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Commitments and Contingencies | 6 Months Ended
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Jun. 30, 2014
Commitments and Contingencies |
(7) | 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, with all cases then before the same judge. The complaints assert claims under the Securities Exchange Act of 1934 and 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 July 24, 2014, the court consolidated the cases, appointed lead counsel for the class and selected James Reiss to serve as lead plaintiff. The Company believes that it has valid defenses and will vigorously defend against this class action suit, but cannot predict the outcome. The Company is unable to reasonably estimate the loss exposure, if any, associated with the claims. The Company has insurance coverage that is anticipated to cover any significant loss exposure that may arise from this action after payment by the Company of the associated deducible obligation under such insurance coverage. On February 27, 2014, the Company commenced a lawsuit against the FDA that challenges FDA’s denial of the Company’s request for five-year NCE exclusivity for Vascepa based on its reading of the relevant statute, the Company’s view of FDA’s inconsistency with past actions in this area and the retroactive effect of what the Company believes is a new policy at FDA as it relates to Vascepa situation. The Company’s complaint requests that the court vacate FDA’s decision, declare that Vascepa is entitled to the benefits of five-year statutory exclusivity, bar the FDA from accepting any ANDA or similar application for which Vascepa is the reference-listed drug until after the statutory exclusivity period and set aside what the Company contends are—due to the denial of five-year exclusivity to Vascepa—prematurely accepted pending ANDA applications. On March 4, 2014, the Company filed a lawsuit for patent infringement of U.S. Patent No. 8,663,662 in the U.S. District Court for the District of Delaware against AstraZeneca Pharmaceuticals LP and its subsidiary, Omthera Pharmaceuticals, Inc., captioned Amarin Pharmaceuticals Ireland Limited v. Omthera Pharmaceuticals, Inc. et al., Civ. A. No. 1:14-cv-00279 (D.Del). On June 23, a second complaint was filed against AstraZeneca and Omthera, captioned Amarin Pharmaceuticals Ireland Limited v. Omthera Pharmaceuticals, Inc. et al., Civ. A. No. 1:14-cv-00791 (D.Del). That second complaint replaced the first complaint, which was voluntarily dismissed on June 27, and was filed in order to expedite the progress of this litigation on the merits. The focus of the lawsuit is the commercial marketing of Epanova® (omega-3-carboxylic acids) capsules in the United States. Epanova was approved by the FDA in May 2014 with substantially the same indication as Vascepa and is expected to compete with Vascepa. The Company is seeking damages and injunctive relief in the litigation. The Company intends to litigate the case vigorously, but cannot predict the outcome of this lawsuit. In March, April, and May 2014, the Company received paragraph IV certification notices from six companies contending to varying degrees that certain of its patents are invalid, unenforceable and/or will not be infringed by the manufacture, use, sale or offer for sale of a generic form of Vascepa as described in those companies’ abbreviated new drug applications, or ANDAs. The Company has commenced patent infringement lawsuits against each of these ANDA applicants. In each of the lawsuits, Amarin is seeking, among other remedies, an order enjoining the defendants from marketing generic versions of Vascepa before the last to expire of the asserted patents expires in 2030. In April 2014, Amarin filed lawsuits against Apotex, Inc. and Apotex Corporation (collectively, “Apotex”) in the U.S. District Court for the District of New Jersey and the U.S. District Court for the Northern District of Illinois. The cases against Apotex are captioned Amarin Pharma, Inc. et al. v. Apotex, Inc. et al., Civ. A. No. 14-2550 (D.N.J) and Amarin Pharma, Inc. et al. v. Apotex, Inc. et al., Civ. A. No. 14-2958 (N.D. Ill.). In April 2014, Amarin also filed lawsuits against Roxane Laboratories, Inc. (“Roxane”) in the U.S. District Court for the District of New Jersey and the U.S. District Court for the Northern District of Ohio. The cases against Roxane are captioned Amarin Pharma, Inc. et al. v. Roxane Laboratories, Inc., Civ. A. No. 14-2551 (D.N.J) and Amarin Pharma, Inc. et al. v. Roxane Laboratories, Inc., Civ. A. No. 14-901 (N.D. Ohio). Amarin voluntarily dismissed the Northern District of Ohio case against Roxane on May 7, 2014. In April 2014, Amarin also filed a lawsuit against Dr. Reddy’s Laboratories, Inc. and Dr. Reddy’s Laboratories, Ltd. (collectively, “Dr. Reddy’s”) in the U.S. District Court for the District of New Jersey. The case against Dr. Reddy’s is captioned Amarin Pharma, Inc. et al. v. Dr. Reddy’s Laboratories, Inc. et al., Civ. A. No. 14-2760 (D.N.J.). In May 2014, Amarin also filed a lawsuit against Watson Laboratories, Inc. and Actavis plc (“Watson”) in the U.S. District Court for the District of New