners. Please proceed with your question.

Yasmeen Rahimi — ROTH Capital — Analyst

Hi team, thank you for your thoughtful prepared remarks. Two questions for you. The first one is, can you share with us — you mentioned that metropolitan areas were areas where Amarin expected sales growth. Can you maybe call out how many total number of doctors are in these epicenters of COVID that you were planning to call on. Maybe what are innovative ways that the sales team is approaching in those regions?

And then the second question is, what is the percentage of total supply of global EPA production that you have secured through your supply chain? And then give us details, how much that has grown over the last few months and how long these supplies are locked in for? And thank you taking our question.

John F. Thero — President, Chief Executive Officer & Director

Yasmeen, thanks for that question. So COVID-19 has had a global effect, as you know, certainly prominent in the United States, but particularly prominent in areas like New York City and certain other metropolitan areas. Amarin, over the first seven years of the commercialization of VASCEPA, had, you may recall, really we had to make this choice, should we spend most of our dollars on research and development, should we spend most of our dollars on commercialization. We chose the continued research and development and funded the expensive but important REDUCE-IT cardiovascular outcome study.

During those years with 135 sales reps, we covered only select parts of the United States, and those select parts included New York City, New Jersey, California, Texas, Florida. It tended to be in areas of fairly dense population. As we’ve expanded now to 800 sales reps, we’ve been adding additional sales reps in some of those areas, but trying to get broader coverage across the country.

So, as we talked about the impact on metropolitan areas, what we’re reflecting there is, reality, A, there’s a lot of people there, but B is some of our most experienced sales representatives and some of our longest-term physician relationships are in those areas. I don’t think we’re unique in that regard. Areas like New York City are populous are targets for lots of drugs. The fact is those were areas where our concentration for a long period of time. Perhaps it has a greater impact.

At the same time, we know that patients who are presenting for COVID-19 tend to have more serious effects of COVID-19 if they have cardiovascular risks or pulmonary risks. And from that perspective, we think that the importance of VASCEPA in addressing cardiovascular risk is even potentially heightened which is why in parallel there’s a number of different physicians and medical institutions that we’re exploring some potential investigatory work with regard to VASCEPA on that topic. But I think that doctors, probably — not probably, but doctors are being reminded of the cardiovascular risk here fairly broadly in this COVID-19 era.

In terms of our innovative ways to reaching out to physicians, it’s webcast and phone calls and digital means and peer-to-peer interactions. An irony here is that without patients coming into physicians’ offices that some physicians have quite a bit more time. So in some cases we’re getting to spend more time with physicians, albeit not face-to-face, but that educational opportunity will potentially provide value over the longer period of time. We’ve got a perfect product and perfect people and they are finding every week new ways to have constructive interactions with healthcare professionals.

With respect to supply, as you know, we have been working on a supply plan to get ourselves to have capacity to support over $5 billion in revenues. Right now, we work through a complex multi-company supply network and of the companies that we’ve been buying APIs through, essentially buying all that they can produce. The beginning of last year, I think we talked about having capacity to support about $1 billion revenues that had increased considerably since that point in time. For strategic reasons, we’ve not quantified the amount to which it’s increased and beyond those increases that have — or even made — there are activities going on at various suppliers to increase capacity further as we think will be important for our international growth and for the US opportunity as well. So I hope those comments are useful.

Yasmeen Rahimi — ROTH Capital — Analyst

Thank you, John. Very helpful.

Operator

Thank you. Our next question comes from the line of Ken Cacciatore with Cowen and Company. Please proceed with your question.

Ken Cacciatore — Cowen & Co. — Analyst

Hi John and team, my continued good luck on the appeal. I know you have a lot of decisions coming up. So good luck on all of those. Just wanted to clarify one of your comments during the prepared remarks about what your shareholders are communicating to you. You said some of them are telling you they’d rather you retain and not partner. I don’t want to put words in your mouth. Maybe just can you dig a little bit more deeper into that?

I was wondering, one of the things you didn’t mention is if the shareholders are pushing more for a sale as you come up to the decision on the European rights. And I asked that because, if you do license out Europe and we have an unfortunate decision in the US that goes against us, we may become a royalty company, which would be difficult to extract kind of complete value out of the Company. So I was wondering, as part of this process, is sale a consideration, how would you handle maybe the value of the appeal, if that was the case as you go into the European discussions.

And my second question is — I know it’s very early in terms of discussions with European partners, but do you get a sense that they share the same type of thoughts on what the product can be in Europe as you’ve entered into kind of the initial conversations? Is there much disagreement? Or are we pretty much in a unanimity what they believe the Europe opportunity is as they look at the product as well? Thank you.

