Amarin Corporation plc (AMRN) Q3 2014 Earnings Report, Transcript and Summary

Greetings, and welcome to the Amarin Corporation Third Quarter 2014 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mike Farrell. Mr. Farrell, you may begin.

Welcome, and thank you for joining us today. 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 sales, revenues and other commercial metrics, expenditures, supply-related activities and the adequacy of our financial resources; our current expectations regarding regulatory filings, government agency decisions and potential label expansion; our current expectations regarding our cardiovascular outcome study, such as enrollment and the potential implications of our regulatory process on such study; our plan to protect the exclusivity and commercial potential of our products; and our current expectations regarding the effect of our copromotion agreement on our business. These statements are based on information available to us today, November 6, 2014. We may not actually achieve our goals, carryout 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 agreement 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 Forward-Looking Statements section in today's press release and the Risk Factor section of our quarterly report on Form 10-Q for the 3 and 9 months ended September 30, 2014. These documents have been filed with the SEC and are available through the Investor Relations section of our website at www.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 of its approved indication. Finally, an archive of this call will be posted to the Amarin website in the Investor Relations section. In addition to myself, on today's call from Amarin are John Thero, our President and Chief Executive Officer; Steve Ketchum, our President of R&D; Joe Kennedy, our Senior Vice President and General Counsel; and Aaron Berg, our Senior Vice President of Marketing and Sales. I'll now turn the call over to John Thero, President and Chief Executive Officer of Amarin.

Good afternoon. Thank you for joining us today. On today's call, we'll discuss Amarin's recent commercial, operational and financial performance; provide a regulatory update; and then take questions from analysts and investors. During our comments, we will touch on our priorities of improved patient care, increasing revenues, successfully completing REDUCE-IT and doing all of the above in a cost-effective and opportunistic manner. We continue to get encouraging feedback from physicians on the positive effects of Vascepa with respect to the treatment of their patients. These comments reflect positive experiences of the drug's tolerability, safety and efficacy, including reported improvements in a broad spectrum of the patient's lipid and inflammatory parameters after taking Vascepa. Vascepa's revenues and prescription levels continued to grow in Q3. Net product revenues for the 3 months ended September 30, 2014 were $14.1 million, representing a 68% increase over net revenues of $8.4 million reported for the same period a year ago, and a 12% increase over net revenues of $12.6 million reported for the second quarter of this year. Vascepa prescription levels in Q3, as reported by Symphony Health and IMS, grew 20% to 22% over Q2. Timing of shipments to wholesalers, upon which revenues are recognized, and prescription levels can vary between periods. Such timing differences contributed to greater prescription growth than revenue growth in Q3 2014. As Aaron will discuss in more detail, we are advancing a number of initiatives to create further prescription and revenue growth. Overall, the strategy that we've implemented earlier this year, our relatively high-frequency detailing on the benefits of Vascepa to a select group of the highest potential target physicians, is working. We want our strategic efforts to work faster. The distraction caused by the launch of generic Lovaza should be largely behind us and we continue our work to convince managed-care plans that generic Lovaza will remain more expensive to them than Vascepa, while more importantly, emphasizing the differentiated efficacy and safety profile of Vascepa. Regarding REDUCE-IT, as described in September, we recently