Jersey. One of the Company’s directors, Patrick J. O’Sullivan, is also a director of Actavis plc. The case against Watson is captioned Amarin Pharma, Inc. et al. v. Watson Laboratories, Inc. et al., Civ. A. No. 14-3259 (D.N.J). On July 17, 2014, Amarin agreed to dismiss Actavis plc but the lawsuit against Watson remains pending. In June 2014, Amarin also filed a case against Teva Pharmaceuticals USA, Inc. (“Teva”) in the U.S. District Court for the District of New Jersey. The case against Teva is captioned Amarin Pharma, Inc. et al. v. Teva Pharmaceuticals USA, Inc., Civ. A. No. 14-3558 (D.N.J.). In June 2014, Amarin also filed a lawsuit against Andrx Labs, LLC, Andrx Corporation, and Actavis plc (collectively, “Andrx”) in the U.S. District Court for the District of New Jersey. The case against Andrx is captioned Amarin Pharma, Inc. et al v. Andrx Labs, LLC et. al., Civ. A. No. 14-3924 (D.N.J.). As a result of the 30-month stay associated with the filing of these lawsuits under the Hatch-Waxman Act, the FDA cannot grant final approval to any ANDA before September 2016, unless there is an earlier court decision holding that the subject patents are not infringed and/or are invalid. The Company intends to vigorously enforce its intellectual property rights relating to Vascepa, but cannot predict the outcome of these lawsuits. 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 June 30, 2014, 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 its 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 is either a party adverse to the Company or its subsidiaries or has a material interest adverse to the Company or its subsidiaries. Royalty and Milestone Obligations The Company is party to certain milestone and royalty obligations under several product development agreements, as follows:
| • |  | 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, a consortium of companies led by Slanmhor Pharmaceutical, Inc. 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 certain exclusivity with each respective supplier. Chemport and BASF were approved by the FDA to manufacture API for commercial sale in April 2013. On December 30, 2013, the Company issued a notice of termination of its API agreement to BASF as a result of BASF’s non-compliance with the terms of such agreement. BASF did not remedy within a contractual 60-day cure period and as a result, this agreement terminated on February 28, 2014. On April 30, 2014, the Company reached a settlement agreement with BASF under which it received a refund for material purchases of $3.0 million, included as other income in the statement of operations. As part of the settlement agreement, both companies agreed to negotiate in good faith a development and supply agreement under which (a) BASF would use reasonable commercial efforts to validate the Manufacturing Process for API that meets the API Specifications, and (b) the terms of commercial supply of such API would be regulated (the “Development and Supply Agreement”) for a period of one hundred eighty (180) days from the effective date of the agreement.
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 the Slanmhor consortium contains a provision, whereby under certain conditions the Company is required to pay the consortium in cash for any shortfall in the minimum purchase obligations. The 2011 supply agreements with Chemport and BASF, the latter of which is now terminated, include commitments for the Company to fund (i) certain development fees (ii) material purchases for initial raw materials, which amount will be credited against future API purchases and (iii) a raw material purchase commitment. The Company made payments of $3.1 million related to these commitments through June 30, 2014. Under these agreements, during the six months ended June 30, 2014, the Company made payments of $1.3 million to Chemport and made no payments to BASF. The agreement with the Slanmhor consortium provides for certain development fees and other commitments, which will be credited against future API material purchases. The Company made payments of $6.2 million related to these commitments through June 30, 2014. Certain of these commitments are contingent upon the mutually agreed upon expansion of the Slanmhor consortium’s API manufacturing capacity. To date, the parties have not agreed upon such additional expansion. Under this agreement, during the six months ended June 30, 2014, the Company made payments of $0.4 million to the Slanmhor consortium 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 the investment of $2.0 million and $3.3 million as of June 30, 2014 and December 31, 2013, respectively, 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 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 $12.8 million at June 30, 2014).
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 $8.5 million at June 30, 2014) for each of the two potential market approvals (i.e. £10 million maximum, or approximately $17.0 million at June 30, 2014). The Company has no provision for any of the obligations above since the amounts are either not probable or estimable at June 30, 2014.

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