(continue reading below for additional details and figures)
"On December 6, 2012 the Company entered into an agreement with Biopharma Secured Debt Fund II Holdings Cayman LP (“Biopharma”). Under this agreement, the Company granted to Biopharma a security interest in future receivables and all related rights to Vascepa, in exchange for $100 million received at the closing of the agreement which closing occurred in December 2012. The Company has agreed to repay Biopharma up to $150 million of future revenue and receivables. The first repayment under the agreement is a repayment of $2.5 million of interest due to Biopharma in November 2013, subject to the limitation described below. Additional quarterly repayments are due thereafter in accordance with the following schedule: $2.5 million of interest in the first quarter of 2014; $8.0 million per quarter in each of the next four quarters, $10.0 million per quarter in each of the next four quarters, $15.0 million per quarter in each of the next four quarters and a final payment of $13.0 million due in May 2017. The quarterly repayments through the third quarter of September 2014 represent interest only. Quarterly payments do not begin to reduce the principal balance until the fourth quarter of 2014. These quarterly payments are subject to a quarterly threshold amount whereby, if a calculated threshold, based on quarterly Vascepa revenues, is not achieved, the quarterly payment payable in that quarter can at our election be reduced and with the reduction carried forward without interest for payment in a future period. Payment of such carried forward amounts are subject to similarly calculated threshold repayment amounts based on Vascepa revenue levels. Except upon a change of control in Amarin, the agreement does not expire until $150 million has been repaid. Under the agreement, upon a change of control, we would be required to pay $140 million, less any previously repaid amount, if the change of control occurs on or before December 31, 2013, or required to repay $150 million, less any previously repaid amount, if the change of control event occurs after December 31, 2013. The Company can prepay after October 1, 2013, an amount equal to $150 million less any previously repaid amount."
Additional notes from elsewhere in the 10K (PDF file can be downloaded here):
- The deal appears to place restrictions of the ability of Amarin to raise other capital, take on debt above a certain threshold, or pay a dividend.
- "The Company estimates that its Vascepa revenue levels will be high enough to support repayment to Biopharma in accordance with the repayment schedule without the optional reduction which is allowed to be elected by the Company if the threshold revenue levels are not achieved. Accordingly, the Company currently anticipates that over the schedule repayment period that it will record as interest expense the difference between the proceeds received by the Company and the redemption amount. These estimates will be reevaluated each reporting period by the Company and adjusted if necessary"
- There was chatter at the time the deal was announced that the change-in-control provisions meant that a buyout was in the works and highly likely in 2013. One, we see now that the altered payment terms in a buyout aren't very different, and two, AMRN continues to be investing in a solo launch, does not act like a partnership is imminent, and has no increased visibility on NCE market exclusivity from the FDA - a factor that many believe is gating for partnering discussions.
You can see the schedule of payments laid out in the table below. I didn't bother to calculate the interest rate, but it is clearly exorbitant and something around 10% or a bit higher. This is intuitively obvious from the fact they are paying a total of $150m over four years in return for $100m cash received in December 2012.