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Commitments and Contingencies
 3 Months Ended
Mar. 31, 2013
Commitments and Contingencies
(7) Commitments and Contingencies

Royalty and Milestone Obligations

The Company is party to certain milestone and royalty obligations under several product development agreements, as follows:

 

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The 2010 active pharmaceutical ingredient, or API, supply agreement with the Company’s existing Japan-based supplier provides for minimum supply purchase obligations on behalf of the Company. As of March 31, 2013, the remaining API aggregate minimum purchase obligations under this supply agreement were approximately $5.4 million through 2013. The Company may purchase more than this minimum amount.

 

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In 2011, the Company signed agreements with two additional suppliers for the supply of API materials for Vascepa. In 2012, the Company agreed to terms with a fourth API supplier. These agreements include requirements for the suppliers to qualify their materials and facilities with applicable regulatory authorities including the FDA. The Company anticipates incurring certain costs associated with the qualification of product produced by these suppliers as described below. In each case, following qualification of the supplier for the manufacture of API for commercial sale, these agreements include annual purchase levels to enable Amarin to maintain exclusivity with each respective supplier, and to prevent potential termination of the agreements. As of March 31, 2013, these suppliers had not yet been qualified for the manufacture of API for commercial sale and no liability was recorded for these minimum purchase obligations. The second and third API suppliers were approved by the FDA to manufacture API for commercial sale in April 2013. The 2011 supply agreements include commitments for the Company to fund (i) development fees up to a maximum of $0.5 million (ii) material purchases of up to $5.0 million for initial raw materials, which amount will be credited against future API purchases and (iii) a raw material purchase commitment of $1.1 million. The agreement with the fourth API supplier, Slanmhor Pharmaceuticals, Inc., or Slanmhor, provides for development fees of up to $2.3 million and a commitment of up to $15.0 million, which will be credited against future API material purchases. Under this agreement, during the three months ended March 31, 2013, the Company made payments of $3.9 million to Slanmhor related to stability and technical batches and advances on future API purchases.

 

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Under the 2004 share repurchase agreement with Laxdale Limited, or Laxdale, upon approval of Vascepa by the FDA on July 26, 2012, the Company was required to make a milestone payment to Laxdale of £7.5 million. The Company made this payment in 2012 and capitalized this Laxdale milestone ($11.6 million on July 26, 2012) as a component of other long term assets. This long-term asset is being amortized over the estimated useful life of the intellectual property the Company acquired from Laxdale and the Company recognized amortization expense of $0.2 million during the three months ended March 31, 2013. Also under the Laxdale agreement, upon receipt of marketing approval in Europe for the first indication for Vascepa (or first indication of any product containing Amarin Neuroscience intellectual property acquired from Laxdale in 2004), the Company must make an aggregate stock or cash payment to the former shareholders of Laxdale (at the sole option of each of the sellers) of £7.5 million (approximately $11.4 million at March 31, 2013). Also under the Laxdale agreement, upon receipt of a marketing approval in the U.S. or Europe for a further indication of Vascepa (or further indication of any other product using Amarin Neuroscience intellectual property), the Company must make an aggregate stock or cash payment (at the sole option of each of the sellers) of £5 million (approximately $7.6 million at March 31, 2013) for each of the two potential market approvals (i.e. £10 million maximum, or approximately $15.2 million at March 31, 2013).

The Company has no provision for any of the obligations above since the amounts are either not probable or estimable at March 31, 2013.