completed a substantial scientific and business-focused analysis, leading to the decision to complete the REDUCE-IT cardiovascular outcome study, independent of the regulatory review of the ANCHOR indication. We believe that completion of this important study is in the best interest of patients and shareholders. While there can be no assurance that REDUCE-IT will read up positively, we believe that the REDUCE-IT study is positioned to succeed and that Vascepa is positioned to improve the lives of millions of patients, representing an opportunity for Amarin measured in the billions of dollars. The FDA has yet to act on our sNDA for the ANCHOR indication. As we discussed in September, we have worked to engage FDA on the ANCHOR sNDA every available opportunity for over a year now. We have nothing new to report on the sNDA progress to date. In our SPA appeal, the FDA has repeatedly taken a position that it is no longer willing to grant regulatory approval for drugs focused on the cardiovascular risk reduction in the ANCHOR population, based solely on a showing of triglyceride lowering. That is a change in policy at the division level at FDA that resulted in rescission of our SPA agreement over a year ago. And it's a change in policy that we believe has now involved input from FDA officials at levels higher than those who have heard our appeal. Based on the FDA's repeated position in its 3 reconsideration and appeal denials, and its internal consultation with FDA officials at even higher levels, we informed the FDA that we do not intend to appeal the SPA rescission further. We continue to believe that approval of an indication based upon the ANCHOR clinical trial results is in the best interest of patient care. We have presented FDA with a range of potential sNDA approval options based upon the ANCHOR clinical results that we believe would benefit clinicians and their patients. However, based upon FDA's reasoning for rescinding the SPA for the ANCHOR indication, it is unlikely that FDA will approve the ANCHOR indication. The next step for FDA is to take action on the ANCHOR sNDA. When we receive that action letter, we'll update investors. Financially, we continue to make good progress in increasing productivity and preserving cash. Compared to 2013, our SG&A spending in 2014 has dropped by nearly half while our revenues have increased. Moreover, we ended September with $135 million in cash, with net cash burn decreasing from over $50 million per quarter in the middle of last year to $34 million in Q4 2013 to approximately $27 million and then $14 million and then most recently, $15 million in each of Q1, Q2 and Q3 of this year, resulting in year-to-date 2014 net cash burn of $56 million compared to $156 million for the same 9-month period of 2013, excluding the July 2013 financing. Over the last 6 months, we've increasingly leveraged the resources of our copromotion partner, Kowa, and expanded our celebrity campaign to increase focus on the need for triglyceride management. We will look for both of these early stage initiatives to contribute to our growth going forward. Recently, we increased our attention on potential partnering opportunities for Vascepa outside the United States. We will continue to aggressively look for opportunistic ways to add value. But our primary focus remain on that which we can most directly affect, which is growing revenues in the United States and advancing REDUCE-IT. I understand from some investors that they have sold Amarin shares in recent weeks due to tax considerations. It's painful and disappointing to have Amarin's current share values below levels experienced before we had results from either the ANCHOR or MARINE studies. As a reminder, at that time, we had limited patent coverage, a single API supplier, no product approval, no managed-care coverage and an outcome study that we hadn't commenced. We have made considerable progress since that time. And I am hopeful that this progress, together with the significant future potential for Amarin, will soon again be recognized in our stock price. We are working hard to gain your confidence and support. I now ask Aaron to comment further on our commercial performance. Aaron?