John F. Thero — President, Chief Executive Officer & Director

Ken, thanks. So, on the shareholder feedback, I’ve heard enough from frequency. We have investors which I’ve spoken of late to recognize that that topic of European partnering was on the minds of many, and the opinions vary. But amongst a number of folks, there was a perspective of there’s greater value in keeping rights and in partnering rights. And because a number of people were saying, so I thought rather than just responding to it and then just avoid the doubt.

My response to everybody has been consistent with what we’ve said in the past, which is that we’re taking a parallel process. But rather than just having it on people’s minds, I wanted to acknowledge on today’s call so that if other people are thinking that we let people know that we’ve heard that comment. We do think that it makes sense for us to get all the facts or as many facts as are available to us, including proposal from partners, so before making that decision.

As I was trying to reference in the response to the earlier question, a decision with regarding partnering in Europe will be a holistic decision, including many factors. And some of what you’ve described as considerations I would put under that holistic view of optionality and flexibility. But all this is in terms of creation of long-term value. And we need to pull that together and see what makes the most sense for our shareholders. By the time that we’re making that decision, we will have seen — our motions will have been filed and the appeal will have seen the response to that from the other side. And to the extent that there’s anything there that needs to be considered, we will continue to consider inputs that are available. At the same time we will be progressing the approval process in Europe and don’t want to lose the significant opportunity to launch in a prompt and robust way in Europe.

I think it’s both from a physician’s perspective who have been educated regard to European opportunity and from a potential partner perspective regarding Europe, the opportunity is large. The cardiovascular disease globally is almost in every country one of the largest, if not the largest area of spending, and the number one cause of death, and we’ve got unprecedented results — we’ve reduced it in the first in class products. And I think that the clinical results speak for themselves. And there’s been great claim there.

As to the economic terms, we will see where those come out and we will make those comparisons. But I don’t want to — it is an ongoing process at this point in time. The partnering process just got kicked off in the March time frame in conjunction with the 120 letter. So it is active and early but, as referenced, we’ve also been considering direct sales actively and for a while as well. The aim is to put ourselves in a position to be able to make the right decision for our shareholders based upon a number of different factors in a holistic manner for shareholder value. And until we make that decision, I don’t have a specific answer for you as to what the most significant variables are. But we are considering what you’ve described, what I’ve described as well as a variety of other different inputs, and we’ll continue to listen to shareholders’ perspectives along the way. Thanks.

Ken Cacciatore — Cowen & Co. — Analyst

Thanks so much.

Operator

Thank you. Our next question comes from the line of Louise Chen with Cantor Fitzgerald. Please proceed with your questions.

Louise Chen — Cantor Fitzgerald — Analyst

Hi. Thanks for taking my questions here. So my first question here is how do we think about the opex in 2020, the decline relative to your previous guidance and the quarterly progression in light of some of your promotional activities. And then secondly, when will you know if your appeal has been granted and if it will be expedited? Thank you.

John F. Thero — President, Chief Executive Officer & Director

So I’ll pick the second one first and then we’re all sitting in different locations at the time. I’ll turn it over to Mike Kalb the opex question.

With regard to the appeal, it would surprise us at this point in time if the schedule that we put forth in front of the Federal Circuit is not accepted. And I’m not sure exactly when we’ll hear that, but based upon our understanding of the Court, as both sides aren’t contesting the schedule, the schedule for expedited motions should be accepted.

In terms of when we’ll hear about whether the Court hearing is in September or October, that wouldn’t likely occur until after the motions have been all filed. So I’m guessing that that’s probably — we’ll probably hear in about the July time frame on that. But, again, we don’t control the timing of the Court. So that’s a rough estimate. So relative to opex, Mike, do you want to comment on that?

Michael W. Kalb — Senior Vice President, Chief Financial Officer

Sure. Thanks, John, and thanks, Louise, for the question. Look, in light of the ANDA litigation and COVID-19, as we said, we’re reducing spending levels out. We have not quantified, but we do anticipate savings on DTC which was planned related to this year as we stated. Qualitatively, we have said that we will be prioritizing activities which advance US growth, international and the ANDA appeal.

As we noted, new sales reps during ’19 to become productive very quickly. We look forward to them getting back in the field when responsible for them to be back in the field. So historically, we’ve focused on R&D. Our focus now is obviously on sales marketing, and we’ll provide updates as we get clarity.

