(9) Commitments and Contingencies

Litigation

On November 1, 2013, a purported investor of Amarin filed a putative class action lawsuit captioned Steven Sklar v. Amarin Corporation plc et al., No. 13-cv-6954 (D.N.J. Nov. 1, 2013) in the U.S. District Court for the District of New Jersey. Substantially similar lawsuits, captioned Bove v. Amarin Corporation plc, Civ. No. 13-07882 (AT) (S.D.N.Y. Nov. 5, 2013), Bentley v. Amarin Corporation plc, Civ. No. 13-08283 (AT) (S.D.N.Y. Nov. 20, 2013) and Siegel v. Amarin Corporation plc, No. 3:13-cv-07210 (D.N.J. Nov. 27, 2013), were subsequently filed in the U.S. District Court for the District of New Jersey and U.S. District Court for the Southern District of New York. On December 9, 2013 the cases filed in the Southern District of New York were transferred to the District of New Jersey, where the four cases are now proceeding in front of the same judge pending a formal order consolidating the actions.

Each of the complaints asserts claims under the Securities Exchange Act of 1934. The complaints allege that Amarin and certain of its current and former officers and directors made misstatements and omissions regarding the FDA’s willingness to approve Vascepa’s ANCHOR indication and the potential relevance of data from the ongoing REDUCE-IT trial to that approval. The putative class periods alleged in the complaints vary from the July 9, 2009-October 15, 2013 period alleged in the Sklar and Siegel complaints, the July 9, 2009-October 16, 2013 period alleged in the Bentley complaint, and August 8, 2012-October 16, 2013 period alleged in the Bove complaint. The lawsuits seek unspecified monetary damages and attorneys’ fees and costs.

On January 3, 2014, ten plaintiffs and their respective counsel moved for appointment as lead plaintiff and lead counsel for the putative class. The plaintiffs also moved for consolidation of the pending actions. The motion for appointment of lead plaintiff was set for February 3, 2014, but has not yet been decided. After the Court appoints a lead plaintiff, and consolidates the actions, the Company expects that the lead plaintiff will file a consolidated amended complaint that will become the operative complaint for the action.

The Company believes that it has valid defenses and will vigorously defend against the claims. The Company is unable to reasonably estimate the loss exposure, if any, associated with these claims.

In addition to the above, in the ordinary course of business, the Company is from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements and other matters. While the outcome of these proceedings and claims cannot be predicted with certainty, as of December 31, 2013, the Company was not party to any legal or arbitration proceedings that may have, or have had in the recent past, significant effects on the Company’s financial position or profitability. No governmental proceedings are pending or, to our knowledge, contemplated against the Company. The Company is not a party to any material proceedings in which any director, member of senior management or affiliate of ours is either a party adverse to the Company or its subsidiaries or has a material interest adverse to the Company or its subsidiaries.

Leases

The Company leases office space and office equipment under operating and capital leases. Future minimum lease payments under these leases as of December 31, 2013 are as follows (in thousands):


Year Ending December 31,	Operating		Capital
2014	$	828	$	6
2015		662		4
2016		675		—
2017		687		—
2018		172		—

Total	$	3,024		10

Less: interest				—
Total principal obligations				10
Less: current portion				6

Long-term capital lease			$	4

On November 28, 2011, the Company entered into a lease agreement for 4,327 net useable square feet of office space in Groton, Connecticut. The Lease terminates on January 31, 2015, but may be extended by Amarin for a period of three years. Under the Lease, Amarin pays monthly rent of approximately $8,500.

On September 30, 2011, the Company entered into an agreement for 320 square feet of office space at 2 Pembroke House, Upper Pembroke Street 28-32 in Dublin, Ireland. The agreement began November 1, 2011 and terminates on October 31, 2014 and can be extended automatically for successive one year periods. Monthly rent is approximately €2,700 (approximately $3,500). The agreement can be terminated by either party with three months prior written notice.

On July 1, 2011, the Company leased 9,747 square feet of office space in Bedminster, New Jersey. The lease, as amended, terminates on March 31, 2018, and may also be terminated with six months prior notice. On December 6, 2011 the Company leased an additional 2,142 square feet of space in the same location. On December 15, 2012 and May 8, 2013, the Company leased an additional 2,601 and 10,883 square feet of space, respectively, in the same location. Effective December 31, 2013, the December 6, 2011 lease was terminated.

Total rent expense during the years ended 2013, 2012 and 2011 was approximately $1.0 million, $0.6 million, and $0.5 million, respectively.