Thank you, John. John mentioned prescription growth in Q3. Let me quantify that growth before further discussing our progress. Normalized prescriptions for the quarter ended September 30, 2014, as estimated by Symphony Health Solutions and IMS Health, totaled approximately 132,000 and 113,000, respectively, representing growth of approximately 20% and 22%, respectively, over prescriptions during the previous quarter this year and representing growth of 78% as compared to the same period in 2013. Such prescription growth continues to be primarily generated from higher decile positions targeted by Amarin and Kowa sales representatives. For clarity, the term normalized prescriptions refers to prescriptions of 120 capsules of Vascepa representing a 1-month supply. We believe that Vascepa can grow considerably further based on the currently approved indication. Vascepa's scripts reached 10% share of the prescription omega-3 market in September, which is up from 8% in June despite the availability of multiple generic Lovaza products. Given the safety and efficacy profile of Vascepa, clearly, there is room to grow the omega-3 market share and of course, even greater room to grow based on Vascepa's current indication in the overall non-statin lipid lowering market. As has been true since we shifted the focus of our sales team earlier this year, overall prescription growth in Q3 was led by the group of target physicians who were in the highest deciles. In the most valuable group of the highest decile prescription omega-3 prescribing physicians, those in deciles 8 to 10, as targeted by Amarin's direct sales force, new prescription share rose to 18.2% in September from 16.6% at the end of June. Kowa has also significantly expanded our ability to reach additional physicians with Vascepa promotional messaging, many of whom have never been presented with a Vascepa detail. Q3 was the first full quarter that the Kowa sales force of 250 sales representatives were promoting Vascepa. In Q3, we saw growth in prescriptions coming from all 3 of our pools of targeted physicians: physicians called on only by Amarin sales representatives; physicians called on only by Kowa sales representatives; and physicians called on jointly by Amarin and Kowa. While the greatest growth came from the physicians who have been called on the longest, it's encouraging to see a reversal in prescription trends for some of the lower decile physicians who Amarin didn't have the bandwidth to address prior to Kowa. The Kowa sales team's working hard and very enthusiastically in their copromotion of Vascepa. As previously described, their sales team's targeting more than twice the number of physicians targeted by Amarin sales representatives. Whereas the Amarin sales team earlier this year began intentionally taking the approach of calling on a narrow set of physicians with high-frequency, the Kowa sales team is calling on a much broader set of physician targets with a lower frequency. As of the end of Q3, Kowa's sales team had called on each of their Vascepa targets an average of approximately 2 times. By the end of this year, the aim is for the Kowa sales team to have called on approximately 1/3 of their target physicians 5 times to educate these physicians about Vascepa. As previously stated, Amarin believes detailing efforts for new therapies that treat chronic, asymptomatic conditions typically require 5 or more calls to significantly affect physician prescribing habits, and that it typically takes 6 months or more for a copromotion relationship to begin showing meaningful impact. Early signs indicate that Kowa is having a positive impact. We expected that their contribution will grow as they cumulatively invest more time in educating physicians about Vascepa and as they become more proficient with Vascepa. However, we continue to rely on the Amarin sales team for the largest portion of our sales growth as it is the Amarin sales reps who are targeting the highest potential target physicians with the greatest frequency. We're convinced that Vascepa's well positioned for future revenue growth. One market factor of interest to investors has been the approval of generic forms of Lovaza, which, as the first approved prescription omega-3 therapy, is the market leader in the space. The concern was that the generic Lovaza would negatively impact Vascepa sales. Lovaza's now been generic since April. While we saw some pockets of disruption, overall, in Q3, we did not witness any major pattern of patients being switched away from Vascepa, and Vascepa prescriptions continue to grow despite generic Lovaza. Physicians, payers and pharmacists are being reminded that Vascepa and Lovaza are not AB rated and therefore not substitutable. Vascepa doesn't include DHA and therefore, doesn't increase LDL-C or bad cholesterol, and generic Lovaza is not a typical generic in that it's more expensive and periodically in short supply. There are 3 companies approved to market generic Lovaza: Par, Teva and Apotex. We've spoken in the past about the important labeled clinical differentiation between Vascepa and Lovaza, including that Vascepa has demonstrated that it does not increase LDL-C in its approved indication compared to placebo, while trials for Lovaza for this indication showed median increases in LDL-C of 49% relative to placebo as per the FDA approved label for Lovaza. This difference showed up in the respective Phase III studies for the drugs and