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Warrants and Derivative Liability
9 Months Ended
Sep. 30, 2011
Warrants and Derivative Liability
(3) Warrants and Derivative Liability

The Company has 21,139,090 warrants to purchase common shares outstanding at September 30, 2011 at a weighted-average exercise price of $1.48, as summarized in the following table:

 

Issue Date      Amount      Exercise Price      Expiration Date  
  4/27/07         17,500         17.90         1/17/2014   
  6/1/07         55,737         7.20         5/31/12   
  12/5/07         539,027         1.17         12/3/12   
  7/31/09         138,888         1.00         7/30/14   
  7/31/09         1,666,000         1.00         7/30/14   
  10/16/09         18,074,888         1.50         10/15/14   
  10/16/09         647,050         1.50         10/15/14   
  

 

 

     

 

 

     
     21,139,090       $ 1.48      
  

 

 

        

October 2009 Warrants

On October 16, 2009, the Company completed a $70.0 million private placement with both existing and new investors resulting in $62.3 million in net proceeds and an additional $3.6 million from bridge notes converted in conjunction with the private placement. In consideration for the $62.3 million in net cash proceeds Amarin issued 66.4 million units, each unit consisting of (i) one ADS (representing one ordinary share) at a purchase price of $1.00 and (ii) a warrant with a five year term to purchase 0.5 of an ADS at an exercise price of $1.50 per ADS. In consideration for the conversion of $3.6 million of convertible bridge notes, Amarin issued 4.0 million units, each unit consisting of (i) one ADS (representing one ordinary share) at a purchase price of $0.90 and (ii) a warrant with a five year term to purchase 0.5 of an ADS at an exercise price of $1.50 per ADS. The total number of warrants issued in conjunction with the financing was 35.2 million.

The warrants issued in connection with the October 2009 financing contained a pricing variability feature which provided for an increase to the exercise price if the exchange rate between the U.S. dollar and British pound adjusts such that the warrants could be issued at a price less than the £0.5 par value of the common stock – that is, if the exchange rate exceeded U.S. $3.00 per £1.0 sterling. Due to the potential variable nature of the exercise price, the warrants are not considered to be indexed to the Company’s common stock. Accordingly, the warrants do not qualify for the exception to classify the warrants within equity and are classified as a derivative liability. The fair value of this warrant derivative liability is remeasured at each reporting period, with changes in fair value recognized in the statement of operations. The fair value of the warrants at December 31, 2010 was determined to be approximately $230.1 million using the Black-Scholes option pricing model.

Although the warrants contain a pricing variability feature, the number of warrants issuable remains fixed. Therefore, as of September 30, 2011 the maximum number of common shares issuable as a result of the October 2009 private placement is 18.7 million. During the three and nine months ended September 30, 2011, approximately 2.5 million and 12.1 million of the October 2009 warrants were exercised, respectively, resulting in gross proceeds to the Company of approximately $3.8 million and $18.1 million, respectively. During the three and nine months ended September 30, 2010, approximately 1.3 million and 2.2 million warrants were exercised, respectively, resulting in gross proceeds of the Company of approximately $1.9 million and $3.3 million, respectively. Upon exercise, the fair value of the warrants exercised is remeasured and reclassified from warrant liability to additional paid-in capital. During the nine months ended September 30, 2011, $129.5 million of fair value for the exercised warrants was transferred from warrant liability to additional paid in capital, with the change in the fair value on the exercise date recognized in the statement of operations. The fair value of the warrant liability at September 30, 2011 for the remaining warrants was determined to be approximately $155.0 million. The Company recognized a loss on change in fair value of derivative liability of $53.4 million and compensation expense of $1.0 million for the nine month period ended September 30, 2011.