Lease Liability

In December 2005 the Company ceased using office space in Ely, Cambridgeshire. Amarin is obligated to pay rent, service charges and rates to the end of the lease, which expires in November 2014. The premises have been sublet through November 2014. In December 2013, the Company ceased using the office space in Groton, Connecticut. The Company is obligated to pay rent through the end of the lease in January 2015. Liabilities for exited lease facilities at December 31, 2013 and 2012 were $0.1 million and $17 thousand, respectively, and are included within the consolidated balance sheets under accrued expenses and other long-term liabilities.

Royalty and Milestone Obligations

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

•

The Company’s active pharmaceutical ingredient, or API, supply agreement with Nisshin Pharma, Inc. (“Nisshin”), provided for minimum supply purchase obligations on behalf of the Company to enable Amarin to maintain exclusivity with this supplier, and to prevent potential termination of the agreement based on estimated minimum purchase requirements. As of December 31, 2013, the API aggregate minimum purchase obligations under this supply agreement had been achieved and as a result, the Company has no future minimum purchase obligation from Nisshin.

•

In 2011, the Company entered into agreements with two additional suppliers, Chemport, Inc. (“Chemport”) and BASF (formerly Equateq Limited) for the supply of API materials for Vascepa. In 2012, the Company agreed to terms with a fourth API supplier, Slanmhor Pharmaceutical, Inc., or Slanmhor. These agreements include requirements for the suppliers to qualify their materials and facilities with applicable regulatory authorities including the FDA. The Company will incur 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. Chemport and BASF were approved by the FDA to manufacture API for commercial sale in April 2013. On December 30, 2013, we issued a notice of termination of our API agreement to BASF as a result of BASF’s non-compliance with the terms of such agreement. BASF is entitled to a 60-day cure period. If the agreement is not terminated and BASF successfully completes validation of their manufacturing process for the production of Vascepa API, the Company will be subject to minimum purchase obligations. The Company has begun to purchase commercial supply from Chemport. The agreement with Chemport contains a provision requiring the Company to pay Chemport in cash for any shortfall in the minimum purchase obligations. The minimum purchase commitment was achieved in 2013. The agreement with Slanmhor contains a provision requiring the Company to pay Slanmhor in cash for any shortfall in the minimum purchase obligations, which will become effective upon the approval for manufacture by the FDA of supply from Slanmhor. 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. We have paid $3.1 million related to these commitments through December 31, 2013. Under these agreements, during the year ended December 31, 2013, the Company made payments of $6.9 million and $0.1 million to Chemport and BASF, respectively. The agreement with 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. We have paid $6.2 million related to these commitments through December 31, 2013. The $15.0 million commitment fee is contingent upon the mutually agreed upon expansion of Slanmhor’s API manufacturing capacity. Under this agreement, during the year ended December 31, 2013, the Company made payments of $6.1 million to Slanmhor related to stability and technical batches and advances on future API purchases.

•

Concurrent with its entry into one of the two agreements entered into in 2011 for the supply of API materials for Vascepa, the Company agreed to make a non-controlling minority share equity investment in the supplier of up to $3.3 million. The Company invested $1.7 million under this agreement in July 2011 and the remaining $1.6 million during 2012. In September 2013, the Company entered into an equity sale and purchase agreement between this supplier and a third party in which the Company agreed to sell approximately $1.3 million of its investment in the supplier to the third party at cost. This transaction closed in the first quarter of 2014. The carrying amount of $3.3 million as of December 31, 2013 and 2012 is included in other long term assets and is accounted for under the cost method.

•

Under the 2004 share repurchase agreement with Laxdale Limited, or Laxdale, upon receipt of marketing approval in the U.S. and/or 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 $12.4 million at December 31, 2013) for each of the two potential marketing approvals. Upon approval of Vascepa by the FDA on July 26, 2012, the Company capitalized this first Laxdale milestone ($11.6 million on July 26, 2012) as an intangible asset. This long-term asset will be amortized over the estimated useful life of the intellectual property the Company acquired from Laxdale and the Company recognized amortization expense of $0.6 million during the year ended December 31, 2013. The Company paid $12.1 million in cash in November 2012 in settlement of this liability and recognized a currency exchange loss of $0.5 million.

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 $8.2 million at December 31, 2013) for each of the two potential market approvals (i.e. £10 million maximum, or approximately $16.5 million at December 31, 2013).

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