we've also seen multiple reports of LDL-C improvement in patients that switched from Lovaza to Vascepa. As discussed previously, generic Lovaza is priced in a manner which, while at less expensive wholesale pricing than branded Lovaza, is as expensive or more expensive to managed care and to patients than Vascepa, particularly when adjusted for discounts available to managed-care plans for coverage of Vascepa and co-pay card discounts available to patients. Our $9 co-pay card makes Vascepa available to patients at a monthly cost which is approximately the same as, and in some cases, less than, the monthly co-pay cost for generic Lovaza. As physicians, payers and pharmacists become more aware that pricing on Lovaza generics is not typical, or that Lovaza generics have periodic supply shortages, this could help Vascepa prescriptions. Manufacture of highly pure omega-3 products is not easy or inexpensive. While Lovaza doesn't have the 96% EPA-only purity of Vascepa, its EPA plus DHA content is approximately 84%, such that it will be difficult to profitably manufacture and sell it at discounted price levels typical of other classes of generic drugs. For now, we don't seem to be losing any business to generic Lovaza. As a reminder, it's the DHA component of omega-3 products which has been correlated to increases in bad cholesterol. Vascepa is the only FDA-approved omega-3 therapy which excludes DHA. Approximately half of patients treated for triglyceride-lowering therapies are also on statin therapy for cholesterol reduction. It's difficult for doctors to justify offsetting the value of LDL-C reduction from statin therapy by simultaneously using the drug or a dietary supplement that, because it contains DHA, increases LDL-C. The differences in clinical effect of omega-3 products containing DHA and excluding DHA are visible in the November publication within postgraduate medicine by Dr. Howard S. Weintraub entitled Overview of Omega-3 Fatty Acid Products for Hypertriglyceridemia that is currently available online ahead of the print version. In September 2014, the National Lipid Association released new recommendations for patient-centered management of dyslipidemia. There are several elements of these new recommendations that align to the clinical benefits of Vascepa. In particular, the NLA recommendations emphasize that omega-3 therapies that include DHA increase LDL-C, while those that contained EPA-only do not increase LDL-C. Vascepa is the only omega-3 therapy that has a single active ingredient, EPA, and no DHA. And we strongly believe that Vascepa has the best product profile for treating patients with very high triglycerides. In Q3, we continue to complement our field sales efforts with nonpersonal tactics, including our expanding digital presence, which delivers targeted content via WebMD and via Medscape. Further, we continued our support of promotional medical education via our speaker meeting programs, which now include support from our Kowa colleagues to drive attendance by high value targets and to conduct additional programs across the country in the area that Amarin does not have a direct sales presence. Amarin also continued our broader celebrity campaign we announced in June, in which Amarin is partnering with Rick Harrison, star of the #1 History Channel hit television show, Pawn Stars, to raise awareness of very high triglycerides and treating the condition with Vascepa. Rick is a very high-triglyceride patient and speaks passionately about the importance of talking to your doctor, the need to avoid dietary supplement omega-3 products to treat this disease and why EPA-only Vascepa works for him. We recently completed the next wave of this campaign with Rick being interviewed by numerous media outlets. We continue to see increases in consumer online engagement with our website, lowermytrigs.com, and we're planning further events with Rick in the months ahead and are using his image and story in some of our educational materials. From a managed-care perspective, we continue to gain additional Vascepa lives covered in Tier 2 in the third quarter of 2014. Vascepa's now available on formulary to over 200 million lives in the United States, including over 119 million lives in Tier 2 coverage. The continued conversion of lives to Tier 2 status has enabled Amarin to continue to grow Vascepa market share and accelerate new patient starts. And Vascepa Medicare Part D coverage remained strong in spite of generic competitor entrants, with 70% of all Medicare Part D lives covered. We've secured 95% of the existing Tier 2 coverage to 2015 and additional renewals are scheduled to review soon. While formulary coverage for Vascepa is good, there continue to be some health care plans that restrict access to Vascepa. In most cases, such plans restrict access to Lovaza as well. It's not uncommon for coverage to differ between health plans. Some health plans appear to focus more on costs than on optimal patient care. We're aware and thankful that many physicians have reached out to these outlier plans urging coverage for their patients. In parallel, we continue to emphasize the clinical advantage of Vascepa with the hope that these outlier health plans will follow the path of the majority of health plans in the support of good patient health and move Vascepa to Tier 2 coverage. I'll now turn the call over to Steve Ketchum, our President of Research and Development, for regulatory update. Steve?

