What Amarin Stock Investors Will Hear at the Annual Meeting
Last week, Amarin Corp. PLC (NASDAQ: AMRN) filed its proxy statement with the U.S. Securities and Exchange Commission (SEC) for the coming annual shareholders meeting on July 13. Among the items on the agenda are the usual proposals to elect the slate of directors selected by the current board, provide an advisory vote on executive pay and approve the company’s accounting firm.
The board also has submitted a new stock incentive plan to replace the existing one that expires next year. The new plan depends heavily on the company’s ability to sell its Vascepa cardiovascular treatment.
Vascepa has been available in the United States since 2013 to treat high triglycerides. It consists of one active ingredient, icosapent ethyl, which is an omega-3 fatty acid derived from fish oil. It is the only drug of its kind on the market.
Last December, Vascepa received label expansion approval from the U.S. Food and Drug Administration (FDA) as a treatment to reduce cardiovascular events in people with elevated triglyceride levels and either established cardiovascular disease or diabetes with other persistent cardiovascular risk factors. Vascepa has been shown to be effective in reducing cardiovascular risks for heart attacks and stroke, a key point Amarin had been pushing hard to get FDA approval for.
When the company lost a patent ruling in a Nevada federal district court in March, the company’s share price tumbled. Yet, how much was due to the verdict and how much to the overall decline in share prices due to the COVID-19 pandemic is unclear. The stay-at-home orders in many of the countries where Amarin focused its sales had an impact on the ability of its newly hired sales staff to meet new customers in person.
The New Stock Plan
In its proxy filing with the SEC, the company said that the new plan is “designed to enhance the flexibility to grant equity awards to our employees, officers, non-employee directors and consultants and to ensure that we can continue to grant equity awards to eligible recipients at levels determined to be appropriate by our Board and the Remuneration Committee.”
If the plan is not approved, Amarin’s “efforts to grow our work force could be disadvantaged, and we believe we would be at a significant disadvantage against our competitors for recruiting, retaining and motivating those individuals who are critical to our success.”
The new plan includes 20 million shares that may be awarded as “stock options (both incentive and non-qualified stock options), restricted stock units and certain limited unrestricted share awards.” Including shares remaining in the 2011 plan, the company valued the entire pool of equity awards to be worth $95.15 million, of which $15.15 million are shares remaining in the old plan.
The company has doubled its sales force and in the first days following the Nevada court ruling, the company had some dark moments thinking about how it could keep revenues rolling in despite the coronavirus outbreak.
Amarin’s Executive Pay Plan Is Incentive Driven
Vascepa accounted for $427.4 million of 2019 revenues totaling $429.8 million. Vascepa’s label expansion ruling from the FDA and expanded sales were expected to push Vascepa sales even higher. Generic drug makers Dr. Reddy and Hikma Pharmaceuticals, winners in the Nevada court case, would still have to invest in manufacturing a generic version of Vascepa and set up distribution channels to compete with Amarin.
CEO John Thero said last week the company plans to restore $80 million it previously had cut from annual educational and promotional spending in order to “increase awareness” of Vascepa and its approved uses. The drug, he said, is “proven to reduce risk, it has been found to be affordable and cost-effective and it is covered by most insurance policies.”
Thero was paid $8.93 million in 2019, which is 78 times the median worker’s compensation of $114,760. Of Thero’s compensation, $697,067 (7.8%) was base salary and about $7.60 million came as stock and options awards. Thero was paid another $635,250 in non-equity compensation last year.
Looking a little more deeply at how the biopharmaceutical company pays its executives reveals that Thero’s base salary puts him in the lower 25% of Amarin’s peers. Executive Vice President and General Counsel Joseph Kennedy’s salary fell into the top 50% for the same position among the peer group. So did the salary of Dr. Steven Ketchum, the company’s president of research and development and its chief scientific officer.
Other named officers, Michael Kalb and Aaron Berg, were also paid in the top half of the pay range for their positions at peer companies.
Amarin’s base executive salaries reflect an average of 8% of total compensation packages. Long-term equity awards comprise 85% of executive compensation, and bonus payments account for the rest.