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Warrants and Derivative Liability
 3 Months Ended
Mar. 31, 2012
Warrants and Derivative Liability
(3) Warrants and Derivative Liability

The Company had 21,066,363 warrants to purchase common shares outstanding at March 31, 2012 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

      516,300         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

      18,024,888         1.50         10/15/14   

10/16/09

      647,050         1.50         10/15/14   
  

 

 

     

 

 

     
     21,066,363       $ 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, 2011 was determined to be approximately $123.1 million using the Black-Scholes option pricing model.

Although the warrants contain a pricing variability feature, the number of common shares issuable under the warrants remains fixed. Therefore, as of March 31, 2012 the maximum number of common shares issuable as a result of the October 2009 private placement is 18.7 million. During the three months ended March 31, 2012, approximately 40,000 of the October 2009 warrants were exercised, resulting in gross proceeds to the Company of approximately $0.1 million. During the three months ended March 31, 2011, approximately 3.9 million of the October 2009 warrants were exercised, resulting in gross proceeds to the Company of approximately $5.9 million. Upon exercise, the fair value of the warrants exercised is remeasured and reclassified from warrant liability to additional paid-in capital. During the three months ended March 31, 2012 and 2011, the fair value of the exercised warrants of $0.3 million and $29.2 million, respectively, 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 March 31, 2012 for the remaining warrants was determined to be approximately $191.4 million. The Company recognized a loss on change in fair value of derivative liability of $66.2 million and compensation expense of $2.4 million for the three month period ended March 31, 2012. The Company recognized a gain on change in fair value of derivative liability of $25.3 million and compensation income of $0.7 million for the three month period ended March 31, 2011.