Thank you, Aaron. Regarding the sNDA for the ANCHOR indication, the FDA assures us that they have resumed work on the sNDA review. When we have a definitive update, we will share it publicly. We note that during today's call, we are not going to comment further on the pending sNDA. Our primary focus currently is on advancing the REDUCE-IT study to a timely and successful conclusion, as doing so is both consistent with recent urging from FDA and, we believe, in the best interest of patient care and Amarin shareholders. Heart disease is the #1 cause of death in the U.S. and the world resulting in 1 in every 4 deaths. Statin therapy reduces CV risk by approximately 1/3. That's significant risk reduction, but there remains a significant unmet need for further risk reduction to improve patient care for the many millions of patients with cardiovascular disease. REDUCE-IT represents a compelling opportunity for improving patient care and for Amarin. As previously described, the epidemiological genetic and clinical data suggest that triglycerides and the lipoproteins that carry them are within the causal pathway of cardiovascular disease, and that treating elevated triglycerides can result in reduced cardiovascular risk. REDUCE-IT is the first prospective outcome study of any drug in a population of patients who, despite stable statin therapy, have elevated triglyceride levels. Before the REDUCE-IT study, no outcome study was designed to specifically address this triglyceride-lowering hypothesis. REDUCE-IT is also the first outcome study of a U.S. prescription level dose, 4 grams daily, of an omega-3 drug. Amarin's scientific rationale for the REDUCE-IT study is also supported by possible mechanisms of action of EPA, when used on top of statin therapy, that suggest cardioprotective effects independent of triglyceride-lowering. These mechanisms of action have been explored and described in the scientific literature, but have not been fully elucidated. For example, hardening of the arteries or atherosclerosis is a primary underlying process of cardiovascular disease involving inflammation followed by plaque formation, progression and instability. Atherosclerotic plaques readily incorporate EPA, and higher EPA plaque content is associated with decreased inflammation and increased plaque stability. Intervention with EPA-only therapy in combination with statin therapy, may reduce markers of inflammation and plasma and in plaque and may stabilize vulnerable plaques better than statin alone. Therefore, EPA therapy may have important beneficial effects on atherosclerotic processes and cardiovascular disease beyond EPA's favorable effects on triglyceride and other lipid and lipoprotein levels. Taken together, the efficacy and safety profile of Vascepa in the completed Phase III studies, the epidemiological genetic and clinical data supporting the triglyceride-lowering hypothesis in cardiovascular risk reduction and the potential EPA specific mechanisms of action and cardiovascular disease support Amarin's confidence in the science behind the ongoing REDUCE-IT study. REDUCE-IT is an events-driven study and the accrual of cardiovascular events is a function of a number of factors, including the number of patients enrolled, the underlying risk of the patients enrolled and the amount of time that those patients are followed. Since commencement of the REDUCE-IT study at the end of 2011, we have enrolled over 7,100 patients, representing approximately 90% of the targeted patient enrollment of 8,000. Amarin currently estimates that full patient enrollment in the study will be completed in 2015. As previously disclosed, the baseline mean and median triglyceride levels for patients enrolled in the study are above 200 milligrams per deciliter. Thus far, while early, the cool [ph] blinded event rate appears to be tracking to the following forecast expectations. The prespecified interim analysis by the independent data monitoring committee at 60% of the targeted events is anticipated in 2016, with 100% of the targeted events currently anticipated to occur by the end of 2017 and with results expected to be available in 2018. As is typical, the statistical threshold for defining overwhelming efficacy on the primary endpoint at the interim analysis is considerably higher than the threshold for defining statistical significance of the final analysis. The results of the REDUCE-IT study remained blinded to Amarin. In our substantial scientific and business analysis earlier this year, which reinforced our conclusion that the REDUCE-IT study is positioned for success, we took another look back at results reported for various other studies, including data from JELIS, ACCORD-Lipid and AIM-HIGH. Of these studies, JELIS was the most informative as it was a study of the effects of highly pure EPA on top of statin therapy. As previously discussed, there are some key limitations of the JELIS study, which led the FDA to require that we conduct the REDUCE-IT study. Notably, JELIS was conducted solely in a Japanese population. There are, of course, other differences, including EPA dose levels, patient diets, trial inclusion criteria and statin dose levels. We have covered these items in the past, including the fact that most of the patients in JELIS were relatively low-risk patients compared to the patients being enrolled in REDUCE-IT, whom all have elevated triglyceride levels. Given the importance of the REDUCE-IT study, I want to provide some additional comment regarding why we are using a 4-gram daily dose of Vascepa in REDUCE-IT compared to the 1.8-grams per day of EPA administered to patients in JELIS. First, multiple studies have shown that low-dose omega-3 use is not effective. We know that low-dose omega-3s have limited effect on lipid lipoprotein and inflammatory parameters. Second, we know that in JELIS, the level of EPA achieved in plasma with a 1.8-gram per day dose was relatively high. This is likely due in large part to the Japanese diet, which generally consists of greater fish consumption, resulting in higher baseline levels of EPA. In REDUCE-IT, 4 grams of EPA per day is intended to raise EPA concentrations in plasma to high levels that are similar to or slightly higher than those observed in JELIS, and to sustain these high-plasma EPA concentrations throughout the study. With statin-treated baseline triglyceride levels of 200 to 499 milligrams per deciliter, the lipid profiles of ANCHOR patients most closely resembled REDUCE-IT patients. Patients in ANCHOR had baseline plasma EPA levels that were less than 1/3 of baseline levels in JELIS. But Vascepa 4 grams per day raised plasma EPA levels in ANCHOR to comparable levels as observed in JELIS. Vascepa 4 grams per day in MARINE raised plasma EPA levels even higher in patients with baseline triglycerides of 500 to 2,000 milligrams per deciliter. While there can be no assurance that REDUCE-IT will be successful, 4 grams per day dosing in REDUCE-IT is an intentional step towards positioning REDUCE-IT for success. We look forward to updating you on the continued progress of REDUCE-IT. With that, I welcome Mike Farrell, Amarin's Controller, to comment on Amarin's third quarter 2014 financial results. Mike?