John F. Thero — President, Chief Executive Officer & Director

The DTC, as you may remember, Louise, was not intended to be an extensive — and those who [Indecipherable] the DTC spending had been in the prior guidance that we had given for opex. The DTC could have been in the sort of $70 million, $80 million in an annualized basis. Obviously wasn’t going to be spent for the full year, but it was a really good chunk of money that comes out if we’re not doing DTC spending for the second half of the year as had been planned.

And there’s some other expenses that we will be reducing as well. But matters are fairly fluid and some of this also is impacted by the timing of COVID and our field force getting out more actively and where we’re spending our money and how much is digital versus in person versus speaker programs. And there’s a lot of fluidity at the moment. But we are looking for ways to — while it will be variable quarter to quarter, we’re looking for ways to be constructive on our cash flow side of things.

Last year, we were essentially net neutral on cash flow as Mike was talking about. We are going to spend this year investing heavily for long-term growth, expecting that we’d burn quite a bit of cash for the year. But now with the revised circumstances, we’ll be spending less and trying to get cash flow positivity faster than we might have otherwise.

Louise Chen — Cantor Fitzgerald — Analyst

Okay. Thank you.

Operator

Thank you. Our next question comes from the line of Michael Yee with Jefferies. Please proceed with your question.

Michael Yee — Jefferies — Analyst

Hey, John, thanks for the question and congrats on the progress so far. I wanted to follow up on your commentary on the European process. If I go back maybe a year or so ago when all the US FDA filing and the review was going on, you said you had a lot of European interest and I thought you said maybe there was a dozen folks or so. But maybe just remind us about the type of interest that is out there in Europe, because I get the sense that a lot of big companies these days are maybe less interested in cardiovascular and much more interested in oncology.

So maybe just frame how much interest is there by big pharma and frame what happens in the third quarter? If you look at these things and you accept one of them or you are going to announce in the third quarter that you’re hiring your own sales force? And if it’s the latter, is expenses for launching the sales reps in the guidance? Thanks so much.

John F. Thero — President, Chief Executive Officer & Director

So, with regard to interest in VASCEPA by big pharma, there is interest in VASCEPA by big pharma globally. And right now we’re focusing on Europe. Europe certainly no exception to that. We’ve had multiple companies doing diligence. I’m not going to get into numbers of companies and to really talk about terms, but this is a multi-billion dollar opportunity for a differentiated product. And there’s companies that might say they’re not into cardiovascular, but they’re into metabolic or they’re into diabetes, and generally they’re into growth. And so we’re seeing interest as to whether those companies will put forth terms that we feel to be appropriate given the size of the opportunity and the stage of where it’s [Technical Issues] essentially derisked from a clinical perspective and largely derisked from a regulatory perspective, we will see.

The decision that you’re asking me about in Q3, yes, we’re aiming in Q3 to hopefully be in a position to decide are we going direct or are we partnering and if partnering hopefully to announce what the terms of that are, and if we’re going direct, hopefully to outline some guidance as to what that means in terms of what would undoubtedly be a bit of a sequenced launch with emphasis on some of the larger countries first and the mid to smaller countries later and whether we would do some of those smaller countries directly or potentially with partners — would be potentially flushed out at that point in time.

And at this juncture, while we’ve withdrawn on our overall guidance for the year, including our previous quantification of operating expenses — and I’ve talked about those prior spending guidance volumes being too high relative to expenses [Indecipherable] US DTC, for example, that earlier guidance included some money for Europe, but did not include money for a significant launch in Europe.

That being said, with approval for Europe, that would likely be somewhere near the end of this year. The launch in Europe would most likely be more of a next year event rather than a year event. So possible for this year, but you get too close to the holidays [Indecipherable] further for the New Year. So that would all be detailed out when we make a decision. Again, at this point in time, we’re just trying to let shareholders and all interested parties know that we’re evaluating and our aim is to do what is in the best interest of shareholders on a long-term basis from a holistic perspective.

Michael Yee — Jefferies — Analyst

Thank you. Appreciate the color.

Operator

Thank you. Ladies and gentlemen, that is the time we have for questions. I’ll now turn the floor back to Mr. Thero for any final comments.

John F. Thero — President, Chief Executive Officer & Director

Folks, thanks. I apologize for what may be difficult sound quality here today as I do this off of a mobile phone. But appreciate your interest, appreciate your support. We are making progress in numerous areas and we look forward to continuing to provide updates along the way. Talk to you soon. Thanks.

Operator

[Operator Closing Remarks]