Thank you, Steve. My comments will address our recent financial results. You'll find a more detailed discussion of our results in our 10-Q and press release issued earlier today. In Q3 2014, we recognized $14.1 million in revenues, representing an increase of 68% as compared to revenues of $8.4 million in Q3 of 2013 and an increase of 12% as compared to $12.6 million in revenues in the second quarter of 2014. The timing of shipments to wholesalers, upon which revenues are recognized, and prescription levels, can vary between periods. As previously noted, such timing differences contributed to greater prescription growth than revenue growth in Q3 of 2014. On a year-to-date basis, we recognized $37.7 million in revenue through September 30, 2014 as compared to $16.2 million in the same period in 2013, representing a year-to-date increase of 133%. Our average price per capsule sold in Q3 2014 approximated the average price from the first half of 2014. Cash collections in the sale of Vascepa in the 9 months ended September 30, 2014 were approximately $45.2 million and all of our customers remain current in their payments. Gross margin during the quarter ended September 30, 2014 was 62% as compared to 56% in Q3 2013. Gross margin for the 9 months ended September 30, 2014 was 61% as compared to 52% for the same period in 2013. While our gross margin may fluctuate from quarter-to-quarter, overall, we expect our gross margin percentage to improve further beyond 2014 as we source lower-cost API. Our SG&A expenses in Q3 2014 were $19.3 million as compared to $28.3 million in Q3 2013, reflecting an intentional reduction in expenditures. SG&A expenses in the 9 months ended September 30, 2014 were $60.9 million as compared to $101.5 million for the same period in 2013. The 40% decrease in SG&A expenses was primarily intentionally driven by previously announced decisions to decrease sales force staffing, marketing program spend, and other costs associated with the commercialization of Vascepa, following the adcom surprise last fall, which led to the rescission of the SPA for the ANCHOR indication. In addition, 2013 was the year in which we commenced selling Vascepa, and as such, included certain launch-year related costs. Included in Q3 2014 expenses was approximately $0.6 million earned by Kowa for its co-promotion of Vascepa. Other than anticipated growing cost for Kowa's copromotion, which is scheduled to increase based on its contribution to increasing gross margin from Vascepa sales, our intention is to continue to seek growing productivity from Amarin sales and marketing team by holding expenses generally consistent while growing revenues. This is not to suggest that we won't have quarter-to-quarter variability, but intended to suggest that we are not planning significant increases in our spending until supported by considerably higher revenues. Our prescription levels need to approximately double to cover Amarin's total current costs excluding R&D costs. It is our aim to get there through increased revenues without significant aggregate increases in SG&A costs. Our R&D expenses in Q3 2014 were $14.5 million as compared to $16.8 million in Q3 2013, and were $37.9 million in the 9 months ended September 30, 2014 as compared to $56.1 million for the same period in 2013. The decrease in R&D expenses compared to 2013 was primarily driven by supply purchases in 2013, which were expensed to R&D prior to FDA approval of the API suppliers, and to reduce staffing and overhead cost in 2014 following the decision discussed last year to narrow Amarin's R&D efforts pursuant to the ANCHOR SPA being rescinded. The decrease in expenses in the year-to-date period was also driven by a decrease in REDUCE-IT expenses reflecting both quarterly variability and some efficiency savings as the trial is fully operational in 2014 across all countries and clinical sites. Under U.S. GAAP, we reported a net loss of $26.1 million in the third quarter of 2014 for basic and diluted loss per share of $0.15 and $0.17, respectively. This net loss included $1.9 million in noncash share-based compensation expense, $0.3 million in noncash foreign compensation income and a $4.5 million noncash gain in the change in fair value of derivatives. We reported a net loss of $36.7 million for the 9 months ended September 30, 2014 for basic and diluted loss per share of $0.21 and $0.25, respectively. This net loss included $6.3 million in noncash share-based compensation expense, $0.5 million in noncash foreign compensation income and $11.9 million noncash gain on the change in fair value of derivatives. And a $38 million noncash gain on extinguishment of debt. We reported cash and cash equivalents of $135.4 million at September 30, 2014, representing a net decrease of $15.1 million from reported cash and cash equivalents of $150.5 million as of June 30, 2014, and a net decrease of $56.1 million from reported cash and cash equivalents of $191.5 million as of December 31, 2013. Improvement in net cash outflows from operations to $19.9 million in Q3 2014 as compared to $44.8 million in Q3 2013 reflects our focus on maximizing our existing resources and cash preservation. It is anticipated that we will experience fluctuations in quarterly net cash outflows from operations. As a result of the timing of certain items, including interest payments and the timing of supply purchases, our Q3 net cash outflows from operations were in excess of Q2 net cash outflows. We continue to estimate that during 2014, net cash outflows will be less than $80 million. I will now turn the call back to John Thero. John?

Thank you, Mike. Amarin continues to make progress growing the Vascepa brand, advancing REDUCE-IT and preserving cash. We are confident that we can continue to make progress and we are actively pursuing ways to accelerate this progress. We have an experienced and dedicated employee base and in Vascepa, a product that works. We are optimistic about Amarin's future. With that, I would like to open the line to some questions. Operator?

[Operator Instructions] Our first question comes from John Boris with SunTrust Robinson Humphrey.

First question just relates to the Kowa copromote. Can you maybe give a little bit more granularity on number of physicians and number of details? And how confident you are that once they hit that 5 to 6 call activity on their respective physicians, that we'll begin to see, potentially, an acceleration after that 6-month period? And then second question just has to do with a competitor on the horizon, potentially Epanova. It sounds like they've had some supply issues in being able to enter the market. However, it appears that AstraZeneca, if and when they'll launch, will launch on their diabetes sales force. Can you just talk about the sizing of your sales force relative to AZN when they enter the market in that competitive front?

John, this is John Thero. Good to hear from you. I'm going to ask Aaron Berg, our head of Sales and Marketing to respond to your questions. Aaron?

Sure. So what we know is, in regarding Kowa, your first question, that physicians respond to the Vascepa message. In particular, when a number of calls to individual physicians exceed 5 or more, we've seen that data since launch with Vascepa and that continues. This is similar to other prescriptions that -- prescription products that are launched. And as you know, it takes time to generate that frequency level of calls to affect the prescribing habits. And it's one of the reasons why for copromotion partnerships, it often takes 6 months or even more for that relationship to begin showing a meaningful impact. So Kowa's targeting more than twice the number of physicians than we are alone, in the Amarin sales force. And as of the end of Q3, Kowa's sales team had called on each of their Vascepa targets an average of 2 times. So by the end of this year, the aim is for the Kowa sales team to have called on approximately 1/3 of their target physicians 5 times to educate them about Vascepa. So it takes time to build the frequency. We know the frequency with Vascepa -- with the Vascepa message does resonate with physicians and we know we affect behavior based on that. Now with that said, it is very early and we'll repeat that. But the early signs indicate that Kowa is having a very early positive effect. The data show that there's greater prescription -- new prescription growth in physicians called on by both Kowa and Amarin versus those called on by Amarin alone. So early signs are good. It's early. We'll continue to monitor. Our focus with both sales forces is on execution. And we expect both sales forces to continue to execute, to focus on quality of Vascepa calls, getting the frequency levels up as high as possible on a highest value physicians and we expect to see a return.

And regarding the second question, which is about Epanova. We know that, that product has been approved for a while. We're not sure of when it will be launched. We know that there's been, or at least we've heard, as you have, that it may be launched through that particular sales force. But they've got multiple products there competing for attention. As we've talked about in the past, there's many patients that have very high triglyceride that are not currently being treated. And any effort that increases awareness should be useful to all therapies relative to patient care. There's not been a head-to-head study between Vascepa and Epanova. But Epanova's, like Lovaza, contains both EPA and DHA. And it therefore, it raises LDL. And as Aaron was pointing out earlier, many of these patients are also on statin therapy. So a drug that will offset the effect of statin therapy, will be something that docs, as they become familiar with the LDL effect, will want to consider. And it also is a drug that has a very different safety and tolerability profile, which may cause some concern for patients and clinicians. Just as a note, in our MARINE study, we had 0 patients drop out of MARINE as a result of tolerability effects associated with Vascepa, whereas in their study, which was comparably, less than 3 months -- 12 weeks, depending upon dose, they had 5% to 7% of patients drop out due to side-effect profiles of the drug, which is something that we'll have to see how that plays out in the marketplace. There's other differences between the products. But we think anything [ph] that increases awareness out there will, overall, be good for the marketplace because this is an underserved market, and we think physician education in this space is important. Our marketing to these docs is going to continue to focus in on the highest prescribers. We're going to be continuing to do that with our sales force, which is about 130 sales reps here in the United States. We do that with high frequency, which appears to be working. And then we're, of course, supplementing that with the roughly 250 sales reps that Kowa has, which are calling on some of the same docs that we're calling on. But also calling on a much broader audience. So that in the United States, we're calling on, with our sales force, a little over 20,000 physicians, of which 7,000 get the most attention. Kowa is closer to 60,000 docs that they're calling on and we think that with the universe of docs that we're currently calling on and the frequency that we're calling on those docs, that we can continue to grow Vascepa with some of the initiatives that were talked about here, particularly by Aaron. We think we have an opportunity to grow at a faster rate. So we don't, again, don't know when a competitor product will be launched, if it will be launched. But if it does, I think it could be helpful to us, and in any case, we think were well-differentiated and have product with a proven record of safety, efficacy and tolerability, both in clinical trials and in real-world use that will bode well for us.

Our next question comes from Jonathan Eckard with Citi.

This is Joel Beatty on for Jon. My first question is on REDUCE-IT. Could you provide more detail on when in 2015 enrollment is expected to complete? And then also, how do you anticipate the R&D costs will change after enrollment completes?

Joel, thanks for the questions. This is a trial, as we're getting into the late stages of enrollment, that we're trying to bring in for the appropriate landing, if you will. We did make a change to the enrollment criteria not too long ago, to emphasize the need for any patients being enrolled going forward to only have triglyceride levels that are above, I think 200 mgs per deciliter. That was intentional to give us the kind of balance of patients within the study that's consistent with the way that study was designed and the statistics for how we have the study design has. As we get closer to the end of the study, we're trying to make sure that we did the right patient mix. In all likelihood, events in the study, because it is an events-driven study, will probably come from the 7,000-plus patients who are already enrolled. And so whether we finish 1 month or different month probably won't have a huge impact on the timing of the trial being completed. The costs within REDUCE-IT bounce around for a variety of different reasons. During the enrollment phase, we've talked about the overall cost, and annual basis being between $30 million and $40 million on an annual basis. And that's been holding up. There are some savings that occur after enrollment is completed. Outreach in advertising efforts relative to patients, et cetera. But there are still significant costs going forward to ensure patient compliance and a robust study. We -- I think, we're commended by many physicians relative to our conduct of both the MARINE and ANCHOR study and how it was robustly conducted. And we're trying to ensure that here as the first study in this space that we're conducting it robustly as well. So while we do anticipate seeing some curtailment of costs in REDUCE-IT after enrollment is complete in 2015, it's not a halving of costs, but we haven't quantified it beyond that and the costs do tend to be variable enough from quarter-to-quarter that it's somewhat difficult to forecast or to articulate to you in terms of guidance.

Sure. That was helpful. And then one more question. I noticed in the 10-Q today, it says that the data monitoring committee has been more frequently examining the safety data from REDUCE-IT. What could be the reasons for that? And Is there anything that could be read into that?

It's -- this is Steve Ketchum speaking. It's just good standard practice for a trial of this nature for an independent data monitoring committee to meet quarterly to look at all available information. And so that was kind of the prespecified plan from the outset of this study. And in each of those instances the DMC has come back to Amarin and recommended continuation of the study as planned.

And then, given the profile of Vascepa coming out of both the MARINE and ANCHOR studies, we weren't anticipating safety or tolerability issues. But now, with a much broader accumulation of lives within the study and time on drug in the study, it's good to have that confirmed that. Not that we have seen the results but an independent group's looking at it and continuing to give us the thumbs-up moving forward. It's what we would've expected. But it's still confidence-building and we thought that we should be articulating to investors that which we know, which is we continue to get the thumbs-up on the safety side. The efficacy side, of course, is blind to that committee and to ourselves, other than whatever they might interpret based upon the safety.

Our next question comes from Max Kerker [ph] with Goldman Sachs.

I'm just filling in for Gary today. Could you maybe elaborate a little bit more on the cash burn and maybe a run rate and if you'll need possible additional financing? And then for my second question, I know that you talked about, like keeping the sales -- keeping the expenses relatively constant for sales efforts. But looking forward, do you see any possibility of maybe like, expanding it at all?

Thanks, Max, for the questions. I'll take the second one first only 'cause it parlays into answering the first one. So for the MARINE indication, we're currently approved. We think that we're adequately sized today. If we were to get approval for a broader indication or an ability to market a broader indication, that would be something we'd want to take another look at. But for the current indication, I think we're adequately sized, at least to the point in time where the sales force is fully paying for itself. Relative to the cash burn, as we've discussed a bit in the call, we have taken significant measures over the past year to increase productivity, reduce expenditures. I think our SG&A costs now are at a level that should be relatively consistent from period to period until, again, we sort of hit a threshold moment of covering those costs. Our R&D cost, the majority spending there is REDUCE-IT, which we've talked about that level of spending, really in response to an earlier question from Joel, which sort of leads as a variable to that revenue growth and related supply purchases for revenue growth. The -- we ended Q3 with $135 million in cash for this year as a whole. We anticipate burning not more than $80 million, of which we burned about $56 million of it, so far, $14 million and $15 million, respectively, in each of the last 2 quarters. Our focus is to continue to grow revenues, to advance REDUCE-IT and we're going to continue to look for ways to do this cost-effectively and opportunistically. And by opportunistically, I mean bringing on -- we did Kowa, that was opportunistic. We did a celebrity program, that's opportunistic. If there's things that we can do without adding a heavy cost burn that we think will add to the upside, we're going to continue to look for those things, that includes also, looking outside the United States. So we haven't quantified, beyond that, our cash burn levels, we may get into a bit more detail in conjunction with our 10-K in that regard. But right now, we're tracking to the guidance that we provided this year, which is keeping the cash burn under $80 million for the year and our focus is as I said, to continue to look for improvement based upon revenue growth. I hope those answers help.

There are no further questions at this time. I'd like to turn the floor back over to John Thero for closing comments.

Terrific. Thank you, operator and more importantly, thank you to everybody who's been on this call listening. We appreciate your interest and support, and we look forward to providing regular updates as we move forward. Good evening.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.